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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0001019056-05-000337.txt : 20050324
<SEC-HEADER>0001019056-05-000337.hdr.sgml : 20050324
<ACCEPTANCE-DATETIME>20050324060539
ACCESSION NUMBER:		0001019056-05-000337
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20050321
ITEM INFORMATION:		Results of Operations and Financial Condition
ITEM INFORMATION:		Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20050324
DATE AS OF CHANGE:		20050324

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			NATURAL HEALTH TRENDS CORP
		CENTRAL INDEX KEY:			0000912061
		STANDARD INDUSTRIAL CLASSIFICATION:	WHOLESALE-MISCELLANEOUS NONDURABLE GOODS [5190]
		IRS NUMBER:				592705336
		STATE OF INCORPORATION:			FL
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-26272
		FILM NUMBER:		05700259

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

	MAIL ADDRESS:	
		STREET 1:		12901 HUTTON DRIVE
		STREET 2:		--
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>natural_8k.txt
<DESCRIPTION>FORM 8-K
<TEXT>
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               ------------------

                                    FORM 8-K

                               ------------------

                                 CURRENT REPORT

                     PURSUANT TO SECTION 13 OR 15(d) OF THE

                         SECURITIES EXCHANGE ACT OF 1934

        Date of Report (Date of earliest event reported): March 21, 2005

                               ------------------

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

                               ------------------


           Florida                        0-26272                59-2705336
(State or other jurisdiction     (Commission File Number)       (IRS Employer
       of incorporation)                                     Identification No.)


                 12901 Hutton Drive
                    Dallas, Texas                             75234
      (Address of Principal Executive Offices)              (Zip Code)

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

   Former Name or Former Address, if Changed Since Last Report: Not applicable

                               ------------------

Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:

[ ]  Written communications pursuant to Rule 425 under the Securities Act (17
     CFR 230.425)

[ ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
     CFR 240.14a-12)

[ ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the
     Exchange Act (17 CFR 240.14d-2(b))

[ ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the
     Exchange Act (17 CFR 240.13e-4(c))

================================================================================
<PAGE>

ITEM 2.02   RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On March 23, 2005, Natural Health Trends Corp. (the "Company") issued a press
release announcing its financial results for the fourth quarter of 2004 and for
the year ended December 31, 2004. A copy of the press release is furnished as
Exhibit 99.1 to this report and is incorporated herein by reference.

The information in this Item, including the Exhibit 99.1 attached hereto, is
being furnished and shall not be deemed "filed" for the purposes of Section 18
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
otherwise subject to the liabilities of that Section. The information in this
report shall not be incorporated by reference into any filing under the
Securities Act of 1933, or the Exchange Act, except as otherwise expressly
stated in such filing.

ITEM 4.02   NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS OR A RELATED
AUDIT REPORT OR COMPLETED INTERIM REVIEW.

During its review of its financial statements for the quarter ended March 31,
2004, the Company learned that commission and transportation-related expenses
incurred as of December 31, 2003 were under-accrued by approximately $640,000
(on a pre-tax basis) for the quarter and year ended December 31, 2003. Adjusting
entries of approximately $640,000 were included as expenses in the financial
statements for the quarter ended March 31, 2004.

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's pre-tax income of approximately $4.0 million for the first
quarter of 2004 combined with the Company'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's net income for the 2004 fiscal year.

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's net income for fiscal 2004.

During its review of its financial statements for the year ended December 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 31, 2003. The amount of revenues that was
over-stated for the 2003 fiscal year was approximately $310,000.

On March 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 31, 2004 would materially affect the Company's net income
for the year ended December 31, 2004, and the Company believes that an amendment
to its financial statements for the year ended December 31, 2003 is warranted.
<PAGE>

The restatement of the adjustments into the financial statements for the year
ended December 31, 2003 will reduce the Company'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 31,
2003.

For the quarter ended March 31, 2004, the restatement will increase the
Company'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.

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 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's Annual Report on Form 10-KSB for the year ended
December 31, 2003 and the Quarterly Report on Form 10-Q for the first quarter
ended March 31, 2004. Although the financial statements for the three month
periods ended June 30, 2004 and September 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.

