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<SEC-DOCUMENT>0000950134-05-007360.txt : 20050413
<SEC-HEADER>0000950134-05-007360.hdr.sgml : 20050413
<ACCEPTANCE-DATETIME>20050413172202
ACCESSION NUMBER:		0000950134-05-007360
CONFORMED SUBMISSION TYPE:	S-1
PUBLIC DOCUMENT COUNT:		3
FILED AS OF DATE:		20050413
DATE AS OF CHANGE:		20050413

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:		S-1
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-124051
		FILM NUMBER:		05748966

	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>S-1
<SEQUENCE>1
<FILENAME>d22568sv1.htm
<DESCRIPTION>FORM S-1
<TEXT>
<HTML>
<HEAD>
<TITLE>sv1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="center" style="font-size: 10pt"><B>As filed with the Securities and Exchange Commission on April&nbsp;13, 2005</B>



<DIV align="right" style="font-size: 10pt; margin-right:30px"><B>Registration No.&nbsp;333-</B></DIV>



<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<P align="center" style="font-size: 14pt"><B>SECURITIES AND EXCHANGE COMMISSION</B>

<DIV align="center" style="font-size: 12pt"><B>WASHINGTON, D.C. 20549</B>
</DIV>


<DIV align="center" style="font-size: 10pt"><HR size="1" noshade width="100%" align="center" color="#000000"></DIV>


<P align="center" style="font-size: 18pt"><B>FORM S-1</B>


<DIV align="center" style="font-size: 10pt"><B>REGISTRATION STATEMENT<BR>
UNDER<BR>
THE SECURITIES ACT OF 1933</B></DIV>



<DIV align="center" style="font-size: 10pt"><HR size="1" noshade width="100%" align="center" color="#000000"></DIV>


<P align="center" style="font-size: 24pt"><B>NATURAL HEALTH TRENDS CORP.</B>


<DIV align="center" style="font-size: 10pt">(Exact Name of Registrant as Specified in Its Charter)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Florida</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>5122</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>59-2705336</B></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(State or Other Jurisdiction of
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Primary Standard Industrial
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(I.R.S. Employer</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Incorporation or Organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Classification Code No.)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Identification No.)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><HR size="1" noshade width="100%" align="center" color="#000000">



<DIV align="center" style="font-size: 10pt"><B>12901 Hutton Drive<BR>
Dallas, Texas, 75234<BR>
(972)&nbsp;241-4080</B><BR>
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant&#146;s Principal Executive Offices)</DIV>


<DIV align="center" style="font-size: 10pt"><HR size="1" noshade width="100%" align="center" color="#000000"></DIV>




<DIV align="center" style="font-size: 10pt"><B>Keith C. Zagar<BR>
Chief Operating Officer and General Counsel<BR>
Natural Health Trends Corp.<BR>
12901 Hutton Drive<BR>
Dallas, Texas 75234<BR>
(972)&nbsp;241-4080</B><BR>
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)</DIV>



<DIV align="center" style="font-size: 10pt"><HR size="1" noshade width="100%" align="center" color="#000000"></DIV>



<P align="center" style="font-size: 10pt"><B><I>Copy to:</I></B><BR>
<B>Alan N. Forman, Esq.<BR>
Brown Rudnick Berlack Israels LLP<BR>
120 West 45</B><SUP style="font-size: 85%; vertical-align: text-top"><B>th</B></SUP> <B>Street<BR>
New York, NY 10036</B>



<P align="center" style="font-size: 10pt"><HR size="1" noshade width="100%" align="center" color="#000000">



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Approximate date of commencement of proposed sale to the public: </B>From time to time after the
effectiveness of the registration statement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any of the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule&nbsp;415 under the Securities Act of 1933, as amended (the &#147;Securities
Act&#148;), check the following box: <FONT face="Wingdings">&#254;</FONT>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same
offering. <FONT face="Wingdings">&#111;</FONT>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities
Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. <FONT face="Wingdings">&#111;</FONT>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities
Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. <FONT face="Wingdings">&#111;</FONT>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If delivery of the prospectus is expected to be made pursuant to Rule&nbsp;434, please check the
following box. <FONT face="Wingdings">&#111;</FONT>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="17" style="border-bottom: 1px solid #000000"><B>CALCULATION OF REGISTRATION FEE</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"> <B>Title of Each Class of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount To Be</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Proposed Maximum</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Proposed Maximum</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Amount of</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"> <B>Securities To Be Registered</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Registered</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Offering Price Per Security</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Aggregate Offering Price (1)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Registration Fee</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Common Stock, $.001 par value
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">2,159,704</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom">12.92</TD>
    <TD nowrap valign="bottom">(2)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom">27,903,376</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="right" valign="bottom">$</TD>

<TD nowrap align="right" valign="top">3,284.23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Common Stock, $.001 par value
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">1,369,704</TD>
    <TD nowrap valign="bottom">(3)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom">12.47</TD>
    <TD nowrap valign="bottom">(4)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom">17,080,208</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom">2,010.34</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>TOTAL</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom">44,983,584</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">$</TD>
    <TD nowrap align="right" valign="top">5,294.57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P><HR noshade size="1" width="18%" align="left" color="#000000">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(1)</I></B>&nbsp;&nbsp;</TD>
    <TD><B><I>Estimated solely for the purpose of calculating the registration fee pursuant to Rule
4</I></B><B><I>57(c)</I></B><B><I> under the Securities Act of 1933.</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(2)</I></B>&nbsp;&nbsp;</TD>
    <TD><B><I>Pursuant to Rule&nbsp;</I></B><B><I>457(c)</I></B><B><I>, calculated upon the basis of the average of the bid and asked
prices of the common stock, as quoted on The NASDAQ National Market, on April&nbsp;11, 2005, a date within five days of the
original filing date of this Registration Statement.</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(3)</I></B>&nbsp;&nbsp;</TD>
    <TD><B><I>Represents the number of shares that may be sold by the selling security holders following the
exercise of warrants.</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(4)</I></B>&nbsp;&nbsp;</TD>
    <TD><B><I>Pursuant to Rule&nbsp;</I></B><B><I>457(g)</I></B><B><I>, calculated based upon the exercise price of the warrants held by the
selling security holders.</I></B></TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The Registrant hereby amends this Registration Statement on such date or dates as may be
necessary to delay its effective date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become effective in
accordance with </B><B>Section 8(a)</B><B> of the Securities Act or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section&nbsp;</B><B>8(a)</B><B>, may determine.</B>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>





<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">








<P align="left" style="font-size: 10pt"><B><I>The information in this prospectus is not complete and may be changed. The selling security
holders may not sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to sell these Securities and
it is not soliciting an offer to buy these securities in any state where the offer or sale is not
permitted.</I></B>



<P align="center" style="font-size: 10pt"><B><I>SUBJECT TO COMPLETION<BR>
Preliminary Prospectus dated April&nbsp;13, 2005</I></B>



<P align="center" style="font-size: 10pt"><B>NATURAL HEALTH TRENDS CORP.</B>



<P align="center" style="font-size: 10pt">2,159,704 shares of common stock<BR>
1,369,704 shares issuable upon exercise of warrants



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
prospectus relates to the disposition by the selling security holders listed on page 81
or their transferees, of up to 2,159,704 shares of our common stock already issued and outstanding
and 1,369,704 shares of our common stock issuable upon the exercise of warrants held by the selling
security holders. We will receive no proceeds from the disposition of already outstanding shares
of our common stock by the selling security holders. We will receive proceeds of $12.47 per share
from the exercise of any of the 1,369,704 warrants.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
a description of the plan of distribution of the shares, please see page 88 of this
prospectus.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is listed for trading on NASDAQ&#146;s National Market System, under the symbol
&#147;BHIP&#148; since February&nbsp;22, 2005. The closing price of the common stock on April&nbsp;11, 2005 was $12.92
per share.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. PLEASE READ THE &#147;RISK FACTORS&#148;
BEGINNING ON PAGE 5.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or accuracy of the
prospectus. Any representation to the contrary is a criminal offense.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal executive offices are located at 12901 Hutton Drive, Dallas, Texas 75234. Our
telephone number is (972)&nbsp;241-4080.


<P align="center" style="font-size: 10pt">The date of the prospectus is April&nbsp;__, 2005.



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>TABLE OF CONTENTS</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Page</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101">Prospectus Summary</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102">The Offering</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#103">Summary Financial Data</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#104">Special Note Regarding Forward-Looking Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#105">Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#106">Legal Proceedings</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#107">Market for Common Equity and Related Stockholder Matters</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#108">Dividend Policy</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#109">Use of Proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#110">Capitalization</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#111">Selected Financial Data</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#112">Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#113">Business</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#114">Management</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#115">Compensation of Executive Officers</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#116">Principal Shareholders</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#117">Certain Relationships and Related Transactions</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#118">Description of Securities</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#119">Selling Shareholders</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#120">Plan of Distribution</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#121">Disclosure of Commission Position of Indemnification for Securities Act Liabilities</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#122">Legal Matters</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#123">Experts</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#124">Where You Can Find More Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#125">Index to Consolidated Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-1</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d22568exv23w1.htm">Consent of BDO Seidman, LLP</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d22568exv23w2.htm">Consent of Sherb & Co., LLP</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>
<P>
<DIV style="border-top: 1px solid #000000">&nbsp;</DIV>
<DIV align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>You should rely only on the information contained in this document or to which we have
referred you. We have not, and the selling security holders have not, authorized anyone to provide
you with information that is different. This document may only be used where it is legal to sell
these securities. The information in this document may only be accurate on the date of this
document.</B></DIV>
<DIV style="border-bottom: 1px solid #000000">&nbsp;</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="101"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>PROSPECTUS SUMMARY</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>The following summary should be read in conjunction with, and is qualified in its entirety by,
the more detailed information and financial statements (including the accompanying notes) appearing
elsewhere in this prospectus. Unless otherwise noted, the terms &#147;we,&#148; &#147;our,&#148; &#147;us,&#148; refer to Natural
Health Trends Corp. (&#147;the Company&#148;) and its subsidiaries. The Company is a holding company with
substantially all of its assets consisting of the capital stock of its subsidiaries. You should
carefully consider the information set forth under &#147;Risk Factors.&#148; In addition, certain statements
in this prospectus are forward-looking statements which involve risks and uncertainties. See
&#147;Special Note Regarding Forward-Looking Statements.&#148;</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Natural Health Trends Corp. (the &#147;Company&#148;) is an international direct selling organization.
We control subsidiaries that distribute products through two separate direct selling businesses
that promote health, wellness and vitality. Lexxus International, Inc., our wholly-owned
subsidiary (&#147;Lexxus U.S.&#148;), and other Lexxus subsidiaries (collectively, &#147;Lexxus&#148;), sell certain
cosmetic products, consumer as well as &#147;quality of life&#148; products, which accounted for
approximately ninety-nine (99%) percent of our consolidated net revenues in 2004. eKaire.com, Inc.
(&#147;eKaire&#148;), our wholly-owned subsidiary, distributes nutritional supplements aimed at general
health and wellness.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lexxus commenced operations in January&nbsp;2001 and has experienced tremendous growth, as we are
currently conducting business in at least 30 countries through approximately 130,000 active
distributors as of December&nbsp;31, 2004. (We consider a distributor &#147;active&#148; if he or she has placed
at least one product order with us during the preceding year). The Lexxus business includes KGC
Networks Pte. Ltd. (&#147;KGC&#148;), a Singapore company owned 51% by the Company and 49% by a European
private investor. KGC sells Lexxus products into a separate network with distributors primarily in
Russia and other Eastern European countries. eKaire has been in business since 2000 and is
operating in four countries through approximately 3,600 active distributors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We seek to be a leader in the direct selling industry serving the health and wellness
marketplace by driving our products into as many venues and into as many markets as possible
through our direct selling marketing operations. Our objectives are to enrich the lives of the
users of our products and enable our distributors to benefit financially from the sale of our
products.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain executive offices at 12901 Hutton Drive, Dallas, Texas 75234 and our telephone
number is (972)&nbsp;241-4080. Our website is located at <U>www.naturalhealthtrendscorp.com</U>. The
information provided on our website should not be considered part of this prospectus.


<P align="center" style="font-size: 10pt">1
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="102"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>THE OFFERING</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Shares of common stock being registered
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2,159,704</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Shares of common stock being registered for issuance upon the
exercise of warrants
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1,369,704</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Total shares of common stock outstanding as of the date of this
registration statement
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6,819,667</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Total proceeds raised by us from the
disposition of the common stock by
the selling security holders of
their transferees
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">We will receive no proceeds from the
disposition of already outstanding
shares of our common stock by the
selling security holders or their
transferees.<BR><BR>
We could receive gross proceeds of
up to $17,080,208 from the exercise
of all the 1,369,704 warrants
covered by this registration
statement.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NASDAQ National Market
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">BHIP</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Risk factors
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">See &#147;Risk Factors&#148; beginning on page 5 of this prospectus for
a discussion of factors you should carefully consider before
deciding to invest in our common shares.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">2
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="103"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>SUMMARY FINANCIAL DATA</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following data has been derived from the audited consolidated financial statements of the
Company and should be read in conjunction with those statements. Historical results are not
necessarily indicative of future results.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2000<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18">(In Thousands, Except Per Share Data)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Statement of Operations Data:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,989</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">36,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">133,225</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,904</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Distributor commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,759</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,102</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,552</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(65</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,223</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,669</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,241</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted income (loss)&nbsp;from continuing
operations per share<SUP style="font-size: 85%; vertical-align: text-top">2</SUP>:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(146.83</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.98</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted weighted-average number of shares
outstanding<SUP style="font-size: 85%; vertical-align: text-top">2</SUP>:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,822</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Balance Sheet Data (at end of
period):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,324</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Working capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,865</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,858</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,187</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,519</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,105</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,021</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">684</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">818</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total stockholders&#146; equity (deficit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,737</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,370</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(398</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,029</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<HR size="1" width="18%" align="left" noshade color="#000000">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Reflects the Company&#146;s results of operations from previously owned subsidiaries, Kaire Nutraceuticals, Inc. and Global Health Alternatives, Inc. The Lexxus business commenced operations in January&nbsp;2001.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">2</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">All share and earnings per share data gives effect to a 1-for-100 reverse stock split, which took effect in March&nbsp;2003.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">3
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left">
<A name="104"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain statements contained in this prospectus constitute &#147;forward-looking statements&#148; within
the meaning of Section&nbsp;27A of the Securities Act of 1933, as amended, and Section&nbsp;21E of the
Securities Exchange Act of 1934, as amended. All statements included in this prospectus, other than
statements of historical facts, regarding our strategy, future operations, financial position,
estimated revenues, projected costs, prospects, plans and objectives are forward-looking
statements. When used in this prospectus, the words &#147;believe,&#148; &#147;anticipate,&#148; &#147;intend&#148;, &#147;estimate,&#148;
&#147;expect,&#148; &#147;project&#148;, &#147;could&#148;, &#147;would&#148;, &#147;may&#148;, &#147;plan&#148;, &#147;predict&#148;, &#147;pursue&#148;, &#147;continue&#148;, &#147;feel&#148; and
similar expressions are intended to identify forward-looking statements, although not all
forward-looking statements contain these identifying words.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot guarantee future results, levels of activity, performance or achievements, and you
should not place undue reliance on our forward-looking statements. Our actual results could differ
materially from those anticipated in these forward-looking statements as a result of various
factors, including the risks described in Risk Factors, and elsewhere in this prospectus. Our
forward-looking statements do not reflect the potential impact of any future acquisitions, mergers,
dispositions, joint ventures or strategic investments. In addition, any forward-looking statements
represent our expectation only as of the date of this prospectus and should not be relied on as
representing our expectations as of any subsequent date. While we may elect to update
forward-looking statements at some point in the future, we specifically disclaim any obligation to
do so, even if our expectations change.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although we believe that the expectations reflected in any of our forward-looking statements
are reasonable, actual results could differ materially from those projected or assumed in any of
our forward-looking statements. Our future financial condition and results of operations, as well
as any forward-looking statements, are subject to change and to inherent risks and uncertainties,
such as those disclosed in this prospectus. Important factors that could cause our actual results,
performance and achievements, or industry results to differ materially from estimates or
projections contained in forward-looking statements include, among others, the following:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left"><FONT face="wingdings">&#167;</FONT>&nbsp;&nbsp;</TD>
    <TD>our relationship with our distributors;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left"><FONT face="wingdings">&#167;</FONT>&nbsp;&nbsp;</TD>
    <TD>our need to continually recruit new distributors;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left"><FONT face="wingdings">&#167;</FONT>&nbsp;&nbsp;</TD>
    <TD>our internal controls and accounting methods may require further modification;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left"><FONT face="wingdings">&#167;</FONT>&nbsp;&nbsp;</TD>
    <TD>regulatory matters governing our products and network marketing system;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left"><FONT face="wingdings">&#167;</FONT>&nbsp;&nbsp;</TD>
    <TD>our relationship with our majority owned subsidiary operating in Russia;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left"><FONT face="wingdings">&#167;</FONT>&nbsp;&nbsp;</TD>
    <TD>our ability to recruit and maintain key management,</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left"><FONT face="wingdings">&#167;</FONT>&nbsp;&nbsp;</TD>
    <TD>adverse publicity associated with our products or direct selling organizations;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left"><FONT face="wingdings">&#167;</FONT>&nbsp;&nbsp;</TD>
    <TD>product liability claims;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left"><FONT face="wingdings">&#167;</FONT>&nbsp;&nbsp;</TD>
    <TD>our reliance on outside manufacturers;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left"><FONT face="wingdings">&#167;</FONT>&nbsp;&nbsp;</TD>
    <TD>risks associated with operating internationally, including foreign exchange risks;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left"><FONT face="wingdings">&#167;</FONT>&nbsp;&nbsp;</TD>
    <TD>product concentration;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left"><FONT face="wingdings">&#167;</FONT>&nbsp;&nbsp;</TD>
    <TD>dependence on increased penetration of existing markets;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left"><FONT face="wingdings">&#167;</FONT>&nbsp;&nbsp;</TD>
    <TD>the competitive nature of our business; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left"><FONT face="wingdings">&#167;</FONT>&nbsp;&nbsp;</TD>
    <TD>our ability to generate sufficient cash to operate and expand our business.</TD>
</TR>


</TABLE>

<P align="center" style="font-size: 10pt">4
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Market data and other statistical information used throughout this report is based on
independent industry publications, government publications, reports by market research firms or
other published independent sources and on our good faith estimates, which are derived from our
review of internal surveys and independent sources. Although we believe that these sources are
reliable, we have not independently verified the information and cannot guarantee its accuracy or
completeness.

<DIV align="left">
<A name="105"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>RISK FACTORS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Investing in our common stock involves a high degree of risk. You should carefully consider
the following risk factors in addition to the other information contained in this </I></B><B><I>prospectus</I></B><B><I> before
deciding whether to invest in our shares of common stock. If any of the following risks actually
occurs, our business, financial condition and results of operations would suffer. In this case, the
trading price of our shares of common stock would likely decline and you might lose all or part of
your investment in our common stock. The risks described below are not the only ones we face. Other
risks, including those that we do not currently consider material or may not currently anticipate,
may impair our business.</I></B>


<P align="center" style="font-size: 10pt"><B><I>Risks Related to Our Business</I></B>



<P align="left" style="font-size: 10pt"><B>Our Failure To Maintain and Expand Our Distributor Relationships Could Adversely Affect Our
Business.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We distribute our products through independent distributors, and we depend upon them directly
for all of our sales. Accordingly, our success depends in significant part upon our ability to
attract, retain and motivate a large base of distributors. Our direct selling organization is
headed by a relatively small number of key distributors. The loss of a significant number of
distributors, including any key distributors, could materially and adversely affect sales of our
products and could impair our ability to attract new distributors. Moreover, the replacement of
distributors could be difficult because, in our efforts to attract and retain distributors, we
compete with other direct selling organizations, including but not limited to those in the personal
care, cosmetic product and nutritional supplement industries. Our distributors may terminate their
services with us at any time and, in fact, like most direct selling organizations, we have a high
rate of attrition.


<P align="left" style="font-size: 10pt"><B>If The Number Or Productivity Of Independent Distributors Does Not Increase, Our Revenue Could Not
Increase.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To increase revenue, we must increase the number and/or the productivity of our distributors.
We can provide no assurances that distributor numbers could increase or remain constant or that
their productivity could increase. We experienced an 81% increase in active Lexxus distributors
during 2004, following a 39% increase in active distributors in 2003 compared to the prior years.
See table presented in &#147;Business &#151; Operations of the
Business&#148;. The number of active distributors may not increase and could decline in the
future. Distributors may terminate their services at any time, and, like most direct selling
companies, we experience a high turnover among distributors from


<P align="center" style="font-size: 10pt">5
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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">year to year. We cannot accurately predict any fluctuation in the number and productivity of
distributors because we primarily rely upon existing distributors to sponsor and train new
distributors and to motivate new and existing distributors. Operating results could be adversely
affected if our existing and new business opportunities and products do not generate sufficient
economic incentive or interest to retain existing distributors and to attract new distributors.


<P align="left" style="font-size: 10pt"><B>Because Our Hong Kong Operations Account For A Majority Of Our Business, Any Adverse Changes In Our
Business Operations In Hong Kong Would Harm Our Business.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2003 and 2004, approximately 49% and 56% of our revenue, respectively, was generated in
Hong Kong. Various factors could harm our business in Hong Kong, such as worsening economic
conditions or other events that are out of our control. For example, on April&nbsp;12, 2004, an
investigative television program was aired in the People&#146;s Republic of China with respect to the
operations of the Company&#146;s Hong Kong subsidiary and the Lexxus representative office located in
Beijing. The television program alleged that Lexxus&#146;s Hong Kong operations engaged in fraudulent
activities and sold products without proper permits. Due to the adverse publicity caused by the
airing of the television program, revenues from Hong Kong declined significantly. See &#147;Business &#150;
Recent Developments&#148;. Our financial results could be harmed if our products, business opportunity
or planned growth initiatives fail to retain and generate continued interest and enthusiasm among
our distributors and consumers in this market.


<P align="left" style="font-size: 10pt"><B>Our Plan to Expand Operations In China May Result In More Governmental Scrutiny, And Our Business
In Hong Kong May Be Harmed By The Results Of Such Scrutiny.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Chinese government banned direct selling activities in China in 1998. The government has
rigorously monitored and enforced this ban. In the past, the government has taken significant
actions against companies that the government found engaging in violation of applicable law.
Governmental actions included shutting down their businesses and arresting alleged perpetrators.
Consequently, a few of our direct selling peer companies have modified their business models and
started selling to Chinese consumers through owned, leased or franchised retail outlets. We have
not implemented our direct sales model in China. We intend to follow the path of some of our
competitors and implement a business model that utilizes retail stores and an employee sales force
that we believe will comply with applicable regulations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of our Hong Kong distributors have engaged in activities that violated our policies in
this market and resulted in some regulatory concern and some adverse publicity such as the negative
television documentary aired on April&nbsp;12, 2004. Reviews and investigations by government
regulators could restrict our ability to conduct business.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although we would attempt to work closely with both national and local governmental agencies
in implementing our plans, our efforts to comply with national and local laws may be harmed by a
rapidly evolving regulatory climate, concerns about activities resembling direct selling and any
subjective interpretation of laws. Any determination that our operations or activities, or the
activities of our employee sales representatives or distributors living outside of China, are not
in compliance with applicable regulations could result in the imposition of substantial fines,
extended interruptions of business, restrictions on our future ability to open


<P align="center" style="font-size: 10pt">6
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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">new stores or expand into new locations, substantially diminishing our ability to retain
existing sales representatives and attract new sales representatives, changes to our business
model, the termination of required licenses to conduct business, or other actions, all of which
would harm our business.


<P align="left" style="font-size: 10pt"><B>If China Fails To Adopt New Direct Selling Regulations, Or If These Regulations Are Not Favorable
To Us, Our Future Growth Could Be Harmed.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Chinese government has published a draft of the new direct selling regulations. None of
these regulations have been adopted and there can be no assurance that these regulations will be
adopted or, if adopted, that they will benefit our company. While we intend to apply for a direct
selling license under any newly adopted regulations, there can be no assurance that a license will
be granted. Although we currently do not operate a direct selling business in China, our future
growth could be harmed if the regulations are not adopted or are unfavorable, or if we are unable
to obtain a license for direct selling under these regulations.


<P align="left" style="font-size: 10pt"><B>Intellectual Property Rights Are Difficult To Enforce In China.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chinese commercial law is relatively undeveloped compared to most other major markets, and, as
a result, we may have limited legal recourse in the event we encounter significant difficulties
with patent or trademark infringers. Limited protection of intellectual property is available under
Chinese law, and the local manufacturing of our products may subject us to an increased risk that
unauthorized parties may attempt to copy or otherwise obtain or use our product formulations. As a
result, we cannot assure you that we would be able to adequately protect our product formulations.


<P align="left" style="font-size: 10pt"><B>Our Continued Influence Over Our KGC Networks Subsidiary And Its Success Depends In Large Part On A
Good Working Relationship With The Minority Shareholder.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company owns 51% of the outstanding capital stock of KGC and has the right to appoint a
majority of the Board of Directors of KGC. KGC accounted for 22% of
our total revenue in 2004,
compared to 21% in 2003. We have limited influence over KGC&#146;s day-to-day operations, which are
actively managed by a European private investor that owns 49% of the outstanding capital stock of
KGC, and Septuor Consulting (&#147;Septuor&#148;), KGC&#146;s third party service
provider. We work with the management of KGC and Septuor
on supply chain management, cash
flow management, product development and financial reporting. But our influence over KGC is not as
much as that over our other subsidiaries. There can be no assurance that this subsidiary will
continue to grow under the current ownership structure. There is also no guarantee that the
interests of the minority shareholder will always be aligned with our interests. Deterioration in
our relationship with the minority shareholder or Septuor, or a failure to work cooperatively by
either party, could result in a slow-down of the business growth, disruption in timely financial
reporting, or other business problems that could materially harm our business.


<P align="center" style="font-size: 10pt">7
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>As We Continue To Expand Into Foreign Markets Our Business Becomes Increasingly Subject To
Political and Economic Risks. Changes In These Markets Could Adversely Affect Our Business.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that our ability to achieve future growth is dependent in part on our ability to
continue our international expansion efforts. However, there can be no assurance that we would be
able to grow in our existing international markets, enter new international markets on a timely
basis, or that new markets would be profitable. We must overcome significant regulatory and legal
barriers before we can begin marketing in any foreign market.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Also, it is difficult to assess the extent to which our products and sales techniques would be
accepted or successful in any given country. In addition to significant regulatory barriers, we
may also encounter problems conducting operations in new markets with different cultures and legal
systems from those encountered elsewhere. We may be required to reformulate certain of our
products before commencing sales in a given country. Once we have entered a market, we must adhere
to the regulatory and legal requirements of that market. No assurance can be given that we would
be able to successfully reformulate our products in any of our current or potential international
markets to meet local regulatory requirements or attract local customers. The failure to do so
could have a material adverse effect on our business, financial condition, and results of
operations. There can be no assurance that we would be able to obtain and retain necessary permits
and approvals.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In many markets, other direct selling companies already have significant market penetration,
the effect of which could be to desensitize the local distributor population to a new opportunity,
or to make it more difficult for us to recruit qualified distributors. There can be no assurance
that, even if we are able to commence operations in foreign countries, there would be a
sufficiently large population of potential distributors inclined to participate in a direct selling
system offered by us. We believe our future success could depend in part on our ability to
seamlessly integrate our business methods, including distributor compensation plan, across all
markets in which our products are sold. There can be no assurance that we would be able to further
develop and maintain a seamless compensation program.


<P align="left" style="font-size: 10pt"><B>An Increase In The Amount
Of Compensation Paid To Distributors Reduces Profitability.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A significant expense is the payment of compensation to our distributors. We paid
approximately 46% and 44% in 2002 and 2003, of our net revenues as compensation to our
distributors. In 2004, we paid approximately 51% of our net revenues as compensation to our
distributors. The increase is due to the growth of the distributor network, an elevated level of
promotions, and the Company&#146;s decision to not seek recovery of commissions paid on returned
products in Hong Kong during the second quarter of 2004. We compensate our distributors by paying
commissions, bonuses, and certain awards and prizes based upon product
sales by a distributor&#146;s down-line distributor network. We closely monitor the amount of compensation
to distributors paid as a percentage of net sales and may need to adjust our compensation plan to
prevent distributor compensation from having a significant adverse effect on earnings. There can
be no assurance that these changes or future changes to


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<P align="left" style="font-size: 10pt">our compensation plan or product pricing would be successful in maintaining the level of
distributor compensation expense as a percentage of net sales. Furthermore, these changes may make
it difficult to recruit and retain qualified and motivated distributors. An increase in
compensation payments to distributors as a percentage of net sales will reduce our profitability.
See &#147;Business &#150; Working with Distributors &#150; Compensation Plans.&#148;


<P align="left" style="font-size: 10pt"><B>We May be Required to Change the Name of our Lexxus Subsidiaries, Internet Sites and Certain
Products.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;1, 2004, Toyota Motor Sales, U.S.A. filed a lawsuit against the Company and Lexxus
alleging that our use of the name Lexxus dilutes and infringes upon Toyota&#146;s Lexus trademark.
Toyota wants to enjoin the Company and Lexxus from using the Lexxus mark and otherwise competing
unfairly with Toyota, to transfer the ownership of the mylexxus.com and lexxusinternational.com
Internet sites to Toyota, and reimbursement of costs and reasonable attorney fees incurred by
Toyota in connection with this matter. See &#147;Legal Proceedings.&#148; If the Company is unsuccessful in
defending this action, the Company may be required to change the name of some or all of its Lexxus
subsidiaries, and certain product and website domain names which could have a material adverse
effect on the financial condition, results of operations, cash flow or business prospects of the
Company. Further, even if the Company is successful in defeating all or some of Toyota&#146;s claims,
legal costs and expenses incurred by the Company could be substantial.


<P align="left" style="font-size: 10pt"><B>We Do Not Have Product Liability Insurance And Product Liability Claims Could Hurt Our Business.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Currently, we do not have product liability insurance, although the insurance carried by our
suppliers may cover certain product liability claims against us. Nevertheless, we do not conduct or
sponsor clinical studies of our products. As a marketer of nutraceuticals, cosmetics and other
products that are ingested by consumers or applied to their bodies, we may become subjected to
various product liability claims, including that:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>our products contain contaminants;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>our products include inadequate instructions as to their uses; or</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>our products include inadequate warnings concerning side effects and interactions
with other substances.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Especially since we do not have direct product liability insurance, it is possible that
product liability claims and the resulting adverse publicity could negatively affect our business.
In November&nbsp;2004, Dorothy Porter filed a complaint against the Company for strict liability, breach
of warranty and negligence in the U.S. District Court for the Southern District of Illinois,
alleging that she sustained a brain hemorrhage after taking Formula One, an ephedra-containing
product marketed by Kaire Nutraceuticals, Inc., a former subsidiary of the Company. See &#147;Legal
Proceedings.&#148;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If our suppliers&#146; product liability insurance fails to cover product liability claims or other
product liability claims, or any product liability claims exceeds the amount of coverage provided


<P align="center" style="font-size: 10pt">9
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<P align="left" style="font-size: 10pt">by such policies or if we are unsuccessful in any third party claim against the manufacturer
or if we are unsuccessful in collecting any judgment that may be recovered by the Company against
the manufacturer, we could be required to pay substantial monetary damages which could materially
harm our business, financial condition and results of operations. As a result, we may become
required to pay higher premiums and accept higher deductibles in order to secure adequate insurance
coverage in the future.


<P align="left" style="font-size: 10pt"><B>Our Internal Controls and Accounting Methods May Require Further Modification.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company modified certain of its accounting policies and made other adjustments to our
accounting for past transactions, which resulted in the restatement of the Company&#146;s financial
statements for each quarter in 2001 and 2002, the first three quarters
in 2003, as well as for the years ended December&nbsp;31, 2001 and 2002. In connection with the restatement of our financial
statements, the Company has been informed by its independent auditors that many of the restatement items
are the result of material weaknesses in the Company&#146;s internal controls and procedures.
Further in March 2005 the Company determined a restatement of the
quarter and year ended December 31, 2003 as well as the first quarter
of 2004 was warranted due to certain accounting errors. The
Company has implemented new controls and procedures and plans to implement additional controls and
procedures that we believe are sufficient to accurately report our financial performance on a timely basis in the
foreseeable future. See &#147;Management&#146;s Discussion and
Analysis of Financial Condition and Results of Operations &#151;
Controls and Procedures&#148;. If we are unable to implement these additional
controls and procedures, we may not be able to report our financial performance on a timely basis
and our business and stock price would be adversely affected.


<P align="left" style="font-size: 10pt"><B>Non-Compliance with Section&nbsp;404 of the Sarbanes-Oxley Act of 2002 Could Materially Adversely Affect
Us.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Securities Exchange Commission, as directed by Section&nbsp;404 of the Sarbanes-Oxley Act of
2002, adopted rules which would require us to include in our annual reports on Form 10-K, beginning
in fiscal 2005, an assessment by management of the effectiveness of our internal controls over
financial reporting. In addition, our independent auditors must attest to and report on
management&#146;s assessment of the effectiveness of such internal controls over financial reporting.
While we intend to diligently and thoroughly document, review, test and improve our internal
controls over financial reporting to comply with Section&nbsp;404 of the Sarbanes-Oxley Act, if our
independent auditors are not satisfied with the adequacy of our internal controls over financial
reporting, or if the independent auditors interpret the requirements, rules and/or regulations
differently than we do, then they may decline to attest to management&#146;s assessment or may issue a
report that is qualified. This could result in an adverse reaction in the financial marketplace due
to a loss of investor confidence in the reliability of our financial statements, which could
negatively impact the price of our common stock.


<P align="left" style="font-size: 10pt"><B>We Rely On And Are Subject To Risks Associated With Our Reliance Upon Information Technology
Systems.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success is dependent on the accuracy, reliability, and proper use of sophisticated and
dependable information processing systems and management information technology. Our information
technology systems are designed and selected to facilitate order entry and customer


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<P align="left" style="font-size: 10pt">billing, maintain distributor records, accurately track purchases and distributor compensation
payments, manage accounting operations, generate reports, and provide customer service and
technical support. Although we acquired MarketVision, our software service provider, during the
first half of 2004, in part, to gain greater control over its operations, any interruption in these
systems could have a material adverse effect on our business, financial condition, and results of
operations.


<P align="left" style="font-size: 10pt"><B>Our Lexxus Subsidiaries Have a Limited Operating History Which May Not be Indicative of Future
Performance</B>.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although our Lexxus subsidiaries accounted for approximately 99% of our consolidated net
revenues during fiscal 2004, it has been operating only since January&nbsp;2001. Therefore, Lexxus is
still in the early stage of its development.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business and prospects must be considered in light of the risk, expense and difficulties
frequently encountered by companies in an early stage of development, particularly companies in new
and rapidly evolving international markets. If we are unable to effectively allocate our resources
and help grow our Lexxus subsidiaries, our stock price may be adversely affected and we may be
unable to execute our strategy of expanding our network of independent distributors. Our business
depends upon the performance of our Lexxus subsidiaries and, due to its relatively short operating
history, past performance may not be indicative of future results.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success has been, and could continue to be, significantly dependent on our ability to
manage rapid growth through expansions and enhancements of our worldwide personnel and management,
order processing and fulfillment, inventory and shipping systems, financial reporting and other
aspects of operations. As we continue to expand our operations, the ability to manage this growth
could represent an increasing challenge and our failure to properly manage this growth may
materially and adversely affect our results of operation.


<P align="left" style="font-size: 10pt"><B>Regulatory Matters Governing Our Industry Could Have A Significant Negative Effect On Our Business.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In both our United States and foreign markets, we are affected by extensive laws, governmental
regulations, administrative determinations, court decisions and similar constraints. Such laws,
regulations and other constraints may exist at the federal, state or local levels in the United
States and at all levels of government in foreign jurisdictions.


<P align="center" style="font-size: 10pt"><U>Product Regulations</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The formulation, manufacturing, packaging, labeling, distribution, importation, sale and
storage of certain of our products are subject to extensive regulation by various federal agencies,
including the Food and Drug Administration (&#147;FDA&#148;), the Federal Trade Commission (the &#147;FTC&#148;), the
Consumer Product Safety Commission and the United States Department of Agriculture and by various
agencies of the states, localities and foreign countries in which our products are manufactured,
distributed and sold. Failure by our distributors or us to comply with those regulations could lead
to the imposition of significant penalties or claims and could


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<P align="left" style="font-size: 10pt">materially and adversely affect our business. In addition, the adoption of new regulations or
changes in the interpretation of existing regulations may result in significant compliance costs or
discontinuation of product sales and may adversely affect the marketing of our products, resulting
in significant loss of sales revenues.


<P align="center" style="font-size: 10pt"><U>Product Claims, Advertising and Distributor Activities</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our failure to comply with FTC or state regulations, or with regulations in foreign markets
that cover our product claims and advertising, including direct claims and advertising by us, as
well as claims and advertising by distributors for which we may be held responsible, may result in
enforcement actions and imposition of penalties or otherwise materially and adversely affect the
distribution and sale of our products. Distributor activities in our existing markets that violate
applicable governmental laws or regulations could result in governmental or private actions against
us in markets where we operate. Given the size of our distributor force, we cannot assure that our
distributors would comply with applicable legal requirements.


<P align="center" style="font-size: 10pt"><U>Direct Selling System</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our direct selling system is subject to a number of federal and state regulations administered
by the FTC and various state agencies as well as regulations in foreign markets administered by
foreign agencies. Regulations applicable to direct selling organizations generally are directed at
ensuring that product sales ultimately are made to consumers and that advancement within the
organizations is based on sales of the organizations&#146; products rather than investments in the
organizations or other non-retail sales related criteria. We are subject to the risk that, in one
or more markets, our marketing system could be found not to be in compliance with applicable
regulations. The failure of our direct selling system to comply with such regulations could have a
material adverse effect on our business in a particular market or in general.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are also subject to the risk of private party challenges to the legality of our direct
selling system. The regulatory requirements concerning direct selling systems do not include
&#147;bright line&#148; rules and are inherently fact-based. An adverse judicial determination with respect
to our direct selling system, or in proceedings not involving us directly but which challenge the
legality of other direct selling marketing systems, could have a material adverse effect on our
business.


<P align="center" style="font-size: 10pt"><U>Transfer Pricing and Similar Regulations</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In many countries, including the United States, we are subject to transfer pricing and other
tax regulations designed to ensure that appropriate levels of income are reported as earned by our
United States or local entities and are taxed accordingly. In addition, our operations are subject
to regulations designed to ensure that appropriate levels of customs duties are assessed on the
importation of our products.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal domicile is the United States. Under tax treaties, we are eligible to receive
foreign tax credits in the United States for taxes paid abroad. As our operations expand outside


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<P align="left" style="font-size: 10pt">the United States, taxes paid to foreign taxing authorities may exceed the credits available
to us, resulting in the payment of a higher overall effective tax rate on our worldwide operations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have adopted transfer pricing agreements with our subsidiaries to regulate intercompany
transfers, which agreements are subject to transfer pricing laws that regulate the flow of funds
between the subsidiaries and the parent corporation for product purchases, management services, and
contractual obligations, such as the payment of distributor compensation. We have begun the
initial steps of implementing a foreign holding and operating company structure for our non-United
States businesses. This new structure is expected to re-organize our non-United States
subsidiaries in the Cayman Islands. Though our goal is to improve the overall tax rate, there is
no assurance that the new tax structure could be successful. If the United States Internal Revenue
Service or the taxing authorities of any other jurisdiction were to successfully challenge these
agreements, plans, or arrangements, or require changes in our transfer pricing practices, we could
be required to pay higher taxes, interest and penalties, and our earnings would be adversely
affected.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that we operate in compliance with all applicable transfer pricing laws and we
intend to continue to operate in compliance with such laws. However, there can be no assurance
that we will continue to be found to be operating in compliance with transfer pricing laws, or that
those laws would not be modified, which, as a result, may require changes in our operating
procedures.


