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<SEC-DOCUMENT>0000950134-07-026303.txt : 20080514
<SEC-HEADER>0000950134-07-026303.hdr.sgml : 20080514

<ACCEPTANCE-DATETIME>20071228172402

<PRIVATE-TO-PUBLIC>

ACCESSION NUMBER:		0000950134-07-026303

CONFORMED SUBMISSION TYPE:	S-3/A

PUBLIC DOCUMENT COUNT:		4

FILED AS OF DATE:		20071228

DATE AS OF CHANGE:		20080317


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:			DE

		FISCAL YEAR END:			1231



	FILING VALUES:

		FORM TYPE:		S-3/A

		SEC ACT:		1933 Act

		SEC FILE NUMBER:	333-147480

		FILM NUMBER:		071332723



	BUSINESS ADDRESS:	

		STREET 1:		2050 DIPLOMAT DRIVE

		STREET 2:		--

		CITY:			DALLAS

		STATE:			TX

		ZIP:			75234

		BUSINESS PHONE:		972-241-4080



	MAIL ADDRESS:	

		STREET 1:		2050 DIPLOMAT DRIVE

		STREET 2:		--

		CITY:			DALLAS

		STATE:			TX

		ZIP:			75234



</SEC-HEADER>

<DOCUMENT>
<TYPE>S-3/A
<SEQUENCE>1
<FILENAME>d52624sv3za.htm
<DESCRIPTION>AMENDMENT TO FORM S-3
<TEXT>
<HTML>
<HEAD>
<TITLE>sv3za</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">

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>As filed with the Securities and Exchange Commission on December 28, 2007</B>
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="right" style="font-size: 10pt; margin-top: 0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Registration No.&nbsp;333-147480</B>
</DIV>
<DIV align="left"><FONT size="1">

</FONT></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>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, DC 20549</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="center" style="font-size: 12pt; margin-top: 0pt"><B>Pre-Effective Amendment No. 1 to</B></DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM S-3</B>
</DIV>



<DIV align="center" style="font-size: 12pt; margin-top: 12pt"><B>REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 12pt"><B><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></B>
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>NATURAL HEALTH TRENDS CORP.</B>
</DIV>

<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 valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Delaware</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">(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">Identification Number)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>2050 Diplomat 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<BR>
offices)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Gary C. Wallace<BR>
General Counsel<BR>
Natural Health Trends Corp.<BR>
2050 Diplomat 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; margin-top: 12pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><I>Copy to</I>:</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>John B. McKnight<BR>
Locke Lord Bissell &#038; Liddell LLP<BR>
2200 Ross Avenue, Suite&nbsp;2200<BR>
Dallas, Texas 75201<BR>
(214)&nbsp;740-8000</B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Approximate date of commencement of proposed sale to the public: From time to time after the
effectiveness of the registration statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If the only securities being registered on this form are being offered pursuant to dividend or
interest reinvestment plans, please check the following box. <FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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;),
other than securities offered only in connection with dividend or interest reinvestment plans,
check the following box. <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If this Form is a registration statement pursuant to General Instruction I.D. or a post effective
amendment thereto that shall become effective upon filing with the Commission pursuant to Rule
462(e) under the Securities Act, check the following box. <FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If this Form is a post-effective amendment filed pursuant to General Instruction I.D. filed to
register additional securities or additional classes of securities pursuant to Rule 413(b) under
the Securities Act, check the following box. <FONT face="Wingdings">&#111;</FONT>
</DIV>



<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>


<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD><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&nbsp;a further amendment which
specifically states that this Registration Statement shall thereafter become effective in
accordance with Section&nbsp;8(a) of the Securities Act or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section&nbsp;8(a), may
determine.</B></TD>
</TR>

</TABLE>
</DIV>


<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"><!-- Folio -->&nbsp;<!-- /Folio -->
</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" style="font-size: 10pt; margin-top: 6pt">PROSPECTUS (Subject to Completion)
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 0pt">Dated December&nbsp;28, 2007
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<P style="padding: 5px; border: 3px double #000000; font-size: 10pt; color: #FF0000"><I>The information in this prospectus is not complete and may be changed. The selling stockholders 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 any offer to buy these securities in any jurisdiction where the offer or sale is not
permitted.</I>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>NATURAL HEALTH TRENDS CORP.</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="center" style="font-size: 12pt; margin-top: 12pt">1,700,000 shares of common stock issuable in connection with $4,250,000<BR>
face amount variable rate convertible debentures</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="center" style="font-size: 12pt; margin-top: 12pt">1,495,952 shares of common stock issuable upon exercise of warrants</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 9pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus relates
 to the disposition of up to a total of 3,195,952 shares of our common
stock, par value $0.001, that may be offered from time to time by the selling stockholders listed
on page&nbsp;27 or their transferees. The shares being
 offered by this prospectus consist of:
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR valign="top" style="font-size: 9pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>up to 1,700,000 shares issuable upon conversion of variable rate convertible debentures in the aggregate face
amount of $4,250,000; and</TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR><TR valign="top" style="font-size: 9pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>up to 1,495,952 shares issuable upon the exercise of warrants held by the selling
stockholders;</TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus also
covers any additional shares of common stock that may become issuable
upon any anti-dilution adjustment pursuant to the terms of the above-described debentures and
warrants by reason of stock splits, stock dividends, or similar events. The foregoing debentures
and warrants were acquired by the selling stockholders in a private placement financing completed
in October&nbsp;2007.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will receive no proceeds from the disposition of shares of our common stock by the selling
stockholders. We will receive proceeds of $3.52 per share from the exercise of any of the
warrants, except to the extent that any such warrants are exercised on a cashless basis.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 9pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For a description of the
 plan of distribution of the shares, please see page&nbsp;35 of this
prospectus.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 9pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is quoted on The NASDAQ Global Market under the symbol &#147;BHIP.&#148; The closing
price of our common stock on December&nbsp;27, 2007 was $1.20 per share.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt">&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&nbsp;6.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt">&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 this
prospectus. Any representation to the contrary is a criminal offense.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 12pt">The date of the prospectus
 is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2008.</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>


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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>


<DIV align="left"><FONT size="1">

</FONT></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="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#101">CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap 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 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"><A href="#102">PROSPECTUS SUMMARY
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap 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 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"><A href="#103">THE OFFERING
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap 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 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"><A href="#104">RISK FACTORS
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD nowrap 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 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"><A href="#105">USE OF PROCEEDS
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">22</TD>
    <TD nowrap 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 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"><A href="#106">PRINCIPAL STOCKHOLDERS
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">22</TD>
    <TD nowrap 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 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"><A href="#107">SHARES ELIGIBLE FOR FUTURE SALE
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">24</TD>
    <TD nowrap 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 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"><A href="#108">SELLING STOCKHOLDERS
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">26</TD>
    <TD nowrap 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 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"><A href="#109">PLAN OF DISTRIBUTION
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">35</TD>
    <TD nowrap 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 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"><A href="#110">DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">37</TD>
    <TD nowrap 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 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"><A href="#111">LEGAL MATTERS
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">37</TD>
    <TD nowrap 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 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"><A href="#112">EXPERTS
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">37</TD>
    <TD nowrap 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 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"><A href="#113">WHERE YOU CAN FIND MORE INFORMATION
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">38</TD>
    <TD nowrap 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 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"><A href="#114">INCORPORATION OF DOCUMENTS BY REFERENCE
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">38</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d52624exv5w1.htm">Legal Opinion of Locke Lord Bissell & Liddell LLP</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d52624exv23w1.htm">Consent of Lane Gorman Trubitt, L.L.P.</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">You should rely only on the information contained in or incorporated by reference into this
document or to which we have referred you. We have not, and the selling stockholders 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.
</DIV>


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

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



<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot guarantee future results, levels of activity, performance or achievements, and you
should not place 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 &#147;Risk Factors,&#148; 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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 under &#147;Risk Factors.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional factors that could cause actual results to differ materially from our
forward-looking statements are set forth in each of our most recent Annual Report on Form 10-K and
our Quarterly Reports on Form 10-Q, each of which is incorporated by reference into this
prospectus, including under the heading &#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; and in our financial statements and the related notes included
therein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forward-looking statements in this prospectus speak only as of the date hereof. The Company
does not undertake any obligation to update or release any revisions to any forward-looking
statement or to prospectus any events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events, except as required by law. Unless otherwise noted, the terms
&#147;we,&#148; &#147;our,&#148; &#147;us,&#148; &#147;Company,&#148; refer to Natural Health Trends Corp. and its subsidiaries.
</DIV>

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PROSPECTUS SUMMARY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This <I>summary highlights information contained elsewhere in this prospectus. This summary does
not contain all of the information you should consider before investing in our common stock. You
should read the entire prospectus carefully, including the section describing the risks of
investing in our common stock under the caption &#147;Risk Factors,&#148; and the documents incorporated by
reference in the section entitled &#147;Incorporation of Certain Documents by Reference&#148; before making
an investment decision. Some of the statements in this summary constitute forward-looking
statements. For more information, please see &#147;Cautionary Note Regarding Forward-Looking
Statements.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are an international direct-selling and e-commerce organization headquartered in Dallas,
Texas. Subsidiaries controlled by us sell personal care, wellness, and &#147;quality of life&#148; products
under the &#147;NHT Global&#148; brand to an independent distributor network that either uses the products
themselves or resells them to consumers. Prior to June&nbsp;1, 2006, we marketed our &#147;NHT Global&#148;
branded products under the name &#147;Lexxus International.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our majority-owned subsidiaries have an active physical presence in the following markets:
North America; Greater China, which consists of Hong Kong, Macau, Taiwan and China; Southeast Asia;
Australia and New Zealand; South Korea; Japan; Latin America; and Europe.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We seek to be a leader in the direct selling industry serving the health and wellness
marketplace by selling our products into multiple venues and markets 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We were originally incorporated as a Florida corporation in 1988. We merged into one of our
subsidiaries and re-incorporated in the State of Delaware effective June&nbsp;29, 2005. We maintain
executive offices at 2050 Diplomat Drive, Dallas, Texas 75234 and our telephone number is (972)
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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Private Placement Financing</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;19, 2007, we entered into definitive agreements that resulted in the consummation
of a private placement financing generating gross proceeds of approximately $3,740,000. The
financing consisted of the sale of variable rate convertible debentures having an aggregate face
amount of $4,250,000, seven-year warrants representing the right to purchase 1,495,952 shares of
our common stock, and one-year warrants representing the right to purchase 1,495,952 shares of our
common stock. The selling stockholders identified in this prospectus are the original investors and
the placement agent (and certain of its assigns) that participated in the private placement
financing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The debentures are convertible by their holders into shares of our common stock at a
conversion price of $2.50, subject to adjustment in certain specified circumstances. One-half of
the original principal amount of the debentures is payable in 12 equal monthly installments
beginning on November&nbsp;1, 2008, with the balance payable on October&nbsp;19, 2009, unless extended by the
holders to October&nbsp;19, 2012. The debentures bear interest at the greater of (i)&nbsp;LIBOR plus 4% and
(ii)&nbsp;10% per annum. Interest is payable quarterly beginning on January&nbsp;1, 2008. Payments of
principal and interest may be made in cash or, at our option if certain conditions are met, in
shares of registered common stock. Under certain conditions, we also have the right to force
conversion or to effect a redemption of the debentures. The debentures include a number of
obligations and negative covenants binding on us, including the requirement that we seek
stockholder approval of the issuance of all of the shares of common stock underlying both the
debentures and the warrants sold in the private placement financing no later than the date of our
2008 annual stockholder meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The seven-year warrants have a seven-year term and the one-year warrants have a one-year term,
each beginning six months and one day after their respective issuance. All such warrants have an
exercise price
</DIV>

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

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



<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">of $3.52 per share and otherwise have identical terms. The exercise price and the number of
shares underlying the warrants are subject to adjustment in certain specified circumstances;
provided that the exercise price cannot be adjusted lower than $3.52 prior to stockholder approval.
If, at any time after the earlier of October&nbsp;19, 2008 and the completion of the then applicable
holding period under Rule&nbsp;144, there is no effective registration statement for the underlying
shares of common stock, the warrants may be exercised on a cashless basis. For further information
regarding the foregoing October 2007 private placement financing, please see below under the
caption &#147;Selling Stockholders &#151; Private Placement Financing.&#148;
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dawson James Securities, Inc. (&#147;Dawson James&#148;) acted as placement agent in connection with the
private placement described above. In addition to a cash transaction fee of approximately $280,500,
Dawson James received five-year warrants to purchase an aggregate of 149,595 shares of our common
stock at an exercise price of $3.52 per share. Other than its five-year term, the terms of the
warrant issued to Dawson James are identical to the terms in the warrants purchased by the investors
in the private placement.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>THE OFFERING</B>
</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="47%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Shares of common stock underlying
variable rate convertible debentures
due October&nbsp;19, 2009
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1,700,000</TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>

<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></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
one-year warrants
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1,495,952</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><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Total shares of common stock
outstanding as of November&nbsp;12, 2007
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10,056,268</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 stockholders or their
transferees
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">We will receive no proceeds
from: (i)&nbsp;the conversion of the
debentures, (ii)&nbsp;the sale of
common stock issuable upon such
conversion, or (iii)&nbsp;the sale of
the common stock issuable upon
exercise of any warrants.</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><TD><DIV align="left"><FONT size="1">

</FONT></DIV></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">We could receive gross proceeds
of up to $5,265,751 (based on
an exercise price of $3.52 per
share) from the exercise of the
1,495,952 warrants covered by
the registration statement of
which this prospectus forms a
part.</TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></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 Global Market symbol
</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&nbsp;6 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"><!-- Folio -->5<!-- /Folio -->
</DIV>