As of today, the Company plans to file with the Securities and Exchange
Commission its Annual Report on Form 10-K for the year ended December 31, 2004
by March 31, 2005, which will include the restated results for the year ending
December 31, 2003. The Company also intends to file in the near future an
amended Annual Report on Form 10-KSB for the year ended December 31, 2003, and
amended Quarterly Reports on Form 10-Q for the first three quarters of 2004.

Certain statements in this Current Report on Form 8-K, including statements
about our plans, objectives, intentions, and expectations are "forward-looking
statements" within the meaning of the Securities Exchange Act of 1934, as
amended. Forward-looking statements are based on the opinions and estimates of
management at the time the statements are made and are subject to known and
unknown risks and uncertainties and inaccurate assumptions that could cause
actual results to differ materially from those expected or implied by the
forward-looking statements. The Company's actual results could differ materially
from those anticipated in the forward-looking statements for many reasons,
including the risk that additional "material weaknesses" or other internal
control deficiencies with the meaning of Section 404 of the Sarbanes-Oxley Act
of 2002 are identified, the risk that additional accounting errors are
identified, and the risk that the Company is required to restate its prior
financial statements for periods other than the fourth quarter of 2003, the
fiscal year ended December 31, 2003 and the first quarter ended March 31, 2004.
<PAGE>

Readers are cautioned not to place undue reliance upon these forward-looking
statements, which speak only as the date hereof.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS


Exhibit
Number       Description
- -------      -----------
  99.1       Press Release of Natural Health Trends Corp., dated March 23, 2005,
             reporting financial results for the fourth quarter of 2004 and for
             the year ended December 31, 2004

================================================================================
                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.


                                        Natural Health Trends Corp.
                                        (Registrant)

Date: March 23, 2005                    By: /s/ MARK D. WOODBURN
                                            -----------------------------------
                                            Mark D. Woodburn
                                            President

================================================================================
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>ex99_1.txt
<DESCRIPTION>EXHIBIT 99.1
<TEXT>
                                                                    Exhibit 99.1

            NATURAL HEALTH TRENDS CORP. ANNOUNCES FISCAL 2004 RESULTS

                                NET SALES UP 113%
                           ACTIVE DISTRIBUTORS UP 75%

DALLAS, TX, March 23, 2005 -- Natural Health Trends Corp. (NASDAQ NMS: BHIP), an
international direct-selling company, today announced its financial results for
the fourth quarter and year ended December 31, 2004.

Fourth quarter net sales in 2004 were approximately $36.3 million, up 61% from
$22.6 million for the comparable period a year ago. The growth in sales was
attributable to an increase in the number of distributors. As of December 31,
2004, the operating subsidiaries of Natural Health Trends Corp. had
approximately 133,000 active distributors, up from 76,000 at the end of 2003.

Gross profit margin for the fourth quarter was $29.0 million, or 79.8%, versus
$17.1 million, or 75.5% a year ago. The improvement can be mainly attributed to
the elimination of commissions paid to Marketvision Communications Corp., the
Company's Internet-based distributor system service provider, which was acquired
by the Company on March 31, 2004.

For the fourth quarter, the Company recorded a net loss of approximately
$802,000, or a loss of $0.12 per fully diluted share. In the fourth quarter of
2003, the Company had a net income of $1.1 million, or $0.19 per fully diluted
share. The decrease in net income was due to higher commissions paid to
distributors and selling, general and administrative expenses, or SG&A, partly
offset by the margin flow-through of the higher volume.

Mark Woodburn, President of Natural Health Trends Corp., said, "The fourth
quarter of 2004 capped off a very respectable year for Natural Health Trends
Corp. We are very pleased with our top-line growth for both the quarter and the
year. We made significant investment in building our markets and the pay-off is
not immediate. We are obviously less than satisfied with the bottom line results
and are working to ensure that 2005 shows improvement in this area. Still we
finished 2004 with over $22 million in cash and working capital of $17.5
million. This gives us liquidity to rapidly develop newly entered markets. We
also had $9.6 million in deferred revenue as of December 31, 2004. Approximately
$4.7 million of the deferred revenue was related to membership enrollment, which
when recognized as revenue has no cost of sales or commission expenses
associated with it. The $4.9 million was for product orders taken but unshipped
as of year end. When we do ship these orders and recognize them as revenue,
related product costs and applicable commissions will be expensed."