<P align="center" style="font-size: 10pt"><U>Taxation Relating To Distributors</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our distributors are subject to taxation, and in some instances legislation or governmental
agencies impose an obligation on us to collect the taxes, such as value added taxes, and to
maintain appropriate records. In addition, we are subject to the risk in some jurisdictions of
being responsible for social security and similar taxes with respect to our distributors.


<P align="center" style="font-size: 10pt"><U>Other Regulations</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are also subject to a variety of other regulations in various foreign markets, including
regulations pertaining to employment and severance pay requirements, import/export regulations and
antitrust issues. Our failure to comply, or assertions that we fail to comply, with these
regulations could have a material adverse effect on our business in a particular market or in
general.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the extent we decide to commence or expand operations in additional countries, government
regulations in those countries may prevent or delay entry into or expansion of operations in those
markets. In addition, our ability to sustain satisfactory levels of sales in our markets is
dependent in significant part on our ability to introduce additional products into the markets.
However, government regulations in both our domestic and international markets can delay or prevent
the introduction, or require the reformulation or withdrawal, of some of our products.


<P align="left" style="font-size: 10pt"><B>Currency Exchange Rate Fluctuations Could Lower Our Revenue And Net Income.</B>



<P align="center" style="font-size: 10pt">13
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2004, approximately 87% of our revenue was recorded in markets outside the United States.
However, that figure does not accurately reflect our foreign currency exposure mainly because the
Hong Kong dollar is pegged to the U.S. dollar. Our European business, KGC, sold products in U.S.
dollars and paid distributors commissions in U.S. dollars, until the fourth quarter of 2004, when
KGC switched to euro for both selling products and paying commissions. We also purchase all
inventories in U.S. dollars. Therefore, our currency exposure, mainly to Korean won, Singapore
dollar, New Taiwan dollar and Australia dollar, representing approximately 10% of our revenue in
the first nine months of 2004 before KGC switched to euro from U.S. dollar, was relatively
insignificant, compared to our overall geographic reach. In the fourth quarter of 2004, with KGC
doing business in euro, approximately 27% of our net revenue was generated in functional currencies
in or pegged to U.S. dollar.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our exposure to foreign currency fluctuation is expected to increase, as KGC switched to euro
from U.S. dollar, and the Company opens for business in Japan and Mexico. In the fourth quarter of
2004, with KGC doing business in euro, approximately 27% of our net revenue was generated in
functional currencies not denominated in or pegged to U.S. dollar. In preparing our consolidated
financial statements, we translate revenue and expenses in foreign countries from their local
currencies into U.S. dollars using the average exchange rates for the period. The effect of the
translation of the Company&#146;s foreign operations is included in accumulated other comprehensive
income within stockholders&#146; equity and do not impact the statement of operations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Given our inability to predict the degree of exchange rate fluctuations, we cannot estimate
the effect these fluctuations may have upon future reported results, product pricing or our overall
financial condition. Further, to date we have not attempted to reduce our exposure to short-term
exchange rate fluctuations by using foreign currency exchange contracts.


<P align="left" style="font-size: 10pt"><B>Although Our Distributors Are Independent Contractors, Improper Distributor Actions That Violate
Laws Or Regulations Could Harm Our Business.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Distributor activities that violate governmental laws or regulations could result in
governmental actions against us in markets where we operate. Our distributors are not employees and
act independently of us. Some of our distributors may be doing business in countries without proper
registration or authority to do so. We implement strict policies and procedures to ensure our
distributors comply with applicable legal requirements. However, given the size and diversity of
our distributor force, we experience problems with distributors from time to time, especially with
respect to our distributors in foreign markets. Distributors often desire to enter a market before
we have received approval to do business to gain an advantage in the marketplace. Improper
distributor activity in new geographic markets could result in adverse publicity and can be
particularly harmful to our ability to ultimately enter these markets. See &#147;Business &#150; Recent
Developments&#148; regarding events in Hong Kong during April&nbsp;2004.


<P align="left" style="font-size: 10pt"><B>Failure Of New Products To Gain Distributor And Market Acceptance Could Harm Our Business.</B>



<P align="center" style="font-size: 10pt">14
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An important component of our business is our ability to develop new products that create
enthusiasm among our distributor force. If we fail to introduce new products on a timely basis, our
distributor productivity could be harmed. In addition, if any new products fail to gain market
acceptance, are restricted by regulatory requirements, or have quality problems, this would harm
our results of operations. Factors that could affect our ability to continue to introduce new
products include, among others, limited capital resources, government regulations, proprietary
protections of competitors that may limit our ability to offer comparable products and any failure
to anticipate changes in consumer tastes and buying preferences.


<P align="left" style="font-size: 10pt"><B>System Failures Could Harm Our Business.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because of our diverse geographic operations and our internationally applicable distributor
compensation plans, our business is highly dependent on efficiently functioning information
technology systems provided by MarketVision (for Lexxus) and Septuor (for KGC). The MarketVision
and Septuor systems and operations are vulnerable to damage or interruption from fires,
earthquakes, telecommunications failures, computer viruses and worms, software defects and other
events. They are also subject to break-ins, sabotage, acts of vandalism and similar misconduct.
Despite precautions implemented by the staff of MarketVision, problems could result in
interruptions in services and materially and adversely affect our business, financial condition and
results of operations.


<P align="left" style="font-size: 10pt"><B>Three Of Our Products Constitute A Significant Portion Of Our Sales.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our <I>Skindulgence</I><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, <I>Alura&#153; </I>and <I>Premium Noni Juice&#153; </I>products constitute a significant
portion of our sales. If demand for either of these products decreases significantly, government
regulation restricts the sale of these products, we are unable to adequately source or deliver
these products, or we cease offering any of these products for any reason without a suitable
replacement, our business, financial condition and results of operations could be materially and
adversely effected.


<P align="left" style="font-size: 10pt"><B>We Do Not Manufacture Our Own Products So We Must Rely On Independent Third Parties For The
Manufacturing And Supply Of Our Products.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of our products are manufactured by independent third parties. There is no assurance that
our current manufacturers will continue to reliably supply products to us at the level of quality
we require. In the event any of our third-party manufacturers become unable or unwilling to
continue to provide the products in required volumes and quality levels at acceptable prices, we
will be required to identify and obtain acceptable replacement manufacturing sources. There is no
assurance that we will be able to obtain alternative manufacturing sources or be able to do so on a
timely basis. An extended interruption in the supply of our products will result in a substantial
loss of sales. In addition, any actual or perceived degradation of product quality as a result of
our reliance on third party manufacturers may have an adverse effect on sales or result in
increased product returns and buybacks.


<P align="left" style="font-size: 10pt"><B>The High Level Of Competition In Our Industry Could Adversely Affect Our Business.</B>



<P align="center" style="font-size: 10pt">15
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The business of marketing personal care, cosmetic, nutraceutical, and lifestyle enhancement
products is highly competitive. This market segment includes numerous manufacturers, distributors,
marketers, and retailers that actively compete for the business of consumers both in the United
States and abroad. The market is highly sensitive to the introduction of new products, which may
rapidly capture a significant share of the market. Sales of similar products by competitors may
materially and adversely affect our business, financial condition and results of operations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to significant competition for the recruitment of distributors from other
direct selling organizations, including those that market similar products. Many of our
competitors are substantially larger than we are, offer a wider array of products, have far greater
financial resources and many more active distributors than we have. Our ability to remain
competitive depends, in significant part, on our success in recruiting and retaining distributors
through an attractive compensation plan and other incentives. We believe that our compensation and
incentive programs provide our distributors with significant earning potential. However, we cannot
be sure that our programs for recruitment and retention of distributors would be successful.


<P align="left" style="font-size: 10pt"><B>Terrorist Attacks, Acts Of War, Epidemics Or Other Communicable Diseases Or Any Other Natural
Disasters May Seriously Harm Our Business.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Terrorist attacks, or acts of war or natural disasters may cause damage or disruption to our
Company, our employees, our facilities and our customers, which could impact our revenues, expenses
and financial condition. The potential for future terrorist attacks, the national and international
responses to terrorist attacks, and other acts of war or hostility, such as the Chinese objection
to the Taiwan independence movement and its resultant tension in the Taiwan Strait, could
materially and adversely affect our business, results of operations, and financial condition in
ways that we currently cannot predict. Additionally, natural disasters less severe than the Indian
Ocean tsunami that occurred in December&nbsp;2004 may adversely affect our business, financial condition
and results of operations.


<P align="left" style="font-size: 10pt"><B>Loss Of Key Personnel Could Adversely Affect Our Business.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our future success depends to a significant degree on the skills, experience and efforts of
Mark D. Woodburn, our President, and Terry A. LaCore, Chief Executive Officer of Lexxus U.S. The
loss of the services of either Mr.&nbsp;Woodburn or Mr.&nbsp;LaCore could have a material adverse effect on
our business, results of operations and financial condition. We also depend on the ability of our
executive officers and other members of senior management to work effectively as a team. The loss
of one or more of our executive officers and other members of senior management could have a
material adverse effect on our business, results of operations and financial condition.


<P align="left" style="font-size: 10pt"><B>We May Be Unable To Protect Our Proprietary Technology Rights.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success depends to a significant degree upon the protection of our MarketVision software
and other proprietary technology rights. We rely on trade secret, copyright and


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<P align="left" style="font-size: 10pt">trademark laws and confidentiality agreements with employees and third parties, all of which
offer only limited protection. Moreover, the laws of some countries in which we market our
products may afford little or no effective protection of our proprietary technology. The reverse
engineering, unauthorized copying or other misappropriation of our proprietary technology could
enable third parties to benefit from our technology without paying us for it. This could have a
material adverse effect on our business, operating results and financial condition. If we resort
to legal proceedings to enforce our intellectual property rights, the proceedings could be
burdensome and expensive and could involve a high degree of risk.


<P align="center" style="font-size: 10pt"><B><I>Risks Related To Our Common Stock</I></B>



<P align="left" style="font-size: 10pt"><B>Disappointing Quarterly Revenue Or Operating Results Could Cause The Price Of Our Common Stock To
Fall.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our quarterly revenue and operating results are difficult to predict and may fluctuate
significantly from quarter to quarter. If our quarterly revenue or operating results fall below
the expectations of investors or securities analysts, the price of our common stock could fall
substantially.


<P align="left" style="font-size: 10pt"><B>Our Common Stock Is Particularly Subject To Volatility Because Of The Industry That We Are In.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market prices of securities of direct selling companies, have been extremely volatile, and
have experienced fluctuations that have often been unrelated or disproportionate to the operating
performance of such companies. These broad market fluctuations could adversely affect the market
price of our common stock.


<P align="left" style="font-size: 10pt"><B>Substantial Dilution May Occur From The Exercise of Outstanding Options or Warrants</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of April&nbsp;11, 2005, the Company had outstanding (i)&nbsp;options to purchase an aggregate of
1,674,124 shares of our common stock exercise prices between $1.00 and $18.11, and (ii)&nbsp;warrants
outstanding from the October&nbsp;2004 private placement of units exercisable for 1,369,704 shares of
our common stock at an exercise price equal to $12.47 per share. In the event that these
options and warrants are exercised, and the shares issued upon such exercise are sold, the market
price of our shares of common stock could decline. In addition, holders of such options and
warrants are likely to exercise them when, in all likelihood, the Company could obtain additional
capital on terms more favorable to the Company than those provided by the options and warrants.
Further, while our options and warrants are outstanding, they may adversely affect the terms on
which the Company could obtain additional capital.


<P align="left" style="font-size: 10pt"><B>Future Sales By the Company or Existing Security Holders Could Depress The Market Price Of Our
Common Stock.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the Company or our existing stockholders sell a large number of shares of our common stock,
the market price of the common stock could decline significantly. Further, even the perception in
the public market that the Company or our existing stockholders might sell shares


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<P align="left" style="font-size: 10pt">of common stock could depress the market price of the common stock.


<P align="left" style="font-size: 10pt"><B>There is No Assurance That an Active Public Trading Market Would Continue.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There was an extremely limited public trading market for our common stock. Commencing in the
fourth quarter of 2003, a more active trading market for our shares developed and the price of our
shares of common stock increased considerably. The Company&#146;s common stock was listed on the OTC
Bulletin Board and commencing on February&nbsp;22, 2005 began trading on The NASDAQ National Market
under the ticker symbol &#147;BHIP&#148;. There can be no assurance that an active public trading market for
our common stock will be sustained. If for any reason an active public trading market does not
continue, purchasers of the shares of our common stock may have difficulty in selling their
securities should they desire to do so and the price of our common stock may decline.


<P align="left" style="font-size: 10pt"><B>If Securities Analysts Do Not Publish Research Or Reports About Our Business Or If They Downgrade
Our Stock, The Price Of Our Stock Could Decline.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The trading market for our shares of common stock could rely in part on the research and
reporting that industry or financial analysts publish about us or our business. We do not control
these analysts. Furthermore, if one or more of the analysts who do cover us downgrades our stock,
the price of our stock could decline. If one or more of these analysts ceases coverage of our
company, we could lose visibility in the market, which in turn could cause our stock price to
decline.


<P align="left" style="font-size: 10pt"><B>We Have Broad Discretion to Use the Proceeds of Our Recent Private Placement Offering</B>.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have broad discretion in spending the proceeds in the recently completed private placement
of units. See &#147;Business &#150; Private Placement of Units.&#148; Of the net proceeds of approximately $16
million from the recently completed private placement, we used approximately $1.6&nbsp;million to repay
certain portion of the promissory notes held by John Cavanaugh and Jason Landry, both current
employees of the Company&#146;s MarketVision subsidiary, issued in connection with the Company&#146;s merger
with MarketVision. We may also spend most of the net proceeds from the private placement in ways
that ultimately prove unsuccessful in terms of the expanding the business. Our failure to apply
these funds effectively could have a material and adverse effect on our business, results of
operations and financial condition, and may also require further funding, which could dilute
security holders&#146; ownership and cause a decline in the share price of our common stock.


<P align="center" style="font-size: 10pt">18
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<A name="106"></A>
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<P align="center" style="font-size: 10pt"><B>LEGAL PROCEEDINGS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time, the Company is involved in legal proceedings incidental to the course of
its business. Except for the following matters, the Company is not subject to any material claims
or proceedings.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the fall of 2003, the customs agency of the government of South Korea brought a charge
against LXK, Ltd., the Company&#146;s wholly owned subsidiary operating in South Korea, with respect to
the importation of the Company&#146;s <I>Alura&#153; </I>product. The customs agency alleges that <I>Alura&#153; </I>is not a
cosmetic product, but rather should be categorized and imported as a pharmaceutical product. During
recent and ongoing hearings, LXK presented evidence that it imported the <I>Alura&#153; </I>product as a
cosmetic in reliance on the expertise and advise of its South Korean import consultant, that it
followed all normal processes and procedures for obtaining the requisite approval, and that it was
correct in categorizing <I>Alura&#153; </I>as a cosmetic because its ingredients are all accepted in South
Korea as ingredients of a cosmetic product and not a pharmaceutical product, and therefore, LXK
should be permitted to sell and distribute <I>Alura&#153; </I>in South Korea. On February&nbsp;18, 2005, the Seoul
Central District Court issued a ruling against LXK and fined it a total of approximately $200,000.
LXK also incurred approximately $40,000 related cost as a result of the judgment. The Company is
currently evaluating whether to appeal the ruling and recorded a reserve of $240,000 as part of its
2004 financial statements. The failure to sell <I>Alura&#153; </I>in South Korea is not anticipated to have a
material adverse effect on the financial condition, results of operations, cash-flow or business
prospects of LXK.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On or around March&nbsp;31, 2004, Lexxus received a letter from John Loghry, a former Lexxus
distributor, alleging that Lexxus had wrongfully terminated an alleged oral distributorship
agreement with Mr.&nbsp;Loghry and that the Company had breached an alleged oral agreement to issue
shares of the Company&#146;s common stock to Mr.&nbsp;Loghry. After Mr.&nbsp;Loghry threatened to commence suit
against Lexxus and the Company in Nebraska, on May&nbsp;13, 2004, Lexxus and the Company filed an action
for declaratory relief against Mr.&nbsp;Loghry in the United States District Court for the Northern
District of Texas seeking, inter alia, a declaration that Mr.&nbsp;Loghry was not wrongfully terminated
and is not entitled to recover anything from Lexxus or the Company. Mr.&nbsp;Loghry has filed
counterclaims against the Company and Lexxus asserting his previously articulated claims. In
September&nbsp;2004, Mr.&nbsp;Loghry filed third party claims against certain officers of the Company and
Lexxus, including against Terry LaCore and Mark Woodburn for fraud, LaCore, Woodburn, and a certain
Lexxus distributor for conspiracy to commit the same and tortuous interference with contract. In
February&nbsp;2005, the court dismissed all of Mr.&nbsp;Loghry&#146;s claims against the individual defendants,
except the claims for fraud and conspiracy to commit fraud. Discovery is ongoing and the Company
intends to vigorously defend itself in this case.




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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;1, 2004, Toyota Jidosha Kabushiki Kaisha (d/b/a Toyota Motor Corporation) and
Toyota Motor Sales, U.S.A. filed a complaint against the Company and Lexxus in United States
District Court for the Central District of California (CV04-9028). The complaint alleges trademark
and service mark dilution, unfair competition, trademark and service mark infringement, and trade
name infringement, each with respect to Toyota&#146;s Lexus trademark. Toyota seeks to enjoin the
Company and Lexxus from using the Lexxus mark and otherwise competing unfairly with Toyota, to
transfer the ownership of the mylexxus.com and lexxusinternational.com Internet sites to Toyota,
and reimbursement of costs and reasonable attorney fees incurred by Toyota in connection with this
matter. The Company filed a motion to dismiss all counts in the complaint which was denied by the
court. The Company intends to vigorously defend this action. In the event that the Company is
unsuccessful in defending this action, the Company may be required to change the name of some or
all of its Lexxus subsidiaries and domain names which could have a material adverse effect on the
financial condition, results of operations, cash flow or business prospects of the Company. It
should be noted that Toyota is not seeking monetary damages in this matter, other than
reimbursement of legal fees and expenses.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;12, 2004, Dorothy Porter filed a complaint against the Company in the United
States District Court for the Southern District of Illinois alleging that she sustained a brain
hemorrhage after taking Formula One, an ephedra-containing product marketed by Kaire
Nutraceuticals, Inc., a former subsidiary of the Company, and, thereafter, eKaire. Ms.&nbsp;Porter has
sued the Company for strict liability, breach of warranty and negligence. The Company intends to
defend this case vigorously and on December&nbsp;27, 2004 filed an answer denying the allegations
contained in the complaint. Recently, the plaintiff demanded $2&nbsp;million in damages to settle the
case. On March&nbsp;7, 2005, a Notice of Tag-Along
Action was filed by Ms.&nbsp;Porter with the Judicial Panel on Multidistrict Litigation. It is
anticipated that this case will be placed on the next Conditional Transfer Order and, ultimately,
transferred to the consolidated Ephedra Products Liability proceedings in the United States
District Court for the Southern District of New York. The Company does not believe that the
plaintiff can demonstrate that its products caused the alleged injury and intends to vigorously
defend this action.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;13, 2005, Nature&#146;s Sunshine Products, Inc. and Nature&#146;s Sunshine Products de Mexico
S.A. de C.V. (collectively &#147;Nature&#146;s Sunshine&#148;) filed suit against the Company in the Fourth
Judicial District Court, Utah County, State of Utah seeking injunctive relief and unspecified
damages against the Company, Lexxus U.S., the Company&#146;s Mexican subsidiary, and the Company&#146;s
Mexico management team, Oscar de la Mora Romo and Jose Villarreal Patino, alleging among other
things that the Company&#146;s employment of De la Mora and Villarreal violated or could lead to the
violation of certain non-compete, non-solicitation, and confidentiality agreements allegedly in
effect between De la Mora and Villarreal and Nature&#146;s Sunshine. Upon request by Nature&#146;s Sunshine,
the state court entered a temporary restraining order against De la Mora and Villarreal on January
14, 2005 restraining them from violating the non-compete, non-solicitation and confidentiality
provisions of the agreements, including continuing their employment with the Company, and
restrained the Company from interfering with the agreements alleged by Nature&#146;s Sunshine to exist
with De la Mora and Villarreal. On January&nbsp;17, 2005, the Company removed the case from Utah state
court to the United States District Court for the Northern District of Utah. The restraining order
expired on its own terms and on January&nbsp;20, 2005 the federal judge declined to extend the
restraining order entered in state court. On January&nbsp;21, 2005, the Company, De la Mora,
Villarreal, and Nature&#146;s Sunshine entered into a stipulation and agreed order restraining De la
Mora and Villarreal from using or disclosing any confidential information of Nature&#146;s Sunshine,
restraining the Company from


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<P align="left" style="font-size: 10pt">attempting to obtain any confidential information of Nature&#146;s Sunshine, and restraining all
parties from soliciting Nature&#146;s Sunshine employees and distributors. De la Mora and Villarreal
were not restrained from their continued employment with the Company, however, Nature&#146;s Sunshine
may seek such restraint at any future point in the litigation, whether in federal court or, if the
federal court remands the case to state court as Nature&#146;s Sunshine has requested, by the state
court. On January&nbsp;19, 2005, Nature&#146;s Sunshine requested the federal court to remand the case to
state court on the basis on alleged lack of federal court jurisdiction. On February&nbsp;17, 2005, the
federal court denied Nature Sunshine&#146;s motion to remand. On March&nbsp;15, 2005, Nature&#146;s Sunshine
filed an Amended Complaint against De la Mora and Villarreal and purportedly the Company&#146;s Mexican
subsidiary, although not properly named. The previously asserted claims against the Company and
Lexxus U.S. were dropped by Nature&#146;s Sunshine. The Company intends to vigorously defend this case
on its own behalf, to the extent the Company remains a party, and on behalf of De la Mora and
Villarreal. If the Company or De la Mora and Villarreal are unsuccessful in defending this action,
the Company may be required to change its Mexico management team, at least during the unexpired
term of any enforceable non-compete period.


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<A name="107"></A>
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<P align="center" style="font-size: 10pt"><B>MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2003, in order to enhance the price of our common stock and to enable us to better
use our capital stock to compensate management and motivate employees, and as consideration for
future acquisition transactions, our stockholders approved and we effected a 1-for-100 reverse
stock split with respect to our outstanding shares of common stock. As a result, on March&nbsp;19,
2003, the number of outstanding shares of common stock declined from 462,873,100 to 4,628,731 and
the closing price per share increased from $0.01 on March&nbsp;18, 2003 to $1.50 on March&nbsp;19, 2003, as
reported on the NASD over-the-counter bulletin board. In addition, the trading symbol for the
shares of our Common Stock changed from &#147;NHTC&#148; to &#147;NHLC.OB&#148;. All share references in this
prospectus give effect to the reverse stock split.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since February&nbsp;22, 2005, our common stock has been listed on The NASDAQ National Market, under
the symbol, &#147;BHIP&#148;.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the range of high and low bid quotations for our common stock
from January&nbsp;1, 2003 through December&nbsp;31, 2004, and for each of the quarterly periods indicated as
reported on the NASD over-the-counter bulletin board. Bid quotations reflect inter-dealer prices
without retail markup, markdown, or commission and may not represent actual transactions.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>HIGH</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>LOW</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2003:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">First quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.99</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Second quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Third quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.63</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Fourth quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4.80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2004:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">First quarter </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">21.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10.80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Second quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11.40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Third quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11.99</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Fourth
Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9.15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2005:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">First quarter </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11.05</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of April&nbsp;11, 2005,
the closing price of our common stock was $12.92 per share. As of
December&nbsp;31, 2004, we had approximately 440 record holders of our common stock. We estimate that
as of such date there were more than 2,500 beneficial holders of our common stock.

<DIV align="left">
<A name="108"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>DIVIDEND POLICY</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have never paid or declared any cash dividend on our common stock. We currently intend to
retain earnings, if any, to finance the growth and development of our business. We do not expect to
pay dividends in the near future. Payment of future dividends, if any, will be at the direction of
our Board of Directors.


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<A name="109"></A>
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<P align="center" style="font-size: 10pt"><B>USE OF PROCEEDS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will not receive any proceeds from the disposition of the shares of common stock by the
selling security holders or their transferees. We may receive gross proceeds of up to $17,080,208
upon the exercise of all the warrants. As we cannot predict when or if we would receive such
proceeds, we expect to use these proceeds, if received, for working capital purposes, which shall
be allocated to projects or needs of the Company at such time. The proceeds received from the
securities sold in the private placement in October&nbsp;2004 were intended to be used for expenses
incurred by the Company in connection with marketing and other costs associated with opening new
markets. We used approximately $1.6&nbsp;million to repay
certain portion of the promissory notes held by John Cavanaugh and Jason Landry, both current
employees of the Company&#146;s MarketVision subsidiary, issued in connection with the Company&#146;s merger
with MarketVision. The additional proceeds we could receive from the exercise of the warrants have not yet
been earmarked for any specific use beyond working capital needs because there is no certainty that
we would ever receive proceeds from the exercise of the warrants.


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<A name="110"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>CAPITALIZATION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should read this table in conjunction with &#147;Use of Proceeds,&#148; &#147;Selected Financial Data,&#148;
&#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations,&#148; and our
consolidated financial statements included elsewhere in this prospectus.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our cash and cash equivalents and capitalization as of December
31, 2004 (in thousands, except share data):

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,324</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Debt (including current portion)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">818</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">598</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mezzanine common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">960</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; equity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Preferred stock, $1,000 par value; 1,500,000 shares authorized; none issued and outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock, $0.001 par value; 500,000,000 shares authorized; 6,819,667 shares
issued and outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,933</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,799</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated other comprehensive loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(112</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,029</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total capitalization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">39,405</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">24
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="111"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>SELECTED FINANCIAL DATA</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have derived the selected financial data as of December&nbsp;31, 2003 and 2004 and for the years
ended December&nbsp;31, 2002, 2003, and 2004 from our audited financial statements and the related notes
included elsewhere in this prospectus. The selected financial data as of December&nbsp;31, 2000 and
2001 and for the years ended December&nbsp;31, 2000 and 2001 have been derived from our audited
financial statements for such years, which are not included in this prospectus. The selected
financial data set forth below are not necessarily indicative of the results of future operations
and should be read in conjunction with the discussion under the heading &#147;Management&#146;s Discussion
and Analysis of Financial Condition and Results of Operations,&#148; and our consolidated financial
statements included elsewhere in this prospectus.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2000<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18">(In Thousands, Except Per Share Data)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Statement of Operations Data:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,989</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">36,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">133,225</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,904</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Distributor commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,759</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,102</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,552</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(65</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,223</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,669</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,241</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted income (loss)&nbsp;from continuing
operations per share<SUP style="font-size: 85%; vertical-align: text-top">2</SUP>:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(146.83</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.98</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted weighted-average number of shares
outstanding<SUP style="font-size: 85%; vertical-align: text-top">2</SUP>:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,822</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Balance Sheet Data (at end of
period):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,324</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Working capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,865</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,858</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,187</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,519</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,105</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,021</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">684</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">818</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total stockholders&#146; equity (deficit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,737</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,370</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(398</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,029</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<HR size="1" width="18%" align="left" noshade color="#000000">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Reflects the Company<FONT style="font-family: Symbol">&#146;</FONT>s results of
operations from previously owned subsidiaries, Kaire Nutraceuticals, Inc. and
Global Health Alternatives, Inc. The Lexxus business commenced operations in
January&nbsp;2001.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">2</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">All share and earnings per share data gives
effect to a 1-for-100 reverse stock split, which took effect in March&nbsp;2003.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">25
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left">
<A name="112"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF<BR>
FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B>



<P align="left" style="font-size: 10pt"><B>Business Overview</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Natural Health Trends Corp. (the &#147;Company&#148;) is an international direct selling organization.
We control subsidiaries that distribute products through two separate direct selling businesses
that promote health, wellness and vitality. Lexxus International, Inc., our wholly-owned
subsidiary (&#147;Lexxus U.S.&#148;), and other Lexxus subsidiaries (collectively, &#147;Lexxus&#148;), sell certain
cosmetic products, consumer as well as &#147;quality of life&#148; products, which accounted for
approximately 99% percent of our consolidated net revenues in 2004. eKaire.com, Inc. (&#147;eKaire&#148;),
our wholly-owned subsidiary, distributes nutritional supplements aimed at general health and
wellness.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lexxus commenced operations in January&nbsp;2001 and has experienced tremendous revenue growth, as
we are currently conducting business in at least 30 countries through approximately 130,000 active
distributors as of December&nbsp;31, 2004. (We consider a distributor &#147;active&#148; if they have placed at
least one product order with us during the preceding year). The Lexxus business includes KGC
Networks Pte. Ltd. (&#147;KGC&#148;), a Singapore company owned 51% by the Company and 49% by a European
private investor. KGC sells Lexxus products into a separate network with distributors primarily in
Russia and other Eastern European countries. eKaire has been in business since 2000 and is
operating in four countries through approximately 3,600 active distributors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have experienced significant revenue growth over the last few years due in part to our
efforts to expand into new markets. We intend to pursue additional foreign markets in 2005. We
anticipate commencing revenue generation in Mexico (in the second quarter of 2005) and Japan (in
the fourth quarter of 2005). We plan to start opening retail stores in China during 2005.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2004, we generated approximately 87% of our revenue from outside North America, with sales
in Hong Kong representing approximately 56% of revenue. Because of the size of our foreign
operations, operating results can be impacted negatively or positively by factors such as foreign
currency fluctuations, and economic, political and business conditions around the world. In
addition, our business is subject to various laws and regulations, in particular regulations
related to direct selling activities that create certain risks for our business, including improper
claims or activities by our distributors and potential inability to obtain necessary product
registrations.


<P align="left" style="font-size: 10pt"><B>Income Statement Presentation</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company derives its revenue from sales of its products, sales of its enrollment packages,
and from shipping charges. Substantially all of its product sales are to independent distributors
at published wholesale prices. We translate revenue from each market&#146;s local currency into U.S.
dollars using average rates of exchange during the period.


<P align="center" style="font-size: 10pt">26
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">The following table sets forth revenue by market and product line for the time periods indicated
(in thousands).


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2002</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">As Restated</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">North America</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,779</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,631</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hong Kong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,763</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,293</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Taiwan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,261</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Southeast Asia</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,786</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Eastern Europe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,248</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">South Korea</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,492</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,524</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Australia/New Zealand</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">876</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">623</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Lexxus</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131,407</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">North America</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,283</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Australia/New Zealand</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">535</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Kaire</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,818</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">36,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">133,225</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of sales consist primarily of products purchased from third-party manufacturers,
freight cost of shipping products to distributors and import duties for the products, costs of
promotional materials sold to the Company&#146;s distributors at or near cost, provisions for slow
moving or obsolete inventories and, prior to the closing of the merger with MarketVision
Communications Corp. as of March&nbsp;31, 2004, the amortization of fees charged by the Company&#146;s third
party software service provider. Cost of sales also includes purchasing costs, receiving costs,
inspection costs and warehousing costs. Certain prior year amounts have been re-classified into
cost of sales so that the financial statements are comparable between periods.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Distributor commissions are our most significant expense and are classified as operating
expenses. Under our compensation plan, distributors are paid weekly commissions in the
distributor&#146;s home country, in their local currency, for product sold by that distributor&#146;s
down-line distributor network across all geographic markets. Distributors are not paid commissions
on purchases or sales of our products made directly by them. This &#147;seamless&#148; compensation plan
enables a distributor located in one country to sponsor other distributors located in other
countries where we are authorized to do business. Currently, there are two fundamental ways in
which our distributors can earn income:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Through retail markups on sales of products purchased by distributors at
wholesale prices; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Through a series of commissions paid on product purchases made by their
down-line distributors.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each of our products carries a specified number of sales volume points. Commissions are based
on total personal and group sales volume points per sales period. Sales volume points are
essentially based upon a percentage of a product&#146;s wholesale cost. To be eligible to receive
commissions, a distributor may be required to make nominal monthly purchases of our products.


<P align="center" style="font-size: 10pt">27
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">Certain of our subsidiaries do not require these nominal purchases for a distributor to be
eligible to receive commissions. In determining commissions, the number of levels of down-line
distributors included within the distributor&#146;s commissionable group increases as the number of
distributorships directly below the distributor increases. Distributor commissions are dependent
on the sales mix and, for 2004, typically ranged between 42% and 55% of net sales. From time to
time we make modifications and enhancements to our compensation plan to help motivate distributors,
which can have an impact on distributor commissions.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative expenses consist of administrative compensation and
benefits, travel, credit card fees and assessments, professional fees, certain occupancy costs,
depreciation and amortization, and other corporate administrative expenses. In addition, this
category includes selling, marketing, and promotion expenses including costs of distributor
conventions which are designed to increase both product awareness and distributor recruitment.
Because our various distributor conventions are not always held at the same time each year, interim
period comparisons will be impacted accordingly.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for income taxes depends on the statutory tax rates in each of the jurisdictions in
which we operate. We have begun the initial steps of implementing a foreign holding and operating
company structure for our non-United States businesses. This new structure is expected to
re-organize our non-United States subsidiaries in the Cayman Islands. Though our goal is to
improve the overall tax rate, there is no assurance that the new tax structure could be successful.
If the United States Internal Revenue Service or the taxing authorities of any other jurisdiction
were to successfully challenge these agreements, plans, or arrangements, or require changes in our
transfer pricing practices, we could be required to pay higher taxes, interest and penalties, and
our earnings would be adversely affected.


<P align="left" style="font-size: 10pt"><B>Critical Accounting Policies</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In response to SEC Release No.&nbsp;33-8040, &#147;Cautionary Advice Regarding Disclosure about Critical
Accounting Policies&#148; and SEC Release Number 33-8056, &#147;Commission Statement about Management&#146;s
Discussion and Analysis of Financial Condition and Results of Operations,&#148; the Company has
identified certain policies that are important to the portrayal of its consolidated financial
condition and consolidated results of operations. These policies require the application of
significant judgment by the Company&#146;s management.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The most significant accounting estimates inherent in the preparation of the Company&#146;s
financial statements include estimates associated with obsolete inventory and the fair value of
acquired intangible assets and goodwill, as well as those used in the determination of liabilities
related to sales returns, distributor commissions, and income taxes. Various assumptions and other
factors prompt the determination of these significant estimates. The process of determining
significant estimates is fact specific and takes into account historical experience and current and
expected economic conditions. Historically, actual results have not significantly deviated from
those determined using the estimates described above. If circumstances change relating to the
various assumptions or other factors used in such estimates the Company could experience an adverse
effect on its consolidated financial condition, changes in financial condition, and results of
operations. The Company&#146;s critical accounting policies at December&nbsp;31, 2004 include the


<P align="center" style="font-size: 10pt">28
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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">following:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Inventory Valuation. </I>The Company reviews its inventory carrying value and compares it to the
net realizable value of its inventory and any inventory value in excess of net realizable value is
written down. In addition, the Company reviews its inventory for obsolescence and any inventory
identified as obsolete is reserved or written off. The Company&#146;s determination of obsolescence is
based on assumptions about the demand for its products, product expiration dates, estimated future
sales, and management&#146;s future plans. Also, if actual sales or management plans are less favorable
than those originally projected by management, additional inventory reserves or write-downs may be
required. The Company&#146;s inventory value at December&nbsp;31, 2004 was approximately $13,991,000.
Inventory write-downs for years 2002, 2003, and 2004 were not significant.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Asset Impairment. </I>The Company reviews the book value of its property and equipment and
intangible assets whenever an event or change in circumstances indicates that the net book value of
an asset or group of assets may be unrecoverable. The Company&#146;s impairment review includes a
comparison of future projected cash flows (undiscounted and without interest charges) generated by
the asset or group of assets with its associated carrying value. The Company believes its expected
future cash flows approximate or exceed its net book value. However, if circumstances change and
the net book value of the asset or group of assets exceeds expected cash flows, the Company would
have to recognize an impairment loss to the extent the net book value of the asset exceeds its fair
value. At December&nbsp;31, 2004, the net book value of the Company&#146;s property and equipment and
intangible assets were approximately $579,000 and $5,474,000, respectively. No such losses were
recognized for the years ended December&nbsp;31, 2003 and 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Allowance for Sales Returns. </I>An allowance for sales returns is provided during the period the
product is shipped. The allowance is based upon the return policy of each country, which varies
from 14&nbsp;days to one year, and their historical return rates, which range from approximately 1% to
approximately 18% of product sales. Sales returns are approximately 4% and 5% of product sales for
the years ended December&nbsp;31, 2003 and 2004, respectively. The allowance for sales returns was
approximately $381 thousand and $1,541 thousand at December&nbsp;31, 2003 and 2004, respectively. No
material changes in estimates have been recognized for the years ended December&nbsp;31, 2003 and 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Revenue Recognition. </I>Product sales are recorded when the products are shipped and title passes
to independent distributors. Product sales to distributors are made pursuant to a distributor
agreement that provides for transfer of both title and risk of loss upon our delivery to the
carrier, which is commonly referred to as &#147;F.O.B. Shipping Point.&#148; The Company primarily receives
payment by credit card at the time distributors place orders. The Company&#146;s sales arrangements do
not contain right of inspection or customer acceptance provisions other than general rights of
return. Amounts received for unshipped product are recorded as deferred revenue. Such amounts
totaled $4.3&nbsp;million and $4.8&nbsp;million at December&nbsp;31, 2003 and 2004, respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Enrollment package revenue, including any nonrefundable set-up fees, is deferred and


<P align="center" style="font-size: 10pt">29
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">recognized over the term of the arrangement, generally twelve months. Enrollment packages
provide distributors access to both a personalized marketing website and a business management
system. Prior to the acquisition of MarketVision Communications Corp. (&#147;MarketVision&#148;) on March
31, 2004, the Company paid MarketVision a fixed amount in exchange for MarketVision creating and
maintaining individual web pages for such distributors. These payments to MarketVision were
deferred and recorded as a prepaid expense. The related amortization was recorded to cost of sales
over the term of the arrangement. The remaining unamortized costs were included in the
determination of the purchase price of MarketVision. Subsequent to the acquisition of
MarketVision, no upfront costs are deferred as the amount is nominal. At December&nbsp;31, 2004,
enrollment package revenue totaling $4.7&nbsp;million was deferred. Although the Company has no
immediate plans to significantly change the terms or conditions of enrollment packages, any changes
in the future could result in additional revenue deferrals or could cause us to recognize its
deferred revenue over a longer period of time.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Tax Valuation Allowance. </I>The Company evaluates the probability of realizing the future
benefits of any of its deferred tax assets and records a valuation allowance when it believes a
portion or all of its deferred tax assets may not be realized. At December&nbsp;31, 2003, the Company
established a valuation allowance for the entire amount of its net deferred tax assets of
approximately $4.0&nbsp;million. At December&nbsp;31, 2004, the Company recognized net deferred tax assets
of approximately $515 thousand as it expects to utilize a portion of its net operating loss
carryforward in connection with the implementation of a foreign holding and operating company
restructure. A valuation allowance of $1.5&nbsp;million was established for the remainder of its net
deferred tax assets. If the Company is unable to realize the expected future benefits of its
deferred tax assets, it would be required to provide an additional valuation allowance.