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RISK FACTORS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An <I>investment 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
prospectus, or incorporated by reference herein, 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 such case, you may lose all or part of your original
investment.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Risk Factors Related To Our Business and Industry</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>We May Continue To Experience Substantial Negative Cash Flows, Which May Have A Significant
Adverse Effect On Our Business And Could Threaten Our Solvency.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have experienced substantial negative cash flows during the years ended December&nbsp;31, 2005
and 2006, and the first three quarters of 2007, primarily due to increase in investment in 2005 as
well as declines in our revenues without as much proportional decreases in expenditures in 2006 and
2007. If this trend continued, the decreasing cash balance could impair our ability to support our
operations and, eventually, threaten our solvency, which would have a material adverse effect on
our business, results of operations and financial condition as well as our stock price. Negative
cash flows and the related adverse market perception associated therewith may have negatively
affected, and may in the future negatively affect, our ability to attract new distributors and/or
sell our products. There can be no assurance that we will be successful in maintaining an adequate
level of cash resources and we could be forced to act more aggressively in the area of expense
reduction in order to conserve cash resources as we look for alternative solutions.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If We Continue To Experience Negative Cash Flows, We May Need To Seek Debt Or Equity Financing,
Which May Not Be Available On Acceptable Terms Or At All. If Available, It Could Have A Dilutive
Effect On The Holdings Of Existing Stockholders.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless we are able to stabilize or grow revenues, control expenses and achieve positive cash
flows, our ability to support our obligations could be impaired and our liquidity could be
adversely affected and our solvency and our ability to repay our debts when they come due could be
threatened. We may need to seek additional debt or equity financing on acceptable terms in order to
improve our liquidity. However, our ability to obtain additional debt or equity financing is
restricted by the terms of some agreements with our investors. In any case, we may not be able to
obtain additional debt or equity financing on satisfactory terms, or at all, and any new financing
could have a dilutive effect to our existing stockholders.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We Face Risks Related To An SEC Investigation, Securities Litigation and Other Litigation That
Could Have A Material Adverse Effect On Our Relationships With Our Distributors, Business,
Financial Condition And Results Of Operations. We May Face Additional Litigation In The Future That
Could Also Harm Our Business.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2006, the SEC issued a formal order of investigation to determine whether there
have been violations of the federal securities laws by us and/or others involved with us. Although
we have fully cooperated with the SEC in this matter and intend to continue to fully cooperate, we
cannot predict when this investigation will be completed or its outcome. We could face sanctions in
connection with any resolution of the SEC investigation, including but not limited to, significant
monetary penalties and injunctive relief.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we and certain of our directors and former officers have been named as defendants
in a securities class action lawsuit. Due to the volatility of the stock market and particularly
the stock prices of network marketing companies, it is possible that we will face additional class
action lawsuits in the future. The findings and outcome of the SEC investigation may affect the
class action and other lawsuits that are pending and any future litigation that we may face.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we are scheduled to go to trial in February&nbsp;2008 in a lawsuit with the bankruptcy
estate of John Loghry, a former master distributor for our NHT Global business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any settlement of the class action and other litigation or any resolution of the SEC
investigation may involve significant cash payments that could create or increase negative cash
flows. If we are unable to achieve a settlement of the class action and other litigation, we could
be liable for large damage awards. There can be no assurance that damage awards, if any, and the
costs of litigation will be covered by insurance. If not, this could have a material adverse effect
on our business, results of operations and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Defending against existing and potential litigation and other governmental proceedings may
continue to require significant expense and attention of our management. There can be no assurance
that the significant money, time and effort spent will not adversely affect our business, financial
condition and results of operations.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We Could Be Adversely Affected By Additional Audit Committee Investigations.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time, the Audit Committee of our Board of Directors may investigate, or employ an
independent investigator to investigate, reported or suspected violations of laws, ethics, or
policies by our officers, directors, employees or consultants. Any discovery of wrongdoing
resulting from any such investigation, or any disclosure of any such investigation or its results,
could have material adverse consequences for us.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Continued Adverse News About Us Could Have A Material Adverse Effect On Our Ability To Attract And
Maintain Distributors.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our recent operating performance, changes in management, volatility in stock price, SEC
investigation of us and lawsuits filed against us may have negatively affected, and may continue to
negatively affect, our ability to attract and retain distributors, without whom we would be unable
to sell our products and generate revenues.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We Could Be Adversely Affected By Additional Management Changes Or An Inability To Attract And
Retain Key Management And Consultants.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our future success depends to a significant degree on the skills, experience and efforts of
our top management and key consultants, particularly our management personnel responsible for our
Hong Kong and MarketVision subsidiaries. In November&nbsp;2005, we terminated two top employees, Mark
Woodburn, former President and director of the Company, and Terry LaCore, former Chief Executive
Officer of NHT Global and former director of the Company, due to misconduct. Although we settled
our disputes with these individuals in 2006, continued changes in senior management may have had,
and may in the future 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,
members of our senior management, or key consultants could have a material adverse effect on our
business, results of operations and financial condition. Moreover, as our business evolves, we may
require additional or different management members or consultants, and there can be no assurance
that we will be able to locate, attract and retain them if and when they are needed.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>As A Network Marketing Company, We Rely On An Independent Sales Force And We Do Not Have Direct
Control Over The Marketing Of Our Products.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely on non-employee, independent distributors to market and sell our products. We have a
large number of distributors and a relatively small corporate staff to implement our marketing
programs and to provide motivational support and training to our distributors. Distributors may
voluntarily terminate their agreements with us at any time, and there is typically significant
turnover in our distributor ranks.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Since We Cannot Exert The Same Level Of Influence Or Control Over Our Independent Distributors As
We Could Were They Our Own Employees, Our Distributors Could Fail To Comply With Our Distributor
Policies And Procedures, Which Could Result in Claims Against Us That Could Harm Our Financial
Condition And Operating Results.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our distributors are independent contractors and, accordingly, we are not in a position to
directly provide the same direction, motivation and oversight as we would if distributors were our
own employees. As a result, there can be no assurance that our distributors will participate in our
marketing strategies or plans, accept our introduction of new products, or comply with our
distributor policies and procedures. Extensive federal, state and local laws regulate our business,
our products and our network marketing program. Because we have expanded into foreign countries,
our policies and procedures for our independent distributors differ due to the different legal
requirements of each country in which we do business. While we have implemented distributor
policies and procedures designed to govern distributor conduct and to protect the goodwill
associated with our trademarks and trade names, it can be difficult to enforce these policies and
procedures because of the large number of distributors and their independent status. 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. Violations by our
distributors of applicable law or of our policies and procedures in dealing with customers could
reflect negatively on our products and operations, and harm our business reputation. In addition,
it is possible that a court could hold us civilly or criminally accountable based on vicarious
liability because of the actions of our independent distributors. If any of these events occur, the
value of an investment in our common shares could be impaired.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We May Be Unable To Protect Or Use Our Intellectual Property Rights.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely on trade secret, copyright and 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
intellectual property rights. The unauthorized copying or other misappropriation of our
intellectual property could enable third parties to benefit from such property without paying us
for it. For example, 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. 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. It is also possible that our use of our
intellectual property rights could be found to infringe on prior rights of others and, in that
event, we could be compelled to stop or modify the infringing use, which could be burdensome and
expensive.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Claims May Arise Against Us From Unknown Oral Agreements And Misconduct of Former Officers and
Directors.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have investigated oral agreements entered into and misconduct by Mark Woodburn, former
President and director of the Company, and Terry LaCore, former Chief Executive Officer of NHT
Global and former director of the Company. There can be no assurance that all such oral agreements
and misconduct have been discovered. Additional discoveries could lead to claims and proceedings
against us, our subsidiaries and their officers and directors. If it is determined that any conduct
by Messrs.&nbsp;Woodburn and LaCore violated any law, there can be no assurance that we or one or more
of our subsidiaries would not be subjected to prosecution or adverse proceedings. Any such claims,
prosecutions or other proceedings and the cost of their defense could have a material adverse
impact on our reputation, business and financial condition.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Adverse Publicity Associated With Our Products, Ingredients Or Network Marketing Program, Or Those
Of Similar Companies, Could Harm Our Financial Condition And Operating Results.</B>
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adverse publicity concerning any actual or claimed failure by us or our distributors to comply
with applicable laws and regulations regarding product claims and advertising, good manufacturing
practices, the regulation of our network marketing program, the licensing of our products for sale
in our target markets or other aspects of our business, whether or not resulting in enforcement
actions or the imposition of penalties, could have an adverse effect on our goodwill and could
negatively affect our ability to attract, motivate and retain distributors, which would negatively
impact our ability to generate revenue. We cannot ensure that all distributors will comply with
applicable legal requirements relating to the advertising, labeling, licensing or distribution of
our products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, our distributors&#146; and consumers&#146; perception of the safety and quality of our
products and ingredients as well as similar products and ingredients distributed by other companies
can be significantly influenced by national media attention, publicized scientific research or
findings, widespread product liability claims and other publicity concerning our products or
ingredients or similar products and ingredients distributed by other companies. Adverse publicity,
whether or not accurate or resulting from consumers&#146; use or misuse of our products, that associates
consumption of our products or ingredients or any similar products or ingredients with illness or
other adverse effects, questions the benefits of our or similar products or claims that any such
products are ineffective, inappropriately labeled or have inaccurate instructions as to their use,
could negatively impact our reputation or the market demand for our products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Network marketing systems such as ours are frequently subject to laws and regulations directed
at ensuring that product sales are made to consumers of the products and that compensation,
recognition, and advancement within the marketing organization are based on the sale of products
rather than investment in the sponsoring company. We are subject to the risk that, in one or more
of our present or future markets, our marketing system could be found not to comply with these laws
and regulations or may be prohibited. Failure to comply with these laws and regulations or such a
prohibition could have a material adverse effect on our business, financial condition, and results
of operations. Further we may simply be prohibited from distributing products through a
network-marketing channel in some foreign countries, or be forced to alter our compensation plan.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Failure To Maintain And Expand Our Distributor Relationships Could Adversely Affect Our
Business.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following a 97% and 33% increase in active distributors in 2004 and 2005, we experienced a 19%
decrease in active distributors during 2006 (excluding KGC and the Kaire Entities which were sold
during 2005 and 2006, respectively) and a 35% decrease in active distributors during the nine-month
period ended September&nbsp;30, 2007. The number of active distributors or their productivity may not
increase and could further decline in the future. Distributors may terminate their services at any
time, and, like most direct selling companies, we experience a high turnover in our distributor
ranks. 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.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Changes to Our Distributor Compensation Plan May Not Gain Acceptance</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We completed implementation of a change in our compensation plan for distributors during the
second quarter of 2007. Among other things, this change introduced a new bonus value builder
feature allowing independent distributors to customize their product packages, as opposed to having
to select assortments pre-determined by us, and reduced certain thresholds for earning commissions
so that they can be earned earlier and quicker. This change also eliminated a direct bonus feature
of the plan. If distributors fail to understand the compensation plan or are unhappy with it, we
could lose distributors and fail to attract new distributors.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Because Our Hong Kong Operations Account For A Majority Of Our Business, Any Adverse Changes In Our
Business Operations In Hong Kong Would Materially Harm Our Business.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2004, 2005 and 2006 and for the nine-month period ended September&nbsp;30, 2007, approximately
56%, 62%, 67% and 63% 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, a television program was aired in the
People&#146;s Republic of China with respect to the operations of our Hong Kong subsidiary and our
representative office located in Beijing. The television program alleged that our 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. There have been other isolated cases of alleged misconduct by our members in China.
If the alleged misconduct of our members in China is finally determined to be illegal and
attributable to us or our subsidiaries, then this could have a material adverse effect on our
financial condition and results of operations.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Business In Hong Kong, Which Represented 67% Of Our Revenue In 2006, May Be Harmed By The
Results Of Increased Government Scrutiny Of Our Current And Proposed Operations In China.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since 1998, direct selling has been restricted in China to ten companies that have an approval
that we do not currently have. In November&nbsp;2005, the Chinese government adopted an anti-multilevel
marketing legislation ahead of its December&nbsp;2005 adoption of legislation to legalize direct
selling. The government has rigorously monitored multi-level marketing activities and enforced
these laws. In the past, the government has taken significant actions against companies that the
government found in violation of applicable laws. 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 a direct sales model in China
although we have applied for a direct selling license. Instead, we have begun the initial launch of
a Preferred Customer retail-only e-commerce model in China. This retail-only model would not have a
compensation plan until such time as a direct selling license may be issued. Further, the Chinese
entity will operate completely separate and apart from the Hong Kong entity, though a Chinese
consumer may elect to participate separately in both. While it is not certain if the Chinese
government will embrace this model, we believe that the China entity will be compliant as it will
not be operating a direct selling model in China until it receives a direct selling license.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We Could Be Required To Modify Our Compensation Plan In China In A Way That Could Make It Less
Attractive To Members, And This Could Have A Significant Adverse Effect On Our Revenue.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We could be required to modify our compensation plan in China in a way that could make it less
attractive to members. Any such modification to our compensation plan could, therefore, have a
material adverse effect on revenue. Moreover, the business model that we are implementing in China
will likely involve costs and expenses that we do not generally incur in the e-commerce business
that we have historically operated in other markets, including Hong Kong. As a result, the business
that we ultimately are able to conduct in China could be materially less profitable than the
e-commerce business that we have historically operated in Hong Kong.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our E-Commerce Business In Hong Kong, Which Represents A Significant Portion Of Our Total Revenue,
Could Be Adversely Affected By The Activities Of The Members in China, If Members In China Engage
In Activities That Are Deemed To Violate China&#146;s Anti-Multilevel Marketing Laws.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While we have strictly forbidden any of our members in China to engage in activities that
violate China&#146;s anti-multilevel marketing laws, some of our members in China have engaged in such
activities. In Dongguan, four of our members were detained for questioning in October&nbsp;2005 with
regard to possible violation of Chinese law regarding the maximum number of people who can attend a
meeting as well as possible improper network marketing business activity. Charges were never filed
and all individuals were released. In April, 2006, a media report indicated that someone was
detained by Public Security in Changsha for investigation of similar allegations. We have not been
able to determine if the individual in question is, in fact, a member and whether or not any laws
were actually broken. Initial inquiries made by retained Chinese counsel indicate that no one is
still being detained or has been charged. Reviews and investigations of such activities by
government regulators, if any are commenced, could restrict our ability to conduct business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most of our Hong Kong revenues are derived from the sale of products that are delivered to
members in China. We operate an e-commerce direct selling model in Hong Kong and recognize this
revenue as being generated in Hong Kong. Orders are taken in Hong Kong. Commissions are earned by
members in China based on the same binary model used by us throughout the world and are recorded
and paid in Hong Kong and denominated in Hong Kong Dollars. Commission incomes are declared to the
tax authorities in Hong Kong. Members who order the products register themselves with a Hong Kong
address and tax identification number. None of the servers on which our Hong Kong e-commerce
activities are conducted are located in China. Products purchased by members in China are delivered
by us to a third party that acts as the importer of record under an agreement to pay applicable
duties. From April&nbsp;2005 through December&nbsp;2005, the importer of record was a related party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that the laws and regulations in China regarding direct selling and multi-level
marketing are not specifically applicable to our Hong Kong based e-commerce activity. Nor are we
aware of any specific laws or regulations in China, or any official interpretation thereof, that
govern this Hong Kong centered e-commerce activity. However, there can be no assurance that such
laws, regulations or interpretations will not be adopted in the future. Should such laws, rules or
interpretations be adopted or should the government determine that our e-commerce activity violates
China&#146;s anti-multilevel marketing legislation, there could be a material adverse effect on our
business, cash flow and financial statements. There is no way we can estimate the effect of such an
adverse effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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 violations of
anti-multi-level marketing legislation and any subjective interpretation of laws. Any determination
that our operations or activities, or the activities of our employee sales representatives,
distributors living outside of China or importers of record 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 obtain business license 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.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If We Fail To Obtain A Direct Selling License In China, Our Future Business Could Be Harmed.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Chinese government has adopted new direct selling legislation as of December&nbsp;1, 2005. We
submitted an application for a direct selling license in December&nbsp;2005 and, after rules changes,
re-submitted an application package in June&nbsp;2006. We now anticipate filing a new, revised direct
selling application incorporating a name change, our new e-commerce model and other developments.
We think we meet all of the legal requirements, including capitalizing our Chinese entity with a
$12.0&nbsp;million cash infusion, but there can be no assurance that a license will be granted. We
currently operate a Preferred Customer retail-only e-commerce model in China that is linked to a
member&#146;s position in Hong Kong. If
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">we are able to obtain a direct selling license in China, the license would provide us with
more options to do business. If we do not, there would be some impact to us but it is not believed
that it would materially adversely affect us under our current model.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Failure To Properly Pay Business Taxes, Including Those In China, Could Have A Material Adverse
Effect.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the course of doing business we may be subject to various taxes, such as sales and use,
value-added, franchise, income, and import duty. The failure to properly calculate, report and pay
such taxes when we are subject to them could have a material adverse effect on our financial
condition and results of operations. Moreover, any change in the law or regulations regarding such
taxes, or any interpretation thereof, could result in an increase in the cost of doing business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Between April and December&nbsp;2005, our Hong Kong subsidiary engaged a service provider to
facilitate product importation into China and act, or engage another party to act, as the importer
of record. The individual that owns that service provider was one of the directors of our
wholly-owned Chinese subsidiary. We believe that the amount of duty paid to Chinese Customs on the
imported goods by the importer of record was paid at the negotiated rate. However, there can be no
assurance that Chinese Customs will not elect, in the future, to examine the duty paid, and if they
conduct such examination, they may conclude that the valuation established was insufficient,
resulting in an underpayment of duties. As a consequence, the importer of record could be required
to pay additional duties and possible penalties to Chinese Customs. Additional duties could range
between zero and $46.0&nbsp;million, plus penalties. The extreme worst case was calculated using the
highest possible assessment to the highest possible declared value and assuming that negotiated
valuation practices do not apply. We believe that any such future assessment of additional duties
or penalties would be made against and become the responsibility of the importer of record. There
can be no assurance that we or our subsidiaries would not be assessed with such liability in the
event that the importer of record is unable to pay all or part of such amount.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><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>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>