For the twelve months ended December 31, 2004, net sales rose 113% to
approximately $133.2 million compared to $62.6 million for fiscal year 2003.
Two-thirds of this rise was attributable to the increased number of active
Lexxus distributors while the balance represented higher sales generated per
distributor.

                                     -more-

<PAGE>

Gross profit was approximately $103.9 million or 78.0% of net sales for the
twelve months ended December 31, 2004, compared with approximately $48.9 million
or 78.1% of net sales for the twelve months ended December 31, 2003.

Net income was approximately $1.2 million, or $0.18 per fully diluted share, for
the twelve months ended December 31, 2004 compared to net income of
approximately $4.7 million, or $0.83 per fully diluted share, for the preceding
year. The decrease in net income for the full year is due to higher distributor
commissions as a percentage of sales as well as increased SG&A spending, partly
offset by the margin flow-through on greater sales.

As disclosed in a Form 8-K filed on March 23, 2005, the financial statements of
the fourth quarter of 2003 and the first quarter of 2004 have been revised to
address certain 2003 revenue and expense cut-off issues. With the revisions, the
revenue in the fourth quarter of 2003 was reduced by approximately $310,000, and
the net income was reduced by approximately $650,000. The revenue and net income
of the first quarter of 2004 were increased by $310,000 and $650,000
respectively.

Chris Sharng, CFO of Natural Health Trends Corp., said, "The increase in SG&A
expenses for the fourth quarter as well as the full year was driven by our
increased marketing and promotional activities world-wide, higher credit card
fees, increased audit and legal costs, higher personnel costs, special expenses
the Company incurred as a result of the negative television program aired in
China in April 2004 and the costs associated with building new markets in China,
Mexico and Japan. We also had more depreciation and amortization due to the
Marketvision acquisition."

Woodburn concluded, "During 2004, we began to devote more of our resources to
building a solid infrastructure upon which we can continue to drive our business
forward. With an experienced management team now in place, combined with strong
distributor growth in 2004, we are optimistic about our performance in the
coming year. We expect to start generating revenue from the Japanese and Mexican
markets, the world's 2nd and 4th largest direct-selling markets, in the next few
months. We also foresee continuing to increase our reach inside our established
markets. New products are in the pipeline which we hope will have a significant
positive impact on our revenues before the end of the year."

                                     -more-
<PAGE>

      Safe Harbor Statement under the Private Securities Litigation Reform Act
      of 1995 -- Forward-looking statements in this release do not constitute
      guarantees of future performance. Such forward-looking statements are
      subject to risks and uncertainties that could cause our actual results to
      differ materially from those anticipated. Such statements may relate,
      among other things, to our relationship with our distributors; our need to
      continually recruit new distributors; our internal controls and accounting
      methods that may require further modification; regulatory matters
      governing our products and network marketing system; our ability to
      recruit and maintain key management; adverse publicity associated with our
      products or direct selling organizations; product liability claims; our
      reliance on outside manufacturers; risks associated with operating
      internationally, including foreign exchange risks; product concentration;
      dependence on increased penetration of existing markets; the competitive
      nature of our business; and our ability to generate sufficient cash to
      operate and expand our business. For a more detailed discussion of the
      risks and uncertainties of our business, please refer to our Annual Report
      on Form 10-KSB for the fiscal year ended December 31, 2003 filed with the
      Securities and Exchange Commission. We assume no obligation to update any
      forward-looking information contained in this press release or with
      respect to the announcements described herein.