<P align="left" style="font-size: 10pt"><B>Results of Operations</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our operating results as a percentage of net sales for the
periods indicated.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Distributor commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Selling, general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income (expense)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before income taxes and minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;before discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">7.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">30
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt"><B>2004 Compared to 2003</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Net Sales. </I>Net sales were approximately $133.2&nbsp;million for the twelve months ended December
31, 2004 compared to $62.6&nbsp;million for the twelve months ended December&nbsp;31, 2003. This net
increase of approximately $70.6&nbsp;million or 113% was primarily attributable to the increased number
of active Lexxus distributors, approximately $46.5&nbsp;million or approximately two thirds of the sales
increase, as well as more sales generated per distributor, $24.1&nbsp;million or approximately one third
of the increase. Increases in net sales mainly occurred in Hong Kong ($43.5&nbsp;million), Eastern
Europe ($17.1&nbsp;million) and North America ($6.2&nbsp;million). As of December&nbsp;31, 2004, the Company had
deferred revenue of approximately $9.5&nbsp;million of which $4.8&nbsp;million pertained to goods shipped in
the first quarter of 2005 and recognized as revenue at that time and $4.7&nbsp;million pertained to
enrollment package revenue.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Cost of Sales. </I>Cost of sales was approximately $29.3&nbsp;million or 22.0% of net sales for the
twelve months ended December&nbsp;31, 2004 compared with approximately $13.7&nbsp;million or 21.9% of net
sales for the twelve months ended December&nbsp;31, 2004. This increase of approximately $15.6&nbsp;million
or 114% was primarily driven by increased sales. Cost of sales as a percentage of net sales was
flat with a year ago. Greater air freight costs to ship product from the US to Asia and Europe in
2004 were largely offset by the elimination of the commissions paid to MarketVision after its
acquisition by the Company on March&nbsp;31, 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Gross Profit. </I>Gross profit was approximately $103.9&nbsp;million or 78.0% of net sales for the
twelve months ended December&nbsp;31, 2004 compared with approximately $48.9&nbsp;million or 78.1% of net
sales for the twelve months ended December&nbsp;31, 2003. This increase of approximately $55.0&nbsp;million
or 112% was attributable to the increase in sales.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Distributor Commissions. </I>Distributor commissions were approximately $68.6&nbsp;million or 51.5% of
net sales for the twelve months ended December&nbsp;31, 2004 compared with approximately $27.6&nbsp;million
or 44.0% of net sales for the twelve months ended December&nbsp;31, 2003. This increase of
approximately $41.0&nbsp;million or 149% and as a percentage of sales was primarily related to the
significant increase in sales as well the depth of the distributor network. Approximately $1.1
million of the increase was due to commissions paid on returns and refunds pertaining to the
special product return privilege granted to certain Hong Kong distributors in the second quarter.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Selling, General and Administrative Expenses. </I>Selling, general and administrative costs were
approximately $33.1&nbsp;million or 24.8% of net sales for the twelve months ended December&nbsp;31, 2004
compared with approximately $15.8&nbsp;million or 25.2% of net sales for the twelve months ended
December&nbsp;31, 2003. This increase of approximately $17.3&nbsp;million or 110% was mainly attributable to
increases in the following:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Marketing and promotional activities world-wide of $7.8&nbsp;million (The Company
resorted to the increase in marketing activities in most of the Company&#146;s markets
around the world to drive the increase in the number of active distributors);</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Credit card charges and assessments totaling $2.7&nbsp;million;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Professional fees of $2.3&nbsp;million;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">31
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Personnel costs mainly in the U.S. and Hong Kong of $2.2&nbsp;million;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Costs for building the Chinese market totaling $600 thousand; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Amortization of intangibles of $600 thousand related to the MarketVision
acquisition.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Other Income (Expense). </I>Other income was approximately $137 thousand for the year ended
December&nbsp;31, 2004 compared with expense of approximately $1 thousand for the year ended December
31, 2003. This increase of approximately $138 thousand was due to recognized gain on foreign
exchange partly offset by an increase in interest expense resulting from the MarketVision
acquisition.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Income Taxes. </I>Income tax expense was approximately $663 thousand or 28.1% of the income before
income taxes and minority interest for the twelve months ended December&nbsp;31, 2004 compared with $860
thousand or 15.4% of income before income taxes and minority interest for the twelve months ended
December&nbsp;31, 2003. The increase in effective tax rate was attributable to use of net operating
loss in the U.S. and lower effective tax rates on foreign earnings in 2003 compared to 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Minority Interest. </I>Minority interest expense was approximately $456 thousand for the twelve
months ended December&nbsp;31, 2004, compared to a benefit of approximately $14 thousand for the twelve
months ended December&nbsp;31, 2003. The increase in the expense relates primarily to the increased
profitability of our subsidiary, KGC Networks Pte. Ltd.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Net Income. </I>Net income was approximately $1,241 thousand or 0.9% of net sales for the twelve
months ended December&nbsp;31, 2004 compared to net income of approximately $4.7&nbsp;million or 7.5% of net
sales for the twelve months ended December&nbsp;31, 2003. The decrease in net income was primarily due
to higher commissions paid to distributors and marketing-related expenses, partly offset by higher
volume.


<P align="left" style="font-size: 10pt"><B><I>2003 Compared to 2002</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Net Sales. </I>Net sales were approximately $62.6&nbsp;million for the year ended December&nbsp;31, 2003
compared to $37.0&nbsp;million for the year ended December&nbsp;31, 2002. This increase of approximately
$25.6&nbsp;million or 69% was primarily attributable to the increased number of active Lexxus
distributors (approximately $12.1&nbsp;million or approximately 47% of the increase) including Lexxus&#146;s
expansion into new markets, such as South Korea in the second quarter of 2003 (approximately $2.7
million) and more sales per distributor (approximately $13.5&nbsp;million or 53% of the total increase).
As of December&nbsp;31, 2003, the Company had deferred revenue of approximately $6.9&nbsp;million of which
$4.2&nbsp;million pertained to goods shipped in the first quarter of 2004 and recognized as revenue at
that time.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Cost of Sales. </I>Cost of sales was approximately $13.7&nbsp;million or 21.9% of net sales for the
year ended December&nbsp;31, 2003 compared with approximately $7.8&nbsp;million or 21.0% of net sales for the
year ended December&nbsp;31, 2002. This increase of approximately $5.9&nbsp;million or 76% was primarily
attributable to the higher sales in 2003.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Gross Profit. </I>Gross profit was approximately $48.9&nbsp;million or 78.1% of net sales for the year
ended December&nbsp;31, 2003 compared with approximately $29.2&nbsp;million or 79.0% of net sales for the
year ended December&nbsp;31, 2002. This increase of approximately $19.7&nbsp;million or 67% was attributable
to the increase in gross sales of Lexxus products.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Distributor Commissions. </I>Distributor commissions were approximately $27.6&nbsp;million or 44.0% of
net sales for the year ended December&nbsp;31, 2003 compared with approximately $16.8&nbsp;million or 45.5%
of net sales for the year ended December&nbsp;31, 2002. This increase of approximately $10.8&nbsp;million or
64% was directly related to the increase in sales. The decrease in commissions as a percentage of
revenue is due to the normal fluctuations that occur in the compensation plan and also due to the
amount of revenue allocated to the compensation plan.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Selling, General and Administrative Expenses. </I>Selling, general and administrative costs were
approximately $15.8&nbsp;million or 25.2% of net sales for the year ended December&nbsp;31, 2003 compared
with approximately $10.7&nbsp;million or 29.0% of net sales for the year ended December&nbsp;31, 2002. This
increase of approximately $5.1&nbsp;million or 47% was attributable to approximately $1.3&nbsp;million of
additional administrative expenses associated with the new office in Seoul, South Korea and the
balance of the increase resulted from sales and marketing conventions, promotions and trainings.
Selling, general and administrative expenses decreased as a percentage of net sales from 29.0% in
2002 to 25.2% in 2003 due to operating efficiencies and economies of scale gained with higher
volumes of net sales.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Stock-Based Compensation. </I>Stock-based compensation expense was zero for the year ended
December&nbsp;31, 2003 compared to approximately $1.4&nbsp;million for the year ended December&nbsp;31, 2002. The
stock-based compensation recorded in 2002 was in connection with the issuance of certain stock
options granted in January&nbsp;2001 and October&nbsp;2002 to senior executive officers of the Company which
triggered variable accounting because the options contained a &#147;cashless&#148; exercise feature. A
cashless exercise feature allows option holders to use the &#147;in the money&#148; value of the options (or
the spread between the exercise price and the fair market price of the underlying shares as of the
exercise date) as payment for all, or a portion, of the exercise price of an option. The options
were amended in November&nbsp;2002 to require the option holder to obtain Company approval before the
option holder could use the cashless exercise feature. Under variable accounting, changes in the
market value of a company&#146;s shares would generally result in recording a charge or credit to
stock-based compensation expense.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Other Income (Expense). </I>Other expense was approximately $1 thousand for the year ended
December&nbsp;31, 2003 compared with income of approximately $33 thousand for the year ended December
31, 2002. This decrease of approximately $34,000 was due to recognized loss on foreign exchange
offset by an increase in other income.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Income Taxes. </I>Income taxes were approximately $860 thousand or 15.4% of income from
continuing operations before taxes for the year ended December&nbsp;31, 2003 compared with $300 thousand
or 110.7% of income from continuing operations before taxes for the year ended December&nbsp;31, 2002.
The decrease in effective tax rate was attributable to use of net operating loss in the U.S. and
lower effective tax rates on foreign earnings in 2003. The Company&#146;s effective tax rate differs
from the amount that would result from applying the U.S. federal


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<P align="left" style="font-size: 10pt">statutory rate for the reasons identified in Note 11 to the consolidated financial statements
contained elsewhere herein.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Minority Interest. </I>Minority interest benefit was approximately $14 thousand for the year
ended December&nbsp;31, 2003 compared with expense of approximately $232 thousand for the year ended
December&nbsp;31, 2002. This decrease was primarily attributable to the minority interest in KGC since
inception in November&nbsp;2003.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Income (Loss) before Discontinued Operations. </I>Income before discontinued operations was
approximately $4.7&nbsp;million or 7.5% of net sales for the year ended December&nbsp;31, 2003 compared to a
loss of approximately $261 thousand for the year ended December&nbsp;31, 2002. Compared to 2002, this
increase in 2003 is due to significantly larger net sales and smaller commissions, selling, general
and administrative and stock option based compensation expenses as a percentage of net sales offset
by a slight increase in cost of sales as a percentage of net sales.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Gain from Discontinued Operations. </I>Gain from discontinued operations of approximately $2.4
million for the year ended December&nbsp;31, 2002 was attributable to the recognition of the deferred
gain on the sale of Kaire Nutraceuticals, Inc. (&#147;Kaire&#148;) recorded at December&nbsp;31, 2002. See Note 2
of Notes to Consolidated Financial Statements contained elsewhere herein.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Net Income. </I>Net income was approximately $4.7&nbsp;million or 7.5% of net sales for the year ended
December&nbsp;31, 2003 compared to approximately $2.1&nbsp;million or 5.8% of net sales for the year ended
December&nbsp;31, 2002. The Company recorded a gain from discontinued operations of $2.4&nbsp;million in
2002.


<P align="left" style="font-size: 10pt"><B>Liquidity and Capital Resources</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash generated from operations is the main funding source for the Company&#146;s working capital
and capital expenditure. In the past, the Company also borrowed from institutions and individuals
and issued preferred stock. In October&nbsp;2004, the Company raised approximately $16&nbsp;million net of
transaction fees through a private equity placement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2004, the ratio of current assets to current liabilities was 1.75 to 1.00 and
the Company had working capital of approximately $17.5&nbsp;million. Working capital as of December&nbsp;31,
2004 increased since December&nbsp;31, 2003 by approximately $14.6&nbsp;million mainly due to the October
2004 private placement, partly offset by the MarketVision promissory note of approximately $0.7
million remaining to be paid over the 12&nbsp;months in 2005.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash provided by operations for the twelve months ended December&nbsp;31, 2004 was approximately
$428 thousand. The significant sales increase and the Company&#146;s anticipation of continued sales
increase in the near future was the most significant underlying trend for cash flows from operating
activities and the change in the Company&#146;s working capital. Cash was mainly generated from
earnings, increases in accrued distributor commissions, other accrued expenses such as sales
returns and deferred revenue, all driven by sales increase, partly offset by a significant increase
in inventory attributable to anticipated sales increase in the coming year.


<P align="center" style="font-size: 10pt">34
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<P align="left" style="font-size: 10pt">But there is no assurance that the expected sales increase in the near turn would be realized.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash used in investing activities during the period was approximately $2.6&nbsp;million, which
primarily relates to the cash payment made to MarketVision as part of the acquisition, purchase of
minority interest and capital expenditures. Cash provided by financing activities during the period
was approximately $13.5&nbsp;million due to the Company&#146;s October&nbsp;2004 private placement of units offset
by the repayment of MarketVision promissory notes payable. Total cash increased by approximately
$11.2&nbsp;million during the period.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With cash generated from profitable business operations and the net proceeds from the private
placement closed in October&nbsp;2004, the Company believes that its existing liquidity and cash flows
from operations, including its cash and cash equivalents, should be adequate to fund normal
business operations expected in the future.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the Company&#146;s current obligations related to its accounts payable and accrued
expenses, the approximate future maturities of the Company&#146;s existing commitments and obligations
are as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22" style="border-bottom: 1px solid #000000">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">818</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minimum commitment
related to
non-cancelable
operating leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,206</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase commitment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Totals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,866</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,774</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company maintains a purchase commitment with one of its suppliers to purchase its
Alura<I>&#153; </I>product. Pursuant to the agreement, the Company is required to purchase from this supplier
a minimum volume of 15 barrels of product per quarter. The total product cost is $1,350,000 before
any volume discounts.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has employment agreements with certain members of its management team, the terms
of which expire at various times through December&nbsp;2009. Such agreements provide minimum salary
levels, as well as incentive bonuses that are payable if specified management goals are attained.
The aggregate commitment for future salaries at December&nbsp;31, 2004, assuming continued employment
and excluding bonuses, was approximately $4,358,000.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the above obligations, the shareholder&#146;s agreement entered into in connection
with the Company&#146;s acquisition of MarketVision contains a one time put right related to 240,000
shares of restricted common stock for the benefit of certain former stockholders of MarketVision
that requires the Company, during the six month period commencing eighteen months following the
earlier of (i)&nbsp;the first anniversary of the closing date, or (ii)&nbsp;the date on which the shares are
registered with the Securities and Exchange Commission for resale to the public, to repurchase all
or part of such 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 restricted common stock.
The Company&#146;s maximum put right obligation is $960,000 in the aggregate. See &#147;Mezzanine Common
Stock&#148; in our consolidated financial statements included


<P align="center" style="font-size: 10pt">35
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<P align="left" style="font-size: 10pt">elsewhere in this prospectus.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company intends to continue to open additional operations in new foreign markets in coming
years. The Company is in the process of planning for its entry into the Mexican and Japanese
markets. The estimated initial cost for entering into the Mexican market is $2&nbsp;million to $3
million, and $5&nbsp;million to $7&nbsp;million for the Japanese market.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;China is currently the Company&#146;s most important business development project. Direct selling,
or multi-level marketing, is currently prohibited in China. The Chinese government is committed to
opening the direct selling market and has published drafts of pertinent legislation, which is
expected to be formally adopted some time during 2005 or 2006. Before the formal adoption of direct
selling laws, many of the international direct selling companies have started to operate in China
in a retail format. In June&nbsp;2004, Lexxus obtained a license to engage in retail business in China.
The license stipulates a capital requirement of $12&nbsp;million over a three-year period, including a
$1.8&nbsp;million initial payment the Company made in January&nbsp;2005. In planning for a retail operation,
the Company estimates that each retail store will cost approximately $50,000 to $100,000 and is
evaluating the number, location, timing and format of store openings.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since the airing of a negative program on Chinese television on April&nbsp;12, 2004, to the
knowledge of the Company, the Chinese government has not initiated any investigation of the Company
or its independent distributors. Nevertheless the Company is also unable to predict whether it will
be successful in obtaining a direct selling license to operate in China, and if it is successful,
when it will be permitted to commence direct selling operations there. Further, even if the
Company is successful in obtaining a direct selling license to do business in China, it is
uncertain as to whether the Company will generate profits from such operations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the MarketVision acquisition, the Company issued three different promissory
notes in the aggregate principal amount of approximately $3.2&nbsp;million. As of December&nbsp;31, 2004,
approximately $0.7&nbsp;million balance remained to be paid over the 12&nbsp;months in 2005.


<P align="left" style="font-size: 10pt"><B>Recent Accounting Pronouncements</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2004, the FASB issued Statement of Financial Accounting Standards No.&nbsp;151,
&#147;Inventory Costs.&#148; This statement requires that certain costs such as idle facility expense,
excessive spoilage, double freight, and re-handling costs be recognized as current-period charges
and that allocation of fixed production overheads to the costs of conversion be based on the normal
capacity of the production facilities. The provisions of the statement shall be effective for
inventory costs incurred during fiscal years beginning after June&nbsp;15, 2005. Adoption of this
statement is not anticipated to have a significant impact on the Company&#146;s financial condition,
results of operations, or cash flows.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2004, the FASB issued Statement of Financial Accounting Standards No.&nbsp;123 (Revised
2004), &#147;Share-Based Payment.&#148; This statement is a revision of FASB Statement No.&nbsp;123, &#147;Accounting
for Stock-Based Compensation&#148; and supersedes APB Opinion No.&nbsp;25, &#147;Accounting for Stock Issued to
Employees.&#148; This Statement requires that we record


<P align="center" style="font-size: 10pt">36
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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">compensation expense for stock options issued based on the estimated fair value of the options at
the date of grant. This statement is effective as of the first interim period beginning after June
15, 2005. We currently are not required to record stock-based compensation charges if the
employee&#146;s stock option exercise price is equal to or exceeds the fair value of the stock at the
date of grant. We have not yet determined what impact, if any, the proposed pronouncement would
have on our financial statements.


<P align="left" style="font-size: 10pt"><B>Off&#150;Balance Sheet Arrangements</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company does not utilize off-balance sheet financing arrangements other than in the normal
course of business. The Company finances the use of certain facilities, office and computer
equipment, and automobiles under various operating lease agreements.


<P align="left" style="font-size: 10pt"><B>Quantitative and Qualitative Disclosures About Market Risk</B>




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Foreign Currency Risk</I><B>. </B>In 2004, approximately 87% of our revenue was recorded in markets
outside the United States. However, that figure does not accurately reflect our foreign currency
exposure mainly because the Hong Kong dollar is pegged to the U.S. dollar. Our European business,
KGC, sold products in U.S. dollars and paid distributors commissions in U.S. dollars, until the
fourth quarter of 2004, when KGC switched to euro for both selling products and paying commissions.
We also purchase all inventories in U.S. dollars. Therefore, our currency exposure, mainly to
Korean won, Singapore dollar, New Taiwan dollar and Australia dollar, representing approximately
10% of our revenue in the first nine months of 2004 before KGC switched to euro from U.S. dollars,
was relatively insignificant, compared to our overall geographic reach. In the fourth quarter of
2004, with KGC doing business in euro, approximately 27% of our net revenue was generated in
functional currencies denominated in or pegged to U.S. dollar.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In preparing our consolidated financial statements, we translate revenue and expenses in
foreign countries from their local currencies into U.S. dollars using the average exchange rates
for the period. The local currency of each subsidiary&#146;s primary markets is considered the
functional currency. The effect of the translation of the Company&#146;s foreign operations is included
in accumulated other comprehensive income within stockholders&#146; equity and do not impact the
statement of operations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As currency rates change, translation of our foreign currency functional businesses into U.S.
dollars affects year-over-year comparability of equity. We do not plan to hedge translation risks
because cash flows from our international operations are generally reinvested locally. Changes in
the currency exchange rates that would have the largest impact on translating our international net
assets included Euro, Korean won, New Taiwan dollar, Australian dollar and Canadian dollar.
Japanese yen and Mexican peso are expected to be more significant as we enter those two markets.


<P align="center" style="font-size: 10pt">37
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Hedging</I><B>. </B>Our exposure to foreign currency fluctuation is expected to increase, as KGC
switched to euro from U.S. dollar, and the Company opens for business in Japan and Mexico. The
Company currently has no specific plans but expects to evaluate whether it should use forward or
option contracts to hedge its foreign currency exposure.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Seasonality</I><B>. </B>In addition to general economic factors, the Company is impacted by seasonal
factors and trends such as major cultural events and vacation patterns. For example, most Asian
markets celebrate their respective local New Year in the first quarter, which generally has a
negative impact on that quarter. We believe that direct selling in the United States and Europe is
also generally negatively impacted during the month of August, which is in our third quarter, when
many individuals, including our distributors, traditionally take time off for vacations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Interest Rate Risk</I><B>. </B>As of December&nbsp;31, 2004, we do not think the Company has any exposure to
interest rate risk as the Company has limited borrowings that are interest rate sensitive.


<P align="left" style="font-size: 10pt"><B>Controls and Procedures</B>



<P align="left" style="font-size: 10pt"><U>Evaluation of Disclosure Controls and Procedures</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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&#146;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.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the quarters ended September&nbsp;30 and December&nbsp;31, 2003, the Company re-evaluated its
financial statements for the years ended December&nbsp;31, 2002 and 2001, the quarterly periods included
in such years and the quarterly periods ended March&nbsp;31, June&nbsp;30 and September&nbsp;30, 2003. As a result
of such review, the Company determined that it inadvertently applied the incorrect accounting
treatment with respect to the following items:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(i)&nbsp;&nbsp;</TD>
    <TD>revenue recognition with respect to administrative enrollment fees;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(ii)&nbsp;&nbsp;</TD>
    <TD>revenue cut-off between 2002 and 2003;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(iii)&nbsp;&nbsp;</TD>
    <TD>accounts receivable reconciliation to supporting documents;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(iv)&nbsp;&nbsp;</TD>
    <TD>reserves established for product returns and refunds;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(v)&nbsp;&nbsp;</TD>
    <TD>the gain recorded in connection with the sale of a subsidiary in 2001;<BR></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(vi)&nbsp;&nbsp;</TD>
    <TD>income tax provisions; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(vii)&nbsp;&nbsp;</TD>
    <TD>stock option based compensation.</TD>
</TR>

</TABLE>

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<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consequently, the Company amended and restated its financial statements for each quarter in
2001 and 2002, the first three quarters in 2003, as well as for the years ended December&nbsp;31, 2001 and 2002 with respect to each
of the foregoing items (collectively, the &#147;Restatement Items&#148;).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During its review of its financial statements for the quarter ended March&nbsp;31, 2004, the
Company learned that commission and transportation-related expenses incurred as of December&nbsp;31,
2003 were under-accrued by approximately $640,000 (on a pre-tax basis) for the quarter and year
ended December&nbsp;31, 2003. Adjusting entries of approximately $640,000 were included as expenses in
the financial statements for the quarter ended March&nbsp;31, 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At that time, the Company concluded that the error was not material, and therefore, did not
warrant a restatement of the 2003 financial statements. Based upon the Company&#146;s pre-tax income of
approximately $4.0&nbsp;million for the first quarter of 2004 combined with the Company&#146;s historical
sales and net income growth rates, the Company believed that the recording of $640,000 of pre-tax
expenses during the first quarter of 2004 would not have a material effect on the Company&#146;s net
income for the 2004 fiscal year.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, while sales continued to grow significantly, net income for the 2004 fiscal year
declined substantially. As a consequence, the adjusting entries made in the first quarter of 2004
are now considered by management to materially affect the Company&#146;s net income for fiscal 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the Company also learned that certain revenues not earned until 2004 were
improperly recorded as revenue by its Eastern European business, KGC Networks Ptd. Ltd., for the
year ended December&nbsp;31, 2003. The amount of revenues that was over-stated for the 2003 fiscal year
was approximately $310,000.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company recognizes that the improper accounting for commission and transportation-related
expenses and the revenue recognition for the year ended December&nbsp;31, 2003 reflects a material
control weakness in the Company&#146;s internal control over financial reporting.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;23, 2005, the Audit Committee of the Company&#146;s Board of Directors determined that the
inclusion of the aforementioned two items in the financial statements for the quarter ended March
31, 2004 would materially affect the Company&#146;s net income for the year ended December&nbsp;31, 2004, and
the Company believes that an amendment to its financial statements for the year ended December&nbsp;31,
2003 is warranted.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The restatement of the adjustments into the financial statements for the year ended December
31, 2003 reduced the Company&#146;s revenue by approximately $310,000, increased cost of goods sold by
approximately $180,000, increased distributor commission expense by approximately $460,000, reduced
the minority interest expense by approximately $300,000, and reduced after-tax net income for
approximately $650,000 for the quarter as well as the year ended December&nbsp;31, 2003.


<P align="center" style="font-size: 10pt">39
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the quarter ended March&nbsp;31, 2004, the restatement increased the Company&#146;s revenue by
approximately $310,000, reduced cost of goods sold by approximately $180,000, reduced distributor
commission expense by approximately $460,000, increased the minority interest expense by
approximately $300,000, and increased after-tax net income for approximately $650,000 for the
quarter ended March&nbsp;31, 2004.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company, after consultation with its Audit Committee, concluded that the consolidated
financial statements for the fourth quarter and the full year of 2003 and the first quarter of 2004
should no longer be relied upon, including the consolidated financial statements and other
financial information in the Company&#146;s Annual Report on Form 10-KSB for the year ended December&nbsp;31,
2003 and the Quarterly Report on Form 10-Q for the first quarter
ended March&nbsp;31, 2004. Although the financial statements for the three month periods ended
June&nbsp;30, 2004 and September&nbsp;30, 2004 are unaffected by this error, the consolidated financial statements
for the second and third quarters of 2004 include inaccurate information on a year to date basis because they include the erroneous information
from the first quarter of 2004 which financial statements should not be relied upon.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s Audit Committee and management have discussed these matters with BDO Seidman LLP
(&#147;BDO&#148;), the Company&#146;s independent registered public accounting firm.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An evaluation of the Company&#146;s disclosure controls and procedures (as defined in Section
13(a)-14(c) of the Exchange Act) as of December&nbsp;31, 2004 was carried out under the supervision and
with the participation of the Company&#146;s President, Chief Financial Officer, Chief Accounting
Officer and other members of the Company&#146;s senior management. The Company&#146;s President, Chief
Financial Officer and Chief Accounting Officer concluded that the Company&#146;s disclosure controls and
procedures as currently in effect are effective in ensuring that the information required to be
disclosed by the Company in the reports it files or submits under the Exchange Act is (i)
accumulated and communicated to the Company&#146;s management (including the President and Chief
Financial Officer) in a timely manner, and (ii)&nbsp;recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission&#146;s rules and forms.


<P align="left" style="font-size: 10pt"><U>Changes in Internal Controls</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the twelve months ended December&nbsp;31, 2004, the Company made changes to improve its
internal controls over financial reporting with respect to (i)&nbsp;each of the Restatement Items, and
(ii)&nbsp;monthly financial reports provided to the Company by its subsidiaries. The Company hired a new
Chief Financial Officer in August&nbsp;2004, a new Chief Accounting Officer in September&nbsp;2004, a
regional Chief Financial Officer for Greater China and Southeast Asia in October&nbsp;2004 and is still
hiring additional accounting staff to upgrade the financial organization. In addition, the Company
has commenced its documentation required under the Sarbanes-Oxley Act of 2002 and is developing

additional policies and procedures to further strengthen its international reporting, including the
areas of revenue recognition, sales and expense cut-off and sales returns. The Company hired a
reporting specialist in November&nbsp;2004 to coordinate the world-wide Sarbanes-Oxley compliance work.
In December&nbsp;2004, the Company hired a general counsel, who subsequently was given additional
responsibilities as the Chief Operating Officer, to enhance compliance and control.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company plans to implement additional controls and procedures sufficient to accurately
report their financial performance on a timely basis. There have been no other


<P align="center" style="font-size: 10pt">40
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<P align="left" style="font-size: 10pt">changes in the Company&#145;s internal control over financial reporting (as defined in Rule
13a-15(f) of the Exchange Act) that occurred during the quarter ended December&nbsp;31, 2004, that have
materially affected, or are reasonably likely to materially affect, the Company&#146;s internal control
over financial reporting.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company intends to continually review and evaluate the design and effectiveness of its
disclosure controls and procedures and to improve its controls and procedures over time and to
correct any deficiencies that it may discover in the future. The goal is to ensure that senior
management has timely access to all material financial and non-financial information concerning the
Company&#146;s business. While the Company believes the present design of its disclosure controls and
procedures is effective to achieve its goal, future events affecting its business may cause the
Company to modify its disclosure controls and procedures.

<DIV align="left">
<A name="113"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>BUSINESS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Natural Health Trends Corp. (the &#147;Company&#148;) is an international direct selling organization.
We control subsidiaries that distribute products through two separate direct selling businesses
that promote health, wellness and vitality. Lexxus International, Inc., our wholly-owned
subsidiary (&#147;Lexxus U.S.&#148;), and other Lexxus subsidiaries (collectively, &#147;Lexxus&#148;), sell certain
cosmetic products, consumer as well as &#147;quality of life&#148; products, which accounted for
approximately ninety-nine (99%) percent of our consolidated net revenues in 2004. eKaire.com, Inc.
(&#147;eKaire&#148;), our wholly-owned subsidiary, distributes nutritional supplements aimed at general
health and wellness.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lexxus commenced operations in January&nbsp;2001 and has experienced tremendous growth, as we are
currently conducting business in at least 30 countries through approximately 130,000 active
distributors as of December&nbsp;31, 2004. (We consider a distributor &#147;active&#148; if he or she has placed
at least one product order with us during the preceding year). The Lexxus business includes KGC
Networks Pte. Ltd. (&#147;KGC&#148;), a Singapore company owned 51% by the Company and 49% by a European
private investor. KGC sells Lexxus products into a separate network with distributors primarily in
Russia and other Eastern European countries. eKaire has been in business since 2000 and is
operating in four countries through approximately 3,600 active distributors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We seek to be a leader in the direct selling industry serving the health and wellness
marketplace by driving our products into as many venues and into as many markets as possible
through our direct selling marketing operations. Our objectives are to enrich the lives of the
users of our products and enable our distributors to benefit financially from the sale of our
products.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain executive offices at 12901 Hutton Drive, Dallas, Texas 75234 and our telephone
number is (972)&nbsp;241-4080. Our website is located at <U>www.naturalhealthtrendscorp.com</U>. The
information provided on our website should not be considered part of this prospectus.


<P align="center" style="font-size: 10pt">41
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>Our Products</B>



<P align="center" style="font-size: 10pt"><B><I>Lexxus</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We offer several Lexxus branded lifestyle enhancement products:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;&nbsp;<I>Skindulgence</I>&#174; is a skin care system marketed as a &#147;30-Minute Non-Surgical FaceLift&#148;
designed to create a more youthful appearance by helping to tone and firm facial muscles, by
helping to diminish fine lines and wrinkles and by helping to improve skin tone and color. The
facelift masque is coupled with a cleanser and moisturizer.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;&nbsp;<I>Alura&#153; </I>is an intimacy cream designed to increase the sexual satisfaction of women.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;&nbsp;<I>Premium Noni Juice&#153; </I>is a reconstituted morinda citrifolia fruit juice, made from
organic noni puree. Noni is a fruit native in the Samoan Islands of the South Islands of the South
Pacific. Marketed as a refreshing and energizing beverage, its naturally offensive flavor has been
neutralized with white grape concentrate, concord grape concentrate, pineapple juice puree and
other natural flavors.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;&nbsp;<I>LexLips&#153; </I>is a lip enhancing gloss for women, designed to create the effect of fuller
lips and to help reduce fine lines and wrinkles around the mouth.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;&nbsp;<I>La Vie&#153; </I>is a dietary supplement described as a non-alcoholic red wine. It is marketed
as an energizing supplement containing aloe.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;&nbsp;<I>180&#176; Life System Carb-Blocker&#153; </I>is marketed as a weight management product based upon
over 30&nbsp;years of research.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><B><I>eKaire</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We offer Kaire branded products, generally nutritional supplements, which are organized into
several broad categories such as antioxidant support, immune support, bone &#038; joint support,
digestive and dietary support, weight management, OmegaKaire hemp products, Sakaira Spa with Moor
Mud, Sakaira Skin &#038; Hair Care, Kaire Essentials and ecoKaire Home Care.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Among the products offered by eKaire, <I>Pycnogenol</I><SUP style="font-size: 85%; vertical-align: text-top"> </SUP><I>&#174; </I>, <I>Enzogenol&#153;, OptiMSM&#153;,
OptiPure&#174;, Phase2&#153; &#038; ActivAloe&#153; </I><SUP style="font-size: 85%; vertical-align: text-top"> </SUP>are trademarks of suppliers of eKaire<I>.</I>


<P align="center" style="font-size: 10pt">42
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<P align="left" style="font-size: 10pt"><B>Operations of the Business</B>



<P align="center" style="font-size: 10pt"><B><I>Sourcing of Products</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s independent research consultants and the executive staff work closely with
research and development personnel of our manufacturers to create product concepts and develop the
product ideas into actual products. Each of the Company&#146;s three current major product lines -
<I>Skindulgence</I>&#174;, <I>Alura&#153;</I>, and <I>Premium Noni Juice&#153; </I>- were originally conceived by our manufacturing
vendors. The Company then enters into standard supply agreements with the vendors pursuant to which
the Company retains trademark rights to the products purchased and the vendors are restricted from
supplying the products to other direct selling companies. Because our current main products all
came to us originally as proposals from our vendors, we have incurred minimal &#147;out-of-pocket&#148;
research and development costs through December&nbsp;31, 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company purchases finished goods from manufacturers and sells them to our distributors for
their resale or personal consumption. Aloe Commodities International (for <I>Skindulgence</I>&#174;), 40Js LLC
(for <I>Alura&#153;</I>) and Two Harbor Trading (for <I>Premium Noni Juice&#153;</I>) are the three most significant
vendors, accounting for a majority of the Company&#146;s product purchases. All three of the vendors
entered into our standard supply agreements. The agreement with 40Js LLC contains a minimum annual
purchase of $1.35&nbsp;million for the Company to retain the exclusivity. The terms of these agreements
are between one and three years, with annual automatic renewal.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that, in the event we were unable to source products from these suppliers or the
other suppliers of our other products, our revenue, income and cash flow could be adversely and
materially impacted.


<P align="center" style="font-size: 10pt"><B><I>Marketing and Distribution</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lexxus and eKaire are set up as direct selling companies using a network of distributors to
sell products. Our distributors are independent full-time or part-time contractors who purchase
products directly from our subsidiaries via the Internet for resale to retail consumers or for
personal consumption. The growth of a distributor&#146;s business depends largely upon their ability to
recruit a down-line network of distributors and the popularity of our products in the marketplace.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2004, we had distributors located in the United States, as well as Puerto
Rico, Canada, Australia, New Zealand, Taiwan, Hong Kong, Macau, Singapore, Indonesia, Philippines,
South Korea, Japan, Brazil, India and countries in Eastern Europe, including Russia. As of
December&nbsp;31, 2004, we had an active physical presence in only six (the U.S., South Korea, Taiwan,
Australia, Canada and Russia) of the top 15 direct selling markets in the world. The table below
shows the number of active distributors the Company had in each of our major markets.


<P align="center" style="font-size: 10pt">43
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We experienced
an 81% increase in active Lexxus distributors during 2004, following a 39%
increase in active distributors in 2003 compared to the prior years. The following table
represents the number of active distributors by market for both Lexxus and eKaire
as of December&nbsp;31, 2002, 2003, and 2004.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,336</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,295</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,876</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canada</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,793</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,020</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">North America</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,037</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,088</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,896</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hong Kong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,752</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,971</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,114</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Taiwan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,492</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,533</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Greater China</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,647</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Singapore</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">735</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Philippines</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,799</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Southeast Asia</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,534</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Australia</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">799</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">374</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">New Zealand</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Australia/NZ</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">406</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">South Korea</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,780</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">KGC (Eastern Europe/Central Asia)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,727</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Latin America</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">192</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Central Europe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">891</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">848</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">India</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">eKaire</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,656</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,597</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133,497</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Lexxus w/o KGC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,114</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Lexxus w/ KGC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,926</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129,841</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to pursue additional foreign markets in 2005. We anticipate commencing revenue
generation in Mexico (in the second quarter of 2005) and Japan (in the fourth quarter of 2005). We
plan to start opening retail stores in China during the latter half of 2005.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To become a Lexxus distributor, a prospective distributor must agree to the terms and
conditions of our distributor agreement (posted on our Lexxus website) and to pay a nominal $100
annual enrollment fee. KGC does not require an enrollment fee for a membership. The distributor
agreement sets forth our policies and procedures, and we may elect to terminate a


<P align="center" style="font-size: 10pt">44
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">distributor for non-compliance. To be eligible to receive bonus compensation, which is based
upon sales recorded by a distributor&#146;s network of down-line distributors, a distributor may be
required to make nominal monthly purchases of products. As of December&nbsp;31, 2004, Lexxus had
approximately 130,000 active distributors, including KGC&#146;s approximately 40,000 active
distributors. Active distributors are defined as those who made at least one product purchase over
the last 12&nbsp;months.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To become an eKaire distributor, a person must sign an agreement (posted on our eKaire
website) to comply with our policies and procedures. To be considered &#147;active&#148;, the distributor
must have placed an order for product within the preceding year. As of December&nbsp;31, 2004, eKaire
had approximately 3,600 active distributors and customers.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We pay commissions to eligible distributors based on sales by such distributors&#146; down-line
distributors during a given commission period. We believe, based upon our knowledge of our
competitor&#146;s compensation plans, that we offer one of the highest commission payouts in the direct
selling industry. We also believe that the uniqueness and efficacy of our products, combined with a
high commission rate, creates a highly desirable business opportunity and work environment for our
distributors. See &#147;Working with Distributors &#150; Compensation Plans.&#148;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Distributors generally pay for products by credit card in connection with orders placed
through their own Internet page at <U>www.mylexxus.com</U> or
<U>www.mykaire.com</U> prior to shipment.
Accordingly, we carry minimal accounts receivable and credit losses are historically minimal.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We regularly sponsor promotional meetings and participate in motivational training events in
key cities around the world. These events are designed to inform prospective and existing
distributors about both existing and new product lines as well as selling techniques. Distributors
typically share their direct selling experiences, their individual selling styles and their
recruiting methods at these promotional or training events. Prospective distributors are educated
about the structure, dynamics and benefits of the direct selling industry. We are continually
developing or updating our marketing strategies and programs to motivate our distributors. These
programs are designed to increase distributors&#146; monthly product sales and the recruiting of new
distributors in their down-lines.


<P align="center" style="font-size: 10pt"><B><I>Management Information Systems</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Lexxus business, with the exception of KGC, uses our proprietary MarketVision software to
maintain a web-based system to process orders, to communicate volume and commissions to
distributors. KGC, a majority owned subsidiary, uses third-party service provider, Septuor
and its software for functionalities similar to those provided by
MarketVision. See &#147;Recent Developments.&#148;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The eKaire commission system uses a third-party software package, Infotrax, and provides each
independent distributor with a detailed monthly accounting of all sales and recruiting activity.
These statements eliminate the need for substantial record keeping on behalf of the distributor.


<P align="center" style="font-size: 10pt">45
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other than MarketVision, which handles order processing seamlessly for all applicable markets,
the Company has not automated and integrated other critical business processes such as inventory
management and accounting. The Company is currently evaluating business systems to automate more of
the business functions and to improve their linkage to MarketVision.