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</DIV>



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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>An Increase In The Amount Of Compensation Paid To Distributors Would Reduce Profitability.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A significant expense is the payment of compensation to our distributors, which represented
approximately 51% and 48% of net sales during 2006 and the nine-month period ended September&nbsp;30,
2007, respectively. Factors impacting the overall commission payout include the growth and depth
of the distributor network, the distributor retention rate, the level of promotions, local
promotional programs and business development agreements. We compensate our distributors by paying
commissions, bonuses, and certain awards and prizes. We closely monitor the amount of compensation
to distributors paid as a percentage of net sales and have recently implemented adjustments to our
compensation plan to provide, in our view, a more viable and sustainable business model for both us
and our distributors. There can be no assurance that these changes or future changes to 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We Do Not Have Product Liability Insurance And Product Liability Claims Could Hurt Our Business.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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:
</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our products contain contaminants;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our products include inadequate instructions as to their uses; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our products include inadequate warnings concerning side effects and interactions
with other substances.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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
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 us 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. 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Internal Controls And Accounting Methods Require Further Modification.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We modified certain of our accounting policies and made other adjustments to our accounting
for past transactions, which resulted in the restatement of our financial statements for each
quarter in 2001, 2002, and 2003, for the years ended December&nbsp;31, 2001, 2002, 2003, and 2005, as
well as the first quarter in 2004. In connection with the restatement of our financial statements,
many of the restatement items are the result of material weaknesses in our internal controls and
procedures. Also, in November&nbsp;2005, our top two officers at the time, Mark Woodburn and Terry
LaCore, our President and the Chief Executive Officer of NHT Global U.S., respectively, were
terminated due to management misconduct.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We continue to develop controls and procedures and plans to implement additional controls and
procedures sufficient to accurately report our financial performance on a timely basis in the
foreseeable future. Nevertheless, we continue to have material weaknesses. If we are unable to
develop and implement
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">effective 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Non-Compliance With Section&nbsp;404 Of The Sarbanes-Oxley Act Of 2002 Could Materially Adversely Affect
Us.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Securities and Exchange Commission (the &#147;Commission&#148;), as directed by Section&nbsp;404 of the
Sarbanes-Oxley Act of 2002, adopted rules which could require us to include in our annual reports
on Form 10-K, beginning in fiscal 2007, 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 beginning in fiscal 2008. 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 of 2002, 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We Rely On And Are Subject To Risks Associated With Our Reliance Upon Information Technology
Systems.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success is dependent on the accuracy, reliability, and proper use of information
processing systems and management information technology. Our information technology systems are
designed and selected to facilitate order entry and customer 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&#151;our distributor software service provider&#151;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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with its acquisition of MarketVision Communications Corporation in 2004, we and
MarketVision entered into a Software License Agreement (the &#147;Software License Agreement&#148;) dated as
of March&nbsp;31, 2004, with MarketVision Consulting Group, LLC (the &#147;Licensee&#148;), a limited liability
company owned by John Cavanaugh, the President of MarketVision, and Jason Landry, a Vice President
of MarketVision. The Software License Agreement was filed on April&nbsp;15, 2004, as an Exhibit to our
Current Report on Form 8-K filed on that date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon an Event of Default (as defined), the Software License Agreement grants, among other
things, the Licensee with an irrevocable, exclusive, perpetual, royalty free, fully-paid,
worldwide, transferable, sublicensable right and license to use, copy, modify, distribute, rent,
lease, enhance, transfer, market, and create derivative works to the MarketVision software. An
&#147;Event of Default&#148; under the Software License Agreement includes a &#147;Share Default,&#148; which is
defined as our market value per share failing to equal or exceed $10.00 per share for any one
rolling period of six months for a certain period following the acquisition of MarketVision. The
last time that our stock closed at or above $10.00 per share was February&nbsp;16, 2006, and a Share
Default would otherwise have occurred on August&nbsp;17, 2006. The parties to the Software License
Agreement amended that agreement to provide that no Share Default would occur prior to December&nbsp;31,
2006. No further amendments have been entered into, and as a result, we are currently in default.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although an Event of Default has occurred, we believe that we continue to have the right to
continue using the MarketVision software for internal use only and not as an application service
provider or service bureau, but may not rent, lease, license, transfer or distribute the software
without the Licensee&#146;s prior written consent. Moreover, we believe that we have the right to
receive certain application service provider services from Licensee, if it chooses to do so. We do
not believe that the occurrence of the Event of Default has had or will have a material adverse
effect on us.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Regulatory Matters Governing Our Industry Could Have A Significant Negative Effect On Our Business.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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. There can be no assurance that we
or our distributors are in compliance with all of these regulations. Our failure or our
distributors&#146; failure to comply with these regulations or new regulations could lead to the
imposition of significant penalties or claims and could negatively impact our business. In
addition, the adoption of new regulations or changes in the interpretations of existing regulations
may result in significant compliance costs or discontinuation of product sales and may negatively
impact the marketing of our products, resulting in significant loss of sales revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Direct Selling System</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our direct selling system is subject to a number of federal and state regulations administered
by the Federal Trade Commission (the &#147;FTC&#148;) 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;12, 2006 the FTC issued a notice of proposed rulemaking which, if implemented, will
regulate all sellers of &#147;business opportunities&#148; in the United States. The proposed rule would,
among other things, require all sellers of business opportunities, which would likely include us,
to (i)&nbsp;implement a seven day waiting period before entering into an agreement with a prospective
business opportunity purchaser, and (ii)&nbsp;provide all prospective business opportunity purchasers
with substantial information in writing at the beginning of the waiting period regarding the
business opportunity, including information relating to: representations made as to the earnings
experience of other business opportunity purchasers, the names and telephone numbers of recent
purchasers in their geographic area, cancellation or refund policies and requests within the prior
two years, certain legal actions against the company, its affiliated companies and company
officers, directors, sales managers and certain others. The Direct Selling Association (the &#147;DSA&#148;)
and other interested parties have filed over 17,000 comments with the FTC that are publicly
available regarding the proposed rule through the FTC&#146;s website at
http://www.ftc.gov/os/comments/businessopprule/index.htm. The DSA and other interested parties also
filed &#147;rebuttal&#148; comments with the FTC in September&nbsp;2006. Based on information currently available,
we anticipate that the final rule may require several years to become final and effective, and may
differ substantially from the rule as originally proposed. Nevertheless the proposed rule, if
implemented in its original form, would negatively impact our business in the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Product Regulations</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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 U.S. Food and Drug Administration (&#147;FDA&#148;), FTC, the Consumer Product Safety
Commission and the United States Department of Agriculture and by various agencies of the states,
localities and foreign countries in
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;7, 2003, the FDA proposed a new regulation to require current Good Manufacturing
Practices (&#147;cGMPs&#148;), affecting the manufacture, packing, and holding of dietary supplements. The
proposed regulation would establish standards to ensure that dietary supplements and dietary
ingredients are not adulterated with contaminants or impurities, and are labeled to accurately
reflect the active ingredients and other ingredients in the products. It also includes proposed
requirements for designing and constructing physical plants, establishing quality control
procedures, and testing manufactured dietary ingredients and dietary supplements, as well as
proposed requirements for maintaining records and for handling consumer complaints related to
cGMPs. We are evaluating this proposal with respect to its potential impact upon the various
contract manufacturers that we use to manufacture our products, some of whom might not meet the new
standards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Product Claims, Advertising and Distributor Activities</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Transfer Pricing and Similar Regulations</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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
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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have adopted transfer pricing agreements with our subsidiaries to regulate inter-company
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. In 2005, we implemented a
foreign holding and operating company structure for our non-United States businesses, although we
have since discontinued our operational use of this structure to reduce costs and because we
determined that our United States operating losses will lower our overall effective tax rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Taxation Relating To Distributors</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Other Regulations</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Currency Exchange Rate Fluctuations Could Lower Our Revenue And Net Income.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2006 and for the nine months ended September&nbsp;30, 2007, approximately 89% and 91%,
respectively, of our revenue was recorded by subsidiaries located outside of North America. Revenue
transactions and related commission payments, as well as other incurred expenses, are typically
denominated in the local currency. Accordingly, our international subsidiaries use the local
currency as their functional currency. The results of operations of our international subsidiaries
are exposed to foreign currency exchange rate fluctuations during consolidation since we translate
into U.S. dollars using the average exchanges rates for the period. As exchange rates vary, revenue
and other operating results may differ materially from our expectations. Additionally, we may
record significant gains or losses related to foreign-denominated cash and cash equivalents and the
re-measurement of inter-company balances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that our foreign currency exchange rate exposure is somewhat limited since the Hong
Kong dollar is pegged to the U.S. dollar. We also purchase almost all inventories in U.S. dollars.
Our foreign currency exchange rate exposure, mainly to Korean won, Singapore dollar, New Taiwan
dollar, Japanese yen, Mexican peso, Chinese yuan, European euro and Australia dollar, represented
approximately 23% and 26% of our revenue in 2006 and for the nine-month period ended September&nbsp;30,
2007. Our foreign currency exchange rate exposure would significantly increase if the Hong Kong
dollar were no longer pegged to the U.S. dollar.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Failure Of New Products To Gain Distributor And Market Acceptance Could Harm Our Business.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>System Failures Could Harm Our Business.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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. The MarketVision 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We Have A Limited Product Line.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We offer a limited number of products under our NHT Global brand. Our <I>Premium Noni Juice&#153;</I>,
<I>Skindulgence</I><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, <I>Alura</I><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> and <I>La Vie&#153; </I>products each account for a significant portion of our total
sales and, together, account for a significant majority of our total sales. If demand for any of
these four 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 affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><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>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The High Level Of Competition In Our Industry Could Adversely Affect Our Business.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

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</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Terrorist Attacks, Acts Of War, Epidemics Or Other Communicable Diseases Or Any Other Natural
Disasters May Seriously Harm Our Business.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Terrorist attacks, or acts of war or natural disasters may cause damage or disruption to us,
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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Risk Factors Related To Our Common Stock</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Disappointing Quarterly Revenue Or Operating Results Could Cause The Price Of Our Common Stock To<BR>
Fall.</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Common Stock Is Particularly Subject To Volatility Because Of The Industry In Which We Operate.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>There Is No Assurance That An Active Public Trading Market Will Continue.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><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>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We Have Broad Discretion To Use The Proceeds Of Our Recent Private Placement Financings.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have broad discretion in spending the net proceeds generated by our May&nbsp;2007 and October
2007 private placements. We may spend most of the net proceeds from the private placements in ways
that ultimately prove unsuccessful. Our failure to apply these funds effectively could have a
material adverse effect on our business, results of operations and financial condition, and may
also require further funding, which could dilute stockholders&#146; ownership and cause a decline in the
share price of our common stock.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Risk Factors Related To Our October&nbsp;2007 Private Placement Financing and To This Offering</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Leverage And Debt Service Obligations May Adversely Affect Our Cash Flows</B><I>.</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with our sale of variable rate convertible debentures in October&nbsp;2007, we
incurred new indebtedness of $4,250,000. As a result of this indebtedness, we incurred significant
principal and interest payment obligations. The degree to which we are leveraged could, among other
things:
</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>require us to dedicate a substantial portion of our future cash flows from operations
and other capital resources to debt service, especially if the debentures are not
converted into shares of common stock or we are otherwise unable to make payments of
principal and interest in shares of common stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>make it difficult for us to obtain necessary financing in the future for working
capital, acquisitions or other purposes on favorable terms, if at all;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>make it more difficult for us to be acquired;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>make us more vulnerable to industry downturns and competitive pressures; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>limit our flexibility in planning for, or reacting to changes in, our business.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our ability to meet our debt service obligations will depend upon our future performance,
which will be subject to financial, business and other factors affecting our operations, many of
which are beyond our control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We Could Be Required To Make Substantial Cash Payments Upon An Event Of Default Under Our Variable
Rate Convertible Debentures.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our variable rate convertible debentures provide for events of default including, among
others, payment defaults not timely cured, failure to perform other covenants not timely cured,
cross-defaults not timely cured having a material adverse effect on us, representations or
warranties are untrue when made, certain bankruptcy-type events involving us or one of our
significant subsidiaries, acceleration of more than $150,000 in indebtedness for borrowed money or
under a long-term leasing or factoring agreement, our common stock is no longer listed on an
eligible market, we are subject to certain changes in control or we sell or dispose of more than
40% of our assets in a single or series of related transactions, the registration statement
covering the shares of common stock underlying the debentures and warrants issued in our October
2007 financing is not declared effective, lapses or otherwise cannot be used beyond specified
periods, failure to timely deliver certificates for converted shares, and a judgment in excess of
$250,000 against us, any subsidiary or our respective assets that is not timely vacated, bonded or
stayed. Upon an event of default, the holders of the debentures may elect to accelerate the
payment of all amounts due under the debentures and require that 115% of the outstanding debenture
principal be paid. If an event of default occurs, our available cash could be seriously depleted
and our ability to fund operations could be materially harmed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We Are Responsible For Having The Resale Of Shares Of Common Stock Underlying Certain of Our
Convertible Securities Issued In Our 2007 Private Placement Financings Registered With The
Commission Within Specified Time Periods And Will Incur Liquidated Damage Payment Obligations If
The Shares Are Not Registered With The Commission Within Those Specified Time Periods Or Such
Registration Is Not Maintained.</B>
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to our agreement with the investors in our October&nbsp;2007 financing, we are obligated
to (i)&nbsp;file a registration statement covering the resale of certain of the shares of common stock underlying
the securities issued in the financing with the Commission on or prior to November 18, 2007, (ii)&nbsp;cause the registration statement to be declared effective within certain specified periods of
time and (iii)&nbsp;maintain the effectiveness of the
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->20<!-- /Folio -->
</DIV>

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



<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">registration statement and the ability of the investors to use the prospectus forming a part
thereof for a specified period. If we fail to comply with these or certain other provisions, then
we will be required to pay liquidated damages of 2.0% per month of the aggregate purchase price
paid with respect to the unregistered shares of common stock by the investors in the October&nbsp;2007 financing until the first anniversary of the closing date
of the financing and 1.0% per month thereafter through the second anniversary of the closing date.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to our agreement with the investors in our May&nbsp;2007 financing, we are obligated for a
specified period of time to maintain the effectiveness of the registration statement that we filed
with the Commission covering the resale of the shares of common stock issuable upon the conversion
of Series&nbsp;A preferred stock or the exercise of warrants issued in the financing. If we fail to
maintain the effectiveness of such registration statement due to our intentional and willful act
without immediately causing a subsequent registration statement to be filed with the Commission,
then we will be obligated to pay in cash an amount equal to 2% of the product of $1.70 times the
number of shares of Series&nbsp;A preferred stock sold in the financing to the relevant purchasers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The Agreements Governing The Variable Rate Convertible Debentures And Related Warrants Issued In
Our October&nbsp;2007 Financing Contain Various Covenants And Restrictions That May Limit Our Ability To
Operate Our Business.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The agreements governing the variable rate convertible debentures and related warrants issued
in our October&nbsp;2007 financing contain various covenants and restrictions, including, among others:
</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>until the first anniversary of the closing of the October&nbsp;2007 financing, we are
required to offer to the investors participating therein the opportunity to participate in
subsequent equity securities offerings by us, subject to certain exceptions for, among
other things, strategic investments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>until 60&nbsp;days after the effective date of the registration statement of which this
prospectus forms a part, we cannot issue shares of common stock or equivalent securities,
subject to certain exceptions for, among other things, strategic investments and the
issuance of shares of common stock covered by the registration statement of which this
prospectus forms a part;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>until such time as no investor participating in the financing holds any of the
securities purchased therein, we are prohibited from effecting or entering into an
agreement to effect any financing involving (i)&nbsp;the issuance or sale of common stock or
equivalent securities with an effective price or number of underlying shares that floats
or resets or otherwise varies or is subject to adjustment based on trading prices of or
quotations for shares of common stock, the market for the common stock, or our business or
(iii)&nbsp;any agreement to sell securities at a future-determined price;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>until the earlier of the date that we obtain stockholder approval of the issuance of
all of the shares of common stock underlying the debentures and warrants issued in the
October&nbsp;2007 financing or none of such debentures or warrants are any longer outstanding,
neither we nor any of our subsidiaries may issue common stock or equivalent securities at
an effective price that is less than $3.52 per share; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>for so long as any of the debentures issued in the October&nbsp;2007 financing remain
outstanding, neither we nor any of our subsidiaries may incur indebtedness for borrowed
money other than permitted indebtedness, create or suffer liens other then some permitted
liens, amend our charter documents in certain circumstances, repurchase shares of common
any of our equity securities other then in certain permitted circumstances, repay certain
indebtedness before its due date, pay cash dividends on stock other then our Series&nbsp;A
preferred stock, or enter into certain transactions with affiliates.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These restrictions could limit our ability to plan for or react to market conditions or meet
extraordinary capital needs or otherwise restrict corporate activities, any of which could have a
material adverse impact on our business.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->21<!-- /Folio -->
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The Conversion Of Our Variable Rate Convertible Debentures, The Exercise Of Our Warrants Or The
Exercise Or Conversion Of Our Other Convertible Securities May Result In Substantial Dilution And
May Depress The Market Price Of Our Common Stock.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of November&nbsp;12, 2007, we had outstanding 10,056,268 shares of common stock and also (i)
options to purchase an aggregate of 98,500 shares of our common stock, all with an exercise price
of $1.80, (ii)&nbsp;warrants outstanding from our October&nbsp;2004 private placement exercisable for
1,080,504 shares of our common stock at an exercise price equal to $12.47 per share, (iii)&nbsp;warrants
outstanding from our May&nbsp;2007 private placement exercisable for 2,059,307 shares of our common
stock at an exercise price ranging from $3.80 to $5.00 per share, depending on the time of
exercise, (iv)&nbsp;154,400 shares of Series&nbsp;A preferred stock, convertible into the same number of
shares of common stock, (v)&nbsp;variable rate convertible debentures issued in our October&nbsp;2007 private
placement that are currently convertible into 1,700,000 shares of common stock (plus up to an
additional 314,862 shares of common stock that may be issued in certain circumstances under the
terms of the debentures, which additional number of shares would increase in the event that we
obtain stockholder approval of the issuance of all of the shares of common stock potentially
issuable under the terms of the debentures), and (vi)&nbsp;warrants issued in our October&nbsp;2007 private
placement exercisable for 3,141,499 shares of common stock at an exercise price of $3.52 per share.
If these convertible securities are exercised or converted, and the shares of common stock issued
upon such exercise or conversion are sold, our common stockholders may experience substantial
dilution and the market price of our shares of common stock could decline. Further, the perception
that such convertible securities might be exercised or converted could adversely affect the market
price of our shares of common stock. In addition, holders of our warrants and options are likely to
exercise them when, in all likelihood, we could obtain additional capital on terms more favorable
to us than those provided by the warrants and options. Further, during the time that the foregoing
convertible securities are outstanding, they may adversely affect the terms on which we could
obtain additional capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Future Sales By Us Or Our Existing Stockholders Could Depress The Market Price Of Our Common Stock.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we or our existing stockholders sell a large number of shares of our common stock, the
market price of our common stock could decline significantly. Further, even the perception in the
public market that we or our existing stockholders might sell shares of common stock could depress
the market price of the common stock.
</DIV>
<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>USE OF PROCEEDS</B>
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will not receive any proceeds from the disposition of the shares of common stock by the
selling stockholders or their transferees. We may receive gross proceeds of up to $5,265,751
(based on an exercise price of $3.52 per share), upon the exercise of the 1,495,952 warrants
covered by the registration statement of which this prospectus forms a part. As we cannot predict
when or if we would receive such proceeds, we expect to use these proceeds, if received, for
working capital purposes. The proceeds received from the securities sold in the October&nbsp;2007
private placement financing are intended to provide us additional working capital.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PRINCIPAL STOCKHOLDER</B>S
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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 November&nbsp;12, 2007 by (i)&nbsp;each stockholder we know is the beneficial
owner of more than 5% of the Company&#146;s common stock, (ii)&nbsp;each director or director nominee, (iii)
each of the executive officers named in the Summary Compensation Table set forth under
&#147;Compensation of Named Executive Officers&#148; in our proxy statement for the 2007 Annual Meeting of
Stockholders, and (iv)&nbsp;all executive officers and directors as a group. Beneficial ownership is
determined in accordance with the rules and regulations of the 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
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->22<!-- /Folio -->
</DIV>




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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">property laws, the persons named in the table have sole voting and investment power with respect to
all of our shares of common stock beneficially owned by them.
</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="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&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>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount and</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Nature of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name and Address of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Beneficial</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>of</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Beneficial Owner(1)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Ownership(2)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Class(2)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B><I>Officers and Directors (current and former):</I></B></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:0px; text-indent:-0px">Chris Sharng</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">144,120</TD>
    <TD nowrap>&nbsp;(3)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Timothy S. Davidson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">31,250</TD>
    <TD nowrap>&nbsp;(4)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Gary C. Wallace</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">29,450</TD>
    <TD nowrap>&nbsp;(5)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">John Cavanaugh</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">304,151</TD>
    <TD nowrap>&nbsp;(6)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Stephanie S. Hayano (7)<br>
220 Morsehill Road<br>
Millerton, NY 12546</DIV></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" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Robert H. Hesse (8)<br>
360 Thornton Road<br>
Englewood, NJ 07631</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1,984</TD>
    <TD nowrap>&nbsp;(9)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Randall A. Mason</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">145,446</TD>
    <TD nowrap>&nbsp;(10)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Stefan W. Zuckut</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8,750</TD>
    <TD nowrap>&nbsp;(11)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Directors and Executive Officers As a Group (7 persons)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">760,515</TD>
    <TD nowrap>&nbsp;(12)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B><I>5% Or More Stockholders:</I></B></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:0px; text-indent:-0px">Big Rich International Ltd.<br>
4001 Gloucester Tower, The Landmark<br>
11 Pedder Street<br>
Central<br>
Hong Kong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">941,171</TD>
    <TD nowrap>&nbsp;(13)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.6</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Indicates beneficial ownership of less than 1%</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Unless otherwise indicated, the address of each beneficial owner is c/o Natural Health Trends
Corp., 2050 Diplomat Drive, Dallas, Texas 75234.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Any securities not outstanding that are subject to options or conversion privileges
exercisable within 60&nbsp;days of November&nbsp;12, 2007 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 10,056,268
shares of common stock outstanding (excluding treasury shares) as of November&nbsp;12, 2007.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes (i)&nbsp;1,984 shares of common stock issuable upon the exercise of warrants held by Mr.
Sharng and (ii)&nbsp;118,926 shares of restricted stock subject to vesting. Mr.&nbsp;Sharng shares
voting and investment power over 1,500 of the shares with his wife.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes (i)&nbsp;23,959 shares of restricted stock subject to vesting, and (ii)&nbsp;2,500 shares of
common stock issuable upon exercise of stock options held by Mr.&nbsp;Davidson.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 25,834 shares of restricted stock subject to vesting.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->23<!-- /Folio -->
</DIV>