<PAGE>

                  NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        (In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                                    ----------------------------
                                                                                        2003            2004
                                                                                    ------------    ------------
                                                                                    As Restated
                                     ASSETS
<S>                                                                                 <C>             <C>
Current assets:
      Cash and cash equivalents                                                     $     11,133    $     22,324
      Restricted cash                                                                      1,363           2,395
      Accounts receivable                                                                    239             209
      Inventories, net                                                                     3,580          13,991
      Other current assets                                                                 1,646           2,096
                                                                                    ------------    ------------
Total current assets                                                                      17,961          41,015
Property and equipment, net                                                                  883             579
Goodwill                                                                                     208          14,145
Intangible assets, net                                                                       509           5,474
Deferred tax assets                                                                           --             434
Other assets                                                                                 779             458
                                                                                    ------------    ------------
Total assets                                                                        $     20,340    $     62,105
                                                                                    ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
      Accounts payable                                                              $      3,820    $      2,248
      Income taxes payable                                                                 1,443           1,797
      Accrued distributor commissions                                                      1,027           4,259
      Other accrued expenses                                                               1,012           3,250
      Deferred revenue                                                                     6,943           9,551
      Current portion of debt                                                                168             796
      Other current liabilities                                                              659           1,595
                                                                                    ------------    ------------
Total current liabilities                                                                 15,072          23,496
Debt                                                                                          31              22
                                                                                    ------------    ------------
Total liabilities                                                                         15,103          23,518
Commitments and contingencies
Minority interest                                                                            413             598
Mezzanine common stock                                                                        --             960
Stockholders' equity:
      Preferred stock, $1,000 par value; 1,500,000 shares authorized; none issued
           and outstanding                                                                    --              --
      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                                                                  4               7
      Additional paid-in capital                                                          34,007          64,933
      Accumulated deficit                                                                (29,040)        (27,799)
      Accumulated other comprehensive loss:
            Foreign currency translation adjustment                                         (147)           (112)
                                                                                    ------------    ------------
Total stockholders' equity                                                                 4,824          37,029
                                                                                    ------------    ------------
Total liabilities and stockholders' equity                                          $     20,340    $     62,105
                                                                                    ============    ============
</TABLE>

                                     -more-
<PAGE>

                  NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In Thousands, Except Per Share Data)

<TABLE>
<CAPTION>
                                                           Quarter Ended December 31,
                                                          ---------------------------
                                                              2003           2004
                                                          ------------   ------------
                                                           As Restated
<S>                                                       <C>            <C>
Net sales                                                 $     22,612   $     36,312
Cost of sales                                                    5,550          7,334
                                                          ------------   ------------
Gross profit                                                    17,062         28,978
Operating expenses:
      Distributor commissions                                   11,057         18,834
      Selling, general and administrative expenses               5,464         10,652
                                                          ------------   ------------
Total operating expenses                                        16,521         29,486
                                                          ------------   ------------
Income (loss) from operations                                      541           (508)
Other income, net                                                  191            258
                                                          ------------   ------------
Income (loss) before income taxes and minority interest            732           (250)
Income tax (provision) benefit                                     340           (553)
Minority interest                                                   60              1
                                                          ------------   ------------
Net income (loss)                                         $      1,132   $       (802)
                                                          ============   ============

Income (loss) per common share:
      Basic                                               $       0.24   $      (0.12)
                                                          ============   ============
      Diluted                                             $       0.19   $      (0.12)
                                                          ============   ============

Weighted-average number of shares outstanding:
      Basic                                                      4,656          6,745
                                                          ============   ============
      Diluted                                                    5,812          6,745
                                                          ============   ============
</TABLE>

                                      #####
<PAGE>

                  NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In Thousands, Except Per Share Data)


<TABLE>
<CAPTION>
                                                        Year Ended December 31,
                                                     ----------------------------
                                                         2003            2004
                                                     ------------    ------------
                                                      As Restated
<S>                                                  <C>             <C>
Net sales                                            $     62,576    $    133,225
Cost of sales                                              13,676          29,321
                                                     ------------    ------------
Gross profit                                               48,900         103,904
Operating expenses:
      Distributor commissions                              27,555          68,579
      Selling, general and administrative expenses         15,770          33,102
                                                     ------------    ------------
Total operating expenses                                   43,325         101,681
                                                     ------------    ------------
Income from operations                                      5,575           2,223
Other income (expense), net                                    (1)            137
                                                     ------------    ------------
Income before income taxes and minority interest            5,574           2,360
Income tax provision                                         (860)           (663)
Minority interest                                              14            (456)
                                                     ------------    ------------
Net income                                                  4,728           1,241
Preferred stock dividends                                       1              --
                                                     ------------    ------------
Net income available to common stockholders          $      4,727    $      1,241
                                                     ============    ============

Income per common share:
      Basic                                          $       1.03    $       0.22
                                                     ============    ============
      Diluted                                        $       0.83    $       0.18
                                                     ============    ============

Weighted-average number of shares outstanding:
      Basic                                                 4,609           5,580
                                                     ============    ============
      Diluted                                               5,688           6,822
                                                     ============    ============
</TABLE>

#
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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