<P align="center" style="font-size: 10pt"><B><I>Corporate History</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s current business can be traced back to Kaire Neutraceutical Inc. (&#147;Kaire&#148;), a
privately owned Colorado company in direct selling. Mr.&nbsp;Mark Woodburn, engaged by Kaire&#146;s
investors, became an advisor to, and subsequently the President of, Kaire in 1999 and engaged Mr.
Terry LaCore as a direct selling consultant to turn around the struggling Kaire business. Mr.
Woodburn assisted Kaire with its acquisition of an inactive publicly traded entity, Natural Health
Trends Corp. (the &#147;Company&#148;), originally incorporated in Florida in 1988, and reverse-merged Kaire
into the Company in 1999. In 2000, Kaire Nutraceutical Inc. was sold to certain private investors.
Also in 2000, the Company was relocated to Dallas. The relocation was an ultimately successful
effort in reducing cost and improving the Company&#146;s coordination with key vendors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2001, the Company with certain minority investors launched the Lexxus business in
the U.S. The move was followed by a string of international expansions of the Lexxus business that
significantly fueled the growth of the Company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of the years Lexxus incorporated legal entities to enter into
various international markets:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Canada, Australia, New Zealand: 2001</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Russia and Eastern Europe: January&nbsp;2002. The business in this region was
re-organized into KGC in November&nbsp;2003.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Hong Kong: March&nbsp;2002.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>India: April&nbsp;2002. (Due to poor operating performance, management terminated the
Indian operations in the second quarter of 2004.)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Singapore: June&nbsp;2002.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>The Philippines: November&nbsp;2002.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>South Korea: June&nbsp;2003.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Mexico: November&nbsp;2004.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Colombia: November&nbsp;2004.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Japan: December&nbsp;2004.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Indonesia: December&nbsp;2004.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Malaysia: January, 2005.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I Luv My Pet (&#147;ILMP&#148;) was formed as a wholly owned subsidiary in the fourth quarter of 2003
to launch a new line of business focused on the pet food and supplement market. Sales of ILMP
products were substantially below expectations and total revenue from ILMP operations was
insignificant. After an evaluation in the third quarter of 2004, the Company elected to wind down
the operations of ILMP. As of December&nbsp;2004, the operations of ILMP were terminated.


<P align="center" style="font-size: 10pt">46
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<P align="center" style="font-size: 10pt"><B><I>Geographic Locations</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company operates in more than 30 countries. The Company&#146;s business is generally organized
along geographic lines within the two different brands:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Lexxus has active physical presence in the following markets:</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">o&nbsp;&nbsp;</TD>
    <TD>North America (The United States and Canada)</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="9%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">o&nbsp;&nbsp;</TD>
    <TD>Greater China (Hong Kong, Taiwan and China) and
Southeast Asia (Singapore, Malaysia, the Philippines and Indonesia)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="9%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">o&nbsp;&nbsp;</TD>
    <TD>Eastern Europe (Russia and other former Soviet Union republics)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="9%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">o&nbsp;&nbsp;</TD>
    <TD>Australia and New Zealand</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="9%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">o&nbsp;&nbsp;</TD>
    <TD>South Korea</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="9%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">o&nbsp;&nbsp;</TD>
    <TD>Japan</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="9%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">o&nbsp;&nbsp;</TD>
    <TD>Mexico</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>eKaire has active physical presence in the following markets</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">o&nbsp;&nbsp;</TD>
    <TD>North America (The United States and Canada)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="9%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">o&nbsp;&nbsp;</TD>
    <TD>Australia and New Zealand</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Natural Health Trends Corp., the corporate entity is mainly staffed in Dallas,
Texas and Minneapolis, Minnesota.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Please also see &#147;Properties&#148; for specific cities of our facilities.


<P align="center" style="font-size: 10pt"><B><I>Employees</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The combined total number of world-wide employees for our company was 143, at December&nbsp;31,
2004, including 21 management, 65 sales and customer support, 7 marketing, 18 administrative, 14
accounting and 18 warehouse positions. The Company had 138 full-time and 5 part-time employees.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Out of the 143 worldwide employees, the offices in the U.S. had 31 employees, Canada 9, Hong
Kong 30, Taiwan 29, the Philippines 11, Singapore 7, Indonesia 1, South Korea 17, Mexico 2, Japan
1, and Australia 5.


<P align="center" style="font-size: 10pt"><B><I>Seasonality</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that the seasonality of the recruitment of distributors and the general sales
volume do not correlate with that of traditional retail sales. For instance, most of our
distributors operate as a home-based business. Distributors tend to take &#147;typical&#148; vacations such
as summer and winter holidays, thus, decreasing our sales volume during such vacation periods.


<P align="center" style="font-size: 10pt">47
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<P align="center" style="font-size: 10pt"><B><I>Intellectual Property</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most of the eKaire and Lexxus products are packaged under a &#147;private label&#148; arrangement. We
have applied for trademark registration for names, logos and various product names in several
countries into which eKaire and Lexxus are doing business or considering expanding into. We
currently have three trademark registrations in the United States and two trademark applications
pending with the United States Patent and Trademark Office. Our registered trademarks expire or
become renewable in 2007 and 2008, and we rely on common law trademark rights to protect our
unregistered trademarks. These common law trademark rights do not provide us with the same level
of protection as afforded by a United States federal registration trademark. Common law trademark
rights are limited to the geographic area in which the trademark is actually utilized, while a
United States federal registration of a trademark enables the registrant to discontinue the
unauthorized use of the trademark by a third party anywhere in the United States even if the
registrant has never used the trademark in the geographic area where the trademark is being used,
provided, however, that the unauthorized third party user has not, prior to the registration date,
perfected its common law rights in the trademark within that geographic area.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2001, the inventor of our <I>Alura&#153; </I>product, from whom we have a license to
distribute Alura&#153;, was awarded a patent for the formulation of that product.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;1, 2004, Toyota Motor Sales, U.S.A. filed a lawsuit against the Company and Lexxus
which alleges that by using the name Lexxus we have diluted and infringed upon Toyota&#146;s Lexus
trademark. Toyota seeks to enjoin the Company and Lexxus from using the Lexxus mark and otherwise
competing unfairly with Toyota, to transfer the ownership of the mylexxus.com and
lexxusinternational.com Internet sites to Toyota, and reimbursement of costs and reasonable
attorney fees incurred by Toyota in connection with this matter. If the Company is unsuccessful in
defending this action, the Company may be required to change the name of some or all of its Lexxus
subsidiaries, certain products and domain names. See &#147;Legal Proceedings.&#148;


<P align="center" style="font-size: 10pt"><B><I>Insurance</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company currently carries general liability insurance in the amount of $1,000,000 per
occurrence and $2,000,000 in the aggregate as well as customary cargo and other insurance coverage,
including on international subsidiaries. We do not carry product liability insurance, but may be
covered by the insurance maintained by our principal suppliers. There can be no assurance,
however, that product liability insurance would be available, and if available, that it would be
sufficient to cover potential claims or that an adequate level of coverage would be available in
the future at a reasonable cost, if at all. A successful product liability claim could have a
material adverse effect on our business, financial condition and results of operations. In
November&nbsp;2004, Dorothy Porter filed a complaint against the Company for strict liability, breach of
warranty and negligence in the U.S. District Court for the Southern District of Illinois, alleging
that she sustained a brain hemorrhage after taking Formula One, an ephedra-containing product
marketed by Kaire Nutraceuticals Inc., a former subsidiary of the Company. See &#147;Legal Proceedings.&#148;


<P align="center" style="font-size: 10pt">48
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<P align="left" style="font-size: 10pt"><B>Working with Distributors</B>



<P align="center" style="font-size: 10pt"><B><I>Sponsorship</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The sponsoring of new distributors creates multiple levels in a direct selling structure. The
persons that a distributor sponsors within the network are referred to as &#147;down-line&#148; or
&#147;sponsored&#148; distributors. If down-line distributors also sponsor new distributors, they create
additional levels within the structure, but their down-line distributors remain in the same
down-line network as their original sponsoring distributor.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely on our distributors to recruit and sponsor new distributors. Our top up-line
distributors tend to focus on building their network of &#147;down-line&#148; distributors. While we provide
product samples, brochures and other sales materials, distributors are primarily responsible for
recruiting and educating their new distributors with respect to products, the compensation plan and
how to build a successful distributorship network.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Distributors are not required to sponsor other distributors as their down-line, and we do not
pay any commissions for sponsoring new distributors. However, because of the financial incentives
provided to those who succeed in building a distributor network that consumes and resells products,
we believe that many of our distributors attempt, with varying degrees of effort and success, to
sponsor additional distributors. Because they are seeking new opportunities for income, people are
often attracted to become distributors after using our products and becoming regular customers or
after attending introductory seminars. Once a person becomes a distributor, he or she is able to
purchase products directly from us at wholesale prices via the Internet. The distributor is also
entitled to sponsor other distributors in order to build a network of distributors and product
users.


<P align="center" style="font-size: 10pt"><B><I>Compensation Plans</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that one of our key competitive advantages within the direct selling industry is
our distributor compensation plan. Under our compensation plan, distributors are paid weekly
commissions in the distributor&#146;s home country, in their local currency, for product sold by that
distributor&#146;s down-line distributor network across all geographic markets. Distributors are not
paid commissions on purchases or sales of our products made directly by them. This &#147;seamless&#148;
compensation plan enables a distributor located in one country to sponsor other distributors
located in other countries where we are authorized to do business.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based upon management&#146;s knowledge of our competitors&#146; distributor compensation plans, we
believe that our compensation plan is among the most financially rewarding plans offered to
distributors by any direct selling company. Currently, there are two fundamental ways in which our
distributors can earn income:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Through retail markups on sales of products purchased by distributors at
wholesale prices; and</TD>
</TR>

</TABLE>

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<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Through a series of commissions paid on product purchases made by their
down-line distributors.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each of our products carries a specified number of sales volume points. Commissions are based
on total sales volume points by down-line distributors per sales period. Sales volume points are
essentially based upon a percentage of a product&#146;s wholesale cost. As the distributor&#146;s business
expands from successfully sponsoring other distributors who in turn expand their own businesses by
sponsoring other distributors, the distributor receives higher commissions. To be eligible to
receive commissions, a distributor may be required to make nominal monthly purchases of our
products. Certain of our subsidiaries do not require these nominal purchases for a distributor to
be eligible to receive commissions. In determining commissions, the number of levels of down-line
distributors included within the distributor&#146;s commissionable group increases as the number of
distributorships directly below the distributor increases.


<P align="center" style="font-size: 10pt"><B><I>Distributor Support</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are committed to providing a high level of support services tailored to the needs of our
distributors in each marketplace we are serving. We attempt to meet the needs and build the loyalty
of distributors by providing personalized distributor services and by maintaining a generous
product return policy. See &#147;Government Regulations &#150; Product Warranties and Returns.&#148; Because many
of our distributors are working on a part-time basis and have only a limited number of hours each
week to concentrate on their business, we believe that maximizing a distributor&#146;s efforts by
providing effective distributor support has been, and could continue to be, important to our
success.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through training meetings, annual conventions, web-based messages, distributor focus groups,
regular telephone conference calls and other personal contacts with distributors, we seek to
understand and satisfy the needs of our distributors. Via our websites, we provide product
fulfillment and tracking services that result in user-friendly and timely product distribution.
Most of our offices maintain meeting rooms, which our distributors may utilize for training and
sponsoring activities. We do not believe that most of our distributors maintain a significant
inventory of our products.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To help maintain communication with our distributors, we offer the following support programs:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Teleconferences. </I>Lexxus and eKaire hold teleconferences with company management and associate
field leadership on various subjects such as technical product discussions, distributor
organization building and management techniques.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Internet. </I>We maintain websites at <U>www.naturalhealthtrendscorp.com</U>, <U>www.kaire.com</U>,
<U>www.lexxusinternational.com</U>, <U>www.kgcnetworks.com</U>, <U>www.mylexxus.com</U>, and <U>www.mykaire.com</U>.
On each website, the user can read company news, learn more about various products, sign up to be a
distributor, place orders, and track the fulfillment and delivery of their order.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Product Literature. </I>We offer a variety of literature to distributors, including product
catalogs, informational brochures, pamphlets and posters for individual products.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Toll Free Access. </I>eKaire offers a toll free number to place orders and to sponsor new
distributors. Lexxus offers these services only through its websites. Both eKaire and Lexxus offer
&#147;live&#148; consumer support where a customer service representative can address general questions or
concerns.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Broadcast E-mail. </I>Announcements about Lexxus and eKaire are sent via e-mail to all active
distributors.


<P align="center" style="font-size: 10pt"><B><I>Technology and Internet Initiatives</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that the Internet has become increasingly important to our business as more
consumers communicate online and purchase products over the Internet as opposed to traditional
retail and direct sales channels. As a result, we have committed significant resources to our
e-commerce capabilities and the abilities of our distributors to take advantage of the Internet.
Substantially all of our sales during 2003 and 2004 occurred via the Internet. eKaire has a
personalized website for its distributors to purchase products via
the Internet at <U>www.mykaire.com</U>.
Lexxus offers a global web page that allows a distributor to have a personalized website at
<U>www.mylexxus.com</U> through which he or she can sell products in more than 30 international markets.


<P align="center" style="font-size: 10pt"><B><I>Rules&nbsp;Affecting Distributors</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We monitor regulations in each country in which we do business as well as the activity of
distributors to ensure that our distributors comply with local laws. Our distributor policies and
procedures establish the rules that distributors must follow in each country. We also monitor
distributor activity in an attempt to provide our distributors with a &#147;level playing field&#148; so that
one distributor may not be disadvantaged by the activities of another. We require our distributors
to present products and business opportunities in an ethical and professional manner. Distributors
further agree that their presentations to customers must be consistent with, and limited to, the
product claims and representations made in our literature.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We require that we produce or pre-approve all sales aids used by distributors such as
videotapes, audiotapes, brochures and promotional clothing. Further, distributors may not use any
form of media advertising to promote products unless it is pre-approved by the Company. Products
may be promoted only by personal contact or by literature produced or approved by us. Distributors
are not entitled to use our trademarks or other intellectual property without our prior consent.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our compliance department reviews reports of alleged distributor misbehavior. If we determine
that a distributor has violated our distributor policies or procedures, we may terminate the
distributor&#146;s rights completely. Alternatively, we may impose sanctions, such as warnings,
probation, withdrawal or denial of an award, suspension of privileges of the distributorship,
fines, withholding commissions, until specified conditions are satisfied or other appropriate


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<P align="left" style="font-size: 10pt">injunctive relief. Our distributors are independent contractors, not employees, and may act
independently of us. Further, our distributors may resign or terminate their distributorship at any
time without notice. See &#147;Risk Factors &#150; Although Our Distributors Are Independent Contractors,
Improper Distributor Actions That Violate Laws or Regulations Could Harm Our Business.&#148;


<P align="left" style="font-size: 10pt"><B>Recent Developments</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;29, 2004, the Company purchased shares of common stock owned by the minority
stockholders of Lexxus U.S. (representing the 49% interest not owned by the Company) in exchange
for 100,000 shares of the Company&#146;s common stock. The total purchase price, including acquisition
related costs of approximately $7,000, was approximately $1,969,000 based upon the average closing
price of the Company&#146;s common stock of $23.08 discounted by 15%. See &#147;Acquisitions&#148; and &#147;Related
Party Transactions&#148; in the consolidated financial statements included elsewhere in this prospectus.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;31, 2004, the Company entered into a merger agreement with MarketVision
Communications Corp. (&#147;MarketVision&#148;), the exclusive provider of the direct selling software used
by our Lexxus businesses around the world since mid-2001. See &#147;Acquisitions&#148; and &#147;Related Party
Transactions&#148; in the consolidated financial statements included elsewhere in this prospectus.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;12, 2004, an investigative television program was aired in the People&#146;s Republic of
China with respect to the operations of the Company&#146;s Hong Kong subsidiary and the representative
office located in Beijing. The television program alleged that Lexxus&#146;s Hong Kong operations
engaged in fraudulent activities and sold products without proper permits. After a thorough
internal investigation of the issues raised in the television program, the Company nonetheless
concluded that additional training and development of certain Lexxus independent distributors
located in Hong Kong was warranted. The Company then began to require intensive training of its
independent distributors with respect to:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>The applicable Chinese legal requirements, and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>The need for distributors to accurately and fairly describe business opportunities
available to potential distributors.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2004, the Company elected to suspend shipment of product to certain Hong Kong
distributors until they had completed the required training. This resulted in an unshipped sales
backlog of orders to be shipped of approximately $6,598,000 as of June&nbsp;30, 2004. By September&nbsp;30,
2004, training of the distributors was substantially completed. Furthermore, to accommodate the
concerns of many independent distributors, Lexxus extended its existing 14-day return policy in
Hong Kong to 180&nbsp;days to allow distributors and customers who purchased products during the
two-week period prior to, and the two-week period after, the airing of the television program to
return purchased merchandise for a full refund. In addition, the Company decided not to seek
recovery for any commissions already paid to its distributors related to product sales recorded
during this period that were subsequently returned. Due to the adverse publicity caused by the
airing of the television program, revenues from Hong Kong declined


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<P align="left" style="font-size: 10pt">significantly during the second and third quarters of 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;19, 2004, the Company purchased 510,000 shares of common stock owned by the minority
stockholders of Lexxus International Co., Ltd. (Taiwan), a Taiwan limited liability corporation
(&#147;Lexxus Taiwan&#148;) which represented the 30% interest in Lexxus Taiwan not owned by the Company.
For these shares of Lexxus Taiwan, the Company paid $136,000 in cash.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;6, 2004, the Company entered into a securities purchase agreement with certain
institutional and accredited investors as well as certain officers and directors of the Company.
Pursuant to the agreement, the Company agreed to sell 1,369,704 units at a price of $12.595 per
unit, raising approximately $16&nbsp;million proceeds, net of transaction costs. See &#147;Private Placement
of Units.&#148;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company intends to generate revenue in both the Mexican and Japanese markets in 2005. As
of December&nbsp;2004, management teams were recruited and new entities were established for both
markets. The Company expects that the Mexican operations could start to generate revenue by the
second quarter of 2005, and the Japanese operations should begin to generate revenue sometime by
the fourth quarter of 2005.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June&nbsp;2004, Lexxus obtained a business license in China. The license stipulates a capital
requirement of $12&nbsp;million over a three-year period, including a $1.8&nbsp;million initial payment the
Company made in January&nbsp;2005. In planning for a retail operation, the Company estimates that each
retail store will cost approximately $50,000 to $100,000 and is evaluating the number, location,
timing, and format of store openings. The Company is evaluating ways to develop a retail-based
operation in China. Direct selling is currently prohibited in China. Though the Chinese government
is drafting the pertinent legislation and has published preliminary versions of the new laws, the
Company cannot be sure when the new laws could become effective or whether the Company will satisfy
the requirements necessary to obtain a direct selling license in the near future. In the interim,
the Company plans to follow the path of some of our peer companies that have already commenced
selling in China by selling products from company-owned or franchised retail stores. The Company is
assessing where to open the first stores and how to structure its business in China.




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;22, 2005, the Company&#146;s common stock began trading on The NASDAQ National Market
under the ticker symbol &#147;BHIP&#148;.


<P align="left" style="font-size: 10pt"><B>Private Placement of Units</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2004, the Company entered into a securities purchase agreement (and subscription
agreements with respect to certain Canadian investors) and a registration rights


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<P align="left" style="font-size: 10pt">agreement with certain institutional and accredited investors as well as certain officers and
directors of the Company. Pursuant to the purchase and subscription agreements, the Company agreed
to sell, and the buyers agreed to purchase, a total of 1,369,704 units of the Company&#146;s securities
at a price of $12.595 per unit. Each unit consists of one share of common stock, and one common
stock purchase warrant exercisable for one share of common stock at any time through October&nbsp;6,
2009 at an exercise price of $12.47 per share. Assuming the exercise of all the warrants, the net
proceeds to the Company will be an additional $17&nbsp;million.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the registration rights agreement, the Company has agreed to register the shares
included in the units and the shares issuable upon exercise of the Warrants for resale under the
Act. The registration rights agreement provides for the payment of certain liquidated damages in
the event that delays are experienced in the Securities and Exchange Commission&#146;s declaring that
registration statement effective. The Company agrees to use commercially reasonable effort to
effect and maintain the effectiveness of a registration statement. If the registration statement is
not effective 180&nbsp;days after the closing date, or approximately April&nbsp;4, 2005, the Company will pay
the buyers approximately $85,000, which also applies to any of Company&#146;s possible failure to
maintain the effectiveness of the registration statement after its initial effectiveness. As of
April&nbsp;11, 2005, the registration statement has not been filed and therefore not effective. The
Company incurred and recorded the liability in the second quarter of 2005. The registration rights
agreement also provides indemnification and contribution remedies to the buyers in connection with
the resale of shares pursuant to such registration statement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each of (i)&nbsp;Sir Brian Wolfson, Chairman of the Board of the Company, (ii)&nbsp;Mark D. Woodburn,
President and a director of the Company, (iii)&nbsp;Terry LaCore, an executive officer and a director of
the Company, (iv)&nbsp;Chris Sharng, Executive Vice President and Chief Financial Officer of the
Company, (v)&nbsp;John Cavanaugh, President of MarketVision, and (vi)&nbsp;Robert Hesse, a director of the
Company, invested approximately $25,000 and purchased 1,984 units upon the same terms and
conditions as the other buyers in the private placement. See &#147;Principal Shareholders &#150; Security
Ownership of Certain Beneficial Owners and Management.&#148;


<P align="left" style="font-size: 10pt"><B>Restatement of Financial Statements for the Quarter and the Year Ended December&nbsp;31, 2003 and the
Quarter Ended March&nbsp;31, 2004</B>





<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During its review of its financial statements for the quarter ended March&nbsp;31, 2004, the Company
learned that commission and transportation-related expenses incurred as of December&nbsp;31, 2003 were
under-accrued by approximately $640,000 (on a pre-tax basis) for the quarter and year ended
December&nbsp;31, 2003. Adjusting entries of approximately $640,000 were included as expenses in the
financial statements for the quarter ended March&nbsp;31, 2004.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At that time, the Company concluded that the error was not material, and therefore, did not warrant
a restatement of the 2003 financial statements. Based upon the Company&#146;s pre-tax income of
approximately $4.0&nbsp;million for the first quarter of 2004 combined with the Company&#146;s historical
sales and net income growth rates, the Company believed that the recording of $640,000 of pre-tax
expenses during the first quarter of 2004 would not have a material effect on



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<P align="left" style="font-size: 10pt">the Company&#146;s net income for the 2004 fiscal year.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, while sales continued to grow significantly, net income for the 2004 fiscal year declined
substantially. As a consequence, the adjusting entries made in the first quarter of 2004 are now
considered by management to materially affect the Company&#146;s net income for fiscal 2004.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During its review of its financial statements for the year ended December&nbsp;31, 2004, the Company
discovered that certain revenues not earned until 2004 were improperly recorded as revenue by its
Eastern European business, KGC Networks Ptd. Ltd., for the year ended December&nbsp;31, 2003. The amount
of revenues that was over-stated for the 2003 fiscal year was approximately $310,000.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;21, 2005, the Company and its Audit Committee determined that the inclusion of the
aforementioned two items in the financial statements for the quarter ended March&nbsp;31, 2004 would
materially affect the Company&#146;s net income for the year ended December&nbsp;31, 2004, and the Company
believes that an amendment to its financial statements for the year ended December&nbsp;31, 2003 is
warranted.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The restatement of the adjustments into the financial statements for the year ended December&nbsp;31,
2003 will reduce the Company&#146;s revenue by approximately $310,000, increase cost of goods sold by
approximately $180,000, increase distributor commission expense by approximately $460,000, reduce
minority interest expense by approximately $300,000, and reduce after-tax net income by
approximately $650,000 for the quarter as well as the year ended December&nbsp;31, 2003.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the quarter ended March&nbsp;31, 2004, the restatement will increase the Company&#146;s revenue by
approximately $310,000, reduce cost of goods sold by approximately $180,000, reduce distributor
commission expense by approximately $460,000, increase minority interest expense by approximately
$300,000, and increase after-tax net income by approximately $650,000 for the quarter ended March
31, 2004.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company, after consultation with its Audit Committee, concluded that the consolidated financial
statements for the fourth quarter of 2004 and the year ended December&nbsp;31, 2003 as well as the first
quarter of 2004 should no longer be relied upon, including the consolidated financial statements
and other financial information in the Company&#146;s Annual Report on Form&nbsp;10-KSB for the year ended
December&nbsp;31, 2003 and the Quarterly Report on Form&nbsp;10-Q for the first quarter
ended March&nbsp;31, 2004. Although the financial statements for the three month periods ended June&nbsp;30,
2004 and September&nbsp;30, 2004 are unaffected by this error, the consolidated financial statements for
the second and third quarters of 2004 include inaccurate information on a year to date basis
because they include the erroneous information from the first quarter of 2004 which financial
statements should not be relied upon.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company filed with the Securities and Exchange Commission its Annual Report on Form&nbsp;10-K for
the year ended December&nbsp;31, 2004 by March&nbsp;31, 2005, which included the restated results for the
year ending December&nbsp;31, 2003. The Company also intends to file in the near future an amended
Annual Report on Form&nbsp;10-KSB for the year ended December&nbsp;31, 2003, and



<P align="center" style="font-size: 10pt">55
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<P align="left" style="font-size: 10pt">amended Quarterly Reports on Form&nbsp;10-Q for the first three quarters of 2004.



<P align="left" style="font-size: 10pt"><B>Properties</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company currently has leased office and warehouse facilities in the following locations:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Dallas, Texas: approximately 16,000 square feet of office and warehouse space.
Rent is currently approximately $155,000 per year. The Company also has rented a
second warehouse of approximately 21,000 square feet in Dallas for approximately
$8,000 per month. Both leases expire on September&nbsp;30, 2005. The Company
anticipates relocating by September&nbsp;2005 to a new location in the Dallas/Fort
Worth Metroplex area. The warehouses in the Dallas area are mostly storing
products that are bound for the international markets.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Hollister, Missouri: approximately 1,500 square feet of warehouse space. See
&#147;Certain Relationships and Related Transactions&#148;. The lease term is on a month-to-month
basis at a rent of $18,000 per year. This facility picks and packs products for
individual fulfillment for the Lexxus U.S. business.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Minneapolis, Minnesota: for MarketVision&#146;s office cubicles and server racks,
rented on a month-to-month basis for $1,600 a month. We are looking for more space
in the same area.</TD>
</TR>


<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Langley, British Columbia: office and warehouse lease totaling
approximately 5,000 square feet. The lease term is 36&nbsp;months, expiring on January
2007 and the current rent is approximately $22,000 per year. This facility
services the Kaire business for North America as well as the Lexxus business in
Canada.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Queensland, Australia: office space and warehouse facilities for the Australian
and New Zealand markets in approximately 2,000 square feet. The lease term is 46
months, expiring in October&nbsp;2008, and the current rent is approximately $16,500
per year.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Hong Kong: two leases, expiring in July&nbsp;2005, combined for approximately 8,500
square feet of office space in the same building at a current rate of
approximately $286,000 per year. The Company is evaluating plans to expand the
current location as well as looking for more office space near its current
location.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Kaohsiung Taiwan: approximately 10,000 square feet of office space at a current
rate of approximately $59,000 per year. This lease expires August&nbsp;2005. The
Company is evaluating whether to continue its presence in this location. The
Company leases a 1,700 square-foot apartment for visiting expatriates at
approximately $11,000 a year. The apartment lease expired January&nbsp;2005.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Taipei, Taiwan: a 36-month agreement expiring March&nbsp;2005 for approximately
4,600 square feet of office space at a current rate of approximately $92,000 per
year. The Company is assessing its office needs in Taipei for a possible change.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Singapore: a 24-month agreement through January&nbsp;2007 for 1,500 square feet of
office space at a current rate of approximately $31,000 per year.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Seoul, South Korea: a 12-month agreement through May&nbsp;2005 for approximately
4,100 square feet of office space at a current rate of approximately $270,000 per
year. The Company also leases an apartment for its expatriate and his family at
approximately $44,000 a year.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>Mexico City, Mexico: a 60-month agreement through December&nbsp;2009 for
approximately 2,700 square feet of office space at a current rate of approximately
$96,000 per year.</TD>
</TR>

</TABLE>

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<P align="left" style="font-size: 10pt"><B>Government Regulations</B>



<P align="center" style="font-size: 10pt"><B><I>Government Regulation of Direct Selling Activities</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Direct selling activities are regulated by various federal, state and local governmental
agencies in the United States and foreign countries. These laws and regulations are generally
intended to prevent fraudulent or deceptive schemes often referred to as &#147;pyramid&#148; schemes, that
compensate participants for recruiting additional participants irrespective of product sales, use
high pressure recruiting methods and/or do not involve legitimate products. The laws and
regulations in our current markets often:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>impose cancellation/product return, inventory buy backs and cooling off rights
for consumers and distributors;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>require us or our distributors to register with governmental agencies;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>impose reporting requirements; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>impose upon us requirements, such as requiring distributors to maintain levels
of retail sales to qualify to receive commissions, to ensure that distributors are
being compensated for sales of products and not for recruiting new distributors.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The laws and regulations governing direct selling are modified from time to time to address
concern of regulators. For example, in South Korea new regulations were adopted that, among other
things, restrict direct selling marketing companies from imposing certain personal sales quota to
obtain or maintain distributorship or favorable compensation rates, modify product return
requirements so that product must be returned within a shorter period of time, and require the
companies to show sufficient insurance or guarantee to reimburse customers and/or distributors for
cancelled or unfilled orders. We have had to make some modifications to our compensation plan and
policies in order to be in compliance with all of these rules.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on research conducted in opening our existing markets, the nature and scope of inquiries
from government regulatory authorities, and our history of operations in such markets to date, we
believe that our methods of distribution are in compliance in all material respects with the laws
and regulations relating to direct selling activities of the countries in which we currently
operate. Many countries currently still have laws in place that would prohibit us from conducting
business in such markets. There can be no assurance that we would be allowed to continue to
conduct business in each of our existing markets that we currently service or any new market we may
enter in the future.


<P align="center" style="font-size: 10pt"><B><I>Regulation of Our Products</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our products and related promotional and marketing activities are subject to extensive
governmental regulation by numerous domestic and foreign governmental agencies and authorities,
including the FDA, the FTC, the Consumer Product Safety Commission, the United States Department of
Agriculture, state attorneys general and other state regulatory agencies, and similar government
agencies in each country in which we operate. For example, in Taiwan, all &#147;medicated&#148; cosmetic and
pharmaceutical products require registration. These regulations can limit our ability to import
products into new markets and can delay introductions of new


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<P align="left" style="font-size: 10pt">products into existing markets as we comply with the registration and approval process for our
products.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the fall of 2003, the customs agency of the government of South Korea brought a charge
against LXK, Ltd., the Company&#146;s wholly owned subsidiary operating in South Korea, with respect to
the importation of the Company&#146;s <I>Alura&#153; </I>product. The customs agency alleges that <I>Alura&#153; </I>is not a
cosmetic product, but rather should be categorized and imported as a pharmaceutical product. This
allegation prevailed in a Seoul district court ruling in February&nbsp;2005. In the verdict, the Company
was fined and prohibited from marketing <I>Alura&#153;</I>. The Company is evaluating an appeal. See &#147;Legal
Matters&#148; in the consolidated financial statements included elsewhere in this prospectus.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of our products are strictly regulated in certain markets in which we operate. These
markets have varied regulations that apply to and distinguish nutritional health supplements from
&#147;drugs&#148; or &#147;pharmaceutical products.&#148; For example, the FDA of the United States under the Federal
Food, Drug and Cosmetic Act regulates our products. The Federal Food, Drug and Cosmetic Act has
been amended several times with respect to nutritional supplements, most recently by the Nutrition
Labeling and Education Act and the Dietary Supplement Health and Education Act. The Dietary
Supplement Health and Education Act establishes rules for determining whether a product is a
dietary supplement. Under this statute, dietary supplements are regulated more like foods than
drugs, are not subject to the food additive provisions of the law, and are generally not required
to obtain regulatory approval prior to being introduced to the market. None of this limits,
however, the FDA&#146;s power to remove an unsafe substance from the market. In the event a product, or
an ingredient in a product, is classified as a drug or pharmaceutical product in any market, we
would generally not be able to distribute that product in that market through our distribution
channel because of strict restrictions applicable to drug and pharmaceutical products.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most of our existing major markets also regulate product claims and advertising regarding the
types of claims and representations that can be made regarding the efficacy of products,
particularly dietary supplements. Accordingly, these regulations can limit our ability and that of
our distributors to inform consumers of the full benefits of our products. For example, in the
United States, we are unable to make any claim that any of our nutritional supplements will
diagnose, cure, mitigate, treat or prevent disease. The Dietary Supplement Health and Education
Act permits only substantiated, truthful and non-misleading statements of nutritional support to be
made in labeling, such as statements describing general well-being resulting from consumption of a
dietary ingredient or the role of a nutrient or dietary ingredient in affecting or maintaining a
structure or a function of the body. In addition, all product claims must be substantiated.


<P align="center" style="font-size: 10pt"><B><I>Other Regulatory Issues</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a company incorporated in the United States and operating through subsidiaries in foreign
jurisdictions, we are subject to foreign exchange control, various forms of withholding taxes and
transfer pricing laws that regulate the flow of funds between our subsidiaries and us for product
purchases, management services and contractual obligations such as the payment of


<P align="center" style="font-size: 10pt">58
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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">distributor commissions.


<P align="center" style="font-size: 10pt"><B><I>Product Warranties and Returns</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Lexxus</I>. The Lexxus refund policies and procedures closely follow industry and
country-specific standards, which vary greatly by country. For example, in the United States, the
Direct Selling Association recommends that direct sellers permit returns during the twelve-month
period following the sale, while in Hong Kong the standard return policy is 14&nbsp;days following the
sale. We have conformed our return policies to local laws or the recommendation of the local
direct selling association. In most cases, distributors may return unopened product that is in
resalable condition for a partial refund. Lexxus must be notified of the return in writing and such
written requests would be considered a termination notice of the distributorship.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time we alter our return policy in response to special circumstances. For
example, in April&nbsp;2004, an investigative television program was aired in the People&#146;s Republic of
China with respect to the operations of the Company&#146;s Hong Kong subsidiary and the Lexxus
representative office located in Beijing. The television program made allegations that Lexxus&#146;s
Hong Kong operations engaged in fraudulent activities and sold products without proper permits. In
order to address the concerns of many independent distributors, Lexxus extended its existing 14-day
return policy in Hong Kong to 180&nbsp;days to allow distributors and customers who purchased products
during the two-week period prior to, and the two-week period after, the airing of the television
program to return purchased merchandise for a full refund. See &#147;Recent Developments.&#148; In October
2004, this special extended product return policy expired.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>eKaire. </I>eKaire product warranties and refund policies are similar to those of other companies
in the industry. If a distributor is not satisfied with the product then he/she can return the
product to eKaire for a full refund within ninety (90)&nbsp;days of the first time the product was
purchased. A distributor may return or exchange products that are unopened and in resalable
condition thirty (30)&nbsp;days after the date of purchase.


<P align="left" style="font-size: 10pt"><B>Our Industry</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are engaged in the direct selling industry, selling life-style enhancement products,
cosmetics, personal care and nutritional supplements. Direct selling is also referred to as network
marketing or multi-level marketing. This type of organizational structure and approach to
marketing and sales has proven to be extremely successful for several other direct selling
companies, particularly companies selling life-style-enhancement products, cosmetics and
nutritional supplements, or selling other types of consumer products, such as Tupperware
Corporation and Amway Corp. Generally, direct selling is based upon an organizational structure in
which independent distributors of a company&#146;s products are compensated for sales made directly to
consumers.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Distributors are compensated for sales generated by distributors they recruited and all
subsequent distributors recruited by their &#147;down-line&#148; network of distributors. The experience of
the direct selling industry has been that once a sizeable network of distributors is established,
new and alternative products and services can be offered to those distributors for sale to


<P align="center" style="font-size: 10pt">59
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">consumers and additional distributors. The successful introduction of new products can
dramatically increase sales and profits for both distributors and the direct selling marketing
organization.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to information contained on the Direct Selling Association&#146;s website, direct selling
is one of the fastest growing segments for the distribution of products on a worldwide basis. The
Direct Selling Association reports that approximately 50&nbsp;million individuals are now involved in
direct selling worldwide, and that those involved in direct selling generate approximately $93
billion in annual sales around the world. In the United States, the direct selling channel has
generated sales of approximately $29.6&nbsp;billion of goods and services in 2003, making the United
States the largest direct selling market in the world.


<P align="center" style="font-size: 10pt"><B>Top Direct Selling Markets Worldwide</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Population</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Num. Of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Distributors</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(000s)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Distrib./1000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Revenue Per</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center">Market</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Revenue ($MM)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(000s)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">FY2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Population</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Distributor</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">USA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">29,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">287,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,222</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,250</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Korea</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,515</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">China</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">n.a.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,279,161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">n.a.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">n.a.</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mexico</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,707</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">UK</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,912</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,702</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">France</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,613</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Brazil</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,815</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,345</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Germany</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,289</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,050</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Taiwan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,454</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">392</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Australia</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,777</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Malaysia</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,662</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">343</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canada</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">898</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,902</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,057</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Russia</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,611</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">556</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thailand</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">200</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Top 16</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,851</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,590,484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,382</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,872</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,637,910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">531</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">World</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">92,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,982</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,228,394</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,893</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">Source: World Federation of Direct Selling Associations



<P align="center" style="font-size: 10pt"><B><I>Competition</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We compete with a significant number of other retailers that are engaged in similar lines of
business, including sellers of health-related products and other direct sellers such as Nu Skin
Enterprises, Inc., USANA Health Sciences, Inc., Mannatech, Inc., Reliv&#146; International, Inc, and
Herbalife, Ltd.. Many of the competitors have greater name recognition and financial resources
than us as well as many more distributors. Two of the most well known and established of direct
sellers are Mary Kay, Inc. and Amway Corp., each with over three million distributors worldwide.
The direct selling channel tends to sell products at a higher price compared to traditional
retailers, which poses a degree of competitive risk. There is no assurance that we would continue
to compete effectively against retail stores, internet based retailers or other direct sellers.