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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>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes (i)&nbsp;1,984 shares of common stock issuable upon the exercise of warrants held by Mr.
Cavanaugh and (ii)&nbsp;150,484 shares of restricted stock subject to vesting.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Ms.&nbsp;Hayano is a former director of the Company and the former Chief Executive Officer of the
Company.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;Hesse is a former director of the Company and the former Interim Chief Executive Office
of the Company, and therefore the shares beneficially owned by him are not included in
&#147;Directors and Executive Officers as a Group.&#148;</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(9)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 1,984 shares of common stock issuable upon the exercise of warrants held by Mr.
Hesse.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(10)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes (i)&nbsp;5,000 shares of common stock issuable upon the exercise of options held by Mr.
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, an
entity controlled by Mr.&nbsp;Mason.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(11)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 7,292 shares of restricted stock subject to vesting.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(12)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes (i)&nbsp;3,968 shares that may be acquired upon the exercise of outstanding warrants that
currently are exercisable by our executive officers, (ii)&nbsp;406,652 shares of restricted stock
subject to vesting that are beneficially owned by our directors and executive officers, and
(iii)&nbsp;7,500 shares of common stock issuable upon the exercise of options held by our directors
and executive officers. Does not include any shares held by Ms.&nbsp;Hayano or Mr.&nbsp;Hesse, since
such individuals are no longer executive officers of the Company.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(13)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 941,171 shares of common stock issuable upon the exercise of warrants held by Big
Rich International Ltd., a limited partnership organized under the laws of the British Virgin
Islands (&#147;Big Rich&#148;). Xiaoli Duan is the general partner of Big Rich and as such may be
deemed to be the beneficial owner of such shares.</TD>
</TR>

</TABLE>


<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SHARES ELIGIBLE FOR FUTURE SALE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Future sales of substantial amounts of our common stock in the public market, or the
perception that these sales could occur, could adversely affect prevailing market prices for our
common stock and our ability to raise equity capital in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of November&nbsp;12, 2007, we had outstanding 10,056,268 shares of common stock and the
following convertible securities that may be converted into or exercisable for our shares of common
stock:
</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>98,500 shares issuable upon the exercise of outstanding options, all with an exercise
price of $1.80 per share;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1,080,504 shares issuable upon exercise of the warrants issued as part of our October
2004 private placement at an exercise price equal to $12.47 per share;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>154,400 shares issuable upon conversion of all outstanding shares of our Series&nbsp;A
preferred stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>2,059,307 shares issuable upon exercise of the warrants issued as part of our May&nbsp;2007
private placement financing at exercise prices ranging from $3.80 to $5.00 per share,
depending on the time of exercise;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1,700,000 shares issuable upon conversion of the variable rate convertible debentures
issued in our October&nbsp;2007 private placement (plus up to an additional 314,862 shares of
common stock that may be issued in certain circumstances under the terms of the
debentures, which additional</TD>
</TR>

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

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


<DIV style="margin-top: 6pt"><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="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>number of shares would increase in the event that we obtain stockholder approval of the
issuance of all of the shares of common stock potentially issuable under the terms of the
debentures); and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>3,141,499 shares issuable upon exercise of the warrants issued as part of our October
2007 private placement financing.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on the foregoing, as of November&nbsp;12, 2007, we have 18,290,478 shares of common stock
outstanding or subject to outstanding convertible securities that are convertible into or
exercisable for shares of our common stock.
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 3,195,952 shares registered in this offering, the 2,213,707 shares of common stock
issuable upon the conversion of shares of our Series&nbsp;A preferred stock and warrants issued in our
May&nbsp;2007 private placement and registered under a registration statement on Form S-3, the 932,539
shares issuable upon exercise of outstanding options and outstanding shares of restricted stock
registered under registration statements on Form S-8, and the other outstanding shares of our
common stock that are not &#147;restricted securities&#148; within the meaning of Rule&nbsp;144 promulgated under
the Securities Act, are or will be freely transferable without restriction under the Securities
Act, unless they are held by our &#147;affiliates&#148; as that term is defined under Rule&nbsp;144 under the
Securities Act and the rules and regulations promulgated thereunder. The remaining outstanding
shares of our common stock and shares of common stock issuable upon the exercise of our outstanding
options or warrants may be sold in the public market only if registered under the Securities Act or
if they qualify for an exemption from registration under Rule&nbsp;144 or another rule promulgated under
the Securities Act. The Rule&nbsp;144 exemption is summarized below.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Rule&nbsp;144</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, under Rule&nbsp;144 as currently in effect, a person who has beneficially owned shares
of our common stock for at least one year, including the holding period of any prior owner other
than one of our affiliates, would be entitled to sell within any three-month period the number of
restricted shares that does not exceed the greater of:
</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>one percent of the number of shares of our common stock then outstanding, which will
equal approximately 100,563 shares immediately after this offering; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the average weekly trading volume of our common stock on The NASDAQ Global Market
during the four calendar weeks preceding the filing of a notice on Form&nbsp;144 with the SEC
with respect to the sale.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of restricted shares under Rule&nbsp;144 are also subject to requirements regarding the
manner of sale, notice, and the availability of current public information about us. Rule&nbsp;144 also
provides that affiliates that sell shares of common stock that are not restricted shares must
nonetheless comply with the same restrictions applicable to restricted shares, other than the
holding period requirement.
</DIV>



<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Commission recently adopted amendments to Rule&nbsp;144 that will
shorten the required holding period for shares of our common stock
and will effect certain other changes that, in general, will
facilitate the ability of holders of our common stock to resell
their shares in the market.</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>






<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Registration Rights</B>
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with our October&nbsp;2007 private placement financing, we entered into a
registration rights agreement with the investors in the financing. The registration statement of
which this prospectus forms a part is being filed as part of our obligations under that agreement.
We agreed to file an initial registration statement with the
Commission on or prior to November 18, 2007.
Due to limitations imposed by the Commission on the number of shares of
common stock that can be included in the initial registration statement of which this prospectus
forms a part, and consistent with the terms of the registration rights agreement, we have only included in this initial registration statement
the shares of common stock into which the debentures are convertible and for which the warrants
having a one-year term are exercisable. We also agreed to use our best efforts to have the
initial registration statement declared effective with the Commission within 120 calendar days of the date of the
agreement (or 150&nbsp;days in the event of a full review by the
Commission). Because all of the shares underlying the
debentures and warrants issued in the October&nbsp;2007 financing could not be included in the registration statement of which this prospectus forms a part, under
certain circumstance we are required to
timely file subsequent registration statements or otherwise
include such shares in other registration statements on a piggy-back basis. If the registration
statements are not timely filed, declared effective and maintained in effect, we are required to
pay the investors in the October financing a cash fee of 2% per month of the purchase price paid with respect to the
unregistered shares of common stock until the
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

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

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">first anniversary of the closing date of the financing and 1% per month thereafter until the
second anniversary of such closing date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will pay all expenses relating to the filing of this registration statement, other than
underwriting discounts and commissions and stock transfer taxes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to our agreement with the investors in our May&nbsp;2007 financing, we are obligated for a
specified period of time to maintain the effectiveness of the registration statement that we filed
with the Commission covering the resale of the shares of common stock issuable upon the conversion
of Series&nbsp;A preferred stock or the exercise of warrants issued in the financing. If we fail to
maintain the effectiveness of such registration statement due to our intentional and willful act
without immediately causing a subsequent registration statement to be filed with the Commission,
then we will be obligated to pay in cash an amount equal to 2% of the product of $1.70 times the
number of shares of Series&nbsp;A preferred stock sold in the financing to the relevant purchasers.
</DIV>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SELLING STOCKHOLDERS</B>
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 18pt"><B>Shares
of Common Stock Offered Hereby</B>
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The shares of common stock being offered by the selling stockholders are shares of common
stock issuable upon the conversion of variable rate convertible
debentures and shares of common stock issuable upon the exercise of warrants,
which debentures and warrants were sold or otherwise issued by us in a private placement financing
that was consummated in October&nbsp;2007. For additional information regarding the shares of common
stock, the debentures and the warrants, see the information set forth below under the caption &#147; - Private Placement Financing.&#148;
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus relates to the sale of up to 3,195,952 shares of our common stock for the
selling stockholders named in the table below. A total of 1,700,000 shares of common stock are
issuable to the selling stockholders upon the conversion of variable rate convertible debentures
and a total of 1,495,952 shares of the common stock are issuable to the selling stockholders upon the exercise of warrants
having a term of one year to purchase shares of our common stock. 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. </DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Immediately prior to the sale of the convertible debentures and
warrants on October 19, 2007, we had 9,329,469 shares of common stock outstanding, exclusive of any shares held by our affiliates,
any selling stockholder or any affiliate of a selling stockholder.  Prior to effecting the
registration of the shares of common stock offered hereby, we had not previously registered any
shares of common stock or any other securities on behalf of any of
the selling stockholders or any
of their affiliates.  Except for the ownership of the convertible debentures and warrants issued
to the selling stockholders in our October 2007 private placement financing, none of the selling
stockholders has had any material relationship with us within the past three years.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because the number of shares of common stock issuable under the debentures varies in certain
circumstances, and because the number of shares of common stock into which the debentures are
convertible and for which the warrants are exercisable, and the related conversion or exercise
price per share, as applicable, are subject to adjustment, the number of shares that would actually be issued
under the debentures and the warrants may be more or less than the number of shares indicated to be
offered by this prospectus following their issuance under either the
debentures or the warrants.  The circumstances under which the number of shares of common stock into which the debentures are
convertible or for which the warrants are exercisable (the
&#147;Conversion Ratio&#148;) is subject to
adjustment include the following:
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD>If we pay a stock dividend or effect a stock split or reverse stock split, then the
Conversion Ratio would be adjusted so that the number shares issuable under the debentures and
warrants would after giving effect to such event represent the same proportion of the Company&#146;s
capital stock as prior to such event;</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD>If we shall issue rights, options and warrants to all holders of our shares of common
stock entitling them to subscribe for or purchase shares of our common stock at a price below a
specified threshold, then the Conversion Ratio shall be adjusted on an equitable basis;</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>
<TR valign="top">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD>If we effect a distribution to our holders of common stock of our debt or assets or
rights or warrants to subscribe for or purchase any of our securities other than shares of our
common stock, then in each such case the Conversion Ratio shall be adjusted on an equitable basis;
and</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>
<TR valign="top">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD>If we sell or otherwise grant any option to purchase shares of our common stock or
common stock equivalents at a per share price lower than the conversion price of the debentures
($2.50) or the exercise price of the warrants ($3.52), as the case may be, then the applicable
Conversion Ratio shall be adjusted to reflect such lower price (notwithstanding the foregoing,
no adjustment shall be made with respect to the Conversion Ratio applicable to the warrants for a
price of less than $3.52 prior to the date that stockholder approval of the issuance of the
warrants is obtained).</TD>
</TR>
</TABLE>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
table below lists the selling stockholders and other information
regarding their beneficial
ownership of our shares of common stock. The information provided below with respect to the selling stockholders has been obtained from
the selling stockholders and is current as of November&nbsp;8, 2007.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

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

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because the selling stockholders may sell none, all or some portion of the shares of common
stock owned by them, we cannot estimate the number of shares of common stock that will be
beneficially owned by the selling stockholders after this offering. In addition, the selling
stockholders may sell, transfer or otherwise dispose of, at any time or from time to time since the
date on which the selling stockholders provided the information regarding the shares of common
stock owned by them, all or a portion of the shares of common stock owned by them in transactions
exempt from the registration requirements of the Securities Act of 1933, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as indicated, the selling stockholders are neither broker-dealers nor affiliates of
broker-dealers that are NASD members.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></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="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&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>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percentage of</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Common</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Common</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Common</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Stock Owned</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Common</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Stock Owned</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Stock Owned</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Before the</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>After the</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>After the</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name of Selling Stockholder</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Offering (1)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Offered (2)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Offering (3)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Offering (3)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rockmore Investment Master Fund Ltd.(4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">400,000 </TD>
    <TD nowrap>&nbsp;(5)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">751,989</TD>
    <TD nowrap>&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Iroquois Master Fund Ltd.(6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">400,000 </TD>
    <TD nowrap>&nbsp;(5)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">751,989</TD>
    <TD nowrap>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Portside Growth and Opportunity Fund (7)(8)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">200,000 </TD>
    <TD nowrap>&nbsp;(5)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">375,994</TD>
    <TD nowrap>&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hudson Bay Fund LP (8)(9)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">172,000 </TD>
    <TD nowrap>&nbsp;(5)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">323,355</TD>
    <TD nowrap>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hudson Bay Overseas Fund LTD (8)(9)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">228,000 </TD>
    <TD nowrap>&nbsp;(5)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">428,634</TD>
    <TD nowrap>&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gemini Master Fund, Ltd. (10)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100,000 </TD>
    <TD nowrap>&nbsp;(5)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">187,997</TD>
    <TD nowrap>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cranshire Capital, L.P. (11)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">200,000 </TD>
    <TD nowrap>&nbsp;(5)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">375,994</TD>
    <TD nowrap>&nbsp;</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>
</TABLE>
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left">
<DIV style="font-size: 1pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Less than 1%.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->27<!-- /Folio -->
</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>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The number of shares beneficially owned by the selling stockholders does not include a total
of 3,141,499 shares issuable upon the exercise of warrants, which warrants are not exercisable
within 60&nbsp;days of the date of the registration statement of which this prospectus forms a
part. Each of the selling stockholders holds warrants exercisable for shares of common stock,
but is not currently deemed to be the beneficial owner of such shares of common stock, because
the warrants cannot be exercised within 60&nbsp;days.</TD>
</TR>
 <TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes for each selling stockholder the full number of shares of common stock into which
the debentures and one-year warrants held by such selling stockholder are convertible or exercisable,
as the case may be, without regard to whether such shares are currently deemed beneficially
owned by the selling stockholder. </TD>
</TR>
 <TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>We have determined the number and percentage of shares of common stock owned after the
offering by assuming that each of the selling stockholders will sell all of its shares being
offered pursuant to this prospectus, but will not sell any other shares that they own. In
fact, the selling stockholders may sell none, all or some portion of their holdings.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Rockmore Capital, LLC (&#147;Rockmore Capital&#148;) and Rockmore Partners, LLC (&#147;Rockmore Partners&#148;),
each a limited liability company formed under the laws of the State of Delaware, serve as the
investment manager and general partner, respectively, to Rockmore Investments (US)&nbsp;LP, a
Delaware limited partnership, which invests all of its assets through Rockmore Investment
Master Fund Ltd., an exempted company formed under the laws of Bermuda (&#147;Rockmore Master
Fund&#148;). By reason of such relationships, Rockmore Capital and Rockmore Partners may be deemed
to share dispositive power over the shares of our common stock owned by Rockmore Master Fund.
Rockmore Capital and Rockmore Partners disclaim beneficial ownership of such shares of our
common stock. Rockmore Partners has delegated authority to Rockmore Capital regarding the
portfolio management decisions with respect to the shares of common stock owned by Rockmore
Master Fund and, as of November&nbsp;8, 2007, Mr.&nbsp;Bruce T. Bernstein and Mr.&nbsp;Brian Daly, as
officers of Rockmore Capital, are responsible for the portfolio management decisions of the
shares of common stock owned by Rockmore Master Fund. By reason of such authority, Messrs.
Bernstein and Daly may be deemed to share dispositive power over the shares of our common
stock owned by Rockmore Master Fund. Messrs.&nbsp;Bernstein and Daly disclaim beneficial ownership
of such shares of our common stock and neither of such persons has any legal right to maintain
such authority. No other person has sole or shared voting or dispositive power with respect
to the shares of our common stock as those terms are used for purposes under Regulation&nbsp;13D-G
of the Securities Exchange Act of 1934, as amended. No person or &#147;group&#148; (as that term is
used in Section 13(d) of the Securities Exchange Act of 1934, as amended, or the SEC&#146;s
Regulation&nbsp;13D-G) controls Rockmore Master Fund.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>The number of shares beneficially owned by the indicated selling stockholders is based upon
full, voluntary conversion of the debentures held by such selling stockholder at the current
conversion price of $2.50 per share.</TD>
</TR>

<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->28<!-- /Folio -->
</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>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Joshua Silverman has voting and investment control over the shares held by Iroquois Master
Fund Ltd. Mr.&nbsp;Silverman disclaims beneficial ownership of these securities.</TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Ramius Capital Group, L.L.C. (&#147;Ramius Capital&#148;) is the investment adviser of Portside Growth
and Opportunity Fund (&#147;Portside&#148;) and consequently has voting control and investment
discretion over securities held by Portside. Ramius Capital disclaims beneficial ownership of
the securities held by Portside. Peter A. Cohen, Morgan B. Stark, Thomas W. Strauss and
Jeffrey M. Solomon are the sole managing members of C4S &#038; Co., L.L.C., the sole managing
member of Ramius Capital. As a result, Messrs.&nbsp;Cohen, Stark, Strauss and Solomon may be
considered beneficial owners of any securities deemed to be beneficially owned by Ramius
Capital. Messrs.&nbsp;Cohen, Stark, Strauss and Solomon disclaim beneficial ownership of these
securities.</TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD>Each of these stockholders (i)&nbsp;is an affiliate of a broker-dealer that is an NASD member,
(ii)&nbsp;acquired the securities in the ordinary course of business, and (iii)&nbsp;at the time of the
acquisition of the securities, did not have any agreements or understandings, directly or
indirectly, with any person to distribute the securities.</TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR valign="top">
    <TD nowrap align="left">(9)</TD>
    <TD>&nbsp;</TD>
    <TD>Sander Gerber, Yoav Roth and John Doscas share voting control and investment discretion over
securities held by these entities. Messrs.&nbsp;Gerber, Roth and Doscas disclaim beneficial
ownership of these securities.</TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR valign="top">
    <TD nowrap align="left">(10)</TD>
    <TD>&nbsp;</TD>
    <TD>Gemini Strategies, LLC (&#147;Gemini Strategies&#148;) is the investment adviser of Gemini Master Fund,
Ltd. (&#147;Gemini Master&#148;) and consequently has voting control and investment discretion over
securities held by Gemini Master. Gemini Strategies disclaims beneficial ownership of the
securities held by Gemini Master. Steven Winters is the sole managing member of Gemini
Strategies and as a result may be considered the beneficial owner of any securities deemed to
be beneficially owned by Gemini Strategies. Mr.&nbsp;Winters disclaims any beneficial ownership of
these securities.</TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR valign="top">
    <TD nowrap align="left">(11)</TD>
    <TD>&nbsp;</TD>
    <TD>Downsview Capital, Inc. (&#147;Downsview&#148;) is the general partner of Cranshire Capital, L.P.
(&#147;Cranshire&#148;). Mitchell P. Kopin is the president of Downsview and consequently has voting
control and investment discretion over securities held by Cranshire. Mr.&nbsp;Kopin disclaims
beneficial ownership of these securities.</TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>
</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->29<!-- /Folio -->
</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"><FONT size="1">

</FONT></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Private Placement Financing</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;19, 2007, we entered into a securities purchase agreement with the selling
stockholders pursuant to which the selling stockholders provided to us an aggregate of
approximately $3,740,000&nbsp;million in financing in a private placement of variable rate convertible
debentures having an aggregate face amount of $4,250,000, seven-year warrants to purchase 1,495,952
shares of our common stock, and one-year warrants to purchase 1,495,952 shares of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Securities Purchase Agreement</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As noted above, the securities purchase agreement provides for the issuance and sale to the
selling stockholders of the convertible debentures and the warrants for an aggregate purchase price
of approximately $3,740,000. Other significant provisions of the securities purchase agreement
include, among others:
</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>until the one year anniversary of the closing of the sale of the debentures, we will
offer to the selling stockholders the opportunity to participate in any subsequent
securities offerings we make (up to 100% of such offerings), subject to certain exceptions
for, among other things, strategic investments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>for 60&nbsp;days after the effective date of the registration statement of which this
prospectus forms a part, we will not issue common stock or equivalent securities, subject
to certain exceptions for, among other things, strategic investments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>until such time as none of the selling stockholders holds any of the debentures or
warrants, we are prohibited from effecting or entering into an agreement to effect any
financing involving (a)&nbsp;the issuance or sale of common stock or equivalent securities with
an effective price or number of underlying shares that floats or resets or otherwise varies
or is subject to adjustment based upon trading prices of or quotations for shares of common
stock, the market for the common stock, or our business or (b)&nbsp;any agreement to sell
securities at a future determined price;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>until the earlier of the date that stockholder approval is obtained or the debentures
and warrants are no longer outstanding, neither we nor any of our subsidiaries may issue
common stock or equivalent securities at an effective price that is less than $3.52;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>until one year after the registration statement of which this prospectus forms a part is
declared effective, we shall not undertake a reverse or forward stock split or
reclassification of the common stock without the prior written consent of the selling
stockholders holding a majority in principal amount outstanding of the debentures; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our agreement to seek stockholder approval of the issuance of all of the shares of
common stock underlying the debentures and warrants no later than the date of our 2008
annual stockholder meeting.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Debentures</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The debentures have an aggregate principal amount of $4,250,000, and they are convertible by
their holders into shares of our common stock at a conversion price of $2.50. This conversion
price is subject to adjustment under certain circumstances, including without limitation, stock
splits, stock dividends, rights offerings, and the issuance of shares of common stock or common
stock equivalents at a price less than the conversion price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After one year, we can force conversion of the debentures at the conversion price if the daily
volume weighted average price (&#147;VWAP&#148;) of the common stock for each of the 20 trading days prior to
the forced conversion date
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->30<!-- /Folio -->
</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"><FONT size="1">

</FONT></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">exceeds $7.50 per share, subject to adjustment, provided that a registration statement covering the
stock is then effective and certain trading volume requirements and other conditions are met.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The debentures bear interest at the greater of (i)&nbsp;LIBOR plus 4% and (ii)&nbsp;10% per annum.
Interest is payable quarterly beginning on January&nbsp;1, 2008. 50% of the original principal amount of
the debentures is payable in 12 equal monthly installments beginning on November&nbsp;1, 2008, and the
balance is payable on October&nbsp;19, 2009, unless extended by the holders of the debentures to October
19, 2012 (the extended maturity date). Payments of principal and interest may be made in cash or,
at our option if certain conditions are met, in shares of registered common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If interest is paid in shares of common stock, the conversion price per share will be set at
90% of the VWAP for the 20 consecutive trading days immediately prior to the applicable payment
date or, if less, the average of the VWAPs for the 20 consecutive trading days immediately prior to
the date the applicable shares are issued and delivered if such delivery is after the payment date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If principal is paid in shares of common stock during a specified period immediately prior to
the extended maturity date, the conversion price shall be equal to 90% of the average of the VWAPs
for the 20 consecutive trading days ending on the trading day that is immediately prior to the
applicable payment date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The debentures contain certain limitations on optional and mandatory conversion and payment in
shares of common stock, including that, absent stockholder approval, (a)&nbsp;we may not issue shares of
common stock in payment of principal or interest on the debentures that, when aggregated with prior
such payments (excluding payments of principal with shares not in excess of the number issuable at
the conversion price) exceed 5% of our outstanding shares on the trading day immediately preceding
the date of the securities purchase agreement and (b)&nbsp;we may not issue shares of common stock upon
conversion of or payment of interest or liquidated damages on the debentures that, in the
aggregate, exceed 19.99% of our outstanding shares on the trading day immediately preceding the
date of securities purchase agreement. Moreover, neither we nor the holders may effect any
conversion of a debenture to the extent that it would result in the holder and its affiliates
owning more than 4.99% of our outstanding common stock, unless this limitation is increased or
decreased by the holder (increased up to a maximum of 9.99%) of our outstanding common stock upon
not less than 61&nbsp;days prior notice.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may, under certain circumstances, redeem the debentures for cash equal to 115% of the
aggregate outstanding principal amount plus any accrued and unpaid interest.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The debentures contain certain negative covenants that, among other things, for so long as any
debentures remain outstanding, prohibit us and our subsidiaries from incurring indebtedness for
borrowed money, creating or suffering liens other than certain permitted liens, amending charter
documents to materially adversely harm the debenture holders, repurchasing shares of our common
stock (with certain exceptions), repaying certain indebtedness before its due date, paying cash
dividends on stock other than our Series&nbsp;A Convertible Preferred Stock, and entering into certain
transactions with affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Events of default under the debentures include, among others, payment defaults not timely
cured, failure to perform other covenants not timely cured, cross-defaults not timely cured having
a material adverse effect on us, representations or warranties are untrue when made, certain
bankruptcy-type events involving us or any significant subsidiary, acceleration of more than
$150,000 in indebtedness for borrowed money or under a long-term leasing or factoring agreement,
our common stock is no longer listed on an eligible market, we are subject to certain changes in
control or sell or dispose of more than 40% of our assets a single or series of related
transactions, a registration statement covering the shares of common stock underlying the
debentures and warrants is not declared effective for more than 270&nbsp;days after the closing of the
private placement financing, the effectiveness of such registration statement lapses beyond a
specified period, failure to timely deliver certificates for converted shares, and a judgment in
excess of $250,000 against us, any subsidiary or our respective assets that is not timely vacated,
bonded or stayed. Upon an event of default, the holders may elect to require us to repurchase all
or any portion of the outstanding principal amount of the debentures for a purchase price equal to
115% of such outstanding principal amount, plus all accrued but unpaid interest.
</DIV>

<DIV align="left"><FONT size="1">

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

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


<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend, and have a reasonable basis to believe, that we will have the financial ability to
make all payments provided for in the convertible debentures as they come due.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Warrants</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The warrants to purchase 1,495,952 shares of our common stock have a seven-year term and the
warrants to purchase 1,495,952 shares of our common stock have a one-year term, each beginning six
months and one day after their respective issuance. All of the warrants have an exercise price of
$3.52 per share and otherwise have identical terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The exercise price and the number of shares underlying the warrants are subject to adjustment
for stock dividends and splits, combinations, and reclassifications, certain rights offerings and
distributions to common stockholders, and mergers, consolidations, sales of all or substantially
all assets, tender offers, exchange offers, reclassifications or compulsory share exchanges. In
addition, subject to certain exceptions, the exercise price and number of shares underlying both
types of warrants are subject to anti-dilution adjustments from time to time if we issue our common
stock or equivalent securities at below the exercise price for the warrants; provided that the
exercise price cannot be adjusted lower than $3.52 prior to stockholder approval.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If, at any time after the earlier of October&nbsp;19, 2008 and the completion of the then
applicable holding period under Rule&nbsp;144, there is no effective registration statement for the
underlying shares of common stock, the warrants may be exercised by means of a cashless exercise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Registration Rights Agreement</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We and the selling stockholders also entered into a registration rights agreement pursuant to
which we agreed to file an initial registration statement with the Commission on or prior to
November&nbsp;18, 2007 and to use our best efforts to have such Registration Statement declared
effective with the Commission within 120 calendar days of the date of the registration rights
agreement (or 150&nbsp;days in the event of a full review by the Commission). Because all of the shares
of common stock underlying the debentures and warrants issued in the private placement financing
could not be included in the registration statement of which this prospectus forms a part, under
certain circumstances we are required to timely file subsequent registration statements or
otherwise include such shares in other registration statements on a piggy-back basis. If such
registration statements are not timely filed or declared effective, we are required to pay the
selling stockholders a cash fee of 2% per month of the purchase price paid with respect to the
unregistered shares of common stock until one year after the closing of the private placement
financing, and 1% per month thereafter for the following 12-month period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Dollar Value of Common Stock Underlying Debentures</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The total dollar value of the shares of common stock underlying the variable rate convertible
debentures that we have registered for resale (using the number of underlying shares of common
stock that we have registered for resale and the market price per share for those shares of common
stock on the date of sale) is as follows:
</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="88%">&nbsp;</TD>
    <TD width="5%">&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">Shares of common stock underlying debentures registered for resale:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,700,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Closing market price per share of common stock on October&nbsp;19, 2007:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dollar value of underlying shares of common stock:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,120,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Payments Made in Connection with Private Placement Financing</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table discloses the dollar amount of each payment (including the value of any
payments to be made in common stock) relating to the private placement financing that we closed in
October&nbsp;2007 that we have made or may be required to make to any selling stockholder, any affiliate
of a selling stockholder, or any person with whom any selling stockholder has a contractual
relationship regarding the financing (including any interest payments, liquidated damages, payments
made to &#147;finders&#148; or &#147;placement agents,&#148; and any other payments or potential payments). The net
proceeds to the Company from the sale of the convertible debentures and the total possible payments
to all selling stockholders and any of their affiliates in the first year following the sale of the
convertible debentures are also provided.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->32<!-- /Folio -->
</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"><FONT size="1">

</FONT></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="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&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>Type of</B></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 nowrap align="left" style="border-bottom: 1px solid #000000"><B>Payee</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Payment</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount of Payment</B></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"><B><I>Payments Made to Selling Stockholders&#146; Contracting Parties</I></B></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">Feldman Weinstein &#038; Smith LLP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Cash</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">50,000</TD>
    <TD nowrap>(1)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B><I>Possible Future Payments to Selling Stockholders and their Affiliates</I></B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Debenture holders (Interest)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Cash</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">403,750</TD>
    <TD nowrap>(2)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Debenture holders (Liquidated Damages)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">Cash</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">598,381</TD>
    <TD nowrap>(3)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Total possible payments to selling stockholders and
related parties in first year:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,052,131</B></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"><B>Minimum net proceeds from private placement financing (4):</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>2,687,749</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Feldman Weinstein &#038; Smith LLP served as counsel to one of the selling stockholders in
connection with the private placement financing.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>This represents the total interest payable under the terms of the debentures during the first
year following the sale of the debentures, based upon an assumed annual interest rate of 10%.
The actual annual interest applicable to the debentures is the greater of (i)&nbsp;10% or (ii)
LIBOR for the applicable period plus 4%. This amount does not include any late fees that we
could be required to pay if payments of interest are not made in a timely manner.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>This represents the maximum amount of liquidated damages that we could be required to pay to
the selling stockholders if a registration statement registering substantially the shares
covered by this prospectus is not declared effective on or prior to March&nbsp;17, 2008 (150&nbsp;days
after the sale of the debentures). This amount does not include any interest that we could be
required to pay if payments of liquidated damages are not made in a timely manner.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Based on the total gross proceeds from the sale of the convertible debentures, less the total
possible payments to all selling stockholders, their affiliates and their contracting parties
in the first year following the sale of the convertible debentures as set forth in this table.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Potential Profits from Conversion of Debentures</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows the total possible profit that the selling stockholders could
realize as a result of the conversion discount for the shares of common stock underlying the
convertible debentures issued in our October&nbsp;2007 private placement financing.
</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="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&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>Market</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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">&nbsp;</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"><B>Price per</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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"><B>Combined</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Combined</B></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"><B>Share of</B></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"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Market</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Conversion</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Common</B></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"><B>Possible</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Price of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Price of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Possible</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Stock on</B></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"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Discount to</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" ><B>Date of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Conversion</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" ><B>Market</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Selling Stockholder</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Sale</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Price (1)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Debentures</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Debentures</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Debentures</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Price (2)</B></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">Rockmore Investment Master Fund Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">400,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,440,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">440,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Iroquois Master Fund Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">400,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,440,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">440,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Portside Growth and Opportunity Fund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">720,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">220,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hudson Bay Fund LP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">619,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">430,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">189,200</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hudson Bay Overseas Fund LTD</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">228,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">820,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">570,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">250,800</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gemini Master Fund, Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">360,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">110,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cranshire Capital, L.P.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">720,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">220,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,700,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>6,120,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4,250,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,870,000</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The conversion price of the debentures is subject to adjustment under certain circumstances,
including without limitation, stock splits, stock dividends, rights offerings, and the
issuance of shares of common stock or </TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->33<!-- /Folio -->
</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"><FONT size="1">

</FONT></DIV>





<DIV style="margin-top: 6pt">
<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%" nowrap align="left"><B>&nbsp;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>common stock equivalents at a price less than the
conversion price. We have agreed not to issue any shares of our common stock or common stock equivalents at a purchase price below $3.52 per share (subject
to adjustment for stock splits, dividends and the like) without prior stockholder approval. The
conversion price is not subject to adjustment based solely on fluctuations in the market price
of our common stock.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>This amount does not include the difference between the face value of the debentures and the
purchase price paid by the selling stockholders for such debentures.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Potential Profits from Exercise of Warrants</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows the total possible profit that the selling stockholders could
realize as a result of the exercise discounts for shares of common stock underlying both the
one-year warrants representing the right to purchase 1,495,952 shares of our common stock, and the
seven-year warrants representing the right to purchase an additional 1,495,952 shares of our common
stock, which warrants were issued as part of our October&nbsp;2007 private placement financing.
</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="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&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>Market</B></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>
    <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>
    <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"><B>Price per</B></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>
    <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>
    <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"><B>Share of</B></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"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Combined</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Combined</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Common</B></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"><B>Possible</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Market Price of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Exercise Price</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Possible</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Stock on</B></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"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>of Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Discount to</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" ><B>Date of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" ><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" ><B>Market</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Selling Stockholder</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Sale</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Price*</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Warrants</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Warrants</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Warrants</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Price</B></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">Rockmore Investment Master Fund Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">703,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,534,321</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,478,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">56,318</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Iroquois Master Fund Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">703,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,534,321</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,478,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">56,318</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Portside Growth and Opportunity Fund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">351,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,267,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,238,998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">28,159</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hudson Bay Fund LP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">302,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,089,756</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,065,539</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">24,217</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hudson Bay Overseas Fund LTD</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">401,268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,444,565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,412,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">32,102</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gemini Master Fund, Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">633,578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">619,499</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,079</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cranshire Capital, L.P.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">351,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,267,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,238,998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">28,159</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,991,904</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>10,770,855</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>10,531,503</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>239,352</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>The exercise price of the warrants is subject to adjustment under certain circumstances,
including without limitation, stock splits, stock dividends, rights offerings, and the
issuance of shares of common stock or common stock equivalents at a price less than the
exercise price. We have agreed not to issue any shares of our common stock or common stock
equivalents at a purchase price below $3.52 per share (subject to adjustment for stock splits,
dividends and the like) without prior stockholder approval. The exercise price is not subject
to adjustment based solely on fluctuations in the market price of our common stock.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Comparison of Company Net Proceeds to Potential Investor Profit from Private Placement Financing</B>
</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="88%">&nbsp;</TD>
    <TD width="5%">&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">Proceeds from private placement financing:</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">Gross Proceeds from private placement financing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,739,880</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less payments made or required to be made to selling stockholders
and related parties (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,052,131</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">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Resulting net proceeds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,687,749</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Combined total possible discount to market price:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Debentures (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,870,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Warrants (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">239,352</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,109,352</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" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Payments made or required to be made to selling stockholders &#043;
combined total possible discount to market price)/Net proceeds from
private placement financing:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">117.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Percentage averaged over term of the convertible debentures (2&nbsp;years)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">58.8</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->34<!-- /Folio -->
</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"><FONT size="1">

</FONT></DIV>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Please see the table and related footnote disclosure set forth above under the caption
&#147;&#151;Payments Made in Connection with Private Placement Financing&#148; for further explanation and
certain assumptions made in determining this amount.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Please see the tables and related footnote disclosure set forth above under the captions
&#147;&#151;Potential Profits from Conversion of Debentures&#148; and &#147;&#151;Potential Profits from Exercise of
Warrants&#148; for further explanation and certain assumptions made in determining these amounts.</TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>