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<DIV align="left">
<A name="114"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>MANAGEMENT</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain information concerning executive officers of the Company is set forth below:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Age</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Position(s) with the Company</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mark D. Woodburn
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">34</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President, Secretary and Director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Chris Sharng
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">41</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President and Chief Financial
Officer</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Terry A. LaCore

</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">32</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer of Lexxus
International and Director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Keith C. Zagar
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">48</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Operating Officer and General Counsel</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">John Cavanaugh
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">43</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President of MarketVision</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Richard Johnson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">62</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President of Lexxus Japan</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Timothy S. Davidson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">34</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Accounting Officer</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Mark D. Woodburn. </B>Mr.&nbsp;Woodburn has been a director of the Company since August&nbsp;2000, the
Chief Financial Officer and Secretary of the Company since April&nbsp;1999, and the Company&#146;s President
since September&nbsp;2000. In August&nbsp;2004, Mr.&nbsp;Woodburn resigned as Chief Financial Officer of the
Company. From October&nbsp;1992 until February&nbsp;1999, Mr.&nbsp;Woodburn served as a director and the
Secretary of Kaire International, Inc. Mr.&nbsp;Woodburn has also served as the Chief Financial Officer
of Lexxus International, Inc., a wholly-owned subsidiary of the Company, since March&nbsp;2001.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Chris Sharng. </B>Mr.&nbsp;Sharng has been the Executive Vice President and Chief Financial Officer of
the Company since August&nbsp;2004. From March, 2004 through July&nbsp;2004, Mr.&nbsp;Sharng was the Chief
Financial Officer of NorthPole Limited, a privately held Hong Kong-based manufacturer and
distributor of outdoor recreational equipment. From October&nbsp;2000 through February&nbsp;2004, Mr.&nbsp;Sharng
was the Senior Vice President and Chief Financial Officer of Ultrak Inc., which changed its name to
American Building Control Inc. in 2002, a Texas-based, publicly traded company listed on NASDAQ
that designed and manufactured security systems and products. From March&nbsp;1989 through July&nbsp;2000,
Mr.&nbsp;Sharng worked at Mattel, Inc., most recently as the Vice President of International Finance.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Terry A. LaCore. </B>Mr.&nbsp;LaCore has been the Chief Executive Officer of Lexxus since March&nbsp;2001
and a director of the Company since March&nbsp;2003. From March&nbsp;1999 until February&nbsp;2001, Mr.&nbsp;LaCore
was President of Kaire Nutraceuticals, Inc. From September&nbsp;1997 until March&nbsp;1999, Mr.&nbsp;LaCore was
President of Visionquest International Inc., a network marketing company that subsequently changed
its name to Netvision International, Inc. From March&nbsp;1997 until September&nbsp;1997, Mr.&nbsp;LaCore was an
independent distributor with Visionquest International, Inc.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Keith C. Zagar. </B>Mr.&nbsp;Zagar has been the Chief Operating Officer and General Counsel for the
Company since February&nbsp;2005. Mr.&nbsp;Zagar joined the Company in November&nbsp;2004 as Senior Legal Counsel.
From February&nbsp;2001 to December&nbsp;2004, Mr.&nbsp;Zagar was co-founder and President of Guild Electrical &#038;
Telecom Services, a commercial electrical contractor and provider of specialized services, support,
and equipment installations for telecommunications companies. Prior to 2001, Mr.&nbsp;Zagar was engaged
in the private practice of law since 1981.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>John Cavanaugh</B>. Mr.&nbsp;Cavanaugh has been the Chief Executive Officer of MarketVision since its
founding in 2000 and its President after its acquisition by the Company in March&nbsp;2004. From 1997
until 2000, Mr.&nbsp;Cavanaugh was the founder and CEO of WebWizard LLC, an internet application design
company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Richard S. Johnson. </B>Mr.&nbsp;Johnson is the President of Lexxus Japan and in charge of operations
in Japan since November&nbsp;2004. From 2000 through 2004 Mr.&nbsp;Johnson managed RSJ Strategic Advisory, a
consulting firm he founded. From 1990 to 1999 Mr.&nbsp;Johnson was Senior Vice President of Amway
Corporation with responsibility for the company&#146;s businesses in Japan and Korea. In Japan, Mr.
Johnson was Representative Director and President of Amway Japan Limited. Prior to that Mr.&nbsp;Johnson
led Asia-based businesses for Tupperware, R.J. Reynolds and PepsiCo.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Timothy S. Davidson</B>. Mr.&nbsp;Davidson has been the Company&#146;s Chief Accounting Officer since
September&nbsp;2004. From March&nbsp;2001 to
September&nbsp;2004, Mr.&nbsp;Davidson was Corporate Controller for telecommunications company Celion
Networks, Inc., located in Richardson, Texas. From February&nbsp;2000 to February&nbsp;2001, Mr.&nbsp;Davidson was Manager of Financial
Reporting for Dallas-based telecommunications company IP Communications, Inc. From December&nbsp;1994 through January&nbsp;2000, Mr.
Davidson was employed by Arthur Andersen, LLP, most recently as an Audit Manager.




<P align="left" style="font-size: 10pt"><B>Biographical Summaries of the Board of Directors</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Sir Brian Wolfson. </B>Sir Brian was elected Chairman of the Board in May&nbsp;2003 and previously
served as Chairman of the Board from 1998 to 2000. Sir Brian served as Chairman of the Board of
Wembley PLC from 1986 to 1995. He was a Director of Fruit of the Loom, Inc. from 1992 until 2002,
while serving as the Chairman of the Board from 2000 until 2002.


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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">Currently, Sir Brian is a Director of Kepner-Tregoe, Inc. and Scientific Games Corporation.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Mark D. Woodburn. </B>See background information regarding the executive officers above.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Terry A. LaCore. </B>See background information regarding the executive officers above.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Randall A. Mason. </B>Mr.&nbsp;Mason has been a director of the Company since May&nbsp;2003 and Chief
Executive Officer of Marden Rehabilitation Associates, Inc. since 1989. Marden Rehabilitation
Associates, Inc. is a private, closely held regional ancillary healthcare services provider in the
states of Ohio, W. Virginia, and Pennsylvania.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Robert H. Hesse. </B>Mr.&nbsp;Hesse has been a director of the Company since July&nbsp;2004 and the
President of the Dorchester Group, Inc., an investment banking firm, since 1992. From 1984 to
1992, Mr.&nbsp;Hesse was the President of Swartwood Hesse, Inc., a registered broker-dealer. Mr.&nbsp;Hesse
is also a director of Shortpath, Inc., an application service provider to owners and managers of
real estate, since 2001, and Two Way TV, Inc., an interactive television technology company, since
1996.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
members of the Board of Directors on the date of this prospectus and the committees
of the Board on which they currently serve are identified below.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Audit</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Compensation</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Nominating</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Director</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Age</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Committee</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Committee</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Committee</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Sir Brian Wolfson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">69</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">*
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">**
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">**</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mark D. Woodburn
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">34</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Terry A. LaCore
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">32</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Randall A. Mason
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">45</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">**
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">*
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">*</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Robert H. Hesse
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">61</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">*
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">*
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">*</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<HR size="1" width="18%" align="left" noshade color="#000000">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left">*</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Committee member</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">**</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Chair</TD>
</TR>

</TABLE>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2003, the Board elected Sir Brian Wolfson to serve as Chairman of the Board. The
Chairman of the Board organizes the work of the Board and ensures that the Board has access to
sufficient information to enable the Board to carry out its functions, including monitoring the
Company&#146;s performance and the performance of management. In carrying out this role, the Chairman,
among other things, presides over all meetings of the Board of Directors and shareholders,
including executive sessions of the Board in which management Directors and other members of
management do not participate, establishes the annual agenda of the Board and agendas of each
meeting in consultation with the President and oversees the distribution of information to
Directors.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors has determined that Sir Brian Wolfson, Randall A. Mason and Robert H.
Hesse are independent directors (as independence is defined in the rules of The NASDAQ Stock
Market). In assessing the independence of the directors, the Board of Directors determines whether
or not any director has a material relationship with us (either directly or indirectly as a
partner, shareholder or officer of an organization that has a relationship with us) that would
interfere with the exercise of independent judgment in carrying out the responsibilities of a
director. The Board of Directors considers all relevant facts and circumstances in making
independence determinations, including the existence and scope of any commercial, industrial,
banking, consulting, legal, accounting, charitable and familial relationships.


<P align="left" style="font-size: 10pt"><B>Director Compensation</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2004, the Company paid as director compensation approximately $42,000 to Mr.&nbsp;Mason, $51,000
to Capital Development S.A. (on behalf of Sir Brian Wolfson) and $9,900 to Mr.&nbsp;Hesse. Each
director was also reimbursed for reasonable expenses incurred in connection with attending Board
and committee meetings.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;2002, the Company issued options to purchase 60,000 shares of common stock to each of
Sir Brian Wolfson and Randall A. Mason. The options are exercisable at $1.50 per share until July
24, 2007. In April&nbsp;2003, the Company issued options to purchase 5,000 shares of common stock to
Robert H. Hesse. The options are exercisable at $1.80 per share until April&nbsp;9, 2006.


<P align="left" style="font-size: 10pt"><B>Meetings and Committees of the Board of Directors</B>


<P align="left" style="font-size: 10pt">The Board of Directors met six (6)&nbsp;times during the fiscal year ended December&nbsp;31, 2004 and each
director attended at least seventy-five percent (75%) of these meetings and the meetings of the
committees of the Board on which such director serves.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors has standing Audit, Compensation and Nominating Committees.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Audit Committee. </B>During 2004, the Audit Committee consisted of Randall A. Mason, Sir Brian
Wolfson and, commencing in July&nbsp;2004, Robert H. Hesse. The Board has determined that the members
of the Audit Committee are independent for the purposes of the NASDAQ National Market listing
standards and meet the independence requirements contained in Exchange Act Rule&nbsp;10A-3(b)(1). The
Audit Committee is primarily responsible for reviewing the services performed by the Company&#146;s
independent registered public accounting firm, evaluating the Company&#146;s accounting policies and its
system of internal controls, and reviewing significant finance transactions. The Audit Committee
does not have a member that meets the SEC criteria of an &#147;audit committee financial expert&#148;.
However, the Company believes that the Audit Committee members collectively have acquired
sophisticated business experience and accounting knowledge to fulfill the Audit Committee&#146;s
responsibilities. The Company&#146;s Audit Committee has, and continues to have, at least one member who
has past employment experience in finance or accounting, requisite professional certification in
accounting, or any other comparable experience or background which results in the individual&#146;s
financial sophistication, including being or having been a chief executive officer, chief financial
officer or other senior


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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">officer with financial oversight responsibilities in accordance with NASD Marketplace Rule&nbsp;4350.
During 2004, the Audit Committee met five times.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Compensation Committee. </B>During 2004, the Compensation Committee consisted of Randall A. Mason,
Sir Brian Wolfson and, commencing in July&nbsp;2004, Robert H. Hesse. The Compensation Committee is
comprised of directors who are independent for purposes of the NASDAQ National Market listing
standards. The Compensation Committee is primarily responsible for approving salaries, bonuses and
other compensation for the Company&#146;s President and executive officers, reviewing management
recommendations relating to new incentive compensation plans and changes to existing incentive
compensation plans, and administering the Company&#146;s stock plans, including granting options and
setting the terms thereof pursuant to such plans. During 2004, the Compensation Committee met two
times.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Compensation
Committee Interlocks and Insider Participation.</B> None of our
executive officers serves as a member of the board of directors or
compensation committee, or other committee serving an equivalent
function, of any other entity that has one or more executive officers
serving as a member of our board of directors or compensation
committee. None of the current members of our Compensation Committee
has ever been our employee.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Nominating Committee. </B>In July&nbsp;2004, the Board of Directors created a Nominating Committee and
appointed Sir Brian Wolfson, Robert H. Hesse and Randall A. Mason as the initial members of such
committee. The Nominating Committee is comprised of directors who are independent for purposes of
the NASDAQ National Market listing standards. The Nominating Committee considers and makes
recommendations to the Board of Directors with respect to the size and composition of the Board of
Directors and identifies potential candidates to serve as directors. The Nominating Committee
identifies candidates to the Board of Directors by introduction from management, members of the
Board of Directors, employees or other sources and shareholders that satisfy the Company&#146;s policy
regarding shareholder recommended candidates. The Nominating Committee does not evaluate director
candidates recommended by shareholders differently than director candidates recommended by other
sources. The Nominating Committee did not meet during 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In considering Board of Directors candidates, the Nominating Committee takes into
consideration the Company&#146;s Board Candidate Guidelines, the Company&#146;s policy regarding shareholder
recommended director candidates, and all other factors that they deem appropriate, including, but
not limited to, the individual&#146;s character, education, experience, knowledge and skills.


<P align="center" style="font-size: 10pt">65
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="115"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>COMPENSATION OF EXECUTIVE OFFICERS</B>



<P align="left" style="font-size: 10pt"><B>Summary Compensation Table</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the annual and long-term compensation of the President and
executive officers earning in excess of $100,000 in the fiscal year ended December&nbsp;31, 2004 (the
&#147;Named Executive Officers&#148;):

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Long-Term</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="5" style="border-bottom: 1px solid #000000">Annual Compensation</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Compensation Awards</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Name and</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Other Annual</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Securities Underlying</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Principal Position</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Year</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Salary</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Bonus</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Compensation</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Options(#)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mark D. Woodburn<BR>
President
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2004<BR>
2003<BR>
2002
</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right" valign="bottom">$&nbsp;&nbsp;18,000<BR>
$&nbsp;&nbsp;15,979<BR>
$&nbsp;&nbsp;18,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&#151;<BR>
&#151;<BR>
&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$&nbsp;&nbsp;4,000<BR>
&#151;<BR>
&#151;
</TD>
    <TD nowrap valign="top">(1)</TD>
    <TD align="right" valign="bottom">&#151; <BR>
&#151; <BR>
570,000</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Terry A. LaCore<BR>
Chief Executive
Officer of Lexxus
International, Inc.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2004<BR>
2003<BR>
2002
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$150,207<BR>
$144,231<BR>
$150,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&#151;<BR>
&#151;<BR>
&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$24,000<BR>
$24,000<BR>
$24,000
</TD>
    <TD nowrap>(2)<BR>(3)<BR>(3)</TD>
    <TD align="right" valign="bottom">&#151; <BR>
&#151; <BR>
570,000</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Chris Sharng<BR>
Executive Vice
President and Chief
Financial Officer
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2004<BR>
2003<BR>
2002
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$&nbsp;&nbsp;92,885<BR>
&#151;<BR>
&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$50,000<BR>
&#151;<BR>
&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&#151;<BR>
&#151;<BR>
&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">34,124 <BR>
&#151; <BR>
&#151;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">John Cavanaugh<BR>
President of
MarketVision Comm.
Corp.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2004<BR>
2003<BR>
2002
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$147,843<BR>
&#151;<BR>
&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&#151;<BR>
&#151;<BR>
&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&#151;<BR>
&#151;<BR>
&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">253,580<BR>
&#151; <BR>
&#151;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<HR size="1" width="18%" align="left" noshade color="#000000">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Approximate amount pertaining to personal travel expenses paid by the Company</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Approximate amount pertaining to a housing allowance for a house maintained for Mr.
LaCore&#146;s use in Dallas, Texas ($14,000) and personal travel expenses paid by the Company
($10,000)</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(3)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Pertains to a housing allowance for a house maintained for Mr.&nbsp;LaCore&#146;s use in Dallas,
Texas</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">66
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<P align="left" style="font-size: 10pt"><B>Option Grants in Last Fiscal Year</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information regarding options granted to each Named Executive
Officer during 2004 and the values of such options held by such individuals at fiscal year end:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">% of Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Potential Realizable Value</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Securities</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Options</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">At Assumed Annual Rates</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Underlying</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Granted to</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exercise</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Of Stock Appreciation for</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Date of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Options</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Employees in</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Expiration</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Option Term (1)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">Grant</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">Granted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">Fiscal Year</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">$/Share</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">Date</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">5%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">10%</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">John Cavanaugh</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3/31/04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">253,580</TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">73.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3/31/11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,869,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,356,826</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" colspan="29" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chris Sharng</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6/24/04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">34,124</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">9.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6/23/14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">244,649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">619,987</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<HR size="1" width="18%" align="left" noshade color="#000000">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">The amounts under these columns reflect calculations at assumed 5% and 10% appreciation
rates and, therefore, are not intended to forecast future appreciation, if any, of the
respective underlying common stock. The potential realizable value to the optionees was
computed as the difference between the appreciated value, at the expiration dates of the stock
options, of the applicable underlying common stock obtainable upon exercise of such stock
options over the aggregate exercise price of such stock options.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">The options are 100% vested and were granted to Mr.&nbsp;Cavanaugh in connection with the
Company&#146;s MarketVision acquisition. See &#147;Certain Relationships and Related Transactions -
MarketVision.&#148;</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(3)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Of the total 34,124 options granted Mr.&nbsp;Sharng, 4,992 options vested January&nbsp;31, 2005, 833
vested on March&nbsp;1, 2005, and an additional 833 will vest each month thereafter up to the total
grant of 34,124 options.</TD>
</TR>

</TABLE>



<P align="left" style="font-size: 10pt"><B>Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information concerning the exercise of stock options during the
year ended December&nbsp;31, 2004 by the Named Executive Officers and the number and aggregate value of
unexercised in-the-money options for stock options at December&nbsp;31, 2004. The actual amount, if any,
realized on exercise of stock options will depend on the amount by which the market price of the
Company&#146;s common stock on the date of exercise exceeds the exercise price. The actual value
realized on the exercise of unexercised in-the-money stock


<P align="center" style="font-size: 10pt">67
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">options (whether exercisable or unexercisable) may be higher or lower than the values reflected in
this table.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Number of Securities</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Value of Unexercised in the</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Acquired on</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Underlying Unexercised</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Money Options at</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Exercise(#)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Realized ($)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Options at FY-End (#)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">FY-End ($) (1)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Exercisable</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Unexercisable</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Exercisable</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Unexercisable</TD>
    <TD style="border-bottom: 0px solid #000000">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mark D. Woodburn</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">600,000</TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,117,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Terry A. LaCore</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,200,000</TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,234,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chris Sharng</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">John Cavanaugh</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">253,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<HR size="1" width="18%" align="left" noshade color="#000000">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Based upon a closing price on December&nbsp;31, 2004 of $11.20 per share as reported by OTC
Bulletin Board.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 600,000 options held by the LaCore and Woodburn Partnership, a general partnership
owned by Messrs.&nbsp;LaCore and Woodburn.</TD>
</TR>

</TABLE>



<P align="left" style="font-size: 10pt"><B>Equity Compensation Plan Information</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides information as of December&nbsp;31, 2004 with respect to the Company&#146;s
common stock that may be issued under its existing equity compensation plans. The table shows the
number of securities to be issued under compensation plans that have been approved by shareholders
and those that have not been so approved. The footnotes and other information following the table
are intended to provide additional detail on the compensation plans.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(c)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of securities to</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted-average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of securities remaining available</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">be issued upon exercise of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">exercise price of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">for future issuance under equity</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">outstanding options, warrants</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">outstanding options,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">compensation plans (excluding securities</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Plan Category</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">and rights</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">warrants and rights</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">reflected in column (a))</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation plans
or arrangements approved
by security
holders<SUP style="font-size: 85%; vertical-align: text-top">(1)</sup></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">344,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">880,876</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation plans
or arrangements not
approved by security
holders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,331,419</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,675,543</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">880,876</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">68
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P>
<HR size="1" width="18%" align="left" noshade color="#000000">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">A total of 1,225,000 shares of common stock are reserved under our 2002 Stock Plan approved by shareholders in May
2003.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes (i)&nbsp;options exercisable for 570,000 shares of common stock
issued to the LaCore and Woodburn Partnership, (ii)&nbsp;options
exercisable for 570,000 shares of common stock issued to Mr.&nbsp;LaCore,
(iii)&nbsp;options exercisable for 30,000 shares of common stock issued to
Benchmark Consulting Group (which was subsequently assigned to the
LaCore and Woodburn Partnership) (also see &#147;Option Agreements&#148;
below), (iv)&nbsp;options exercisable for 30,000 shares of common stock
issued to Mr.&nbsp;LaCore, (v)&nbsp;options exercisable for 125,000
shares of common stock issued to certain members of the Company&#146;s
board of directors, (vi)&nbsp;warrants exercisable for 1,419 shares of
common stock issued to Series&nbsp;J Warrant holders on March&nbsp;3, 2000
exercisable at $141.00 per share through March&nbsp;21, 2005, and (vii)
options exercisable for 5,000 shares of common stock issued to an
unrelated party on April&nbsp;9, 2003 exercisable at $1.80 per share
through April&nbsp;9, 2006.</TD>
</TR>

</TABLE>



<P align="left" style="font-size: 10pt"><B>2002 Stock Option Plan</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of the principal features of the 2002 Stock Plan (the &#147;2002 Stock
Plan&#148;). The summary is qualified in its entirety by reference to the complete text of the 2002
Stock Plan.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The maximum number of shares of common stock with respect to which awards may be presently
granted pursuant to the 2002 Stock Plan, as amended, is 1,225,000 shares. As of December&nbsp;31, 2004, there
were 344,124 options issued under the 2002 Stock Plan at exercise prices ranging from $11.40 to
$18.11. Shares issuable under the 2002 Stock Plan may be either treasury shares or authorized but
un-issued shares. The number of shares available for issuance would be subject to adjustment to
prevent dilution in the event of stock splits, stock dividends or other changes in the
capitalization of the Company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to compliance with Rule&nbsp;16b-3 of the Securities Exchange Act of 1934, the 2002 Stock
Plan shall be administered by the Board of Directors of the Company or, in the event the Board
shall appoint and/or authorize a committee, such as the Compensation Committee, of two or more
members of the Board to administer the 2002 Stock Plan, by such committee (the &#147;Plan
Administrator&#148;). Except for the terms and conditions explicitly set forth in the 2002 Stock Plan,
and subject to applicable provisions of the Internal Revenue Code of 1986, as amended (the &#147;Code&#148;),
the Plan Administrator shall have the authority, in its discretion, to determine all matters
relating to the options to be granted under the Plan, including, without limitation, selection of
whether an option would be an incentive stock option or a nonqualified stock option, selection of
the individuals to be granted options, the number of shares to be subject to each option, the
timing of grants and all other terms and conditions of the options.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Options granted under the 2002 Stock Plan may be incentive stock options within the meaning
of Section&nbsp;422 of the Code (&#147;Incentive Options&#148;) or stock options which are not


<P align="center" style="font-size: 10pt">69
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">incentive stock options (so called &#147;non-statutory stock options&#148; or &#147;Non-Incentive Options&#148;)(Incentive Options and
Non-Incentive Options are collectively hereinafter referred to as &#147;Options&#148;). Each Option may be
exercised in whole or in part; provided, that only whole shares may be issued pursuant to the
exercise of any Option. Subject to any other terms and conditions herein, the Plan Administrator may provide that an Option may not be exercised in
whole or in part for a stated period or periods of time during which such Option is outstanding;
provided, that the Plan Administrator may rescind, modify, or waive any such limitation (including
by the acceleration of the vesting schedule upon a change in control of the Company) at any time
and from time to time after the grant date thereof. During an optionee&#146;s lifetime, any Incentive
Options granted under the Plan are personal to such optionee and are exercisable solely by such
optionee.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Plan Administrator can determine at the time the Option is granted in the case of
Incentive Options, or at any time before exercise in the case of Non-Incentive Options, that
additional forms of payment would be permitted. To the extent permitted by the Plan Administrator
and applicable laws and regulations (including, without limitation, federal tax and securities laws
and regulations and state corporate law), an Option exercise price may also be paid as follows:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;in shares of common stock held for the lesser of (A)&nbsp;six months or (B)&nbsp;the requisite
period necessary to avoid a charge to the Company&#146;s earnings for financial reporting purposes and
valued at fair market value on the exercise date, or


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;to the extent the option is exercised for vested shares, through a special sale and
remittance procedure pursuant to which the Option holder shall concurrently provide irrevocable
instructions (A)&nbsp;to a Company-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Company, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus
all applicable Federal, state and local income and employment taxes required to be withheld by the
Company by reason of such exercise and (B)&nbsp;to the Company to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete the sale.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon a merger or consolidation in which securities possessing more than 50% of the total
combined voting power of the Company&#146;s outstanding securities are transferred to a person different
from the person holding those securities immediately prior to such transaction, the sale, transfer
or other disposition of all or substantially all of the Company&#146;s assets in complete liquidation or
dissolution of the Company the sale, transfer or other disposition of all or substantially all of
the Company&#146;s assets to an unrelated entity, or a change in the identity of more than three (3)
directors over a two-year period (each, a &#147;Corporate Transaction&#148;), any award carrying a right to
exercise that was not previously exercisable shall become fully exercisable; the restrictions,
deferral limitations and forfeiture conditions applicable to any other award granted shall lapse;
and any performance conditions imposed with respect to awards shall be deemed to be fully achieved.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incentive Options granted under the 2002 Stock Plan may not be transferred, pledged,
mortgaged, hypothecated or otherwise encumbered other than by will or under the laws of


<P align="center" style="font-size: 10pt">70
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">descent and distribution, except that the Plan Administrator may permit transfers of awards for estate planning
purposes if, and to the extent, such transfers do not cause a participant who is then subject to
Section&nbsp;16 of the Securities Exchange Act of 1934 to lose the benefit of the exemption under Rule
16b-3 for such transactions.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional rules apply under the Code to the grant of Incentive Options. For instance, an
Incentive Option must be exercised within 10&nbsp;years after the date of grant, unless granted to an
individual owning more than 10% of the Company&#146;s stock, in which case the exercise period may not
exceed five (5)&nbsp;years. Similarly, an Incentive Option must be granted at an exercise price that
equals or exceeds 100% of the fair market value of the underlying stock at the time of grant, a
threshold that is increased to 110% of such fair market value in the case of a grant to an
individual owning more than 10% of the Company&#146;s stock.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For federal income tax purposes, the grant to an optionee of a Non-Incentive Option generally
would not constitute a taxable event to the optionee or to the Company. Upon exercise of a
Non-Incentive Option (or, in certain cases, a later tax recognition date), the optionee would
recognize compensation income taxable as ordinary income, measured by the excess of the fair market
value of the common stock purchased on the exercise date (or later tax recognition date) over the
amount paid by the optionee for such common stock, and would be subject to federal income tax
withholding. Upon recognition of income by the optionee, the Company may claim a deduction for the
amount of such compensation. The optionee would have a tax basis in the common stock purchased
equal to the amount paid plus the amount of ordinary income recognized upon exercise of the
Non-Incentive Option. Upon the subsequent sale of the common stock received upon exercise of the
Non-Incentive Option, an optionee would recognize capital gain or loss equal to the difference
between the amount realized on such sale and his tax basis in the common stock, which may be a
long-term capital gain or loss if the optionee holds the common stock for more than one year from
the exercise date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For federal income tax purposes, in general, neither the grant nor the exercise of an
Incentive Option would constitute a taxable event to the optionee or to the Company, assuming the
Incentive Option qualifies as an &#147;incentive stock option&#148; under Code &#167;422. If an optionee does not
dispose of the common stock acquired upon exercise of an Incentive Option during the statutory
holding period, any gain or loss upon subsequent sale of the common stock would be a long-term
capital gain or loss, assuming the shares represent a capital asset in the optionee&#146;s hands. The
statutory holding period is the later of two years from the date the Incentive Option is granted or
one year from the date the common stock is transferred to the optionee pursuant to the exercise of
the Incentive Option. If the statutory holding period requirements are satisfied, the Company may
not claim any federal income tax deduction upon either the exercise of the Incentive Option or the
subsequent sale of the common stock received upon exercise thereof. If the statutory holding
period requirement is not satisfied, the optionee would recognize compensation income taxable as
ordinary income on the date the common stock is sold (or later tax recognition date) in an amount
equal to the lesser of (i)&nbsp;the fair market value of the common stock on that date less the amount
paid by the optionee for such common stock, or (ii)&nbsp;the amount realized on the disposition of the
common stock less the amount paid by the optionee for such common stock; the Company may then claim
a deduction for the amount of such compensation income.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The federal income tax consequences summarized hereinabove are based upon current law and are
subject to change.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board may amend, alter, suspend, discontinue or terminate the 2002 Stock Plan at any time,
except that any such action shall be subject to shareholder approval at the annual meeting
following such Board action if such shareholder approval is required by federal or state law or
regulation or the rules of any exchange or automated quotation system on which the common stock may
then be listed or quoted, or if the Board of Directors otherwise determines to submit such action
for shareholder approval. In addition, no amendment, alteration, suspension, discontinuation or
termination to the 2002 Stock Plan may materially impair the rights of any participant with respect
to any vested Option granted before amendment without such participant&#146;s consent. Unless terminated
earlier by the Board, the 2002 Stock Plan shall terminate upon the earliest to occur of (i)
November&nbsp;17, 2012, or (ii)&nbsp;the date on which all shares of common stock available for issuance
under the 2002 Stock Plan shall have been issued as vested shares. Upon such 2002 Stock Plan
termination, all Options and unvested stock issuances outstanding under the 2002 Stock Plan shall
continue to have full force and effect in accordance with the provisions of the agreements.


<P align="left" style="font-size: 10pt"><B>Employment Agreements</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June&nbsp;2004, the Company entered into an employment agreement with Chris Sharng pursuant to
which Mr.&nbsp;Sharng agreed to serve as the Company&#146;s Executive Vice President and Chief Financial
Officer. The term of Mr.&nbsp;Sharng&#146;s employment commenced on August&nbsp;1, 2004 and ends on December&nbsp;31,
2007. The Company agreed to pay Mr.&nbsp;Sharng an annual base salary of $230,000, for the first year
of the term and a base salary of $250,000 thereafter. Pursuant to the agreement, Mr.&nbsp;Sharng
received options under the Company&#146;s 2002 Stock Plan to purchase 34,124 shares of Common Stock at
an exercise price equal to $11.40 per share, the closing market price on the date of grant. These
options vest beginning with 4,992 options vesting on January&nbsp;31, 2005, and 832 options vesting
monthly thereafter. In addition, Mr.&nbsp;Sharng is entitled to receive a performance bonus based upon
the performance of his duties and the Company&#146;s financial performance as determined by the
Company&#146;s Compensation Committee or Board of Directors. However, for the years ending December&nbsp;31,
2004 and 2005, Mr.&nbsp;Sharng is entitled to receive a bonus of not less than $50,000. An amount of
$50,000 for the year ending December&nbsp;31, 2004 was paid in February&nbsp;2005. The employment agreement
contains other customary terms and conditions.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;7, 2004, the Company entered into employment agreements with Oscar de la Mora and
Jose Villarreal Patino respectively as the General Manager and the Adjunct General Manager for
Lexxus Mexico. Each of the two is paid an annual base salary of $200,000 during the five-year term
of the agreements, and they are also eligible for a performance based restricted share grant based
on Lexxus Mexico reaching specific targets of revenue and earnings before interest, tax,
depreciation and amortization per year.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of November&nbsp;1, 2004, the Company and Lexxus Japan entered into an employment agreement with
Richard Johnson pursuant to which Mr.&nbsp;Johnson agreed to serve as the


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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">Company&#146;s President &#151; Japan and as the Representative Director of Lexxus Japan. The term of Mr.&nbsp;Johnson&#146;s employment with the
Company commenced on November&nbsp;1, 2004 and ends on December&nbsp;31, 2006. The Company agreed to pay Mr.
Johnson an annual base salary of $480,000 as well as a performance bonus in accordance with the
Company&#146;s bonus program as approved by the Compensation Committee of the Board of the Directors. Pursuant to the agreement, Mr.
Johnson is entitled to be reimbursed for reasonable business expenses as well as expenses related
to relocating to, and living in, Japan. In addition, the Company has agreed to pay for travel
expenses, certain living allowances, local transportation, certain form of tax equalization and
certain club membership fees on behalf of Mr.&nbsp;Johnson. The employment agreement with Mr.&nbsp;Johnson
contains other customary terms and conditions.


<P align="left" style="font-size: 10pt">See &#147;Certain Relationships and Related Transactions&#148; for a description of the employment agreements
with John Cavanaugh and Jason Landry.



<P align="left" style="font-size: 10pt"><B>Option Agreements</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2001, the Company entered into a consulting contract with Benchmark Consulting
Group, an affiliate of Mark Woodburn, the Company&#146;s President and former Chief Financial Officer,
and Terry A. LaCore, the Chief Executive Officer of Lexxus International, both directors of the
Company, pursuant to which Benchmark agreed to advise the Company in connection with the
acquisition of, startup of, and/or merger with other companies introduced to, the Company by
Benchmark, and any divesture of, the Company&#146;s assets, subsidiaries, or the sale of, the Company
itself. The Company issued to Benchmark options to purchase an aggregate of 30,000 shares of
Common Stock at an exercise price of $1.10 per share. The options vested upon issuance and expire
on January&nbsp;18, 2011. In September&nbsp;2002, such options were assigned to the LaCore and Woodburn
Partnership, a general partnership owned by Terry A. LaCore and Mark Woodburn.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;2002, the Company issued options to purchase 60,000 shares of common stock to each of
Sir Brian Wolfson and Mr.&nbsp;Randall A. Mason as compensation for serving as directors of the Company.
The options are exercisable at $1.50 per share until July&nbsp;24, 2007. In April&nbsp;2003, the Company
issued options to purchase 5,000 shares of common stock to Robert H. Hesse as compensation for
serving as a director of the Company. The options granted Mr.&nbsp;Hesse are exercisable at $1.80 per
share until April&nbsp;9, 2006.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of October&nbsp;14, 2002, in exchange for Mr.&nbsp;LaCore&#146;s execution of the amendment to the LaCore
Option and as compensation for Mr.&nbsp;LaCore&#146;s exemplary performance of his duties as Chief Executive
Officer of Lexxus, the Company granted to Mr.&nbsp;LaCore options exercisable for 570,000 shares of
common stock at an exercise price of $1.00 per share for a period of ten (10)&nbsp;years (the &#147;New
LaCore Option&#148;). In November&nbsp;2002, the New LaCore Option was amended to require the option holder
to obtain Company approval before such holder could use the cashless exercise feature.
Subsequently, the Company has accounted for the options as fixed options.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of October&nbsp;14, 2002, in exchange for the LaCore and Woodburn Partnership&#146;s execution of the
amendment to the Benchmark Option and as compensation for Mr.&nbsp;Woodburn&#146;s exemplary performance of
his duties as President of the Company, the Company issued to the


<P align="center" style="font-size: 10pt">73
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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">Partnership options exercisable for 570,000 shares of common stock at an exercise price of $1.00 per share for a period of ten (10)
years (the &#147;Partnership Option&#148;). In November&nbsp;2002, the Partnership Option was amended to require
the option holder to obtain Company approval before such holder could use the cashless exercise
feature.


<DIV align="left">
<A name="116"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>PRINCIPAL SHAREHOLDERS</B>



<P align="center" style="font-size: 10pt"><U><B>Security Ownership Of Certain Beneficial Owners And Management</B></U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows the amount of the Company&#146;s common stock beneficially owned (unless
otherwise indicated) as of March&nbsp;31, 2005 by (i)&nbsp;each shareholder we know is the beneficial owner
of more than 5% of the Company&#146;s common stock, (ii)&nbsp;each Director, (iii)&nbsp;each of the executive
officers named in the Summary Compensation Table set forth under
&#147;Compensation of Executive Officers&#148; and (iv)
all executive officers and directors as a group. We have relied exclusively upon information
provided to us by our directors and executive officers and documents filed with the Securities and
Exchange Commission by others for purposes of determining the number of shares each person
beneficially owns. Beneficial ownership is determined in accordance with the rules and regulations
of the Securities and Exchange Commission and generally includes those persons who have voting or
investment power with respect to the securities. Except as otherwise indicated, and subject to
applicable community property laws, the persons named in the table have sole voting and investment
power with respect to all shares of the Company&#146;s common stock beneficially owned by them.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="3">Amount and</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="3">Nature of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Percent</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Name and Address</TD>

    <TD nowrap align="center" colspan="3">Beneficial</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">of</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">of Beneficial Owner<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>

    <TD nowrap align="center" colspan="3">Ownership<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>

    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Class<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="8" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Sir Brian Wolfson<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">79,127
</TD>
    <TD> <SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.1</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mark D. Woodburn<SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">616,922
</TD>
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8.3</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Terry A. LaCore<SUP style="font-size: 85%; vertical-align: text-top">(7)</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">1,670,890
</TD>
    <TD> <SUP style="font-size: 85%; vertical-align: text-top">(8)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">20.8</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Randall A. Mason<SUP style="font-size: 85%; vertical-align: text-top">(9)</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">118,762
</TD>
    <TD> <SUP style="font-size: 85%; vertical-align: text-top">(10)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.7</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Robert H. Hesse<SUP style="font-size: 85%; vertical-align: text-top">(11)</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">65,768
</TD>
    <TD> <SUP style="font-size: 85%; vertical-align: text-top">(12)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.0</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Chris Sharng<SUP style="font-size: 85%; vertical-align: text-top">(13)</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">11,459
</TD>
    <TD> <SUP style="font-size: 85%; vertical-align: text-top">(14)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.2</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">John Cavanaugh<SUP style="font-size: 85%; vertical-align: text-top">(15)</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">453,968
</TD>
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(16)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.4</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Goodwood Inc.<BR>
212 King Street West, Ste 201<BR>
Toronto, Canada M5H 1K5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">492,400
</TD>
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(17)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">7.1</TD>
    <TD nowrap valign="bottom">%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Directors and Executive Officers
As a Group (10 persons)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">2,399,974
</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">(4)(6)(8)(10)(12)(14)(16)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">24.3</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">74
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P>
<HR size="1" width="18%" align="left" noshade color="#000000">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Unless otherwise indicated, the address of each beneficial owner is c/o Natural Health
Trends Corp., 12901 Hutton Drive, Dallas, Texas 75234</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Any securities not outstanding that are subject to options or conversion privileges
exercisable within 60&nbsp;days of March&nbsp;31, 2005 are deemed outstanding for the purpose of
computing the percentage of outstanding securities of the class owned by any person holding such securities
but are not deemed outstanding for the purpose of computing the percentage of the class owned by
any other person in accordance with Item&nbsp;403 of Regulation&nbsp;S-K of the Securities Act 1933 and
Rule&nbsp;13(d)-3 of the Securities Exchange Act, and based upon 6,819,667 shares of common stock
outstanding (excluding treasury shares) as of March&nbsp;31, 2005.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(3)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Sir Brian Wolfson is the Chairman of the Board of Directors of the Company.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(4)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes (i)&nbsp;60,000 shares issuable upon the exercise of options held by Capital
Development S.A, an entity controlled by Sir Brian Wolfson (&#147;Capital Development&#148;), (ii)&nbsp;1,984
shares of common stock issuable upon the exercise of warrants held by Capital Development,
(iii)&nbsp;4,190 shares of common stock owned by Capital Development, and (iv)&nbsp;12,953 shares of
common stock owned by Schweco Nominee Limited, an entity controlled by Sir Brian Wolfson.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(5)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Woodburn is a director and the President and Secretary of the Company.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(6)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes (i)&nbsp;14,938 shares of common stock held by the LaCore and Woodburn
Partnership, a general partnership with respect to which Mr.&nbsp;Woodburn is a general partner,
(ii)&nbsp;600,000 shares of common stock issuable upon the exercise of options held by the LaCore
and Woodburn Partnership and (iii)&nbsp;1,984 shares of common stock issuable upon the exercise of
warrants held by the LaCore and Woodburn Partnership.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(7)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;LaCore is Chief Executive Office of Lexxus International, Inc. and a director of
the Company.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(8)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes (i)&nbsp;14,938 shares of common stock held by LaCore and Woodburn Partnership, a
general partnership with respect to which Mr.&nbsp;LaCore is a general partner, (ii)&nbsp;600,000 shares
issuable upon the exercise of options held by the LaCore and Woodburn Partnership, (iii)&nbsp;1,984
shares of common stock issuable upon the exercise of warrants held by LaCore and Woodburn
Partnership, (iv)&nbsp;600,000 shares of common stock issuable upon the exercise of options held by
Mr.&nbsp;LaCore, (v)&nbsp;450,000 shares of common stock issued to Mr.&nbsp;LaCore as part of the purchase
price for Marketvision, (vi)&nbsp;1,984 shares of common stock purchased by Mr.&nbsp;LaCore as part of
the October&nbsp;2004 Private Placement of Units, (vi)&nbsp;1,984 shares of common stock issuable upon
the exercise of warrants held by Mr.&nbsp;LaCore.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(9)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Mason is a director of the Company.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(10)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes (i)&nbsp;60,000 shares of common stock issuable upon the exercise of options held
by Mr.&nbsp;Mason, (ii)&nbsp;27,399 shares owned by Marden Rehabilitation Associates, Inc., an entity
controlled by Mr.&nbsp;Mason, and (iii)&nbsp;31,363 shares of common stock owned by Magco, Inc, and
entity controlled by Mr.&nbsp;Mason.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(11)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Hesse is a director of the Company.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(12)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes (i)&nbsp;5,000 shares of common stock issuable upon the exercise of options held
by Mr.&nbsp;Hesse, (ii)&nbsp;1,984 shares of common stock issuable upon the exercise of warrants held by
Mr.&nbsp;Hesse, and (iii)&nbsp;58,784 shares of common stock owned by Mr.&nbsp;Hesse.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(13)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Sharng is the Executive Vice President and Chief Financial Officer of the
Company.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(14)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes (i)&nbsp;1,984 shares of common stock, (ii)&nbsp;1984 shares of common stock issuable
upon the exercise of warrants held by Mr.&nbsp;Sharng, (ii)&nbsp;5,825 shares of common stock issuable
upon the exercise of options held by Mr.&nbsp;Sharng and vested as of the record date, and (iii)
1,666</TD>
</TR>

</TABLE>


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<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">shares of common stock issuable upon the exercise of options held by Mr.&nbsp;Sharng vesting
within 60&nbsp;days of March&nbsp;31, 2005, specifically, 833 options on April&nbsp;1, 2005 and 833 options
on May&nbsp;1, 2005.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(15)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Cavanaugh is President of MarketVision.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(16)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes (i)&nbsp;253,580 shares of common stock issuable upon the exercise of options
held by Mr.&nbsp;Cavanaugh, (ii)&nbsp;1,984 shares of common stock
issuable upon the exercise of warrants held by Mr.&nbsp;Cavanaugh,
and (iii)&nbsp;198,404 shares of common stock held by
Mr.&nbsp;Cavanaugh.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(17)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">According to Schedule&nbsp;13G filed by Goodwood Inc., Cameron MacDonald and Peter
Puccetti with the Securities and Exchange Commission on February&nbsp;14, 2005, Goodwood Inc. does
not directly own any shares of the Company&#146;s common stock. Goodwood Inc. acts as the
investment manager of each of Goodwood Fund, Arrow Goodwood Fund, Goodwood Capital Fund,
Goodwood Fund 2.0 and KBSH Goodwood Fund and is deemed to beneficially own 471,100 shares of
the Company&#146;s common stock held by them, which includes 119,000 shares of common stock
issuable upon the exercise of certain warrants. Mr.&nbsp;MacDonald and Mr.&nbsp;Puccetti control
Goodwood Inc. and are thereby deemed to beneficially own 471,100 shares of common stock. In
addition, Mr.&nbsp;MacDonald, as sole owner of BC 628088 Ltd., beneficially owns 21,300 shares of
the Company&#146;s common stock.</TD>
</TR>

</TABLE>


<DIV align="left">
<A name="117"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>S&#038;B Business Services. </B>In August&nbsp;2001, the Company entered into a written lease agreement and
an oral management agreement with S&#038;B Business Services, an affiliate of Brad LaCore, the brother
of Terry LaCore, and Sherry LaCore, Brad LaCore&#146;s wife. Under the terms of the two agreements, S&#038;B
Business Services provides warehouse facilities and certain equipment, manages and ships inventory,
provides independent distributor support services and disburses payments to independent
distributors. In exchange for these services the Company pays $18,000 a year for leasing a
warehouse, $3,600 a year for the lease of warehouse equipment and $120,000 for the management
services provided, plus an annual approximately $12,000 for business related expenses. The Company
paid S&#038;B Business Services approximately $150,000 and $160,000 during 2003 and 2004, respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>William Woodburn. </B>In September&nbsp;2001, the Company entered into an oral consulting agreement
with William Woodburn, the father of Mark Woodburn, President of the Company and a director,
pursuant to which William Woodburn provided the Company with management advice and other advisory
assistance. In exchange for such services, the Company starting June&nbsp;8, 2001 paid to Ohio Valley
Welding, Inc., an affiliate of Mr.&nbsp;Woodburn $6,250 on a bi-weekly basis. The Company paid $168,750
and $118,750 during 2003 and 2004, respectively, to Ohio Valley Welding, Inc. The consulting
agreement between the Company and Mr.&nbsp;Woodburn was terminated as of September&nbsp;30, 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>MarketVision. </B>As of March&nbsp;31, 2004, the Company entered into an Agreement and Plan of Merger
with MarketVision Communications Corporation, a Minnesota corporation. (&#147;MarketVision&#148;), and
MVMergerCo, Inc. a Delaware corporation and wholly owned subsidiary of the Company (&#147;MergerCo&#148;),
pursuant to which MarketVision was merged with and into


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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">MergerCo (the &#147;Merger&#148;). In exchange for all of the outstanding capital stock of MarketVision, the Company issued 690,000 shares of the
Company&#146;s common stock (the &#147;Issued Shares&#148;),
promissory notes in the aggregate principal amount of
approximately $3.2&nbsp;million (the &#147;Notes&#148;) and a cash payment of $1,336,875,
less pre-acquisition net payables due MarketVision of approximately $646,000, for a total purchase
price of approximately $17.6&nbsp;million, including acquisition costs of approximately $153,000. There were a total of three Notes issued by the Company, two of which were 6&nbsp;month notes bearing
interest at 4% per annum, and one of which is a 21-month note bearing interest at 4.5% per annum.
MarketVision has been the exclusive developer and service provider of the direct selling software
used by Lexxus&#146;s business worldwide since mid-2001. Each of the 6-month notes was repaid in full
in October&nbsp;2004. The Company paid the former owners of MarketVision&#151;Mr.&nbsp;Terry A. LaCore, a member
of the Board of Directors and the Chief Executive Officer of Lexxus International, Inc. Mr.&nbsp;John
Cavanaugh, President of MarketVision Communications Corp. and Mr.&nbsp;Jason Landry, Vice
President&#151;Development of MarketVision Communications Corp.&#151;principal and interest payments in 2004
as follows:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Principal</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Terry A. LaCore</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">538,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">551,649</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">John Cavanaugh</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,631,795</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,667,083</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jason Landry</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">362,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,848</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">410,766</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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&#146;s products.
MarketVision earned revenues for this service of approximately $1,839,000 and $579,000 for the year
ended December&nbsp;31, 2003 and three months ended March&nbsp;31, 2004, respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management believes that the MarketVision transaction was in the best interests of the Company
because (i)&nbsp;the success of the Company&#146;s business is dependent upon the direct selling software and
services provided to the Company by MarketVision and (ii)&nbsp;the Company anticipates 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 A. LaCore, a member of the Company&#146;s Board of Directors and the Chief
Executive Officer of Lexxus International, Inc., a wholly owned subsidiary of the Company
(&#147;Lexxus&#148;), the Board of Directors hired Bernstein, Conklin &#038; Balcombe, an independent appraisal
firm, to assess the fairness of the transaction with MarketVision from a financial point of view.
As of March&nbsp;31, 2004, Bernstein, Conklin &#038; Balcombe delivered its opinion to the Company&#146;s Board of
Directors that the MarketVision transaction is fair to the Company from a financial point of view.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, the Company entered into a shareholder&#146;s agreement with the former shareholders of
MarketVision. Such agreement contains customary terms and conditions, including restrictions on
transfer of the Issued Shares, rights of first refusal and indemnification. Further, the
shareholder&#146;s agreement contains a one time put right related to 240,000 Issued Shares for the benefit of the former stockholders of
MarketVision (other than Mr.&nbsp;LaCore) that requires the Company, during the six month period
following the earlier of (i)&nbsp;the first anniversary of the closing date, or (ii)&nbsp;the date on which
the Issued Shares are registered with the Securities and Exchange Commission (the


<P align="center" style="font-size: 10pt">77
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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">&#147;SEC&#148;) for resale to the public, to
repurchase all or part of such shares still owned by the such stockholders
for $4.00 per share less any amount previously received by such stockholders from the sale of the
Issued Shares. The Company has recorded this obligation of $960,000 as mezzanine
common stock in the consolidated balance sheet. The estimated fair value of the put right based on the Black-Scholes option pricing model,
as determined by the independent valuation firm, of approximately $133,000 was not included in the cost of
MarketVision due to materiality.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MergerCo entered into employment agreements (the &#147;Employment Agreements&#148;) with each of John
Cavanaugh and Jason Landry, the former owners (along with Mr.&nbsp;LaCore) of MarketVision, pursuant to
which they have agreed to serve as President and Vice President -Development of MergerCo,
respectively, following the Merger. The Employment Agreements provide Mr.&nbsp;Cavanaugh and Mr.&nbsp;Landry
with annual salaries of $193,000 and $130,000, respectively, as well as options to purchase 253,580
and 56,420 shares of the Company&#146;s common stock, respectively, at an exercise price of $18.11 per
share which represented market value at the time. The Employment Agreements contain customary terms
including confidentiality and non-competition provisions. Lexxus has executed a guaranty of the
obligations of MergerCo under the Employment Agreements. Immediately following the Merger, MergerCo
changed its name to MarketVision Communications Corp.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company and MergerCo have also entered into a license agreement with MarketVision
Consulting Group, LLC, an entity owned by the former shareholders of MarketVision (other than Mr.
LaCore), pursuant to which MarketVision Consulting will have the right to use, develop, modify,
market, distribute and sublicense the MarketVision software to third parties in the event that the
Company defaults on its payment obligations under the Notes or the Employment Agreements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Private Placement. </B>In October&nbsp;2004, the Company entered into a securities purchase agreement
(and subscription agreements with respect to certain Canadian investors)
and a registration rights agreement
with certain institutional and accredited investors as well as certain officers and directors of
the Company. Pursuant to the purchase agreements, the Company agreed to sell, and
the buyers agreed to purchase, a total of 1,369,704 units of the Company&#146;s securities and subscription at
a price of $12.595 per unit. Each unit consists of one share of common stock, and one common stock
purchase warrant exercisable for one share of common stock at any time through October&nbsp;6, 2009 at
an exercise price of $12.47 per share. Assuming the exercises of all
the warrants, the net proceeds to the Company will be an additional
$17&nbsp;million.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the registration rights
agreement, the Company has agreed to register the shares included in the units and the shares
issuable upon exercise of the warrants for resale under the Act. The registration rights agreement
provides for the payment of certain liquidated damages in the event that delays are experienced in
the Securities and Exchange Commission&#146;s declaring that
registration statement effective. The Company agrees to use commercially reasonable effort to effect and maintain the effectiveness of
a registration statement. If the registration statement is not effective 180 days after the closing date,
or approximately April&nbsp;4, 2005, the Company will pay the buyers
approximately $85,000, which also applies to any of company&#146;s possible failure to maintain the effectiveness of the registration statement after its initial
effectiveness. As of April&nbsp;11, 2005, the registration statement has not been filed and therefore not effective. The
Company incurred and recorded the liability in the second quarter of 2005. The
registration rights agreement also provides indemnification and contribution remedies to the Buyers
in connection with the resale of shares pursuant to such registration statement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each of (i)&nbsp;Sir Brian Wolfson, Chairman of the Board of the Company, (ii)&nbsp;Mark D. Woodburn,
President and a director of the Company, (iii)&nbsp;Terry A. LaCore, CEO of Lexxus International, Inc.
and a director of the Company, (iv)&nbsp;Chris Sharng, Executive Vice President


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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">and Chief Financial Officer of the Company, (v)&nbsp;John Cavanaugh, President of MarketVision Communications Corp., and
(vi)&nbsp;Robert H. Hesse, a director of the Company, invested approximately $25,000 and purchased 1,984
Units upon the same terms and conditions as the other Buyers in the private placement. In
addition, certain funds with respect to which Goodwood Inc. acts as an investment manager invested a total of $1,498,805 and purchased 119,000
Units. See &#147;Principal Shareholders &#151; Security Ownership of Certain Beneficial Owners and
Management.&#148;



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Other. </B>The Company&#146;s former Controller is married to Mark Woodburn, the Company&#146;s President,
and her employment with the Company ended in August&nbsp;2004. The Company paid her $100,000 during
each of 2003 and 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;Compensation of Executive Officers &#151; Employment Agreements&#148; and &#147;Compensation of
Executive Officers &#151; Option Agreements&#148; for other related party transactions.

<DIV align="left">
<A name="118"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>DESCRIPTION OF SECURITIES</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our certificate of incorporation, as amended, we are authorized to issue up to
500,000,000 shares of common stock, par value $.001 per share, and 1,500,000 shares of preferred
stock, par value $1,000 per share. As of April&nbsp;11, 2005, there were 6,819,667 shares of common
stock outstanding and no shares of preferred stock outstanding.


<P align="left" style="font-size: 10pt"><B>Common Stock</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The holders of common stock are entitled to one vote for each share of such stock held of
record by them. Subject to the preferences of any then-outstanding preferred stock, the holders
of common stock are entitled to receive dividends when, as and if declared by the Board of
Directors out of funds legally available therefore, subject to the prior rights of the holders of
outstanding shares of preferred stock. Upon our liquidation or dissolution, holders of common
stock are entitled to receive all assets available for distribution to security holders, after
payment of creditors and preferential liquidation distributions to preferred security holders, if
any exist at the time of such liquidation. The common stock has no preemptive or other
subscription rights or redemption or sinking fund provisions with respect to such shares. All
outstanding shares of common stock are fully paid and non-assessable.


<P align="left" style="font-size: 10pt"><B>Common Stock Purchase Warrants</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth below is information concerning the common stock purchase warrants issued by us to
our investors in October&nbsp;2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock purchase warrants are exercisable from October&nbsp;6, 2004 and for the five year
period thereafter at an exercise price of $12.47 per share. The warrants are not listed for
trading on any exchange or for quotation on any Nasdaq Market, the OTC Bulletin Board or the Pink
Sheets, but are transferable. If we subdivide our outstanding shares of common stock into a
greater number of shares or combine our outstanding shares of common stock into a smaller number of
shares or issue by reclassification of our outstanding shares of common stock any shares of our
capital stock (including any such reclassification in connection with a


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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">consolidation or merger in which we are the continuing corporation), then the number of shares of common stock issuable upon
the exercise of the warrants and the exercise price then in effect shall be adjusted by us so that
the holder of the warrant thereafter exercising his, her or its warrants shall be entitled to
receive the number of shares of our common stock or other capital stock which the holder of the warrant would have received if the warrant had been exercised
immediately prior to such event upon payment of the exercise price that has been adjusted to
reflect a fair allocation of the economics of such event to the holder of the warrant. In
addition, if we consolidate or merger with another corporation in which we are not the survivor, or
sell, transfer or dispose of all or substantially all of our assets to another corporation, then,
as a condition of such transaction, a similar warrant exercisable for securities of the acquiring
or surviving entity shall be issued. We have agreed to register the shares of our common stock
underlying the warrants on a registration statement within 180&nbsp;days following October&nbsp;6, 2004.



<P align="left" style="font-size: 10pt"><B>Registration Rights</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company entered into a Stockholders Agreement with the former shareholders of
MarketVision. Such agreement contained customary terms and conditions, including restrictions on
transfer of the issued shares, rights of first refusal and indemnification. Further, the
Stockholders Agreement contains a one time put right for the benefit of the former shareholders of
MarketVision (other than Mr.&nbsp;LaCore) that requires the Company, during the six month period
following the earlier of (i)&nbsp;the first anniversary of the closing date, or (ii)&nbsp;the date on which
the issued shares are registered with the Securities and Exchange Commission for resale to the
public, to repurchase all or part of the issued shares still owned by the such stockholders for
$4.00 per share less any amount previously received by such stockholders from the sale of the
issued shares. The agreement also provided the former shareholders of MarketVision with piggyback
registration rights in the event the Company files a registration statement with the Securities and
Exchange Commission covering the resale of Company securities, other than on Form S-4, Form S-8,
and stock option grants for the former shareholders (other than Mr.&nbsp;LaCore). See &#147;Compensation of
Executive Officers &#151; 2002 Stock Plan&#148; for a description of our 2002 Stock Plan.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company entered into a registration rights agreement with the investors in its private
placement of units in October&nbsp;2004. Pursuant to the registration right agreement, the Company has
agreed to register the shares included in the units and the shares issuable upon exercise of the
Warrants for resale under the Act. The registration rights agreement provides for the payment of
certain liquidated damages in the event that delays are experienced in the Securities and Exchange
Commission&#146;s declaring that registration statement effective.
The Company agrees to use commercially reasonable effort to effect and maintain the effectiveness of a registration statement.
If the registration statement is not effective 180 days after the
closing date, or approximately April&nbsp;4, 2005, the Company will pay the buyers approximately $85,000, which
also applies to any of Company&#146;s possible failure to maintain the effectiveness of the registration statement
after its initial effectiveness. As of April&nbsp;11, 2005, the registration statement has not been filed and therefore not effective.
The Company incurred and recorded the liability in the second quarter of 2005.
The registration rights agreement
also provides indemnification and contribution remedies to the buyers in connection with the resale
of shares pursuant to such registration statement. See &#147;Business &#151; Private Placement of Units.&#148;


<P align="left" style="font-size: 10pt"><B>Transfer Agent</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transfer agent for our common stock is Continental Stock Transfer and Trust Company.


<P align="center" style="font-size: 10pt">80
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="119"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>SELLING SHAREHOLDERS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The shares of common stock being offered by the selling stockholders are shares of common
stock, and shares of common stock issuable upon exercise of the warrants which were sold by the
Company in a private placement transaction. In addition, certain of the selling stockholders were
issued shares of the Company&#146;s common stock in connection with the Company&#146;s minority interest
purchase of Lexxus U.S. and the merger with MarketVision. See
&#147;Business &#151; Recent Developments.&#148; For
additional information regarding the common shares and warrants, see &#147;Business &#151; Private Placement
of Units.&#148; We are registering the shares of common stock in order to permit the selling
stockholders to offer the shares for resale from time to time. Except for the ownership of the
shares and warrants and except as set forth in the footnotes to the chart below, the selling
stockholders have not had any material relationship with us within the past three years.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below lists the selling stockholders and other information regarding the beneficial
ownership of the common stock by each of the selling stockholders. The second column lists the
number of shares of common stock beneficially owned by each selling stockholder, based on its
ownership of the common shares and warrants, as of April&nbsp;11, 2005, assuming exercise of all warrants
held by the selling stockholders on that date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The third column lists the shares of common stock being offered by this prospectus by the
selling stockholders.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with the terms of registration rights agreements with the holders of the
Company&#146;s shares of common stock and warrants, this prospectus generally covers the resale of a
number of shares of common stock equal to the number of shares of common stock issued to the
selling stockholders plus the number of shares of common stock issuable upon exercise of the
warrants, determined as if the outstanding warrants were exercised in full, as of the trading day
immediately preceding the date this registration statement was initially filed with the SEC.
Because the exercise price of the warrants may be adjusted for anti-dilution protection, the number
of shares that would actually be issued may be more or less than the number of shares being offered
by this prospectus. The fourth and fifth columns assume the sale of all of the shares offered by
the selling stockholders pursuant to this prospectus.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selling stockholders may sell all, some or none of their shares in this offering. See
&#147;Plan of Distribution.&#148;


<P align="center" style="font-size: 10pt">81
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Maximum Number</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">of Shares to be Sold</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Percent</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Owned Prior to</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Pursuant to this</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Owned After</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">After</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center">Name of Selling Stockholder</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Offering<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Prospectus<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Offering<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Offering<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acuity Global Equity Fund <SUP style="font-size: 85%; vertical-align: text-top">2</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4,800</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">3</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4,800</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">3</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acuity Clean Environment Balanced Fund <SUP style="font-size: 85%; vertical-align: text-top">2</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">40,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">4</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">40,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">4</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acuity Clean Environment Equity Fund <SUP style="font-size: 85%; vertical-align: text-top">2</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">70,000</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">5</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">70,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">5</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acuity Clean Environment Global Equity Fund <SUP style="font-size: 85%; vertical-align: text-top">2</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">22,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">6</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">22,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">6</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acuity Clean Environment Science &#038; Technology <SUP style="font-size: 85%; vertical-align: text-top">2</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,800</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">7</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,800</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">7</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acuity NT Special Equity Fund <SUP style="font-size: 85%; vertical-align: text-top">2</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">8</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">8</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acuity Pooled Environment Science &#038; Technology Fund <SUP style="font-size: 85%; vertical-align: text-top">2</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">600</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">9</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">600</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">9</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acuity Pooled Global Balanced Fund <SUP style="font-size: 85%; vertical-align: text-top">2</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">400</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">10</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">400</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">10</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acuity Pooled Global Equity Fund <SUP style="font-size: 85%; vertical-align: text-top">2</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">11</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">11</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acuity Pooled Venture Fund <SUP style="font-size: 85%; vertical-align: text-top">2</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">12</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">12</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acuity Social Values Global Equity Fund <SUP style="font-size: 85%; vertical-align: text-top">2</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">12,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">13</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">12,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">13</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Altairis Investments Limited Partnership <SUP style="font-size: 85%; vertical-align: text-top">14</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">16,480</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">15</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">16,480</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">15</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Altairis Offshore<SUP style="font-size: 85%; vertical-align: text-top"> 14</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">189,520</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">16</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">189,520</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">16</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Arrow Clocktower <SUP style="font-size: 85%; vertical-align: text-top">17</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">20,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">18</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">20,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">18</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Arrow Goodwood Fund <SUP style="font-size: 85%; vertical-align: text-top">19</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">80,682</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">20</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">80,682</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">20</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Avondale Partners LLC <SUP style="font-size: 85%; vertical-align: text-top">21</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">45,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">22</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">45,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">22</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">James G. Baker, III</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">15,800</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">23</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">15,800</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top"> 23</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Michael Bray <SUP style="font-size: 85%; vertical-align: text-top">24</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">33,333</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">25</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">33,333</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">25</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">BTR Global Growth Trading Limited <SUP style="font-size: 85%; vertical-align: text-top">26</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">157,080</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">27</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">157,080</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">27</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">82
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Maximum Number</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">of Shares to be Sold</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Percent</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Owned Prior to</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Pursuant to this</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Owned After</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">After</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center">Name of Selling Stockholder</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Offering<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Prospectus<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Offering<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Offering<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->

<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">BTR Global Opportunity Trading Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">80,920</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">28</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">80,920</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">28</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Burlingame Asset Management, LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">47,600</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">29</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">47,600</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">29</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cascade Capital Partners II, L.P. <SUP style="font-size: 85%; vertical-align: text-top">30</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">19,044</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">31</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">19,044</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">31</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cascade Capital Partners, L.P. <SUP style="font-size: 85%; vertical-align: text-top">30</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">298,356</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">32 </SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">298,356</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">32</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">John Cavanaugh <SUP style="font-size: 85%; vertical-align: text-top">33</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">454,024</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">34</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">200,444</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">35</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">253,580</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">36</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Clocktower Partners L.P. <SUP style="font-size: 85%; vertical-align: text-top">17</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">46,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">37</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">46,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">37</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rick Durst</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">120,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">38</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">120,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">38</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Epic Limited Partnership <SUP style="font-size: 85%; vertical-align: text-top">39</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">15,840</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">40</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">15,840</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">40</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Epic Limited Partnership II <SUP style="font-size: 85%; vertical-align: text-top">39</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">15,840</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">40</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">15,840</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">40</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Front Street Investment Management Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">103,200</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">41</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">103,200</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">41</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">John Gildner</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">158,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">42</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">158,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">42</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwood Capital Fund <SUP style="font-size: 85%; vertical-align: text-top">19</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">14,042</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">43</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">14,042</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">43</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwood Fund <SUP style="font-size: 85%; vertical-align: text-top">19</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">126,854</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">44</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">126,854</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">44</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwood Fund 2.0 <SUP style="font-size: 85%; vertical-align: text-top">19</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">9,996</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">45</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">9,996</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">45</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Barry Gruman</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">238,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">46</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">238,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">46</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Robert Hesse <SUP style="font-size: 85%; vertical-align: text-top">47</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">65,768</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">48</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3,968</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">35</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">61,800</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">49</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">K2 Principal Fund LP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">41,200</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">50</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">41,200</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">50</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">KBSH Goodwood Fund <SUP style="font-size: 85%; vertical-align: text-top">19</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6,426</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">51</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6,426</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">51</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Terry LaCore <SUP style="font-size: 85%; vertical-align: text-top">52</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,683,844</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">53</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">453,968</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">35</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,229,876</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">54</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">15.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Scott Lamacraft <SUP style="font-size: 85%; vertical-align: text-top">55</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">39,600</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">56</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">39,600</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">56</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">83
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Maximum Number</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">of Shares to be Sold</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Percent</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Owned Prior to</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Pursuant to this</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Owned After</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">After</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center">Name of Selling Stockholder</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Offering<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Prospectus<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Offering<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Offering<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jason Landry <SUP style="font-size: 85%; vertical-align: text-top">57</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">58</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">56,420</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">58</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Millenium Partners, L.P.<SUP style="font-size: 85%; vertical-align: text-top">39</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">7,920</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">59</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">7,920</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">59</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MMCAP International Inc</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">119,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">60</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">119,000</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">60</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MMI Group Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">206,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">61</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">206,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">61</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jeff Provost<SUP style="font-size: 85%; vertical-align: text-top">24</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">33,333</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">25</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">33,333</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">25</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stephen P. &#038; Anne Radar Living Trust</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">25</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">62</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Clara Serruya</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">158,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">63</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">158,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">63</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chris Sharng <SUP style="font-size: 85%; vertical-align: text-top">64</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8,960</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">65</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3,968</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">35</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4,992</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">66</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sprott Securities Inc.<SUP style="font-size: 85%; vertical-align: text-top">21</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">39,600</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">67</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">39,600</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">67</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stirling Capital Partners, G.P.<SUP style="font-size: 85%; vertical-align: text-top">17</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">35,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">68</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">35,000</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">68</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pam and Rodney Sullivan<SUP style="font-size: 85%; vertical-align: text-top">24</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">33,334</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">25</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">33,334</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">25</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sir Brian Wolfson <SUP style="font-size: 85%; vertical-align: text-top">69</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">79,127</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">70</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3,968</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(35)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">75,159</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">71</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mark Woodburn <SUP style="font-size: 85%; vertical-align: text-top">72</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">616,922</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">73</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3,968</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">35</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">612,954</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">74</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">J. Zechner Associates Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">12,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">75</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">12,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">75</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<HR size="1" width="18%" align="left" noshade color="#000000">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left">*</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Indicates beneficial ownership of less than 1%</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Percentage of ownership is calculated based on Rule&nbsp;13d-3 of the Securities Exchange
Act of 1934, as amended, using 6,819,667 shares of common stock
outstanding as of April&nbsp;11,
2005.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">2</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Acuity Investment Management is the trustee for Acuity Global Equity Fund, Acuity
Clean Environment Balanced Fund, Acuity Clean Environment Equity Fund, Acuity Clean
Environment Global Equity Fund, Acuity Clean Environment Science &#038; Technology, Acuity NT
Special Equity Fund, Acuity Pooled Environment Science &#038; Technology Fund, Acuity Pooled Global
Balanced Fund, Acuity Pooled Global Equity Fund, Acuity Pooled Venture Fund, and Acuity Social
Values Global Equity Fund.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">3</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 2,400 shares of common stock issuable upon the exercise of 2,400 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">4</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 20,000 shares of common stock issuable upon the exercise of 20,000 warrants.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">84
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">5</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 35,000 shares of common stock issuable upon the exercise of 35,000 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">6</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 11,000 shares of common stock issuable upon the exercise of 11,000 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">7</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 900 shares of common stock issuable upon the exercise of 900 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">8</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 25,000 shares of common stock issuable upon the exercise of 25,000 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">9</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 300 shares of common stock issuable upon the exercise of 300 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">10</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 200 shares of common stock issuable upon the exercise of 200 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">11</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 2,000 shares of common stock issuable upon the exercise of 2,000 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">12</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 1,000 shares of common stock issuable upon the exercise of 1,000 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">13</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 6,000 shares of common stock issuable upon the exercise of 6,000 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">14</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Polar Securities, Inc. is the agent for Altairis Investments Limited Partnership and Altairis Offshore.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">15</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 8,240 shares of common stock issuable upon the exercise of 8,240 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">16</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 94,760 shares of common stock issuable upon the exercise of 94,760 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">17</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;David Benwell is the agent for Arrow Clocktower, Clocktower Partners LLP, and
Stirling Capital Partners, G.P.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">18</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 10,000 shares of common stock issuable upon the exercise of 10,000 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">19</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Goodwood Inc. is the investment manager for Arrow Goodwood Fund, Goodwood Fund,
Goodwood Fund 2.0, KBSH Goodwood Fund, Goodwood Capital Fund. See &#147;Principal Shareholders.&#148;</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">20</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 40,341 shares of common stock issuable upon the exercise of 40,341 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">21</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Avondale Partners, LLC and Sprott Securities, Inc. served as placement agents in the
private placement of the Company&#146;s shares of common stock and warrants in October&nbsp;2004.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">22</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 22,500 shares of common stock issuable upon the exercise of 22,500 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">23</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 7,900 shares of common stock issuable upon the exercise of 7,900 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">24</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Messrs Bray, Provost and Sullivan and Ms.&nbsp;Sullivan were former shareholders of Lexxus
International, Inc., a subsidiary of the Company. Each of Messrs Bray and Sullivan and Ms.
Sullivan are currently consultants to the Company. Mr.&nbsp;Provost is currently employed by the
Company.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">25</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Issued in connection with the acquisition of shares of Lexxus International, Inc. See
&#147;Business &#151; Recent Developments.&#148;</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">26</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">SalidaCapital Management is the investment manager for BTR Global Growth Trading
Limited and BTR Global Opportunity Trading Limited.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">27</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 78,540 shares of common stock issuable upon the exercise of 78,540 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">28</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 40,460 shares of common stock issuable upon the exercise of 40,460 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">29</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 23,800 shares of common stock issuable upon the exercise of 23,800 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">30</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Gryphon Capital Management, LLC is general partner of Cascade Partners, L.P. and Cascade Partners II, L.P.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">31</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 9,522 shares of common stock issuable upon the exercise of 9,522 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">32</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 149,178 shares of common stock issuable upon the exercise of 149, 178 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">33</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Cavanaugh is President of MarketVision.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">34</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes (i)&nbsp;253,580 shares of common stock issuable upon the exercise of options
held by Mr.&nbsp;Cavanaugh, and (ii)&nbsp;1,984 shares of common stock issuable upon the exercise of
1,984 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">35</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 1,984 shares of common stock issuable upon the exercise of 1,984 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">36</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 253,580 shares of common stock issuable upon the exercise of options held by Mr.&nbsp;Cavanaugh.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">37</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 23,000 shares of common stock issuable upon the exercise of 23,000 warrants.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">85
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">38</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 60,000 shares of common stock issuable upon the exercise of 60,000 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">39</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Epic Capital Management Inc. is the investment advisor for Epic Partnership and Epic Partnership II.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">40</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 7,920 shares of common stock issuable upon the exercise of 7,920 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">41</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 51,600 shares of common stock issuable upon the exercise of 51,600 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">42</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 79,000 shares of common stock issuable upon the exercise of 79,000 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">43</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 7,021 shares of common stock issuable upon the exercise of 7,021 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">44</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 63,427 shares of common stock issuable upon the exercise of 63,427 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">45</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 4,998 shares of common stock issuable upon the exercise of 4,998 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">46</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 119,000 shares of common stock issuable upon the exercise of 119,000 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">47</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Hesse is a director of the Company.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">48</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes (i)&nbsp;5,000 shares of common stock issuable upon the exercise of 5,000
options, and (ii)&nbsp;1,984 shares of common stock issuable upon the exercise of 1,984 warrants.</TD>
</TR>


<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">49</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 5,000 shares of common stock issuable upon the exercise of 5,000 options.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">50</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 20,600 shares of common stock issuable upon the exercise of 20,600 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">51</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 3,213 shares of common stock issuable upon the exercise of 3,213 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">52</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;LaCore is Chief Executive Office of Lexxus U.S. and a director of the Company.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">53</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes (i)&nbsp;14,938 shares of common stock held by LaCore and Woodburn Partnership, a
general partnership with respect to which Mr.&nbsp;LaCore is a general partner, (ii)&nbsp;600,000 shares
issuable upon the exercise of options held by the LaCore and Woodburn Partnership, (iii)
600,000 shares of common stock issuable upon the exercise of options held by Mr.&nbsp;LaCore, (iv)
1,984 shares of common stock issuable upon the exercise of warrants held by the LaCore and
Woodburn Partnership, and (v)&nbsp;1,984 shares of common stock issuable upon the exercise of
warrants held by Mr.&nbsp;LaCore.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">54</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes (i)&nbsp;14,938 shares of common stock held by LaCore and Woodburn Partnership, a
general partnership with respect to which Mr.&nbsp;LaCore is a general partner, (ii)&nbsp;600,000 shares
issuable upon the exercise of options held by the LaCore and Woodburn Partnership, (iii)
600,000 shares of common stock issuable upon the exercise of options held by Mr.&nbsp;LaCore, and
(iv)&nbsp;1,984 shares of common stock issuable upon the exercise of warrants held by the LaCore
and Woodburn Partnership.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">55</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Lamacraft is Chief Executive Officer of Sprott Securities Inc.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">56</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 19,800 shares of common stock issuable upon the exercise of 19,800 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">57</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Landry is the Vice President &#151; Development of MarketVision.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">58</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 56,420 shares of common stock issuable upon the exercise of 56,420 options.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">59</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 3,960 shares of common stock issuable upon the exercise of 3,960 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">60</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 59,500 shares of common stock issuable upon the exercise of 59,500 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">61</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 103,000 shares of common stock issuable upon the exercise of 103,000 warrants</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">62</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 62,500 shares of common stock issuable upon the exercise of 62,500 warrants</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">63</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 79,000 shares of common stock issuable upon the exercise of 79,000 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">64</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Sharng is the Executive Vice President and Chief Financial Officer of the Company.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">65</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes (i)&nbsp;1,984 shares of common stock issuable upon the exercise of warrants, and
(ii)&nbsp;4,992 shares of common stock issuable upon the exercise of 4,992 options.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">66</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 4,992 shares of common stock issuable upon the exercise of 4,992 options.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">67</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 19,800 shares of common stock issuable upon the exercise of 19,800 warrants.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">86
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">68</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 17,500 shares of common stock issuable upon the exercise of 17,500 warrants.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">69</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Sir Brian Wolfson is the Chairman of the Board of Directors of the Company.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">70</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes (i)&nbsp;60,000 shares issuable upon the exercise of options held by Capital
Development S.A, an entity controlled by Sir Brian Wolfson (&#147;Capital Development&#148;), (ii)&nbsp;1,984
shares of common stock issuable upon the exercise of warrants held by Capital Development,
(iii)&nbsp;4,190 shares of common stock owned by Capital Development, and (iv)&nbsp;12,953 shares of
common stock owned by Schweco Nominee Limited, an entity controlled by Sir Brian Wolfson.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">71</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes (i)&nbsp;60,000 shares issuable upon the exercise of options held by Capital
Development S.A, an entity controlled by Sir Brian Wolfson (&#147;Capital Development&#148;), (ii)&nbsp;4,190
shares of common stock owned by Capital Development, and (iii)&nbsp;12,953 shares of common stock
owned by Schweco Nominee Limited, an entity controlled by Sir Brian Wolfson.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">72</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Woodburn is a director and the President and Secretary of the Company.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">73</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes (i)&nbsp;14,938 shares of common stock held by the LaCore and Woodburn
Partnership, a general partnership with respect to which Mr.&nbsp;Woodburn is a general partner,
(ii)&nbsp;600,000 shares of common stock issuable upon the exercise of options held by the LaCore
and Woodburn Partnership and (iii)&nbsp;1,984 shares of common stock issuable upon the exercise of
warrants held by the LaCore and Woodburn Partnership.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">74</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes (i)&nbsp;12,954 shares of common stock held by the LaCore and Woodburn
Partnership, a general partnership with respect to which Mr.&nbsp;Woodburn is a general partner,
and (ii)&nbsp;600,000 shares of common stock issuable upon the exercise of options held by the
LaCore and Woodburn Partnership.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">75</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 6,000 shares of common stock issuable upon the exercise of 6,000 warrants.</TD>
</TR>

</TABLE>




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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left">
<A name="120"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>PLAN OF DISTRIBUTION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are registering the shares of common stock owned by the selling stockholders, and the
shares of common stock issuable upon exercise of the warrants owned by certain of the selling
stockholders, to permit the resale of these shares of common stock by the holders from time to time
after the date of this prospectus. We will not receive any of the proceeds from the sale by the
selling stockholders of the shares of common stock. We will bear all fees and expenses incident to
our obligation to register the shares of common stock.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selling stockholders may sell all or a portion of the shares of common stock beneficially
owned by them and offered hereby from time to time directly or through one or more underwriters,
broker-dealers or agents. If the shares of common stock are sold through underwriters or
broker-dealers, the selling stockholders would be responsible for underwriting discounts or
commissions or agent&#146;s commissions. The shares of common stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the sale, at varying
prices determined at the time of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions,


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>on any national securities exchange or quotation service on which the securities may
be listed or quoted at the time of sale,</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>in the over-the-counter market,</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>in transactions otherwise than on these exchanges or systems or in the
over-the-counter market,</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>through the writing of options, whether such options are listed on an options
exchange or otherwise,</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>ordinary brokerage transactions and transactions in which the broker-dealer solicits
purchasers;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>block trades in which the broker-dealer would attempt to sell the shares as agent
but may position and resell a portion of the block as principal to facilitate the
transaction;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>purchases by a broker-dealer as principal and resale by the broker-dealer for its
account;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>an exchange distribution in accordance with the rules of the applicable exchange;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>privately negotiated transactions;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>through the settlement of short sales</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>pursuant to Rule&nbsp;144 under the Securities Act;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>broker-dealers may agree with the selling security holders to sell a specified
number of such shares at a stipulated price per share</TD>
</TR>

</TABLE>

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<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>a combination of any such methods of sale; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>any other method permitted pursuant to applicable law.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the selling stockholders effect such transactions by selling shares of common stock to or
through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may
receive commissions in the form of discounts, concessions or commissions from the selling
stockholders or commissions from purchasers of the shares of common stock for whom they may act as
agent or to whom they may sell as principal (which discounts, concessions or commissions as to
particular underwriters, broker-dealers or agents may be in excess of those customary in the types
of transactions involved). In connection with sales of the common stock or otherwise, the selling
stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in
short sales of the common stock in the course of hedging in positions they assume. The selling
stockholders may also sell shares of common stock short and deliver shares of common stock covered
by this prospectus to close out short positions. The selling stockholders may also loan or pledge
shares of common stock to broker-dealers that in turn may sell such shares.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selling stockholders may pledge or grant a security interest in some or all of the
warrants or shares of common stock owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the warrants or shares of
common stock from time to time pursuant to this prospectus or any amendment to this prospectus
under Rule&nbsp;424(b)(3) or other applicable provision of the Securities Act of 1933, as amended,
amending, if necessary, the list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this prospectus. The selling
stockholders also may transfer and donate the shares of common stock in other circumstances in
which case the transferees, donees, pledgees or other successors in interest would be the selling
beneficial owners for purposes of this prospectus.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selling stockholders and any broker-dealer participating in the distribution of the shares
of common stock may be deemed to be &#147;underwriters&#148; within the meaning of the Securities Act, and
any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be
deemed to be underwriting commissions or discounts under the Securities Act. At the time a
particular offering of the shares of common stock is made, a prospectus supplement, if required,
would be distributed which would set forth the aggregate amount of shares of common stock being
offered and the terms of the offering, including the name or names of any broker-dealers or agents,
any discounts, commissions and other terms constituting compensation from the selling stockholders
and any discounts, commissions or concessions allowed or re-allowed or paid to broker-dealers.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the securities laws of some states, the shares of common stock may be sold in such
states only through registered or licensed brokers or dealers. In addition, in some states the
shares of common stock may not be sold unless such shares have been registered or qualified for
sale in such state or an exemption from registration or qualification is available and is complied
with.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There can be no assurance that any selling stockholder could sell any or all of the shares


<P align="center" style="font-size: 10pt">89
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">of common stock registered pursuant to the shelf registration statement, of which this
prospectus forms a part.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selling stockholders and any other person participating in such distribution would be
subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder, including, without limitation, Regulation&nbsp;M of the Exchange Act, which
may limit the timing of purchases and sales of any of the shares of common stock by the selling
stockholders and any other participating person. Regulation&nbsp;M may also restrict the ability of any
person engaged in the distribution of the shares of common stock to engage in market-making
activities with respect to the shares of common stock. All of the foregoing may affect the
marketability of the shares of common stock and the ability of any person or entity to engage in
market-making activities with respect to the shares of common stock.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will pay all expenses of the registration of the shares of common stock pursuant to the
registration rights agreement, estimated to be approximately $240,000 in total, including, without
limitation, Securities and Exchange Commission filing fees and expenses of compliance with state
securities or &#147;blue sky&#148; laws; provided, however, that a selling stockholder will pay all
underwriting discounts and selling commissions, if any. We will indemnify the selling stockholders
against liabilities, including some liabilities under the Securities Act, in accordance with the
registration rights agreements, or the selling stockholders will be entitled to contribution. We
may be indemnified by the selling stockholders against civil liabilities, including liabilities
under the Securities Act, that may arise from any written information furnished to us by the
selling stockholder specifically for use in this prospectus, in accordance with the related
registration rights agreements, or we may be entitled to contribution.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Once sold under the shelf registration statement, of which this prospectus forms a part, the
shares of common stock will be freely tradable in the hands of persons other than our affiliates.