<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PLAN OF DISTRIBUTION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each selling stockholder of our common stock and any of their pledges, assignees, and
successors-in-interest may, from time to time, sell any or all of their shares of common stock on
the Nasdaq Stock Market or any other stock exchange, market or trading facility on which the shares
are traded or in private transactions. These sales may be at fixed or negotiated prices. A
selling stockholder may use any one or more of the following methods when selling shares:
</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ordinary brokerage transactions and transactions in which the broker-dealer solicits
purchasers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>block trades in which the broker-dealer will 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>

</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->35<!-- /Folio -->
</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 style="margin-top: 6pt"><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="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>purchases by a broker-dealer as principal and resale by the broker-dealer for its
account;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an exchange distribution in accordance with the rules of the applicable exchange;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>privately negotiated transactions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>settlement of short sales entered into after the effective date of the registration
statement of which this prospectus is a part;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>broker-dealers may agree with the selling stockholders to sell a specified number of
such shares at a stipulated price per share;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>through the writing or settlement of options or other hedging transactions, whether
through an options exchange or otherwise;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a combination of any such methods of sale; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any other method permitted pursuant to applicable law.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selling stockholders may also sell shares under Rule&nbsp;144 under the Securities Act of 1933,
as amended (the &#147;Securities Act&#148;), if available, rather than under this prospectus.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Broker-dealers engaged by the selling stockholders may arrange for other broker dealers to
participate in sales. Broker-dealers may receive commissions or discounts from the selling
stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this
prospectus, in the case of an agency transaction not in excess of a customary brokerage commission
in compliance with FINRA NASD Rule&nbsp;2440; and in the case of a principal transaction a markup or
markdown in compliance with NASD IM-2440.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the sale of the common stock or interests therein, the selling stockholders
may enter into hedging transactions with broker-dealers or other financial institutions, which may
in turn engage in short sales of the common stock in the course of hedging the positions they
assume. The selling stockholders may also sell shares of the common stock short and deliver these
securities to close out their short positions, or loan or pledge the common stock to broker-dealers
that in turn may sell these securities. The selling stockholders may also enter into option or
other transactions with broker-dealers or other financial institutions or the creation of one or
more derivative securities which require the delivery to such broker-dealer or other financial
institutions of shares offered by this prospectus, which shares such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect
such transaction).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selling stockholders and any broker-dealers or agents that are involved in selling the
shares may be deemed to be &#147;underwriters&#148; within the meaning of the Securities Act in connection
with such sales. In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act. Each selling stockholder has informed us that it does not
have any written or oral agreement or understanding, directly or indirectly, with any person to
distribute our common stock. In no event shall any broker-dealer receive fees, commissions and
markups which, in the aggregate, would exceed eight percent (8%).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are required to pay certain fees and expenses incurred by us incident to the registration
of the shares. We have agreed to indemnify the selling stockholders against certain losses,
claims, damages and liabilities, including liabilities under the Securities Act.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because selling stockholders may be deemed to be &#147;underwriters&#148; within the meaning of the
Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act
including
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->36<!-- /Folio -->
</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" style="font-size: 10pt; margin-top: 6pt">Rule&nbsp;172 thereunder. In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule&nbsp;144 under the Securities Act may be sold under Rule&nbsp;144 rather than under
this prospectus. There is no underwriter or coordinating broker acting in connection with the
proposed sale of the resale shares by the selling stockholders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We agreed to keep this prospectus effective until the earlier of (i)&nbsp;the date on which the
shares may be resold by the selling stockholders without registration and without regard to any
volume limitations by reason of Rule 144(k) under the Securities Act or any other rule of similar
effect or (ii)&nbsp;all of the shares registered under the registration statement of which this
prospectus forms a part have been sold. The resale shares will be sold only through registered or
licensed brokers or dealers if required under applicable state securities laws. In addition, in
certain states, the resale shares may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration or qualification requirement is
available and is complied with.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under applicable rules and regulations under the Exchange Act, any person engaged in the
distribution of the resale shares may not simultaneously engage in market making activities with
respect to the common stock for the applicable restricted period, as defined in Regulation&nbsp;M, prior
to the commencement of the distribution. In addition, the selling stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations thereunder, including
Regulation&nbsp;M, which may limit the timing of purchases and sales of shares of the common stock by
the selling stockholders or any other person. We will make copies of this prospectus available to
the selling stockholders and have informed them of the need to deliver a copy of this prospectus to
each purchaser at or prior to the time of the sale (including by compliance with Rule&nbsp;172 under the
Securities act
</DIV>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our certificate of incorporation incorporates certain provisions permitted under the Delaware
General Corporation Law 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Certificate of Incorporation, as amended, also contains provisions to indemnify the
directors and officers, or other agents to the fullest extent permitted by the Delaware General
Corporation Law. These provisions may have the practical effect in certain cases of eliminating the
ability of stockholders 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
officers or directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insofar as indemnification for liabilities arising under the Securities Act 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 Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore, unenforceable.
</DIV>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>LEGAL MATTERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The validity of the shares of common stock offered hereby and certain other legal matters will
be passed upon for us by Locke Lord Bissell &#038; Liddell LLP, Dallas, Texas.
</DIV>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXPERTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements as of December&nbsp;31, 2006 and for the year then ended
incorporated by reference in this prospectus have been so included in reliance on the report of
Lane
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->37<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Gorman Trubitt, L.L.P., an independent registered public accounting firm, given upon the
authority of said firm as experts in auditing and accounting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements as of December&nbsp;31, 2004 and 2005 and for the years then
ended incorporated by reference in this prospectus have been so included in reliance on the report
of BDO Seidman, LLP, an independent registered public accounting firm, given upon the authority of
said firm as experts in auditing and accounting.
</DIV>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>WHERE YOU CAN FIND MORE INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have filed a registration statement on Form S-3 with the Commission under the Securities
Act with respect to the shares of common stock offered by this prospectus. This prospectus, which
constitutes a part of the registration statement, does not contain all of the information included
in the registration statement or the schedules, exhibits and amendments to the registration
statement. You should refer to the registration statement and its exhibits and schedules for
further information. Statements made in this prospectus as to any of our contracts, agreements or
other documents referred to are not necessarily complete. In each instance, if we have filed a copy
of such contract, agreement or other document as an exhibit to the registration statement, you
should read the exhibit for a more complete understanding of the matter involved. Each statement
regarding a contract, agreement or other document is qualified in all respects by reference to the
actual document. Certain information is also incorporated by reference into this prospectus as
described under &#147;Incorporation of Documents by Reference.&#148;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You may read and copy information omitted from this prospectus but contained in the
registration statement at the Public Reference Section of the SEC at 100 F Street, N.E., Room&nbsp;1580,
Washington, D.C. 20549 at prescribed rates. Please call the Commission at 1-800-SEC-0330 for
further information on the operation of the public reference rooms. In addition, materials filed
electronically with the SEC are available at the SEC&#146;s world wide web site at
<U>http://www.sec.gov</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to the information and periodic reporting requirements of the Securities
Exchange Act of 1934, and, in accordance therewith, file periodic reports, proxy statements and
other information with the SEC. Such periodic reports, proxy statements and other information are
available for inspection and copying at the Public Reference Room and web site of the SEC referred
to above. We also furnish our stockholders with annual reports containing our financial statements
audited by an independent registered public accounting firm and quarterly reports containing our
unaudited financial information. We maintain a web site at <U>www.naturalhealthtrendscorp.com</U><I>.</I>
You may access our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and amendments to those reports, filed or furnished pursuant to section 13(a) or 15(d) of
the Exchange Act with the Commission free of charge at our web site as soon as reasonably
practicable after this material is electronically filed with, or furnished to, the Commission. The
reference to our web address does not constitute incorporation by reference of the information
contained at that site.
</DIV>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>INCORPORATION OF DOCUMENTS BY REFERENCE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Commission allows us to incorporate by reference the information we file with it. This
means that we can disclose information to you by referring you to those documents. The documents
that have been incorporated by reference are an important part of the prospectus, and you should
review that information in order to understand the nature of any investment by you in our common
stock. We are incorporating by reference the documents listed below:
</DIV>


<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our Annual Report on Form 10-K for the fiscal year ended December&nbsp;31, 2006; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our Quarterly Reports on Form 10-Q for each of the fiscal quarters ended March&nbsp;31,
2007, June&nbsp;30, 2007 and September&nbsp;30, 2007; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The description of our shares of common stock contained in our Form 8-A dated June
20, 1995; and</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->38<!-- /Folio -->
</DIV>

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our Forms 8-K filed on January&nbsp;9, 2007, February&nbsp;26, 2007, March&nbsp;6, 2007, March&nbsp;19,
2007, April&nbsp;17, 2007, April&nbsp;26, 2007, May&nbsp;9, 2007, May&nbsp;16, 2007, May&nbsp;30, 2007, August&nbsp;30,
2007, October&nbsp;19, 2007, October&nbsp;22, 2007 and November 19, 2007 (as amended by a Form 8-K/A filed November 20, 2007); and</TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All documents subsequently filed by us pursuant to Section&nbsp;13(a), 13(c), 14 or 15(d)
of the Exchange Act, prior to the termination of the offering, shall be deemed to be
incorporated by reference into this prospectus.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will provide to each person, including any beneficial owner, to whom this prospectus is
delivered, a copy of any or all of the reports or documents that have been incorporated by
reference into this prospectus. If you would like a copy of any of these documents, at no cost,
please write or call us at:
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Natural Health Trends Corp.<BR>
2050 Diplomat Drive<BR>
Dallas, Texas 75234<BR>
(972)&nbsp;241-4080<BR>
Attn: General Counsel
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any statement contained in a document which is incorporated by reference in this prospectus is
automatically updated and superseded if information contained in the prospectus modifies or
replaces this information.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->39<!-- /Folio -->
</DIV>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II &#151; INFORMATION NOT REQUIRED IN PROSPECTUS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;14. Other Expenses of Issuance and Distribution.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows the costs and expenses, other than underwriting discounts and
commissions, payable in connection with the sale and distribution of the common shares being
registered. All of these expenses will be paid by us. All amounts except for the SEC registration
fee are estimated.
</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="88%">&nbsp;</TD>
    <TD width="5%">&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">SEC registration fee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">271</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounting fees and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30,000</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 align="left">$</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Filing costs and other miscellaneous fees and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,000</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">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">65,271</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>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;15. Indemnification of Officers and Directors.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The General Corporation Law of the State of Delaware and the Company&#146;s Certificate of
Incorporation and Bylaws provide for indemnification of the Company&#146;s directors and officers for
liabilities and expenses that they may incur in such capacities. In general, directors and officers
are indemnified with respect to actions taken in good faith in a manner reasonably believed to be
in, or not opposed to, the Company&#146;s best interests and, with respect to any criminal action or
proceeding, actions that the indemnitee had no reasonable cause to believe were unlawful.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the indemnification provided by the Delaware General Corporation Law and the
Company&#146;s Certificate of Incorporation and Bylaws, the Company has entered into an Indemnification
Agreement with each of its directors and one executive officer (each, an &#147;Indemnified Party&#148;)
pursuant to which the Company agrees to indemnify each Indemnified Party (1)&nbsp;in general, for all
reasonable expenses (including attorneys&#146; fees) (which shall be advanced to the Indemnified Party)
incurred by the Indemnified Party in connection with any action, suit, arbitration, alternate
dispute resolution mechanism, investigation (including any internal corporate investigation),
administrative hearing or any other actual, threatened or completed proceeding, whether civil,
criminal, administrative or investigative, formal or informal and any appeal from any of the
foregoing, other than one initiated by the Indemnified Party (unless initiated by the Indemnified
Party to enforce the Indemnified Party&#146;s rights under such Indemnified Party&#146;s Indemnification
Agreement) (each of the foregoing, a &#147;Proceeding&#148;) to the fullest extent permitted by applicable
law, (2)&nbsp;for all reasonable expenses (including attorneys&#146; fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such Indemnified Party or on behalf of such
Indemnified Party in connection with a Proceeding in which the Indemnified Party is, or is
threatened to be made, a party to or is otherwise involved in, other than a Proceeding by or in the
right of the Company, provided that the Indemnified Party acted in good faith and has not been
adjudged during the course of such Proceeding to have derived an improper personal benefit from the
transaction or occurrence forming the basis of such Proceeding, and (3)&nbsp;for all reasonable expenses
(including attorneys&#146; fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such Indemnified Party or on behalf of such Indemnified Party in connection
with a Proceeding brought by or in the right of the Company to procure a judgment in its favor in
which the Indemnified Party is, or is threatened to be made, a party to or is otherwise involved
in, provided that the Indemnified Party acted in good faith and has not been adjudged during the
course of such Proceeding to have derived an improper personal benefit from the transaction or
occurrence forming the basis of such Proceeding, and provided further that no indemnification will
be provided in respect of any claim, issue or matter as to which such Indemnified Party is adjudged
to be liable to the Company if applicable law prohibits such indemnification, proved that, if
applicable law so permits, indemnification shall nevertheless be made by the Company in such event
if and only to the extent that the court which is considering the matter shall so determine.
</DIV>

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

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

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16. Exhibits and Financial Statement Schedules.</B>
</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="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Exhibit Description</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Reference</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">4.1
</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>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(a)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top" align="center"><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="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">5.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Legal Opinion of Locke Lord Bissell &#038; Liddell LLP
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">*</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top" align="center"><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="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Lane Gorman Trubitt, L.L.P.
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">*</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top" align="center"><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="center" valign="bottom">&nbsp;</TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">23.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of BDO Seidman, LLP
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&#134;</TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top" align="center"><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="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">23.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Locke Lord Bissell &#038; Liddell LLP (included in Exhibit&nbsp;5.1)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">*</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top" align="center"><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="center" valign="bottom">&nbsp;</TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">24.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power of Attorney
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&#134;</TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top" align="center"><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="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">99.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities Purchase Agreement dated October&nbsp;19, 2007 between
the Company and certain Purchasers named therein
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(b)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top" align="center"><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="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">99.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Registration Right Agreement between the Company and
certain Purchasers
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(b)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top" align="center"><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="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">99.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Variable Rate Convertible Debenture issued by the
Company to certain Purchasers
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(b)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top" align="center"><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="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">99.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Seven-Year and One-Year Warrants to Purchase Shares of
Common Stock of the Company issued to certain Purchasers
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(b)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Filed herewith</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR valign="top">
    <TD nowrap align="left">&#134;</TD>
    <TD>&nbsp;</TD>
    <TD>Previously filed</TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>
<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>Previously filed May&nbsp;8, 2006, as an Exhibit to the Company&#146;s Annual Report on Form 10-K, and
incorporated herein by reference.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>Previously filed October&nbsp;22, 2007, as an Exhibit to the Company&#146;s Form 8-K, and incorporated
herein by reference.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;17. Undertakings</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned registrant hereby undertakes:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;To file, during any period in which offers or sales are being made, a post-effective
amendment to this registration statement:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;To include any prospectus required by Section&nbsp;10(a)(3) of the Securities Act of 1933;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;To reflect in the prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities
offered (if the total dollar value of the securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20&nbsp;percent change in the
maximum aggregate offering price set forth in the &#147;Calculation of Registration Fee&#148; table in the
effective registration statement.
</DIV>


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

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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;To include any material information with respect to any plan of distribution not
previously disclosed in the registration statement or any material change to such information in
the registration statement;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provided, however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) above do not apply if
the information required to be included in a post-effective amendment by those paragraphs is
contained in reports filed with or furnished to the Commission by the registrant pursuant to
Section&nbsp;13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement, or is contained in a form of prospectus filed pursuant to
Rule 424(b) that is part of the registration statement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;That, for the purpose of determining any liability under the Securities Act of 1933, each
such post-effective amendment 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;To remove from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;That, for the purpose of determining liability under the Securities Act of 1933 to any
purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements relying on Rule&nbsp;430B or other than
prospectuses filed in reliance on Rule&nbsp;430A, shall be deemed to be part of and included in the
registration statement as of the date it is first used after effectiveness. <I>Provided, however, </I>that
no statement made in a registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to such date of first use.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;The undersigned registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant&#146;s annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan&#146;s annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the registration statement 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&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
Commission such indemnification is against public policy as expressed in the Act 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 Act and will be governed by the
final adjudication of such issue.
</DIV>

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it
has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and
has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Dallas, State of Texas, on December&nbsp;28, 2007.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<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><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR>
    <TD align="left">Date:  December 28, 2007&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Chris T. Sharng
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>

<TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Chris T. Sharng&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">President<br>
(Principal Executive Officer)&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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>

<DIV align="left"><FONT size="1">

</FONT></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="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&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>

<!-- End Table Head -->
<!-- Begin Table Body -->
<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 align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Chris T. Sharng
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">December&nbsp;28, 2007</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="1" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" 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">Chris T. Sharng
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(Principal Executive Officer)</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 align="left" 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:50px; text-indent:-0px">*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President and Chief Financial
Officer
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">December&nbsp;28, 2007</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="1" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" 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">Timothy S. Davidson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(Principal Financial and Accounting Officer)</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 align="left" 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:50px; text-indent:-0px">*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the Board and Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">December&nbsp;28, 2007</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="1" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" 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 align="left" 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 align="left" 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:50px; text-indent:-0px">*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="white-space: nowrap">December&nbsp;28, 2007</FONT></TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="1" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" 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">Stefan W. Zuckut</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" 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 align="left" 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">* By: /s/ Chris T. Sharng
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="white-space: nowrap">December&nbsp;28, 2007</FONT></TD>
</TR>
<TR style="font-size: 1px">

<TD colspan="1" valign="top" align="left"><DIV style="margin-left: 22pt; border-top: 1px solid #000000">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" 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:24px; text-indent:-0px">&nbsp;&nbsp;Chris
T. Sharng, Attorney-in-Fact</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->II-4<!-- /Folio -->
</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="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Exhibit Description</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Reference</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">4.1
</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>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(a)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top" align="center"><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="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">5.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Legal Opinion of Locke Lord Bissell &#038; Liddell LLP
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">*</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top" align="center"><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="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Lane Gorman Trubitt, L.L.P.
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">*</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top" align="center"><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="center" valign="bottom">&nbsp;</TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>

<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">23.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of BDO Seidman, LLP
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&#134;</TD>
</TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>