<P align="center" style="font-size: 10pt">90
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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="121"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our certificate of incorporation, as amended, incorporates certain provisions permitted under
the Business Corporation Act of Florida relating to the liability of Directors. The provisions
eliminate a Director&#146;s liability for monetary damages for a breach of fiduciary duty, including
gross negligence, except in circumstances involving certain wrongful acts, such as the breach of a
Director&#146;s duty of loyalty or acts or omissions which involve intentional misconduct or a knowing
violation of law. These provisions do not eliminate a Director&#146;s duty of care. Moreover, the
provisions do not apply to claims against a Director for violations of certain laws, including
federal securities laws.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Certificate of Incorporation, as amended, also contains provisions to indemnify the
Directors, officers, employees or other agents to the fullest extent permitted by the Business
Corporation Act of Florida. These provisions may have the practical effect in certain cases of
eliminating the ability of shareholders to collect monetary damages from Directors. The Company
believes that these provisions will assist the Company in attracting or retaining qualified
individuals to serve as Directors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to our Directors, officers and controlling persons pursuant to the foregoing provisions,
or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is, therefore,
unenforceable.

<DIV align="left">
<A name="122"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>LEGAL MATTERS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain legal matters in connection with this offering and Registration Statement are being
passed upon by the law firm Brown Rudnick Berlack Israels LLP, New York, New York.

<DIV align="left">
<A name="123"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>EXPERTS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements included in this prospectus and in the registration
statement have been audited by BDO Seidman, LLP, an independent registered public accounting firm,
to the extent and for the periods set forth in their report appearing elsewhere herein and in the
registration statement, and are included in reliance upon such report given upon the authority of
said firm as experts in auditing and accounting.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements included in this prospectus and in the registration
statement have been audited by Sherb &#038; Co., LLP, an independent registered public accounting firm,
to the extent and for the periods set forth in their report appearing elsewhere herein and in the
registration statement, and are included in reliance upon such report given upon the authority of
said firm as experts in auditing and accounting.


<P align="center" style="font-size: 10pt">91
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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="124"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>WHERE YOU CAN FIND MORE INFORMATION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We file annual, quarterly and current reports, proxy statements and other information with the
SEC. You may access and read our SEC filings, including the complete registration statement and all
of the exhibits to it, through the SEC&#146;s web site (http://www.sec.gov). This site contains reports
and other information that we file electronically with the SEC. The registration statement and
other reports or information can be inspected, and copies may be obtained, at the Public Reference
Room of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Information
on the operation of the Public Reference Room of the SEC may be obtained by calling the SEC at
1-800-SEC-0330.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have filed with the SEC a registration statement on Form S-1, including exhibits, under the
Securities Act of 1933 with respect to the shares of common stock to be sold in this offering. This
prospectus, which constitutes a part of the registration statement, does not contain all of the
information in the registration statement or the exhibits. Statements made in this prospectus
regarding the contents of any contract, agreement or other document are only summaries and are not
necessarily complete. With respect to each contract, agreement or other document filed as an
exhibit to the registration statement, we refer you to the exhibit for a more complete description
of the matter involved.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to furnish our shareholders with annual reports containing consolidated financial
statements audited by our independent auditors and to make available to our shareholders quarterly
reports for the first three quarters of each fiscal year containing unaudited interim condensed
consolidated financial statements.


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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt">NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES


<DIV align="left">
<A name="125"></A>
</DIV>

<P align="center" style="font-size: 10pt">INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Page</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#300">Report of Independent Registered Public Accounting Firm of BDO Seidman, LLP
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-2</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#301">Report of Independent Registered Public Accounting Firm of Sherb &#038; Co., LLP
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-3</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#302">Consolidated Balance Sheets as of December&nbsp;31, 2003 and 2004
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-4</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#303">Consolidated Statements of Operations for the Years Ended December&nbsp;31, 2002, 2003, and 2004
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-5</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#304">Consolidated Statements of Stockholders&#146; Equity for the Years Ended December&nbsp;31, 2002, 2003, and 2004
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-6</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#305">Consolidated Statements of Cash Flows for the Years Ended December&nbsp;31, 2002, 2003, and 2004
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-7</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#306">Notes to Consolidated Financial Statements
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-8</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-1
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="300"></A>
</DIV>

<P align="center" style="font-size: 10pt">REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



<P align="left" style="font-size: 10pt">Board of Directors and Stockholders<BR>
Natural Health Trends Corp.<BR>
Dallas, Texas


<P align="left" style="font-size: 10pt">We have audited the accompanying consolidated balance sheets of Natural Health Trends Corp. (the
&#147;Company&#148;) as of December&nbsp;31, 2003 and 2004, and the related consolidated statements of operations,
stockholders&#146; equity and cash flows for each of the two years in the period ended December&nbsp;31,
2004. These financial statements are the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial statements based on our audits.



<P align="left" style="font-size: 10pt">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audits include consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Company&#146;s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, 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.



<P align="left" style="font-size: 10pt">In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Natural Health Trends Corp. at December&nbsp;31, 2003 and
2004, and the results of its operations and its cash flows for each of the two years ended December
31, 2004, in conformity with accounting principles generally accepted in the United States of
America.



<P align="left" style="font-size: 10pt">The consolidated financial statements for the year ended December&nbsp;31, 2003 have been restated (see
Note 2).



<P align="left" style="font-size: 10pt">/s/ BDO Seidman, LLP<BR>
BDO Seidman, LLP


<P align="left" style="font-size: 10pt">Dallas, Texas<BR>
March&nbsp;30, 2005


<P align="center" style="font-size: 10pt">F-2
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="301"></A>
</DIV>

<P align="center" style="font-size: 10pt">REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



<P align="left" style="font-size: 10pt">Board of Directors and Stockholders<BR>
Natural Health Trends Corp.<BR>
Dallas, Texas


<P align="left" style="font-size: 10pt">We have audited the accompanying consolidated statements of operations, stockholders&#146; equity and
cash flows of Natural Health Trends Corp. (&#147;the Company&#148;) for the year ended December&nbsp;31, 2002.
These consolidated financial statements are the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial statements based on our audit.



<P align="left" style="font-size: 10pt">We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audit includes consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Company&#146;s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.



<P align="left" style="font-size: 10pt">In our opinion, the consolidated financial statements referred to above present, in all material
respects, the consolidated results of operations and cash flows of Natural Health Trends Corp. for
the year ended December&nbsp;31, 2002, in conformity with accounting principles generally accepted in
the United States of America.



<P align="left" style="font-size: 10pt">The consolidated financial statements for the year ended December&nbsp;31, 2002 have been restated (see
Note 2).



<P align="left" style="font-size: 10pt">/s/ Sherb &#038; Co., LLP<BR>
Sherb &#038; Co., LLP<BR>
Certified Public Accountants


<P align="left" style="font-size: 10pt">New York, New York<BR>
March&nbsp;7, 2003 (except for note 2<BR>
which is dated as of March&nbsp;24, 2004)


<P align="center" style="font-size: 10pt">F-3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt">NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES


<DIV align="left">
<A name="302"></A>
</DIV>

<P align="center" style="font-size: 10pt">CONSOLIDATED BALANCE SHEETS<BR>
(In Thousands, Except Share Data)


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:75px; text-indent:-15px">ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,324</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Restricted cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,395</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,991</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,096</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,015</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">579</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,145</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intangible assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,474</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">434</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">779</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">458</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,105</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">LIABILITIES AND STOCKHOLDERS&#146; EQUITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,248</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,797</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued distributor commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,259</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,250</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,551</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current portion of debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">796</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,595</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,072</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,496</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,518</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commitments and contingencies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">598</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mezzanine common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">960</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; equity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Preferred stock, $1,000 par value; 1,500,000
shares authorized; none issued and
outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock, $0.001 par value; 500,000,000
shares authorized, 4,656,463 and 6,819,667
shares issued and outstanding at December
31, 2003 and 2004, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,933</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29,040</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,799</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated other comprehensive loss:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Foreign currency translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(147</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(112</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,029</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities and stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,105</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of these consolidated financial statements.



<P align="center" style="font-size: 10pt">F-4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt">NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES


<DIV align="left">
<A name="303"></A>
</DIV>

<P align="center" style="font-size: 10pt">CONSOLIDATED STATEMENTS OF OPERATIONS<BR>
(In Thousands, Except Per Share Data)


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">36,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">133,225</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,752</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,321</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,904</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Distributor commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,579</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Selling, general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,102</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,681</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,223</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income (expense), net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">137</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before income taxes and minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,574</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,360</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(300</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(860</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(663</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(232</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(456</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;before discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(261</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,241</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,241</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Preferred stock dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income available to common stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,069</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,241</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Discontinuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Discontinuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average number of shares outstanding:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,580</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,822</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of these consolidated financial statements.



<P align="center" style="font-size: 10pt">F-5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt">NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES


<DIV align="left">
<A name="304"></A>
</DIV>

<P align="center" style="font-size: 10pt">CONSOLIDATED STATEMENTS OF STOCKHOLDERS&#146; EQUITY<BR>
(In Thousands, Except Share Data)


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Additional</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Preferred Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Paid-In</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Deferred</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Comprehensive</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Capital</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Deficit</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Compensation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Loss</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">BALANCE, December, 31, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,209,433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">29,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(35,836</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(416</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(4,370</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,139</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,132</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion of Series&nbsp;F preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,201</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,201</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">610,995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion of Series&nbsp;H preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(150</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(150</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">137,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion of Series&nbsp;J preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(777</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(777</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,025,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion of notes payable to common
stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">236,663</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion of Series&nbsp;F preferred stock
to note payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(180</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(180</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(180</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shares issued for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Preferred stock dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(70</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,434</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">BALANCE, December&nbsp;31, 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,239,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(33,767</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(146</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(398</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,728</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(138</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(138</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,590</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion of Series&nbsp;J preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shares issued in acquisition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">360,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">433</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shares issued for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Preferred stock dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">146</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">BALANCE, December&nbsp;31, 2003 (As Restated)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,656,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29,040</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(147</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,824</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,241</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,276</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shares issued in acquisitions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">790,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,705</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of stock options and warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of common stock and common
stock purchase warrants in private
placement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,369,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,067</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Imputed compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">BALANCE, December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,819,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">64,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(27,799</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(112</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,029</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of these consolidated financial statements.



<P align="center" style="font-size: 10pt">F-6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt">NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES


<DIV align="left">
<A name="305"></A>
</DIV>

<P align="center" style="font-size: 10pt">CONSOLIDATED STATEMENTS OF CASH FLOWS<BR>
(In Thousands)


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH FLOWS FROM OPERATING ACTIVITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,241</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less gain from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,400</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(261</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,241</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments to reconcile income (loss)&nbsp;from continuing
operations to net cash provided by operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">418</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">495</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization of intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">801</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">456</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(515</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Imputed compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock issued for services and penalties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Change in deferred compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Changes in assets and liabilities, excluding acquisitions:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(392</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,019</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(364</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,366</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(858</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,630</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(375</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">330</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">230</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">406</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued distributor commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,213</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(496</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,099</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,560</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(160</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">912</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">428</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH FLOWS FROM INVESTING ACTIVITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Business acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,357</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase of minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(141</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase of database</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(191</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchases of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(701</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(579</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(150</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Increase in restricted cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(227</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,022</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(980</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(928</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,793</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,628</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH FLOWS FROM FINANCING ACTIVITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payments on debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(225</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(339</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,600</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minority interest contribution</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from issuance of common stock, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,078</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by (used in) financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(339</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,478</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of exchange rates on cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(224</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(87</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net increase in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,191</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH AND CASH EQUIVALENTS, beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,133</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH AND CASH EQUIVALENTS, end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,324</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of these consolidated financial statements.



<P align="center" style="font-size: 10pt">F-7
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt">NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES


<DIV align="left">
<A name="306"></A>
</DIV>

<P align="center" style="font-size: 10pt">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">1.&nbsp;&nbsp;</TD>
    <TD>NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><I>Nature of Operations</I>



<P align="left" style="font-size: 10pt">Natural Health Trends Corp. (the &#147;Company&#148;) is an international direct selling organization
headquartered in Dallas, Texas. The Company was incorporated as a Florida corporation in 1988.
Subsidiaries controlled by the Company sell products to a distributor network that either use the
products themselves or resell them to consumers. The Company&#146;s products promote health, wellness
and vitality and are sold under the Lexxus and Kaire brands.



<P align="left" style="font-size: 10pt">The Company&#146;s majority-owned subsidiaries have an active physical presence in the following
markets: North America, which consists of the United States and Canada; Greater China, which
consists of Hong Kong, Taiwan and China; Southeast Asia, which consists of Singapore, Malaysia, the
Philippines and Indonesia; Eastern Europe, which consists of Russia and other former Soviet Union
Republics; Australia and New Zealand, South Korea, Japan, and Mexico.



<P align="left" style="font-size: 10pt"><I>Principles of Consolidation</I>



<P align="left" style="font-size: 10pt">The consolidated financial statements include the accounts of the Company and all of its
majority-owned subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.



<P align="left" style="font-size: 10pt"><I>Use of Estimates</I>



<P align="left" style="font-size: 10pt">The preparation of financial statements in accordance with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results may differ from these estimates.



<P align="left" style="font-size: 10pt">The most significant accounting estimates inherent in the preparation of the Company&#146;s financial
statements include estimates associated with obsolete inventory and the fair value of acquired
intangible assets and goodwill, as well as those used in the determination of liabilities related
to sales returns, distributor commissions, and income taxes. Various assumptions and other
factors prompt the determination of these significant estimates. The process of determining
significant estimates is fact specific and takes into account historical experience and current and
expected economic conditions. Historically, actual results have not significantly deviated from
those determined using the estimates described above.



<P align="center" style="font-size: 10pt">F-8
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><I>Reclassification</I>



<P align="left" style="font-size: 10pt">Certain balances have been reclassified in the prior year consolidated financial statements to
conform to current year presentation.



<P align="left" style="font-size: 10pt"><I>Cash and Cash Equivalents</I>



<P align="left" style="font-size: 10pt">The Company considers all highly liquid investments with original maturities of three months or
less, when purchased, to be cash equivalents.



<P align="left" style="font-size: 10pt"><I>Restricted Cash</I>



<P align="left" style="font-size: 10pt">The Company maintains a cash reserve with certain credit card processing companies to provide for
potential uncollectible amounts and chargebacks. The cash reserve is calculated as a percentage of
sales over a rolling monthly time period.



<P align="left" style="font-size: 10pt"><I>Inventories</I>



<P align="left" style="font-size: 10pt">Inventories consist primarily of merchandise purchased for resale and are stated at the lower of
cost or market, using the first-in, first-out method.



<P align="left" style="font-size: 10pt"><I>Property and Equipment</I>



<P align="left" style="font-size: 10pt">Property and equipment is stated at cost and depreciated using the straight-line method over the
following estimated useful lives:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Office equipment and software
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3 &#150; 5&nbsp;years</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Furniture and fixtures
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5 &#150; 7&nbsp;years</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Leasehold improvements
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shorter of estimated useful life or lease term</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt"><I>Goodwill and Other Intangible Assets</I>



<P align="left" style="font-size: 10pt">The Company has adopted Statement of Financial Accounting Standards (SFAS)&nbsp;No.&nbsp;142, &#147;Goodwill and
Other Intangible Assets.&#148; SFAS No.&nbsp;142 requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead be tested for impairment at least
annually or sooner whenever events or changes in circumstances indicate that they may be impaired.
No impairment of goodwill has been identified in any of the periods presented.



<P align="left" style="font-size: 10pt">SFAS No.&nbsp;142 also requires that intangible assets with definite lives be amortized over their
estimated useful lives. The Company is currently amortizing its acquired intangible assets with
definite lives over periods ranging from 5 to 7&nbsp;years.



<P align="center" style="font-size: 10pt">F-9
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><I>Impairment of Long-Lived Assets</I>



<P align="left" style="font-size: 10pt">The Company reviews property and equipment and certain identifiable intangibles for impairment
whenever events or changes in circumstances indicate the carrying amount of an asset may not be
recoverable. Recoverability of these assets is measured by comparison of its carrying amounts to
future undiscounted cash flows the assets are expected to generate. If property and equipment and
certain identifiable intangibles are considered to be impaired, the impairment to be recognized
equals the amount by which the carrying value of the asset exceeds its fair market value. The
Company has made no adjustments to its long-lived assets in any of the periods presented.



<P align="left" style="font-size: 10pt"><I>Income Taxes</I>



<P align="left" style="font-size: 10pt">The Company recognizes income taxes under the liability method. Deferred income taxes are
recognized for differences between the financial reporting and tax bases of assets and liabilities
at enacted statutory tax rates in effect for the years in which the differences are expected to
reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the
amounts expected to be ultimately realized.



<P align="left" style="font-size: 10pt"><I>Foreign Currency</I>



<P align="left" style="font-size: 10pt">The functional currency of the Company&#146;s international subsidiaries is generally the local
currency. Local currency assets and liabilities are translated at the rates of exchange on the
balance sheet date, and local currency revenues and expenses are translated at average rates of
exchange during the period. The resulting translation adjustments are recorded directly into a
separate component of stockholders&#146; equity and represents the only component of accumulated other
comprehensive loss.



<P align="left" style="font-size: 10pt"><I>Revenue Recognition</I>



<P align="left" style="font-size: 10pt">Product sales are recorded when the products are shipped and title passes to independent
distributors. Product sales to distributors are made pursuant to a distributor agreement that
provides for transfer of both title and risk of loss upon our delivery to the carrier, which is
commonly referred to as &#147;F.O.B. Shipping Point.&#148; The Company primarily receives payment by credit
card at the time distributors place orders. Amounts received for unshipped product are recorded as
deferred revenue. The Company&#146;s sales arrangements do not contain right of inspection or customer
acceptance provisions other than general rights of return.



<P align="left" style="font-size: 10pt">Actual product returns are recorded as a reduction to net sales. The Company estimates and accrues
a reserve for product returns based on its return policies and historical experience.



<P align="left" style="font-size: 10pt">Enrollment package revenue, including any nonrefundable set-up fees, is deferred and recognized
over the term of the arrangement, generally twelve months. During the third quarter of 2004, the
Company changed its amortization methodology from a monthly method to the preferred daily method
whereby revenues for each enrollment package start the day of




<P align="center" style="font-size: 10pt">F-10
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">enrollment. The change in methodology resulted in additional deferred revenue of approximately
$280,000 during 2004. Enrollment packages provide distributors access to both a personalized
marketing website and a business management system. Prior to the acquisition of MarketVision
Communications Corp. (&#147;MarketVision&#148;) on March&nbsp;31, 2004, the Company paid MarketVision a fixed
amount in exchange for MarketVision creating and maintaining individual web pages for such
distributors. These payments to MarketVision were deferred and recorded as a prepaid expense. The
related amortization was recorded to cost of sales over the term of the arrangement. The remaining
unamortized costs were included in the determination of the purchase price of MarketVision.
Subsequent to the acquisition of MarketVision, no upfront costs are deferred as the amount is
nominal.



<P align="left" style="font-size: 10pt">Shipping charges billed to distributors are included in net sales. Costs associated with shipments
are included in cost of sales.



<P align="left" style="font-size: 10pt"><I>Stock-Based Compensation</I>



<P align="left" style="font-size: 10pt">The Company continues to account for stock-based compensation plans under the recognition and
measurement principles of Accounting Principles Board Opinion No.&nbsp;25, &#147;Accounting for Stock Issued
to Employees,&#148; and related Interpretations. The Company recorded stock-based employee compensation
during 2002 of $1,434,000 as a result of certain options held by senior executive officers being
accounted for as variable options. These options were amended in November&nbsp;2002, and subsequently
are being accounted for as fixed options. The following table illustrates the effect on net income
and earnings per share if the Company had applied the fair value recognition provisions of FASB
Statement No.&nbsp;123, &#147;Accounting for Stock-Based Compensation,&#148; to stock-based employee compensation
(in thousands).


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income available to common stockholders, as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,069</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,241</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Add: Stock-based employee compensation expense
included in reported net income, net of related tax
effects</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deduct: Stock-based employee compensation expense
determined under fair value based method for all
awards, net of related tax effects</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(956</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(38</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,893</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma net income available to common stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,689</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,652</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">As reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.48</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">As reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.48</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-11
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">The weighted-average fair value of options granted was $0.81, $1.05, and $11.91 for 2002,
2003, and 2004, respectively. The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model with the following weighted-average assumptions:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">7.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.25</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.50</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">200</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">97</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected life (in years)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt"><I>Income Per Share</I>



<P align="left" style="font-size: 10pt">Basic income per share is computed by dividing net income applicable to common stockholders by the
weighted-average number of common shares outstanding during the period. Diluted income per share
is determined using the weighted-average number of common shares outstanding during the period,
adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be
issued upon the exercise of outstanding stock options and warrants. In periods where losses are
reported, the weighted-average number of common shares outstanding excludes common stock
equivalents, because their inclusion would be anti-dilutive.



<P align="left" style="font-size: 10pt">The dilutive effect of stock options and warrants is reflected by application of the treasury stock
method. The potential tax benefit derived from exercise of non-qualified stock options has been
excluded from the treasury stock calculation as the Company is uncertain that the benefit will be
realized.



<P align="left" style="font-size: 10pt"><I>Certain Risks and Concentrations</I>



<P align="left" style="font-size: 10pt">In 2003 and 2004, a substantial portion of our revenue was generated in Hong Kong (see Note 14).
Various factors could harm our business in Hong Kong, such as worsening economic conditions or
other events that are out of our control. Our financial results could be harmed if our products,
business opportunity or planned growth initiatives fail to retain and generate continued interest
among our distributors and consumers in this market.



<P align="left" style="font-size: 10pt">Three major product lines &#151; <I>Skindulgence</I>&#174;, <I>Alura&#153;</I>, and <I>Premium Noni Juice&#153; </I>- generated the majority
of the Company&#146;s sales for 2003 and 2004. We obtain these products from three different suppliers.
All three of the suppliers entered into our standard supply agreements. We believe that, in the
event we were unable to source products from these suppliers or other suppliers of our products,
our revenue, income and cash flow could be adversely and materially impacted.



<P align="left" style="font-size: 10pt">The Company maintains its cash in bank accounts which, at times, may exceed federally insured
limits. Accounts in the United States are guaranteed by the Federal Deposit Insurance Corporation
(FDIC)&nbsp;up to $100,000. A portion of the Company&#146;s cash balances at December&nbsp;31, 2004 exceeds the
insured limits. The Company has not experienced any losses in such accounts.



<P align="center" style="font-size: 10pt">F-12
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><I>Fair Value of Financial Instruments</I>



<P align="left" style="font-size: 10pt">The carrying amounts of the Company&#146;s financial instruments, including cash and cash equivalents,
accounts receivable, accounts payable, accrued expenses, and debt, approximate fair value because
of their short maturities.



<P align="left" style="font-size: 10pt"><I>Recent Accounting Pronouncements</I>



<P align="left" style="font-size: 10pt">In November&nbsp;2004, the FASB issued Statement of Financial Accounting Standards No.&nbsp;151, &#147;Inventory
Costs.&#148; This statement requires that certain costs such as idle facility expense, excessive
spoilage, double freight, and re-handling costs be recognized as current-period charges and that
allocation of fixed production overheads to the costs of conversion be based on the normal capacity
of the production facilities. The provisions of the statement shall be effective for inventory
costs incurred during fiscal years beginning after June&nbsp;15, 2005. Adoption of this statement is
not anticipated to have a significant impact on the Company&#146;s financial condition, results of
operations, or cash flows.



<P align="left" style="font-size: 10pt">In December&nbsp;2004, the FASB issued Statement of Financial Accounting Standards No.&nbsp;123 (Revised
2004), &#147;Share-Based Payment.&#148; This statement is a revision of FASB Statement No.&nbsp;123, &#147;Accounting
for Stock-Based Compensation&#148; and supersedes APB Opinion No.&nbsp;25, &#147;Accounting for Stock Issued to
Employees.&#148; This Statement requires that we record compensation expense for stock options issued
based on the estimated fair value of the options at the date of grant. This statement is effective
as of the first interim period beginning after June&nbsp;15, 2005. We currently are not required to
record stock-based compensation charges if the employee&#146;s stock option exercise price is equal to
or exceeds the fair value of the stock at the date of grant. We have not yet determined what
impact, if any, the proposed pronouncement would have on our financial statements.



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">2.&nbsp;&nbsp;</TD>
    <TD>RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">During the quarters ended September&nbsp;30 and December&nbsp;31, 2003, the Company re-evaluated its
financial statements for the years ended December&nbsp;31, 2001 and 2002, and quarterly periods included
in such years and the quarterly periods ended March&nbsp;31, June&nbsp;30 and September&nbsp;30, 2003. As a
result of such review, the Company determined that it inadvertently applied the incorrect
accounting treatment with respect to the following items:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">1.&nbsp;&nbsp;</TD>
    <TD>Revenue recognition with respect to enrollment package revenue;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">2.&nbsp;&nbsp;</TD>
    <TD>Revenue cut-off between 2002 and 2003;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">3.&nbsp;&nbsp;</TD>
    <TD>Accounts receivable reconciliation to supporting documents;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">4.&nbsp;&nbsp;</TD>
    <TD>Reserves established for product returns and refunds;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">5.&nbsp;&nbsp;</TD>
    <TD>Gain recorded in connection with the sales of a subsidiary in 2001;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">6.&nbsp;&nbsp;</TD>
    <TD>Income tax provisions; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">7.&nbsp;&nbsp;</TD>
    <TD>Stock-based compensation</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">Consequently, the Company amended and restated its financial statements for each quarter in 2001
and 2002, the first three quarters in 2003, as well as for the years ended December&nbsp;31, 2001




<P align="center" style="font-size: 10pt">F-13
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">and 2002. The cumulative effect of the restatements for 2001 and 2002 resulted in a net increase
in accumulated deficit of approximately $3,520,000 as of December&nbsp;31, 2002.



<P align="left" style="font-size: 10pt">On March&nbsp;23, 2005, the Company filed a Current Report on Form&nbsp;8-K to report, after consultation
with its audit committee, that an amendment to its financial statements for the year ended December
31, 2003 and for the first quarter of 2004 is warranted as certain commission and
transportation-related expenses incurred as of December&nbsp;31, 2003 were under-accrued and certain
revenues not earned until 2004 were improperly recorded as revenue by its Eastern European
business, KGC Networks Ptd. Ltd., for the year ended December&nbsp;31, 2003. The restatement of the
financial statements for the year ended December&nbsp;31, 2003 will reduce the Company&#146;s revenue by
approximately $310,000, increase cost of goods sold by approximately $180,000, increase distributor
commission expense by approximately $460,000, reduce minority interest expense by approximately
$300,000, and reduce after-tax net income by approximately $650,000 for the quarter as well as the
year ended December&nbsp;31, 2003.



<P align="left" style="font-size: 10pt">For the quarter ended March&nbsp;31, 2004, the restatement will increase the Company&#146;s revenue by
approximately $310,000, reduce cost of goods sold by approximately $180,000, reduce distributor
commission expense by approximately $460,000, increase minority interest expense by approximately
$300,000, and increase after-tax net income by approximately $650,000 for the quarter ended March
31, 2004.



<P align="left" style="font-size: 10pt">Although the financial statements for the three month periods ended June&nbsp;30, 2004 and September&nbsp;30,
2004 are unaffected by this error, the consolidated financial statements for the second and third
quarters of 2004 include inaccurate information on a year to date basis because they include the
erroneous information from the first quarter of 2004 which financial statements should not be
relied upon. The Company also intends to file in the near future an amended annual report on Form
10-KSB for the year ended December&nbsp;31, 2003, and amended quarterly reports on Form&nbsp;10-Q for the
first three quarters of 2004.



<P align="left" style="font-size: 10pt">A reconciliation of the amounts as previously reported and as restated for the year ended December
31, 2003 is as follows:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Previously</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Reported</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Adjustments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Restated</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(310</TD>
    <TD nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,576</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(490</TD>
    <TD nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">2</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,900</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Distributor commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">459</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">3</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,555</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,770</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,524</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(949</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,575</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(650</TD>
    <TD nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">4</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,728</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted income per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.83</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted weighted-average number of shares outstanding:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,668</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<HR size="1" width="18%" align="left" noshade color="#000000">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Revenues not earned until 2004 were improperly recorded as revenue by the
Company&#146;s Eastern European business, KGC Networks Ptd. Ltd., for the year ended December&nbsp;31,
2003.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">2</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes certain transportation-related expenses incurred but not accrued as of December&nbsp;31, 2003.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">3</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Reflects distributor commissions incurred but not accrued as of December&nbsp;31, 2003.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">4</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes minority interest related to the restatement adjustments.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">F-14
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">3.&nbsp;&nbsp;</TD>
    <TD>OTHER INCOME (EXPENSE)</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">Other income (expense)&nbsp;consist of the following (in thousands):


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain (loss)&nbsp;on foreign exchange</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(77</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">215</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(71</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(68</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(101</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">137</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">4.&nbsp;&nbsp;</TD>
    <TD>BALANCE SHEET COMPONENTS</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">Selected balance sheet components are as follows (in thousands):


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property and equipment:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Office equipment and software</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">772</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Furniture and fixtures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">422</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">311</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property and equipment, at cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,505</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(461</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(926</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">579</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other accrued expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Sales returns</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,541</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Employee-related expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">355</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Professional fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">182</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Incentive trips</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Litigation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">236</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">630</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,250</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred revenue:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unshipped product</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,842</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Enrollment package revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,684</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,709</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,551</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-15
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">5. GOODWILL AND OTHER INTANGIBLE ASSETS



<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The changes in the carrying amount of goodwill for the year are as follows (in thousands):

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, December&nbsp;31, 2003 (As Restated)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">208</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill acquired during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,937</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,145</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">Intangible assets consist of the following (in thousands):


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">December 31, 2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">December 31, 2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Gross</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Gross</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Carrying</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Carrying</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amortization</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Net</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amortization</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Net</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Computer software
and programs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Distributor database</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">474</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">916</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,474</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Amortization expense for intangible assets was $44, $115, and $801 for 2002, 2003, and 2004,
respectively. Estimated amortization expense for the five succeeding fiscal years is as follows
(in thousands):

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">958</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">958</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">958</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">800</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">800</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,474</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">6. ACQUISITIONS



<P align="left" style="font-size: 10pt"><I>MarketVision Communications Corp.</I>



<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">On March&nbsp;31, 2004, the Company entered into a merger agreement with MarketVision. MarketVision is
the exclusive developer and service provider of direct selling internet technology used by the
Company since 2001. Pursuant to the merger agreement, the Company acquired all of the outstanding
capital stock of MarketVision in exchange for the issuance of 690,000 shares of restricted common
stock (the &#147;Issued Shares&#148;), promissory notes in the aggregate principal amount of approximately
$3,203,000 (see Note 7), a cash payment of approximately $1,337,000 in April&nbsp;2004, less
pre-acquisition net payables due to MarketVision of approximately $646,000, for a total purchase
price of approximately $17,583,000, including acquisition costs of approximately $153,000. The
Issued Shares were valued at $13,536,000 based on the average closing price of $23.08 a few days
before and after the acquisition was announced discounted by 15% due to certain restrictions
contained in the purchase agreement.


<P align="center" style="font-size: 10pt">F-16
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">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&#146;s products.
MarketVision earned revenues for this service of approximately $1,839,000 and $579,000 for the year
ended December&nbsp;31, 2003 and three months ended March&nbsp;31, 2004, respectively.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Management believes that this transaction was in the best interests of the Company because (i)&nbsp;the
success of the Company&#146;s business is dependent upon MarketVision&#146;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&#146;s board of
directors and the Chief Executive Officer of Lexxus International, Inc., a wholly-owned subsidiary
of the Company (&#147;Lexxus U.S.&#148;) , the board of directors hired the independent appraisal firm of
Bernstein, Conklin &#038; Balcombe to assess the fairness of the transaction with MarketVision from a
financial point of view. In March&nbsp;2004, Bernstein, Conklin &#038; Balcombe delivered its opinion to the
Company&#146;s board of directors that the MarketVision transaction is fair to the Company from a
financial point of view.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">In addition, the Company entered into a shareholder&#146;s agreement with the former stockholders of
MarketVision. Such agreement contained customary terms and conditions, including restrictions on
transfers of the Issued Shares, rights of first refusal and indemnification. Further, the
shareholder&#146;s agreement contains a one time put right related to 240,000 Issued Shares for the
benefit of the former stockholders of MarketVision (other than Mr.&nbsp;LaCore) that requires the
Company, during the six month period commencing eighteen months following the earlier of (i)&nbsp;the
first anniversary of the closing date, or (ii)&nbsp;the date on which the Issued Shares are registered
with the Securities and Exchange Commission (the &#147;SEC&#148;) for resale to the public, to repurchase
all or part of such 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 Issued Shares. The Company
has recorded this obligation of $960,000 as mezzanine common stock in the consolidated balance
sheet. The estimated fair value of the put right based on the Black-Scholes option pricing model,
as determined by the independent valuation firm, of approximately $133,000 was not included in the
cost of MarketVision due to materiality.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The agreement also provided the former stockholders of MarketVision with piggyback registration
rights in the event the Company 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.&nbsp;LaCore) as well as
three-year employment agreements for the former stockholders, other than Mr.&nbsp;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.&nbsp;LaCore) has certain
rights to use, develop, modify, market, distribute and sublicense the MarketVision software to
third parties.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">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.


<P align="center" style="font-size: 10pt">F-17
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The purchase price was allocated among assets acquired based on their estimated fair market values
as follows (in thousands):

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Computer software and programs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,600</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,958</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,904</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets recognized by the Company resulting from
offset against MarketVision&#146;s deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,904</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total purchase price allocation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17,583</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Goodwill includes but is not limited to the synergistic value and potential competitive
benefits that could be realized by the Company from the acquisition and any future services that
may arise from MarketVision&#146;s internet technology. The goodwill amount is not deductible for tax
purposes.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The results of operations of MarketVision have been included in the Company&#146;s consolidated
statements of operations since the completion of the acquisition on March&nbsp;31, 2004. The following
unaudited pro forma information presents a summary of the results of operations of the Company
assuming the acquisition of MarketVision occurred on January&nbsp;1, 2003 (in thousands, except per
share data):

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">133,225</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,342</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.18</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt"><I>Acquisitions of Minority Interests</I>



<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">On March&nbsp;29, 2004, the Company purchased 4,900 shares of common stock owned by the minority
stockholders of Lexxus U.S., a Delaware corporation, representing the 49% interest in Lexxus U.S.
not owned by the Company, in exchange for 100,000 shares of restricted common stock. The total
purchase price, including acquisition related costs of approximately $7,000, was approximately
$1,969,000 based upon the average closing price of the Company&#146;s common stock of $23.08 a few days
before and after the acquisition was announced discounted by 15% due to the restrictions contained
in the purchase agreement. The entire purchase price was allocated to goodwill.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">On April&nbsp;19, 2004, the Company purchased 510,000 shares of common stock owned by the minority
stockholders of Lexxus International Co., Ltd. (Taiwan), a Taiwan limited liability corporation
(&#147;Lexxus Taiwan&#148;), representing the 30% interest in Lexxus Taiwan not owned by the Company, in
exchange for approximately $136,000 in cash. The cash consideration given approximated the book
value of the shares acquired and no goodwill resulted from the


<P align="center" style="font-size: 10pt">F-18
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<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">transaction. All Lexxus Taiwan minority stockholders were unrelated to the Company.


<P align="left" style="font-size: 10pt">7. DEBT



<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Debt consists of the following (in thousands):

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MarketVision promissory note</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">682</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes payable a distributor, due upon demand, interest at 1% per annum</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Note payable to a governmental agency, monthly installments of
$2,200, interest at 7% per annum, maturing May&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes payable to a vendor, monthly installments of $580, interest at
25.49% per annum, maturing October&nbsp;2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Note payable to a vendor, due upon demand, non-interest bearing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">818</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current maturities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(168</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(796</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">On March&nbsp;31, 2004, the Company issued two six month promissory notes in the aggregate
principal amount of approximately $2,203,000, bearing interest at 4% per annum, and a twenty-one
month promissory note in the principal amount of $1,000,000, bearing interest at 4.5% per annum, in
connection with the acquisition of MarketVision (see Note 6). The Company repaid the two six month
notes in full on October&nbsp;12, 2004. The twenty-one month note requires monthly payments of
approximately $58,200 commencing June&nbsp;30, 2004. The note is payable in full on December&nbsp;31, 2005.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">8. COMMITMENTS AND CONTINGENCIES


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><I>Operating Leases</I>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The Company has entered into non-cancelable operating lease agreements for locations within the
U.S. and for its international subsidiaries, with expirations through December&nbsp;2009. Rent expense
in connection with operating leases was approximately $518,000, $1,137,000, and $1,400,000 during
2002, 2003, and 2004, respectively.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Future minimum lease obligations as of December&nbsp;31, 2004, are as follows (in thousands):

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">720</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total minimum lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,206</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-19
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><I>Purchase Commitment</I>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The Company maintains an annual purchase commitment with one of its suppliers to purchase its
Alura<I>&#153; </I>product. Pursuant to the agreement, the Company is required to purchase from this supplier
a minimum volume of 15 barrels of product per quarter. The cost of the annual purchase commitment
is $1,350,000 before any volume discounts.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><I>Employment Agreements</I>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The Company has employment agreements with certain members of its management team, the terms of
which expire at various times through December&nbsp;2009. Such agreements provide minimum salary
levels, as well as incentive bonuses that are payable if specified management goals are attained.
The aggregate commitment for future salaries at December&nbsp;31, 2004, assuming continued employment
and excluding bonuses, was approximately $4,358,000.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><I>Legal Matters</I>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">During the fall of 2003, the customs agency of the government of South Korea brought a charge
against LXK, Ltd. (&#147;LXK&#148;), the Company&#146;s wholly-owned subsidiary operating in South Korea, with
respect to the importation of the Company&#146;s Alura product. The customs agency alleges that Alura is
not a cosmetic product, but rather should be categorized and imported as a pharmaceutical product.
On February&nbsp;18, 2005, the Seoul Central District Court ruled against LXK and fined it a total of
approximately $200,000. LXK also incurred related costs of approximately $40,000 as a result of
the judgment. The Company recorded a reserve for the entire $240,000 at December&nbsp;31, 2004 and is
currently evaluating whether to appeal the ruling. The failure to sell Alura in South Korea is not
anticipated to have a material adverse effect on the financial condition, results of operations,
cash flow or business prospects of LXK.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">On or around March&nbsp;31, 2004, Lexxus U.S. received a letter from John Loghry, a former Lexxus
distributor, alleging that Lexxus U.S. had wrongfully terminated an alleged oral distributorship
agreement with Mr.&nbsp;Loghry and that the Company had breached an alleged oral agreement to issue
shares of the Company&#146;s common stock to Mr.&nbsp;Loghry. After Mr.&nbsp;Loghry threatened to commence suit
against Lexxus U.S. and the Company in Nebraska, on May&nbsp;13, 2004, Lexxus U.S. and the Company filed
an action for declaratory relief against Mr.&nbsp;Loghry in the United States District Court for the
Northern District of Texas seeking, inter alia, a declaration that Mr.&nbsp;Loghry was not wrongfully
terminated and is not entitled to recover anything from Lexxus U.S. or the Company. Mr.&nbsp;Loghry has
filed counterclaims against the Company and Lexxus U.S. asserting his previously articulated
claims. In September&nbsp;2004, Mr.&nbsp;Loghry filed third party claims against certain officers of the
Company and Lexxus U.S., including against Terry LaCore and Mark Woodburn for fraud, LaCore,
Woodburn, and a certain Lexxus distributor for conspiracy to commit the same and tortious
interference with contract. In February&nbsp;2005, the court dismissed all of Mr.&nbsp;Loghry&#146;s claims
against the individual defendants, except the claims for fraud and conspiracy to commit fraud.
Discovery is ongoing and the Company intends to vigorously defend itself in this case.


<P align="center" style="font-size: 10pt">F-20
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">On November&nbsp;1, 2004, Toyota Jidosha Kabushiki Kaisha (d/b/a Toyota Motor Corporation) and Toyota
Motor Sales, U.S.A. filed a complaint against the Company and Lexxus U.S. in United States District
Court for the Central District of California (CV04-9028). The complaint alleges trademark and
service mark dilution, unfair competition, trademark and service mark infringement, and trade name
infringement, each with respect to Toyota&#146;s Lexus trademark. Toyota seeks to enjoin the Company
and Lexxus U.S. from using the Lexxus mark and otherwise competing unfairly with Toyota, to
transfer the ownership of the mylexxus.com and lexxusinternational.com internet sites to Toyota,
and reimbursement of costs and reasonable attorney fees incurred by Toyota in connection with this
matter. The Company filed a motion to dismiss all counts in the complaint, which was denied by the
court. The Company intends to vigorously defend this action. In the event that the Company is
unsuccessful in defending this action, the Company may be required to change the name of some or
all of its Lexxus subsidiaries and domain names which could have a material adverse effect on the
financial condition, results of operations, cash flow or business prospects of the Company.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">On November&nbsp;12, 2004, Dorothy Porter filed a complaint against the Company in the United States
District Court for the Southern District of Illinois alleging that she sustained a brain hemorrhage
after taking Formula One, an ephedra-containing product marketed by Kaire Nutraceuticals, Inc., a
former subsidiary of the Company, and, thereafter, eKaire. Ms.&nbsp;Porter has sued the Company for
strict liability, breach of warranty and negligence. The Company intends to defend this case
vigorously and on December&nbsp;27, 2004 filed an answer denying the allegations contained in the
complaint. Recently, the plaintiff demanded $2&nbsp;million in damages to settle the case. On March&nbsp;7,
2005, a Notice of Tag-Along Action was filed by Ms.&nbsp;Porter with the Judicial Panel on Multidistrict
Litigation. It is anticipated that this case will be place on the next Conditional Transfer Order
and, ultimately, transferred to the consolidated Ephedra Products Liability proceedings in the
United States District Court for the Southern District of New York. The Company does not believe
that the plaintiff can demonstrate that its products caused the alleged injury and intends to
vigorously defend this action.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">On January&nbsp;13, 2005, Nature&#146;s Sunshine Products, Inc. and Nature&#146;s Sunshine Products de Mexico S.A.
de C.V. (collectively &#147;Nature&#146;s Sunshine&#148;) filed suit against the Company in the Fourth Judicial
District Court, Utah County, State of Utah seeking injunctive relief and unspecified damages
against the Company, Lexxus U.S., the Company&#146;s Mexican subsidiary, and the Company&#146;s Mexico
management team, Oscar de la Mora Romo and Jose Villarreal Patino, alleging among other things that
the Company&#146;s employment of De la Mora and Villarreal violated or could lead to the violation of
certain non-compete, non-solicitation, and confidentiality agreements allegedly in effect between
De la Mora and Villarreal and Nature&#146;s Sunshine. Upon request by Nature&#146;s Sunshine, the state
court entered a temporary restraining order against De la Mora and Villarreal on January&nbsp;14, 2005
restraining them from violating the non-compete, non-solicitation and confidentiality provisions of
the agreements, including continuing their employment with the Company, and restrained the Company
from interfering with the agreements alleged by Nature&#146;s Sunshine to exist with De la Mora and
Villarreal. On January&nbsp;17, 2005, the Company removed the case from Utah state court to the United
States District Court for the Northern District of Utah. The restraining order expired on its own
terms and on January&nbsp;20, 2005 the federal judge declined to extend the restraining order entered in
state court. On January&nbsp;21, 2005, the Company, De la Mora, Villarreal, and Nature&#146;s Sunshine


<P align="center" style="font-size: 10pt">F-21
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">entered into a stipulation and agreed order restraining De la Mora and Villarreal from using or
disclosing any confidential information of Nature&#146;s Sunshine, restraining the Company from
attempting to obtain any confidential information of Nature&#146;s Sunshine, and restraining all parties
from soliciting Nature&#146;s Sunshine employees and distributors. De la Mora and Villarreal were not
restrained from their continued employment with the Company, however, Nature&#146;s Sunshine may seek
such restraint at any future point in the litigation, whether in federal court or, if the federal
court remands the case to state court as Nature&#146;s Sunshine has requested, by the state court. On
January&nbsp;19, 2005, Nature&#146;s Sunshine requested the federal court to remand the case to state court
on the basis on alleged lack of federal court jurisdiction. On February&nbsp;17, 2005, the federal
court denied Nature Sunshine&#146;s motion to remand. On March&nbsp;15, 2005, Nature&#146;s Sunshine filed an
Amended Complaint against De la Mora and Villarreal and purportedly the Company&#146;s Mexican
subsidiary, although not properly named. The previously asserted claims against the Company and
Lexxus U.S. were dropped by Nature&#146;s Sunshine. The Company intends to vigorously defend this case
on its own behalf, to the extent the Company remains a party, and on behalf of De la Mora and
Villarreal. If the Company or De la Mora and Villarreal are unsuccessful in defending this action,
the Company may be required to change its Mexico management team, at least during the unexpired
term of any enforceable non-compete period.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Currently, there is no other significant litigation pending against the Company other than as
disclosed in the paragraphs above. From time to time, the Company may become a party to litigation
and subject to claims incident to the ordinary course of the Company&#146;s business. Although the
results of such litigation and claims in the ordinary course of business cannot be predicted with
certainty, the Company believes that the final outcome of such matters will not have a material
adverse effect on the Company&#146;s business, results of operations or financial condition. Regardless
of outcome, litigation can have an adverse impact on the Company because of defense costs,
diversion of management resources and other factors.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">9. MEZZANINE COMMON STOCK


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">On March&nbsp;31, 2004, in connection with the Company&#146;s acquisition of MarketVision, the Company
entered into a shareholder&#146;s agreement with the former stockholders of MarketVision. Such agreement
contained customary terms and conditions, including restrictions on transfers of the Issued Shares,
rights of first refusal and indemnification. Further, the shareholder&#146;s agreement contains a one
time put right related to 240,000 Issued Shares for the benefit of the former stockholders of
MarketVision (other than Mr.&nbsp;LaCore) that requires the Company, during the six month period
commencing eighteen months following the earlier of (i)&nbsp;the first anniversary of the closing date,
or (ii)&nbsp;the date on which the Issued Shares are registered with the Securities and Exchange
Commission (the &#147;SEC&#148;) for resale to the public, to repurchase all or part of such 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 Issued Shares. The Company has recorded this obligation of
$960,000 as mezzanine common stock in the consolidated balance sheet. The agreement also provided
the former stockholders of MarketVision with piggyback registration rights in the event the Company
files a registration statement with the SEC, other than on Forms S-4 or S-8.


<P align="center" style="font-size: 10pt">F-22
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">10. STOCKHOLDERS&#146; EQUITY


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><I>Authorized Shares</I>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The Company is authorized to issue two classes of capital stock consisting of up to 1,500,000
shares of preferred stock, $1,000 par value, and 500,000,000 shares of common stock, $0.001 par
value.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><I>Stock Split</I>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The Company effected a 1-for-100 reverse stock split in March&nbsp;2003 of all outstanding shares of
capital stock and unexercised stock options and warrants. All references to share and per share
data have been adjusted to reflect the stock split.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><I>Private Placement of Units</I>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">On October&nbsp;6, 2004, the Company entered into a securities purchase agreement (and subscription
agreements with respect to certain Canadian investors) with certain institutional and accredited
investors as well as certain officers and directors of the Company. Pursuant to the purchase and
subscription agreements, the Company sold 1,369,704 units at a price of $12.595 per unit. Each
unit consist of one share of the Company&#146;s common stock and one stock purchase warrant exercisable
for one share of the Company&#146;s common stock at any time through October&nbsp;6, 2009 at an exercise
price of $12.47 per share. Proceeds were approximately $16,067,000, net of transaction fees.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Pursuant to the registration rights agreement, the Company has agreed to register the shares
included in the units and the shares issuable upon exercise of the warrants for resale. The
registration rights agreement provides for the payment of certain liquidated damages in the event
that delays are experienced in the Securities and Exchange Commission&#146;s declaring that registration
statement effective. The Company agrees to use commercially reasonable effort to effect and
maintain the effectiveness of a registration statement. If the registration statement is not
effective 180&nbsp;days after the closing date, or approximately April&nbsp;4, 2005, the Company will pay the
buyers approximately $85,000, which also applies to any of Company&#146;s possible failure to maintain
the effectiveness of the registration statement after its initial effectiveness. The Company does
not expect an effective registration statement within the required 180&nbsp;day period. The
registration rights agreement also provides indemnification and contribution remedies to the buyers
in connection with the resale of shares pursuant to such registration statement.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><I>Stock Options</I>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The Company maintains the 2002 Stock Option Plan (the &#147;Plan&#148;) which provides for the granting of
incentive and nonqualified stock options to employees, directors and officers of the Company,
members of the board of directors, or consultants. The terms of any particular grant are
determined by the board of directors or a committee appointed by the board of directors. The
maximum number of shares of common stock that may be issued under the Plan is 1,225,000 shares. As
of December&nbsp;31, 2004, the Company had 880,876 shares available to be granted


<P align="center" style="font-size: 10pt">F-23
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">under the Plan.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exercise</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exercise</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exercise</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Price</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22">As Restated</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding, beginning
of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,321,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,331,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.06</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,260,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">344,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,500</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding, end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,321,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,331,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,674,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.42</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercisable at end of
year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,241,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,291,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,640,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4.28</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The following table summarizes information about options outstanding and exercisable at
December&nbsp;31, 2004:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Options Outstanding</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Options Exercisable</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Remaining</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exercise</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Contractual</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exercise</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Range of Exercise Prices</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Outstanding</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Life</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Exercisable</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Price</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$1.00 to $1.80</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,330,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">7.2 years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,330,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.06</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$11.40 to $18.11</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">344,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">6.6 years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">310,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$1.00 to $18.11</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,674,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">7.1 years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,640,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt"><I>Common Stock Purchase Warrants</I>



<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">On June&nbsp;23, 2004, warrants to purchase 2,000 shares of common stock were exercised at an exercise
of $5.00 per share.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">At December&nbsp;31, 2004, warrants to purchase 1,371,123 shares of common stock were outstanding, of
which 1,369,704 were a component of the units sold on October&nbsp;6, 2004 (see <I>Private Placement of
Units </I>above). Such warrants are exercisable for one share of the Company&#146;s common stock at any
time through October&nbsp;6, 2009 at an exercise price of $12.47 per share. The remaining 1,419
warrants are exercisable until March&nbsp;31, 2005 at an exercise price of $141.00 per share. The
weighted-average remaining contractual life of outstanding warrants as of December&nbsp;31, 2004 was 4.8
years.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><I>Restricted Stock</I>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">On October&nbsp;7, 2004, the Company entered into employment agreements with two members of its Mexican
management team whereby each member is entitled to receive a bonus payable in restricted shares of
the Company&#146;s common stock based upon the Mexican subsidiary achieving certain (1)&nbsp;net sales and
(2)&nbsp;net income before interest, taxes, depreciation and amortization


<P align="center" style="font-size: 10pt">F-24
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">(collectively &#147;EBITDA&#148;). The maximum aggregate amount payable in restricted shares is $14.5
million, assuming net sales of $300&nbsp;million and EBITDA of $30&nbsp;million. The shares will be issued
by no later than April&nbsp;15<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> in the year following satisfaction of both targets.


<P align="left" style="font-size: 10pt"><I>Income Per Share</I>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(In Thousands, Except Per Share Data)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income available to common stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,069</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,241</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic weighted-average number of shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,580</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of dilutive stock options and warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,242</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted weighted-average number of shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,822</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income per share from continuing operations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.18</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Options and warrants to purchase 1,324,919 shares of common stock were outstanding during 2002
but were not included in the computation of diluted earnings per share as those potential common
shares were anti-dilutive.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Options and warrants to purchase 1,681,123 shares of common stock were outstanding during 2004 but
were not included in the computation of diluted earnings per share because the exercise prices were
greater than the average market price of the common shares. The options, which expire on March&nbsp;31,
2011, and the warrants, which fully expire on October&nbsp;6, 2009, were still outstanding at the end of
2004.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">11. INCOME TAXES


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The components of income before income taxes consist of the following (in thousands):

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(924</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,108</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,468</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before income taxes</DIV></TD>

    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,574</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,360</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-25
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The components of the provision for income taxes consist of the following (in thousands):

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current taxes:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">248</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">State</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">759</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,178</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(515</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">663</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">A reconciliation of the reported provision for income taxes to the amount that would result
from applying the domestic federal statutory tax rate to pretax income is as follows (in
thousands):

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax at federal statutory rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,895</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">802</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of permanent differences</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">709</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase (decrease)&nbsp;in valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,066</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(602</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign rate differential</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(94</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(32</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(471</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">State income taxes, net of federal benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other reconciling items</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">663</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Deferred income taxes consist of the following (in thousands):

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net operating losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,144</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">488</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">488</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">255</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax credits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,979</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,004</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,492</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,487</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(173</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,861</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(34</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaids</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(44</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(28</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(267</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,972</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">515</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-26
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">As of December&nbsp;31, 2004, the current portion of the net deferred tax assets totaling $81,000
is presented in other current assets.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">A valuation allowance was established for the entire amount of the net deferred tax assets at
December&nbsp;31, 2003, as the Company was unable to determine that the more likely than not criteria
had been met. The Company reduced the valuation allowance during 2004 as it expects to utilize a
portion of its net operating loss carryforward in connection with the implementation of a foreign
holding and operating company restructure.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">At December&nbsp;31, 2004, the Company has net operating loss carryforwards of approximately $9,246,000
that begin to expire in 2018, if not utilized. A portion of the net operating loss carryforward is
subject to an annual limitation as defined by Section&nbsp;382 of the Internal Revenue Code. The
Company has not provided for U.S. federal and foreign withholding taxes on the undistributed
earnings of its foreign subsidiaries as of December&nbsp;31, 2004. Such earnings are intended to be
reinvested indefinitely.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">In June of 2001, the Company sold the stock of its wholly-owned subsidiary, Kaire Neutraceuticals,
Inc. to focus on the Lexxus business. No income tax expense or benefit was allocated to
discontinued operations.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">12. SUPPLEMENTAL CASH FLOW INFORMATION

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash paid during the year for:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">552</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-cash investing and financing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Conversion of preferred stock to common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Conversion of debt and related accrued
interest to common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Preferred stock dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock issued for acquisitions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,665</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Debt issued for acquisitions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,203</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Preferred stock redeemed for debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock issued for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">13. RELATED PARTY TRANSACTIONS



<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">In August&nbsp;2001, the Company entered into a written lease agreement and an oral management agreement
with S&#038;B Business Services, an affiliate of Brad LaCore, the brother of Terry LaCore, Chief
Executive Officer of Lexxus U.S. and a director of the Company, and Sherry LaCore, Brad LaCore&#146;s
spouse. Under the terms of the two agreements, S&#038;B Business Services provides warehouse facilities
and certain equipment, manages and ships inventory, provides independent distributor support
services and disburses payments to independent distributors. In


<P align="center" style="font-size: 10pt">F-27
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">exchange for these services, the Company pays $18,000 annually for leasing the warehouse, $3,600
annually for the lease of warehouse equipment and $120,000 annually for the management services
provided, plus an annual average of approximately $12,000 for business related services. The
Company paid S&#038;B Business Services approximately $156,000, $150,000, and $160,000 during 2002,
2003, and 2004, respectively.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">In September&nbsp;2001, the Company entered into an oral consulting agreement with William Woodburn, the
father of Mark Woodburn, President of the Company and a director, pursuant to which William
Woodburn provided the Company with management advice and other advisory assistance. In exchange
for such services, the Company starting June&nbsp;8, 2001 paid to Ohio Valley Welding, Inc., an
affiliate of Mr.&nbsp;Woodburn, $6,250 on a bi-weekly basis. The Company paid $162,500, $168,750 and
$118,750 during 2002, 2003, and 2004, respectively, to Ohio Valley Welding, Inc. The consulting
agreement between the Company and William Woodburn was terminated as of September&nbsp;30, 2004.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The Company&#146;s former controller is married to Mark Woodburn, the Company&#146;s president. Her
employment with the Company ended in August&nbsp;2004. The Company paid her approximately $100,000 in
each of 2002, 2003, and 2004.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">On March&nbsp;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 (see Note 6). As a
founding stockholder of Marketvision, Terry LaCore, Chief Executive Officer of Lexxus U.S. and a
director of the Company, received 450,000 shares of the Company&#146;s common stock and is entitled to
receive approximately $840,000 plus interest from promissory notes issued by the Company. As of
December&nbsp;31, 2004, the outstanding balance due Mr.&nbsp;LaCore was approximately $307,000.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">On October&nbsp;6, 2004, certain members of the Company&#146;s board of directors and certain of the
Company&#146;s officers invested approximately $25,000 and purchased 1,984 units upon the same terms and
conditions as the other buyers in the private placement. See Note 10.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">14. SEGMENT INFORMATION


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The Company operates in one reportable operating segment by selling products to a distributor
network that operates in a seamless manner from market to market. The Company&#146;s net sales and
long-lived assets by market are as follows (in thousands):

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales to external customers:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">North America</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,914</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Hong Kong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,763</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,293</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Taiwan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,261</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Southeast Asia</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,786</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Eastern Europe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,999</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,248</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">South Korea</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,492</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,524</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Australia/New Zealand</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,158</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">36,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">133,225</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-28
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-lived assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">North America</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,124</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Hong Kong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">247</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Taiwan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Southeast Asia</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Eastern Europe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">South Korea</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">389</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">398</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Australia/New Zealand</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total long-lived assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,379</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">21,090</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Due to system constraints, it is impracticable for the Company to separately disclose product
and enrollment package revenue for the years presented.


<P align="left" style="font-size: 10pt">15. QUARTERLY FINANCIAL DATA (UNAUDITED)


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">Quarter Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">March 31</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">June 30</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">September 30</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14">(In Thousands, Except Per Share Data)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As Restated</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fiscal 2003:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,984</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,612</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,062</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Distributor commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,057</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,464</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">541</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">947</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,276</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,132</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average number of shares outstanding:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,511</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,656</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,812</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">Quarter Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">March 31</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">June 30</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">September 30</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14">(In Thousands, Except Per Share Data)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fiscal 2004:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">38,745</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">40,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">36,312</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,823</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,612</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,978</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Distributor commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,745</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,834</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,652</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,779</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,949</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,902</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(508</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,761</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,746</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(802</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1.24</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.12</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1.24</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.12</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average number of shares outstanding:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,745</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,745</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-29
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">A reconciliation of the amounts as previously reported and as restated is as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Quarter Ended December 31, 2003</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Previously</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Reported</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Adjustments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Restated</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(310</TD>
    <TD nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,612</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,552</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(490</TD>
    <TD nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">2</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,062</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Distributor commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">459</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">3</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,057</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,464</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(949</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">541</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(650</TD>
    <TD nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">4</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,132</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average number of shares outstanding:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,656</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,812</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,812</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Quarter Ended March 31, 2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Previously</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Reported</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Adjustments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Restated</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">38,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">310</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">38,745</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">490</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">2</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,491</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Distributor commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(459</TD>
    <TD nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">3</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,745</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,968</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,779</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">650</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">4</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,761</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.81</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.64</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average number of shares outstanding:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,667</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,909</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<HR size="1" width="18%" align="left" noshade color="#000000">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Revenues not earned until 2004 were improperly recorded as revenue by the Company&#146;s
Eastern European business, KGC Networks Ptd. Ltd., for the year ended December&nbsp;31, 2003.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">2</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes certain transportation-related expenses incurred but not accrued as of
December&nbsp;31, 2003.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">3</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Reflects distributor commissions incurred but not accrued as of December&nbsp;31, 2003.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">4</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes minority interest related to the restatement adjustments.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">F-30
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<P align="center" style="font-size: 10pt"><B>PART II<BR>
INFORMATION NOT REQUIRED IN PROSPECTUS</B>



<P align="left" style="font-size: 10pt"><B>Item&nbsp;13. Other Expenses of Issuance and Distribution.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth all expenses, other than underwriting discounts and
commissions, payable by the registrant in connection with the sale of the common shares being
registered. All amounts shown are estimates except for the SEC registration fee.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount to be Paid</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SEC registration fee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,294.57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Printing and engraving</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,000.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Legal fees and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,000.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounting fees and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,000.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Blue sky fees and expenses (including legal fees)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfer agent and registrar fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Miscellaneous</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">235,294.57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt"><B>Item&nbsp;14. Indemnification of Officers and Directors.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The laws of the State Florida under certain circumstances provide for indemnification of the
Company officers, directors and controlling persons against liabilities which they may incur in
such capacities.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, any Officer, Director, employee or agent may be indemnified against expenses,
fines, settlements or judgments arising in connection with a legal proceeding to which such person
is a party, if that person&#146;s actions were in good faith, were believed to be in the Company&#146;s best
interest, and were not unlawful. Unless such person in successful upon the merits in such an
action, indemnification may be awarded only after a determination by independent decision of the
Board of Directors, by legal counsel, or by a vote of the shareholders, that the applicable
standard of conduct was met by the person to be indemnified.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Article&nbsp;VI of the Company&#146;s Articles of Incorporation contain the following provisions
relating to indemnification:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Corporation shall, to the fullest extent permitted by Florida Statute Section&nbsp;607.0850,
as amended, as the same may be amended and supplemented, indemnify any and all persons whom it
shall have power to indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the indemnification
provided for herein shall not be deemed exclusive of any other rights to which any person may be
entitled under any By-Law, resolution of shareholders, resolution of directors, agreement or
otherwise, as permitted by said section, as to action in any capacity in which he served at the
request of the Corporation.


<P align="center" style="font-size: 10pt">II-1
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>Item&nbsp;15. Recent Sales of Unregistered Securities.</B>



<P align="left" style="font-size: 10pt"><B>(a)&nbsp;Issuances of Capital Stock.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;28, 2002, the Company issued an aggregate of 509,882 shares of common stock to ten
holders of the Company&#146;s Series&nbsp;F Preferred Stock in connection with the conversion of 1,097 shares
of Series&nbsp;F Preferred Stock, plus accrued dividends.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;12, 2002, the Company issued 185,275 shares of common stock to Endeavour Capital
Fund in connection with its conversion of 275 shares of the Company&#146;s Series&nbsp;J Preferred Stock,
plus accrued dividends.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;10, 2002, the Company issued 18,425 shares of common stock to Augusta Street LLC in
connection with its conversion of a convertible note in the aggregate principal amount of $25,000,
plus accrued interest.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;10, 2002, the Company issued 37,739 shares of common stock to the Richard T. Garrett
Trust in connection with its conversion of 50 shares of the Company&#146;s Series&nbsp;H Preferred Stock,
plus accrued dividends.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;10, 2002, the Company issued 17,500 shares of common stock to Surrey Associates Ltd.
as payment for legal services rendered.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;16, 2002, the Company issued 229,397 shares of common stock to Endeavour Capital
Fund in connection with its conversion of 110 shares of the Company&#146;s Series&nbsp;J Preferred Stock,
plus accrued dividends.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;16, 2002 and September&nbsp;17, 2002, the Company issued 78,343 shares of common stock
and 106,562 shares of common stock to Augusta Street LLC in connection with its conversion of a
convertible notes in the aggregate principal amount of $75,000 and $138,000, respectively, plus
accrued interest.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;18, 2002 and November&nbsp;8, 2002, the Company issued 23,087 shares of common stock
and 36,248 shares of common stock to Gregory Mayne in connection with his conversion of 25 shares
of the Company&#146;s Series&nbsp;H Preferred Stock, and 25 shares of Series&nbsp;H Preferred Stock, respectively,
plus accrued dividends.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;18, 2002, the Company issued 33,333 shares of common stock to Infusion Capital
Investment Corp in connection with its conversion of a convertible note in the aggregate principal
amount of $25,000.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;11, 2002, the Company issued 211,082 shares of common stock to Endeavour Capital
Fund in connection with its conversion of 125 shares of the Company&#146;s Series&nbsp;J Preferred Stock,
plus accrued dividends.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;15, 2002, the Company issued 40,001 shares of common stock to Endeavour Capital
Fund in connection with its conversion of 23 shares of the Company&#146;s Series&nbsp;J Preferred Stock, plus
accrued dividends.


<P align="center" style="font-size: 10pt">II-2
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;15, 2002, the Company issued 101,113 shares of common stock to Michael Jessen in
connection with his conversion of 104 shares of the Company&#146;s Series&nbsp;F Preferred Stock, plus
accrued dividends.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;22, 2002, the Company issued 42,432 shares of common stock to John and Naline
Thompson in connection with his conversion of 50 shares of the Company&#146;s Series&nbsp;H Preferred Stock,
plus accrued dividends.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;5, 2002, the Company issued 336,597 shares of common stock to Endeavour Capital
Fund in connection with its conversion of 222 shares of the Company&#146;s Series&nbsp;J Preferred Stock,
plus accrued dividends.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;24, 2002, the Company issued 23,044 shares of common stock to Endeavour Capital
Fund in connection with its conversion of 22 shares of the Company&#146;s Series&nbsp;J Preferred Stock, plus
accrued dividends.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;27, 2003, the Company issued 10,000 shares of common stock to Life Dynamics, Inc.
in connection with the settlement of an outstanding debt.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;27, 2003, the Company issued 18,500 shares of common stock to Surrey Associates
Ltd. as payment for legal services rendered.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;27, 2003, the Company issued 360,000 shares of common stock to NuEworld.Com
Commerce, Inc. in connection with the Company&#146;s purchase from NuEworld of its database of
independent distributors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;30, 2003, the Company issued 27,471 shares of common stock to Endeavour Capital Fund
in connection with its conversion of 16 shares of the Company&#146;s Series&nbsp;J Preferred Stock, plus
accrued dividends.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;29, 2004, the Company purchased 4,900 shares of common stock owned by three minority
stockholders of Lexxus U.S. (representing the 49% interest not owned by the Company) in exchange
for 100,000 shares of the Company&#146;s common stock. Each of Michael Bray and Jeff Provost received
33,333 shares of common stock, Rodney and Pam Sullivan received an aggregate of 33,334 shares of
common stock.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;31, 2004, the Company entered into a merger agreement with MarketVision
Communications Corp. (&#147;MarketVision&#148;), pursuant to which the Company acquired all of the
outstanding capital stock of MarketVision in exchange for Company&#146;s issuance of 690,000 shares of
its common stock, and other consideration. The Company issued 450,000 shares of common stock to
Terry LaCore, the Chief Executive Officer of Lexxus U.S. and a director of the Company, 196,420
shares of common stock to John Cavanaugh, the President of MarketVision, and 43,580 to Jason
Landry, the Vice President &#150; Development of MarketVision.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;23, 2004, the Company issued 2,000 shares of common stock to John Thompson in


<P align="center" style="font-size: 10pt">II-3
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">connection with his exercise of a warrant at an exercise price of $5.00 per share.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;23, 2004, the Company issued 1,500 shares of common stock to Stephanie Flemming in
connection with her exercise of an option at an exercise price of $1.10 per share.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;6, 2004, the Company entered into a securities purchase agreement with certain
institutional and accredited investors as well as certain officers and directors of the Company.
Pursuant to the agreement, the Company sold 1,369,704 units at a price of $12.595 per unit. Each
unit consisted of one share of the Company&#146;s common stock and one common stock purchase warrant
exercisable for one share of the Company&#146;s common stock at any time through October&nbsp;6, 2009 at an
exercise price of $12.47 per share. These securities were issued pursuant to Rule&nbsp;506 of Regulation
D of the Securities Act of 1933, as amended.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as noted above, the securities described in this paragraph (a)&nbsp;of Item&nbsp;15 were issued in
reliance upon exemptions from the registration provisions of the Securities Act set forth in
Section&nbsp;4(2) thereof relative to sales by an issuer not involving any public offering, to the
extent an exemption from such registration was required.


<P align="left" style="font-size: 10pt"><B>(b)&nbsp;Stock option grants.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;18, 2001, the Company granted an option to Terry LaCore, Chief Executive Officer of
Lexxus U.S. and a director of the Company. The LaCore Option provides Mr.&nbsp;LaCore with the right to
purchase 30,000 shares of the Company&#146;s common stock at an exercise price of $1.10 per share for
period of ten (10)&nbsp;years.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;18, 2001, the Company granted an option to Benchmark Consulting Group, an affiliate
of Mark Woodburn, the Company&#146;s President and a director of the Company, and Terry LaCore, Chief
Executive Officer of Lexxus U.S. and a director of the Company. The Benchmark Option provided
Benchmark Consulting Group with the right to purchase 30,000 shares of the Company&#146;s Common Stock
at an exercise price of $1.10 per share for period of ten (10)&nbsp;years. In September&nbsp;2002, the
Benchmark Option was assigned to the LaCore and Woodburn Partnership, a general partnership owned
by Messrs.&nbsp;LaCore and Woodburn.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;2002, the Company issued options to purchase 60,000 shares of common stock to each of
Sir Brian Wolfson and Mr.&nbsp;Randall Mason as compensation for serving as directors of the Company.
The options are exercisable at $1.50 per share until July&nbsp;24, 2007.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of October&nbsp;14, 2002, the Company granted to each of the LaCore and Woodburn Partnership and
Mr.&nbsp;LaCore options exercisable for 570,000 shares of common stock at an exercise price of $1.00 per
share for a period of ten (10)&nbsp;years.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;9, 2003, the Company issued options to purchase 5,000 shares of common stock to each
of Robert Hesse and John Gillin. The options are exercisable at $1.80 per share until April&nbsp;9,
2006.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our 2002 stock plan was adopted by our board of directors and approved by our stockholders
effective on March&nbsp;11, 2003. As of April&nbsp;11, 2005, options to purchase an aggregate of 344,124
shares


<P align="center" style="font-size: 10pt">II-4
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">were granted, none of which have been exercised.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The issuance of stock options and the common stock issuable upon the exercise of such options
described in this section (b)(1) of Item&nbsp;15 were issued in reliance upon exemptions from the
registration provisions of the Securities Act set forth in Section&nbsp;4(2) thereof relative to
issuances by an issuer not involving any public offering, to the extent an exemption from such
registration was required.


<P align="left" style="font-size: 10pt"><B>Item&nbsp;16. Exhibits and Financial Statement Schedules.</B>



<P align="left" style="font-size: 10pt"><B>(a)&nbsp;Exhibits.</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Exhibit</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Number</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Description</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Articles of Incorporation, as amended.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By-Laws of Natural Health Trends Corp.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Specimen Certificate for shares of common stock, $.001 par value per share, of Natural Health Trends Corp.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Common Stock Purchase Warrant issued in October&nbsp;2004 Private Placement.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">5.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Opinion of Brown Rudnick Berlack Israels LLP**</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2002 Stock Plan, as amended.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Option Agreement dated as October&nbsp;14, 2002 granting 570,000 options to the LaCore and Woodburn
Partnership.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Option Agreement dated as October&nbsp;14, 2002 granting 570,000 options to Terry LaCore.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Option Agreement dated as July&nbsp;2, 2002 granting 60,000 options to Sir Brian Wolfson.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Option Agreement dated as July&nbsp;2, 2002 granting 60,000 options to Randall A. Mason.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Distributorship Agreement dated March&nbsp;1, 2002 between the Company and 40J&#146;s.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Founder Compensation Agreement by and between Lexxus International, Inc., Natural Health Trends Corp.,
Rodney Sullivan and Pam Sullivan, Michael Bray, and Jeff Provost.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.8
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Database Purchase Agreement, dated as of January&nbsp;31, 2003, by and among NuEworld.com Commerce, Inc., a
Delaware corporation, Lighthouse Marketing Corporation, a Delaware corporation), and the Company.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.9
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">KGC Agreement dated March&nbsp;17, 2004 between the Company and Bannks Foundation.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.10
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stock Purchase Agreement dated March&nbsp;29, 2004 between Michael Bray, Jeff Provost, Rodney Sullivan and Pam
Sullivan and the Company.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.11
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement and Plan of Merger, dated as of March&nbsp;31, 2004, by and among the Company, MergerCo and
MarketVision.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.12
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stockholders Agreement, dated as of March&nbsp;31, 2004, by and among the Company, John Cavanaugh, Terry LaCore
and Jason Landry.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.13
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated as of March&nbsp;31, 2004, between MarketVision and John Cavanaugh.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.14
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated as of March&nbsp;31, 2004, between MarketVision and Jason Landry.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.15
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Guaranty of the Employment Agreements dated as of March&nbsp;31, 2004 executed by Lexxus U.S.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.16
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Software License Agreement dated as of March&nbsp;31, 2004 among the Company, MergerCo and MarketVision
Consulting Group, LLC.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.17
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated as of August&nbsp;1, 2004, by and between the Company and Chris Sharng.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.18
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated as of October&nbsp;7, 2004, by and between Lexxus .International (Mexico), S.A. and
Jose Raul Villarreal Patino.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.19
</DIV></TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated as of October&nbsp;7, 2004, by and between Lexxus .International (Mexico), S.A. and
Oscar de la Mora.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.20
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated as of November&nbsp;1, 2004, by and between the Company, Lexxus Japan and Richard
Johnson.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities Purchase Agreement dated October&nbsp;6, 2004 by and among the Company and the investors signatory
thereto.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.22
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subscription Agreement (Canada) dated October&nbsp;6, 2004 by and among the Company and the investors signatory
thereto.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.23
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Registration Rights Agreement dated October&nbsp;6, 2004 by and among the Company and the investors
signatory thereto.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.24
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No.&nbsp;1 to Registration Rights Agreement dated February&nbsp;23, 2005 by and among the Company and the
investors signatory thereto.*</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">II-5
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="85%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.25
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No.&nbsp;1 to Founder Compensation Agreement by and among Lexxus International, Inc., Natural Health
Trends Corp., Rodney and Pam Sullivan, Michael Bray, and Jeff Provost.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.26
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Royalty Agreement dated March&nbsp;1, 2005 by and among the Company, Steve Francisco, and Dan Catto.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">14.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Code of Business Conduct.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">14.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Code of Ethics for Senior Financial Officers.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">21.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subsidiaries of the Company.*</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of BDO Seidman, LLP, Independent Registered Public Accounting Firm.</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Sherb &#038; Co., LLP, Independent Registered Public Accounting Firm.</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Brown Rudnick Berlack Israels LLP (included in the opinion filed as Exhibit&nbsp;5.1).**</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<HR size="1" width="18%" align="left" noshade color="#000000">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left">*</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Previously filed.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">**</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">To be filed by amendment</TD>
</TR>

</TABLE>



<P align="left" style="font-size: 10pt"><B>Item&nbsp;17. Undertakings</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Insofar as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy as expressed in
the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is against public policy
as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such
issue.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The undersigned Registrant hereby undertakes that:



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) For purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule&nbsp;430A and contained in a form of prospectus filed by the Registrant
pursuant to Rule&nbsp;424(b)(1) or (4)&nbsp;or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared effective.



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) For the purpose of determining any liability under the Securities Act of 1933,
each post-effective amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial <I>bona fide </I>offering thereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;The undersigned Registrant hereby undertakes to respond to requests for information that
is incorporated by reference into the prospectus pursuant to Item&nbsp;4, 10(b), 11 or 13 of this form,
within one business day of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date of responding to
the request.


<P align="center" style="font-size: 10pt">II-6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;The undersigned Registrant hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the registration statement when it became
effective.


<P align="center" style="font-size: 10pt">II-7
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="126"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>SIGNATURES</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused
this registration statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Dallas, State of Texas, on April&nbsp;13, 2005.


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">NATURAL HEALTH TRENDS CORP.<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>

<TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/
Mark D. Woodburn</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">Mark D. Woodburn&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the dates indicated.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Date</B></TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Sir
Brian Wolfson<BR><HR size="1" noshade color="#000000">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the Board
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April&nbsp;13, 2005</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Sir Brian Wolfson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/
Mark D. Woodburn<BR><HR size="1" noshade color="#000000">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President and Director (Principal Executive Officer)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April&nbsp;13, 2005</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mark D. Woodburn
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Terry
LaCore<BR><HR size="1" noshade color="#000000">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer of Lexxus U.S. and Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April&nbsp;13, 2005</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Terry LaCore
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Chris
Sharng<BR><HR size="1" noshade color="#000000">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President and<BR>Chief Financial Officer
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April&nbsp;13, 2005</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Chris Sharng
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(Principal Financial Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Timothy
S. Davidson<BR><HR size="1" noshade color="#000000">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Accounting Officer<BR>(Principal Accounting Officer)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April&nbsp;13, 2005</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Timothy S. Davidson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Robert H. Hesse<HR size="1" noshade color="#000000">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April&nbsp;13, 2005</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Robert H. Hesse</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Randall
A. Mason<BR><HR size="1" noshade color="#000000">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April&nbsp;13, 2005</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Randall A. Mason</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">II-8
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>2
<FILENAME>d22568exv23w1.htm
<DESCRIPTION>CONSENT OF BDO SEIDMAN, LLP
<TEXT>
<HTML>
<HEAD>
<TITLE>exv23w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="right" style="font-size: 10pt">Exhibit&nbsp;23.1



<P align="center" style="font-size: 10pt"><U>Consent of Independent Registered Public Accounting Firm</U>



<P align="left" style="font-size: 10pt">Natural Health Trends Corp.<BR>
Dallas, Texas

<P align="left" style="font-size: 10pt">We hereby consent to the use in the Prospectus constituting a part of this Registration Statement
on Form S-1 of our report dated March&nbsp;30, 2005 relating to the consolidated financial statements of
Natural Health Trends Corp., which is contained in that Prospectus.


<P align="left" style="font-size: 10pt">We also consent to the reference to us under the caption &#147;Experts&#148; in the Prospectus.



<P align="left" style="font-size: 10pt">/s/ BDO Seidman, LLP<BR>
BDO Seidman, LLP<BR>
Dallas, Texas


<P align="left" style="font-size: 10pt">April&nbsp;8, 2005




<P align="center" style="font-size: 10pt">
</DIV>
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</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>3
<FILENAME>d22568exv23w2.htm
<DESCRIPTION>CONSENT OF SHERB & CO., LLP
<TEXT>
<HTML>
<HEAD>
<TITLE>exv23w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="right" style="font-size: 10pt">Exhibit&nbsp;23.2



<P align="center" style="font-size: 10pt"><U>Consent of Independent Registered Public Accounting Firm</U>



<P align="left" style="font-size: 10pt">Natural Health Trends Corp.<BR>
Dallas, Texas

<P align="left" style="font-size: 10pt">We hereby consent to the use in the Prospectus constituting a part of this Registration Statement
on Form S-1 of our report dated March&nbsp;7, 2003 (except for Note 2 which is dated as of March&nbsp;24,
2004) relating to the consolidated financial statements of Natural Health Trends Corp., which is
contained in that Prospectus.


<P align="left" style="font-size: 10pt">We also consent to the reference to us under the caption &#147;Experts&#148; in the Prospectus.



<P align="left" style="font-size: 10pt">/s/ Sherb &#038; Co., LLP<BR>
Sherb &#038; Co., LLP<BR>
New York, New York


<P align="left" style="font-size: 10pt">April&nbsp;8, 2005




<P align="center" style="font-size: 10pt">
</DIV>
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