<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top" align="center"><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="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">23.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Locke Lord Bissell &#038; Liddell LLP (included in Exhibit&nbsp;5.1)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">*</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top" align="center"><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="center" valign="bottom">&nbsp;</TD>
</TR>

<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">24.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power of Attorney</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&#134;</TD>
</TR>

<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top" align="center"><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="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">99.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities Purchase Agreement dated October&nbsp;19, 2007 between
the Company and certain Purchasers named therein
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(b)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top" align="center"><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="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">99.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Registration Right Agreement between the Company and
certain Purchasers
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(b)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top" align="center"><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="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">99.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Variable Rate Convertible Debenture issued by the
Company to certain Purchasers
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(b)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top" align="center"><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="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">99.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Seven-Year and One-Year Warrants to Purchase Shares of
Common Stock of the Company issued to certain Purchasers
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(b)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Filed herewith</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>
<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR valign="top">
    <TD nowrap align="left">&#134;</TD>
    <TD>&nbsp;</TD>
    <TD>Previously filed</TD>
</TR>
 <TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>


<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>Previously filed May&nbsp;8, 2006, as an Exhibit to the Company&#146;s Annual Report on Form 10-K, and
incorporated herein by reference.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>Previously filed October&nbsp;22, 2007, as an Exhibit to the Company&#146;s Form 8-K, and incorporated
herein by reference.</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt"><!-- Folio -->II-5<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-5.1
<SEQUENCE>2
<FILENAME>d52624exv5w1.htm
<DESCRIPTION>LEGAL OPINION OF LOCKE LORD BISSELL & LIDDELL LLP
<TEXT>
<HTML>
<HEAD>
<TITLE>exv5w1</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">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;5.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>&#091;LLB &#038; L LETTERHEAD&#093;</B>
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">December&nbsp;28, 2007
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Natural Health Trends Corp.<BR>
2050 Diplomat Drive<BR>
Dallas, Texas<BR>
Ladies and Gentlemen:

</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have acted as special counsel to Natural Health Trends Corp., a Delaware corporation (the
&#147;Company&#148;), in connection with the Registration Statement on Form S-3 (the &#147;Registration
Statement&#148;) filed by the Company with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the &#147;Securities Act&#148;), relating to the registration of
3,195,952 shares of common stock, par value $.001 per share (the &#147;Shares&#148;), 1,700,000 of which are
issuable in connection with variable rate convertible debentures, and 1,495,952 of which are
issuable upon the exercise of certain warrants (collectively, the &#147;Underlying Common Stock&#148;), all
as described in the Registration Statement.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In that connection, we have examined originals, or copies certified or otherwise identified to
our satisfaction, of the Registration Statement and the exhibits thereto and such documents,
corporate records and other instruments as we have deemed necessary or appropriate for the purposes
of this opinion, including, without limitation, (a)&nbsp;the Certificate of Incorporation of the
Company, (b)&nbsp;the Bylaws of the Company and (c)&nbsp;certain resolutions adopted by the board of
directors of the Company. We have relied, with respect to certain factual matters, on the
representations of officers of the Company and documents furnished to us by the Company without
independent verification of their accuracy. We have also assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and the conformity to
authentic original documents of all documents submitted to us as copies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based upon the foregoing, we are of the opinion that the Underlying Common Stock has been duly
authorized by all necessary corporate action and such Underlying Common Stock, when issued and
delivered in accordance with the terms of the variable rate convertible debentures or the exercise
of the warrants, as the case may be, will be legally issued, fully paid and nonassessable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This opinion is limited to the laws of the State of Delaware and the federal laws of the
United States of America, each as presently in effect, and is based upon our review of such laws
and the reported judicial decisions interpreting such laws. We do not express any opinion as to
the laws of any other jurisdiction and we express no opinion as to the effect of any other laws on
the opinions stated herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This opinion is being furnished in accordance with the requirements of Item&nbsp;601(b)(5) of
Regulation&nbsp;S-K under the Securities Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We hereby consent to the filing of this opinion as an Exhibit to the Registration Statement.
We also consent to the reference to our firm under the caption &#147;Legal Matters&#148; in the Registration
Statement. In giving such opinion and consent, we do not thereby admit that we are acting within
the category of persons whose consent is required under Section&nbsp;7 of the Securities Act and the
rules and regulations promulgated thereunder.
</DIV>

<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">Very truly yours,<br><BR>
LOCKE LORD BISSELL &#038; LIDDELL LLP<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/ John B. McKnight
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">John B. McKnight&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


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

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>3
<FILENAME>d52624exv23w1.htm
<DESCRIPTION>CONSENT OF LANE GORMAN TRUBITT, L.L.P.
<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">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;23.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Consent of Independent Registered Public Accounting Firm</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Natural Health Trends Corp.<BR>
Dallas, Texas

</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We consent to the reference to our firm under the caption
&#147;Experts&#148; in the Amendment No. 1 to Registration Statement
(Form S-3) and related Prospectus of Natural Health Trends Corp. for
the registration of 3,195,952
shares of its common stock and to the incorporation by reference therein of our report dated March
20, 2007, with respect to the consolidated financial statements of Natural Health Trends Corp.
included in its Annual Report (Form 10-K) for the year ended December&nbsp;31, 2006 filed with the
Securities and Exchange Commission.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">/s/ Lane Gorman Trubitt, L.L.P.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Dallas, Texas</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 0pt">December&nbsp;28, 2007
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

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

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>4
<FILENAME>filename4.htm
<TEXT>
<HTML>
<HEAD>
<TITLE>corresp</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">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><FONT style="font-size:24pt"><FONT style="font-variant: SMALL-CAPS">Locke Lord Bissell &#038; Liddell</FONT></FONT> <FONT style="font-size:16pt">LLP</FONT>
</DIV>

<DIV align="center" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">Attorneys &#038; Counselors</FONT></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="21%"></TD>
    <TD width="3%"></TD>
    <TD width="51%"></TD>
    <TD width="3%"></TD>
    <TD width="21%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">2200 Ross Avenue <BR>
Suite&nbsp;2200<BR>
Dallas, TX 75201
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-variant: SMALL-CAPS">Atlanta <B>&#149;</B> Austin <B>&#149;</B> Chicago <B>&#149;</B> Dallas <B>&#149;</B> Houston <B>&#149;</B> London<BR>
Los Angeles <B>&#149;</B> New Orleans <B>&#149;</B> New York <B>&#149;</B> Sacramento<BR>
Washington, D.C.</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Phone: (214)&nbsp;740-8000<BR>
Fax: (214)&nbsp;740-8800<BR>
www.lockelord.com</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Direct-Number: (214)&nbsp;740-8675<BR>
Direct-Fax: (214)&nbsp;756-8675<BR>
E-mail: jmcknight@lockelord.com
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">December&nbsp;28, 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>VIA EDGAR</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">H. Christopher Owings<BR>
Assistant Director<BR>
Division of Corporate Finance<BR>
Securities and Exchange Commission<BR>
100 F Street, N.E.<BR>
Washington, D.C. 20549

</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Re:</TD>
    <TD>&nbsp;</TD>
    <TD>Natural Health Trends Corp.<br>
Registration Statement on Form&nbsp;S-3 (File No.&nbsp;333-147480)<br>
Form&nbsp;10-K filed March&nbsp;28, 2007 (File No.&nbsp;000-26272)<br>
Form&nbsp;10-Q filed November&nbsp;14, 2007 (File No.&nbsp;000-26272)</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Dear Mr.&nbsp;Owings:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are counsel to Natural Health Trends Corp., a Delaware corporation (the &#147;Company&#148;). On
behalf of the Company, enclosed for your review are three copies of Amendment No.&nbsp;1 (the
&#147;Amendment&#148;) to the Registration Statement on Form S-3 (File No.&nbsp;333-147480) of the Company (the
&#147;Registration Statement&#148;), which is being filed with the Securities and Exchange Commission (the
&#147;Commission&#148;) on December&nbsp;28, 2007. Two of the enclosed copies of the Amendment have been marked
to indicate all changes made to the Registration Statement as filed with the Commission on November
16, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Amendment is being filed in response to comments of the Staff contained in your letter of
December&nbsp;14, 2007 relating to the Registration Statement. These comments, and the responses on
behalf of the Company to these comments, are set forth below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>General</U>
</DIV>


<DIV style="margin-top: 6pt">
<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%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We note that you are registering the sale of 5,156,361 shares. Given the size relative to
the number of shares outstanding held by non-affiliates, the nature of the offering and the
selling security holders, the transaction appears to be a primary offering. Because you are
not eligible to conduct a primary offering on Form S-3 you are not eligible to conduct a
primary at the market offering under Rule&nbsp;415(a)(4).</TD>
</TR>


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

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">H. Christopher Owings<BR>
Securities and Exchange Commission<BR>
December&nbsp;28, 2007

</DIV>

<DIV style="margin-top: 6pt">
<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%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If you disagree with our analysis, please advise the staff of your basis for determining
that the transaction is appropriately characterized as a transaction that is eligible to be
made under Rule&nbsp;415(a)(1)(i). In your analysis, please address the following among any
other relevant factors:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The number of selling shareholders and the percentage of the overall offering made
by each shareholder;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The date on which and the manner in which each selling shareholder received the
shares and/or the overlying securities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The relationship of each selling shareholder with the company, including an analysis
of whether the selling shareholder is an affiliate of the company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any relationships among the selling shareholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The dollar value of the shares registered in relation to the proceeds that the
company received from the selling shareholders for the securities, excluding amounts of
proceeds that were returned (or will be returned) to the selling shareholders and/or
their affiliates in fees or other payments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The discount at which the shareholders will purchase the common stock underlying the
convertible debentures (or any related security, such as a warrant or option) upon
conversion or exercise; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Whether or not any of the selling shareholders is in the business of buying and
selling securities.</TD>
</TR>

</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR>
    <TD style="font-size: 6pt"><FONT size="1">

</FONT></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>



<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>In response to the Staff&#146;s comments, the Company has amended the Registration Statement to
reduce the number of shares of the Company&#146;s common stock being registered for resale by the
selling stockholders to 3,195,952 (reflecting only the shares of common stock into which the
debentures are convertible and for which the
warrants having a term of one-year are exercisable). This number of shares of common stock
is only slightly in excess of one-third of the number of the Company&#146;s total outstanding
shares of common stock held by non-affiliates immediately prior to the convertible debenture
transaction, which on October&nbsp;19, 2007 was 9,329,469 shares (this share amount is disclosed
in the Amendment on page 26 thereof). As a result, we believe that this is a valid
secondary offering under Rule&nbsp;415. With respect to the above specific queries, please note the added disclosure
provided under the heading &#147;SELLING STOCKHOLDERS&#148; beginning on page 26 of the Amendment and the Company&#146;s related responses to Comments
2-8 and 10 below.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt"><FONT size="1">

</FONT></TD>
</TR>


<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Please provide us, with a view toward disclosure in the prospectus, with the total dollar
value of the securities underlying the convertible debentures that you have registered for
resale using the number of underlying securities that you have registered for resale and</TD>
</TR>

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

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">H. Christopher Owings<BR>
Securities and Exchange Commission<BR>
December&nbsp;28, 2007

</DIV>

<DIV style="margin-top: 6pt">
<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%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the market price per share for those securities on the date of the sale of the convertible
debentures.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Please see the disclosure under the heading &#147;SELLING STOCKHOLDERS&#151;Dollar Value of Common
Stock Underlying Debentures&#148; on page 32 of the Amendment.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Please provide us, with a view toward disclosure in the prospectus, tabular disclosure of the
dollar amount of each payment, including the value of any payments to be made in common stock,
in connection with the transaction that you have made or may be required to make to any
selling shareholder, any affiliate of a selling shareholder, or any person with whom any
selling shareholder has a contractual relationship regarding the transaction, including any
interest payments, liquidated damages, payments made to &#147;finders&#148; or &#147;placement agents,&#148; and
any other payments or potential payments. Please provide footnote disclosure of the terms of
each such payment. Please do not include any repayment of principal on the convertible
debentures in this disclosure.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Further, please provide us with a view toward disclosure in the prospectus, with disclosure
of the net proceeds to the issuer from the sale of the convertible debentures and the total
possible payments to all selling shareholders and any of their affiliates in the first year
following the sale of convertible debentures.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Please see the disclosure under the heading &#147;SELLING STOCKHOLDERS&#151;Payments Made in
Connection with Private Placement Financing&#148; on pages 32-33 of the Amendment.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Please provide us, with a view toward disclosure in the prospectus, with tabular disclosure
of:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the total possible profit the selling shareholders could realize as a result of the
conversion discount for the securities underlying the convertible debentures, presented
in a table with the following information disclosed separately:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the market price per share of the securities underlying the convertible
debentures on the date of the sale of the convertible debentures; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the conversion price per share of the underlying securities on the date of
the sale of the convertible debentures, calculated as follows:</TD>
</TR>


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

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">H. Christopher Owings<BR>
Securities and Exchange Commission<BR>
December&nbsp;28, 2007

</DIV>

<DIV style="margin-top: 6pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>if the conversion price per share is set at a fixed price, use the
price per share established in the convertible debentures; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>if the conversion price per share is not set a fixed price and,
instead, is set at a floating rate in relationship to the market price
of the underlying security, use the conversion discount rate and the
market rate per share on the date of the sale of the convertible note
and determine the conversion price per share as of that date;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the total possible shares underlying the convertible debentures, assuming no
interest payments and complete conversion throughout the term of the debentures;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the combined market price of the total number of shares underlying the convertible
debentures, calculated by using the market price per share on the date of the sale of
the convertible debentures and the total possible shares underlying the convertible
debentures;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the total possible shares the selling shareholders may receive and the combined
conversion price of the total number of shares underlying the convertible debentures
calculated by using the conversion price on the date of the sale of the convertible
debentures and the total possible number of shares the selling shareholders may
receive; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the total possible discount to the market price as of the date of the sale of the
convertible debentures, calculated by subtracting the total conversion price on the
date of the sale of the convertible debentures from the combined market price of the
total number of shares underlying the convertible debentures on that date.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If there are provisions in the convertible debentures that could result in a change in the
price per share upon the occurrence of certain events, please provide additional tabular
disclosure as appropriate. For example, if the conversion price per share is fixed unless
and until the market price falls below a stated price, at which point the conversion price
per share drops to a lower price, please provide additional disclosure.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Please see the disclosure under the heading &#147;SELLING STOCKHOLDERS&#151;Potential Profits from
Conversion of Debentures&#148; on pages 33-34 of the Amendment.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Please provide us, with a view toward disclosure in the prospectus, with tabular disclosure
of:</TD>
</TR>

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

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">H. Christopher Owings<BR>
Securities and Exchange Commission<BR>
December&nbsp;28, 2007

</DIV>

<DIV style="margin-top: 6pt">
<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%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the total possible profit to be realized as a result of any conversion discounts for
securities underlying any other warrants, options, notes, or other securities of the
issuer that are held by the selling shareholders or any affiliates of the selling
shareholders, presented in a table with the following information disclosed separately:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>market price per share of the underlying securities on the date of the sale
of that other security; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the conversion/exercise price per share as of the date of the sale of that
other security, calculated as follows:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>if the conversion/exercise price per share is set a fixed price, use
the price per share on the date of the sale of that other security; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>if the conversion/exercise price per share is not set a fixed price,
and, instead, is set at a floating rate in relationship to the market
price of the underlying security, use the conversion/exercise discount
rate and the market rate per share on the date of the sale of that
other security and determine the conversion price per share as of that
date;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the total possible shares to be received under the particular securities, assuming
complete conversion/exercise;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the combined market price of the total number of underlying shares, calculated by
using the market price per share on the date of the sale of that other security and the
total possible shares to be received;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the total possible shares to be received and the combined conversion price of the
total number of shares underlying that other security calculated by using the
conversion price on the date of the sale of that other security and the total possible
number of underlying shares; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the total possible discount to the market price as of the date of the sale of that
other security, calculated by subtracting the total conversion/exercise price on the
date of the sale of that other security from the combined market price of the total
number of underlying shares on that date.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Please see the disclosure under the heading &#147;SELLING STOCKHOLDERS&#151;Potential Profits from
Exercise of Warrants&#148; on page 34 of the Amendment.</B></TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->5<!-- /Folio -->
</DIV>

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">H. Christopher Owings<BR>
Securities and Exchange Commission<BR>
December&nbsp;28, 2007

</DIV>

<DIV style="margin-top: 6pt">
<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%" nowrap align="left">6.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Please provide us, with a view toward disclosure in the prospectus, with tabular disclosure
of:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the gross proceeds paid or payable to the issuer in the convertible debentures
transaction;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all payments that have been made or that may be required to be made by the issuer
that are disclosed in response to current comment 2 (<U>sic</U>, comment 3);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the resulting net proceeds to the issuer; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the combined total possible profit to be realized as a result of any conversion
discounts regarding the securities underlying the convertible debentures and any other
warrants, options, notes, or other securities of the issuer that are held by the
selling shareholders or any affiliates of the selling shareholders that is disclosed in
response to current comments 3 and 4 (<U>sic</U>, comments 4 and 5).</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Further, please provide us, with a view toward disclosure in the prospectus, with disclosure
 &#151; as a percentage &#151; of the total amount of all possible payments, as disclosed in response
to current comment 2 (<U>sic</U>, comment 3), and the total possible discount to the market
price of the shares underlying the convertible debentures, as disclosed in response to
current comment 3 (presumably, <U>sic</U>, comments 4 and 5), divided by the net proceeds
to the issuer from the sale of the convertible debentures, as well as the amount of that
resulting percentage averaged over the term of the convertible debentures.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Please see the disclosure under the heading &#147;SELLING STOCKHOLDERS&#151;Comparison of Company Net
Proceeds to Potential Investor Profit from Private Placement Financing&#148; on pages 34-35 of
the Amendment.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">7.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Please provide us, with a view toward disclosure in the prospectus, with tabular disclosure
of all prior securities transactions between the issuer, or any of its predecessors, and the
selling shareholders, any affiliates of the selling shareholders, or any person with whom any
selling shareholder has a contractual relationship regarding the transaction, or any
predecessors of those persons, with the table including the following information disclosed
separately for each transaction.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the date of the transaction;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the number of shares of the class of securities subject to the transaction that were
outstanding prior to the transaction;</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->
</DIV>

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">H. Christopher Owings<BR>
Securities and Exchange Commission<BR>
December&nbsp;28, 2007

</DIV>

<DIV style="margin-top: 6pt">
<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%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the number of shares of the class of securities subject to the transaction that were
outstanding prior to the transaction and held by persons other than the selling
shareholders, affiliates of the company, or affiliates of the selling shareholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the number of shares of the class of securities subject to the transaction that were
issued or issuable in connection with the transaction;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the percentage of total issued and outstanding securities that were issued or
issuable in the transaction, assuming full issuance, with the percentage calculated by
taking the number of shares issued and outstanding prior to the applicable transaction
and held by persons other than the selling shareholders, affiliates of the company, or
affiliates of the selling shareholders, and dividing that number of the number of
shares issued or issuable in connection with the applicable transaction;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the market price per share of the class of securities subject to the transaction
immediately prior to the transaction, reverse split adjusted, if necessary; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the current market price per share of the class of securities subject to the
transaction, reverse split adjusted, if necessary.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>To the Company&#146;s and the selling stockholders&#146; knowledge, there have been no prior
securities transactions between the Company, or any of its predecessors, and any of the
selling stockholders, any affiliates of the selling stockholders, or any person with whom
any selling shareholder has a contractual relationship regarding the private placement
financing, or any of their respective predecessors.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">8.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Please provide us, with a view toward disclosure in the prospectus, with tabular disclosure
comparing:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the number of shares outstanding prior to the convertible debentures transaction
that are held by persons other than the selling shareholders, affiliates of the
company, and affiliates of the selling shareholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the number of shares registered for resale by the selling shareholder or affiliates
of the selling shareholders in prior registration statements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the number of shares registered for resale by the selling shareholders or affiliates
of the selling shareholders that continue to be held by the selling shareholders or
affiliates of the selling shareholders;</TD>
</TR>


</TABLE>
</DIV>
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</DIV>

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<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">H. Christopher Owings<BR>
Securities and Exchange Commission<BR>
December&nbsp;28, 2007

</DIV>

<DIV style="margin-top: 6pt">
<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%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the number of shares that have been sold in registered resale transactions by the
selling shareholders or affiliates of the selling shareholders; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the number of shares registered for resale on behalf of the selling shareholders or
affiliates of the selling shareholders in the current transaction.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In this analysis, the calculation of the number of outstanding shares should not include any
securities underlying any outstanding convertible securities, options, or warrants.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Disclosure responsive to this request is provided under heading &#147;SELLING
STOCKHOLDERS&#151;Shares of Common Stock Offered Hereby&#148; beginning on page 26 of the Amendment.
In light of the absence of any prior securities transactions between the Company and any of
the selling stockholders or their affiliates, our response to this request is provided in
textual, rather than tabular form.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">9.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Please provide us, with a view toward disclosure in the prospectus, with the following
information:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>whether the issuer has the intention, and a reasonable basis to believe that it will
have the financial ability, to make all payments on the overlying securities; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>whether &#151; based on information obtained from the selling shareholders &#151; any of the
selling shareholders have an existing short position in the company&#146;s common stock and,
if any of the selling shareholders have an existing short position in the company&#146;s
stock, the following additional information:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the date on which such selling shareholder entered into that short position;
and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the relationship of the date on which each such selling shareholder entered
into that short position to the date of the announcement of the convertible
debentures transaction and the filing of the registration statement, e.g.,
before or after the announcement of the convertible debentures transaction,
before the filing or after the filing of the registration statement, etc.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>The Company has the intention, and a reasonable basis to believe, that it will have the
financial ability to make all payments provided for in the convertible debentures as they
come due. A statement to this effect is included under the heading</B></TD>
</TR>


</TABLE>
</DIV>
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</DIV>

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">H. Christopher Owings<BR>
Securities and Exchange Commission<BR>
December&nbsp;28, 2007

</DIV>

<DIV style="margin-top: 6pt">
<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%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>&#147;SELLING STOCKHOLDERS&#151;Private Placement Financing&#151;Debentures&#148; on page 32 of the Amendment.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>The Company is advised by the Selling Stockholders that in the ordinary course of each
Selling Stockholder&#146;s business in trading securities positions, the Selling Stockholder may
enter into short sales. However, the Company is further advised that no such short sales
were entered into by any of the Selling Stockholders during
the period beginning with the time that the Selling Stockholders became aware that the
Company was contemplating a private placement and ending upon the public announcement of the
October&nbsp;2007 Private Placement Financing in which the Selling Stockholders participated.
Further, each Selling Stockholder advises that it is aware of and adheres to the position of
the Staff of the Commission set forth in Item&nbsp;A.65 of the SEC Telephone Interpretations
Manual.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">10.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Please provide us, with a view toward disclosure in the prospectus, with:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a materially complete description of the relationships and arrangements that have
existed in the past three years or are to be performed in the future between the
issuer, or any of its predecessors, and the selling shareholders, any affiliates of the
selling shareholders, or any person with whom any selling shareholder has a contractual
relationship regarding the transaction, or any predecessors of those persons &#151; the
information provided should include, in reasonable detail, a complete description of
the rights and obligations of the parties in connection with the sale of the
convertible debentures; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>copies of all agreements between the issuer, or any of its predecessors, and the
selling shareholders, any affiliates of the selling shareholders, or any person with
whom any selling shareholder has a contractual relationship regarding the transaction,
or any predecessors of those persons, in connection with the sale of the convertible
debentures.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If it is your view that such a description of the relationships and arrangements between and
among those parties already is presented in the prospectus and that all agreements between
and/or among those parties are included as exhibits to the registration statement, please
provide us with confirmation of your view in this regard.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Please see the added disclosure under the heading &#147;SELLING STOCKHOLDERS&#151;Private Placement
Financing&#148; commencing on page 30 of the Amendment for a materially complete description of
the relationships and arrangements between the Company and the selling stockholders, which
are limited to the terms of the private placement financing closed in October&nbsp;2007. All
related material agreements are included as Exhibits 99.1, 99.2, 99.3 and 99.4 to the
Amendment.</B></TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->9<!-- /Folio -->
</DIV>

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">H. Christopher Owings<BR>
Securities and Exchange Commission<BR>
December&nbsp;28, 2007

</DIV>

<DIV style="margin-top: 6pt">
<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%" nowrap align="left">11.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Please provide us, with a view toward disclosure in the prospectus, with a description of the
method by which the company determined the number of shares it seeks to register in connection
with this registration statement. In this regard, please ensure that the number of shares
registered in the fee table is consistent with the shares listed in the Stock Ownership of
Management and Principal Stockholders section and the Selling Stockholders section of the
prospectus.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>The Company has provided disclosure in the Amendment under the heading &#147;SHARES ELIGIBLE FOR
FUTURE SALE&#151;Registration Rights&#148; (page 25 of the Amendment) setting forth a description of
the method by which it determined the number of shares to be included in the Amendment. The
Company has insured that the number of shares for which it seeks registration in the
Amendment is consistent with the tabular share presentations otherwise set forth in the
Amendment.</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Risk Factors, page 6</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>We Are Responsible for Having the Resale of Shares of Common Stock Underlying Certain of Our<BR>
convertible Securities, page 20</U>

</DIV>

<DIV style="margin-top: 6pt">
<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%" nowrap align="left">12.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Here and on page 25, please revise to disclose the specific date by which you are required to
file a registration statement before liquidated damages of 2% per month would become due.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>The Company has revised the disclosure on page 20 and page 25 of the Amendment to disclose
the specific date by which it was required to file the Registration Statement.</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Selling Stockholders, page 26</U>
</DIV>


<DIV style="margin-top: 6pt">
<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%" nowrap align="left">13.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We note that the conversion price of your debentures into shares of you common stock is $2.50
and the exercise price of your warrants is $3.52 per share. Additionally, you state that the
conversion and exercise prices are &#147;subject to adjustment, including stock splits, stock
dividends, recapitalizations and other events.&#148; In this section, please disclose these
adjustments.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><b>The requested disclosure is provided on page 26 of the Amendment.</b></TD>
</TR>

</TABLE>
</DIV>


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



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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">H. Christopher Owings<BR>
Securities and Exchange Commission<BR>
December&nbsp;28, 2007

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Incorporation of documents by reference, page 32</U>
</DIV>


<DIV style="margin-top: 6pt">
<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%" nowrap align="left">14.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Please make revisions to your list of incorporated documents to include your current reports
on Form 8-K filed after October&nbsp;22, 2007. For example, we note that you filed current reports
on Form 8-K on November&nbsp;19, 2007 and on Form 8-K/A on November&nbsp;20, 2007.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>The list of incorporated documents has been updated to reflect the referenced filings.</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Annual Report on Form&nbsp;10-K for the Fiscal Year Ended December&nbsp;31, 2006</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>2006 Compared to 2005, page 31</U>

</DIV>

<DIV style="margin-top: 6pt">
<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%" nowrap align="left">15.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We note your disclosure that the uncertain regulatory environment in China contributed to the
decline in sales in Hong Kong. This description is vague and should be further clarified.
For example, we note elsewhere in the filing you disclose that there was a significant
reduction in the number of distributors in Hong Kong. Presumably the amount of Hong Kong
distributors was impacted by negative press coverage in China as well as your efforts to
restrict sales from Hong Kong into China.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Most of our Hong Kong revenue results from e-commerce with China, in which members in China
sign up as distributors in Hong Kong. This e-commerce business with China is not
specifically prohibited or addressed by laws and regulations in China. Other laws
regarding how and when members may assemble and the activities that they may conduct, or the
conditions under which the activities may be conducted, in China are subject to
interpretations and enforcement attitudes that sometimes vary from province to province,
among different levels of government, and from time to time. These uncertainties lead to
uncertainty about the future of doing this type of business in China generally and under our
business model, specifically.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>In addition, members sometimes violate one or more of the laws regulating these activities,
notwithstanding training that the Company attempts to provide. Enforcement measures
regarding these violations, which can include arrests, raises the uncertainty and perceived
risk associated with conducting this business, especially among those who are aware of the
enforcement actions but not the specific activities leading to the enforcement. The Company
believes that this has led some existing members in China &#151; who are signed up as
distributors in Hong</B></TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->11<!-- /Folio -->
</DIV>

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</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">H. Christopher Owings<BR>
Securities and Exchange Commission<BR>
December&nbsp;28, 2007

</DIV>

<DIV style="margin-top: 6pt">
<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%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Kong &#151; to leave the business or curtail their selling activities and has led potential
members to choose not to participate. Among other things, the Company is combating this
with more training and public relations efforts that are designed, among other things, to
distinguish the Company from businesses that make no attempt to comply with the law.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>The Company undertakes to provide enhanced disclosure relating to this topic in its Form
10-K for the year ended December&nbsp;31, 2007 (&#147;2007 Form&nbsp;10-K&#148;).</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">16.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We refer you to the last paragraph on page 31. Please explain what you mean by stating the
downturn in Southeast Asia sales is due to advance sales to Japan distributors. Specifically,
explain the economics of an advance sale transaction, why it occurred and how it is accounted
for under U.S. GAAP.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>The Company&#146;s Singapore subsidiary began registering distributors in Japan and accepting
their product orders in February&nbsp;2005, prior to the official opening of the Japanese office
in October&nbsp;2005. Hence, the term &#147;advance sale&#148; merely means selling product into the
market prior to the official opening. The orders were fulfilled outside of Japan and
shipped directly to the Japanese distributor. Product revenue was recognized upon shipment
to the distributor. Once the Japan office officially opened, revenue decreased in Singapore
as most of these distributors transferred their distributorship from Singapore and product
orders were fulfilled locally.</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Liquidity and Capital Resources, page 34</U>
</DIV>


<DIV style="margin-top: 6pt">
<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%" nowrap align="left">17.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We refer you to the fifth paragraph below this heading. Your discussion should include a
statement separately describing internal and external sources of liquidity or state that there
are no existing sources aside from cash generated from operations. Also, your disclosure of
anticipated improvements and fundraising activities is too general and lacks substantive
support. The discussion should focus specifically on matters that have adversely impacted
your operations and why management believes these matters will not have an adverse impact upon
future operations. See the Instructions to paragraph Item&nbsp;303A of Regulation&nbsp;S-K.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>The Company will disclose in its 2007 </B><B>Form 10-K</B><B> that there are no existing sources of
liquidity aside from cash generated from operations. Additionally, the Company will provide
disclosure regarding anticipated improvements in cash flows and focus on matters that have
adversely impacted operations and the reasons why management believes they will not have an
adverse impact upon future operations.</B></TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->12<!-- /Folio -->
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</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">H. Christopher Owings<BR>
Securities and Exchange Commission<BR>
December&nbsp;28, 2007

</DIV>

<DIV style="margin-top: 6pt">
<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%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>The Company will also provide more concrete disclosure regarding fundraising activities.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">18.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We note that there was a $7&nbsp;million reduction in inventory. You should discuss the reasons
for the reduction in inventory values as it has had a significant impact on your statement of
cash flows and liquidity. We presume that the inventory balance was primarily impacted by the
discontinuance of the Gourmet Coffee Caf&#233; line along with the associated inventory impairment
as well as reduction in commercial activity in Hong Kong.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Inventory was reduced $4&nbsp;million during the year due to the Company&#146;s slowdown in inventory
purchasing and its effort to monetize existing inventory. Additionally, inventory was
reduced $2.6&nbsp;million to write down inventory to its net realizable value. The majority of
the inventory write down was due to slow moving inventories in both Japan and Mexico as well
as the Gourmet Coffee Caf&#233; product line. The Company will discuss the reasons for those
items with a significant impact on the statement of cash flows and liquidity in future
filings.</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Notes to Consolidated Financial Statements, page 48</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>1. Nature of Operations and Summary of Significant Accounting Policies, page 48</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Restricted Cash, page 49</U>

</DIV>

<DIV style="margin-top: 6pt">
<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%" nowrap align="left">19.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Please tell, and disclose in future filings, the facts and circumstances underlying the $1.6
million of restricted non-current cash that is undisclosed.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Restricted non-current cash includes $1.5&nbsp;million invested in a Korean mutual aid
cooperative, which is an organization designed to protect the rights of consumers in South
Korea and provide insurance for consumer damage compensation. All direct selling companies
within Korea must agree to either (1)&nbsp;consumer damage compensation insurance, (2)&nbsp;a
guarantee contract with financial organizations to secure consumer damage compensation, or
(3)&nbsp;a contract with a mutual aid cooperative. The Company undertakes to make appropriate
disclosures in this regard in future filings.</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>3. Balance Sheet Components, page 53</U>
</DIV>


<DIV style="margin-top: 6pt">
<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%" nowrap align="left">20.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>With a view toward your disclosure in Item&nbsp;15 concerning financial statement schedules,
please tell us where the detailed information required in Schedule&nbsp;II is included in your</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->13<!-- /Folio -->
</DIV>

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</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">H. Christopher Owings<BR>
Securities and Exchange Commission<BR>
December&nbsp;28, 2007

</DIV>

<DIV style="margin-top: 6pt">
<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%" nowrap align="left"></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>filing. Specifically, tell us where information required to be presented in columns C and D of
Schedule&nbsp;II are presented for the allowance for doubtful accounts, sales returns, inventory
reserves and KGC receivable as well as other major classes of valuation and qualifying accounts.
Alternatively, please provide us with an example of the revised disclosure or schedule you
intend to provide in future filings.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>The Company intends to provide Schedule&nbsp;II in future filings and specifically list the
valuation and qualifying accounts related to the KGC receivable and the inventory reserve in
Column A. Additionally, the Company will list the sales return accrual. No other valuation
and qualifying accounts or reserves are significant, either individually or in the
aggregate. A sample of Schedule&nbsp;II to be included with the Company&#146;s 2007 </B><B>Form 10-K</B><B> is
attached hereto.</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>4. Goodwill and Other Intangible Assets, page 53</U>
</DIV>


<DIV style="margin-top: 6pt">
<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%" nowrap align="left">21.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Please tell us how much of the capitalized costs for computer software and programs
represents the software licensed from MarketVision Consulting Group, LLC, if any at all. If
so and the amount is material, please tell us your consideration of the license agreement
default and your accounting for this software.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>The capitalized cost for computer software and programs is entirely related to the software
the Company acquired on March&nbsp;31, 2004 when it acquired MarketVision Communications Corp.
The Company does not license any software </B><B><I>from </I></B><B>MarketVision Consulting Group, LLC. When the
Company acquired MarketVision Communications Corp and its software, MarketVision
Communications Corp. granted a license to MarketVision Consulting Group, LLC, to use and
license the software to third parties in the event of certain defaults under the acquisition
agreement. Notwithstanding the occurrence of one those defaults (relating to the market
price of the Company&#146;s stock), the Company&#146;s subsidiary, MarketVision Communications Corp.,
retains ownership and the right to use the software. However, as a result of the default,
MarketVision Consulting Group, LLC now has the right to license the software to </B><B><I>third
parties</I></B><B>. MarketVision Consulting Group, LLC is owned by John Cavanaugh and Jason Landry,
the President and Vice President of MarketVision Communications Corp., respectively.</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>6. Commitments and Contingencies, page 55</U>
</DIV>


<DIV style="margin-top: 6pt">
<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%" nowrap align="left">22.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If we understand your disclosure correctly, you are required to purchase 60 barrels of
product at about $25,000 per barrel, or $1.5&nbsp;million, annually. Please tell us if the
Alura product is the only consideration you receive in exchange for your annual payments or
if</TD>
</TR>

</TABLE>
</DIV>
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</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">H. Christopher Owings<BR>
Securities and Exchange Commission<BR>
December&nbsp;28, 2007

</DIV>

<DIV style="margin-top: 6pt">
<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%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>there are other products and services received by you. Please also explain why this product
commands the price per barrel that it does and its value to your operations.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>The Alura product is the only consideration the Company receives. This product is patented
and was the Company&#146;s flagship product when the organization began. The product currently
accounts for almost 20% of the Company&#146;s sales. Recently, the Company decided to no longer
maintain its exclusivity for this product, and as a result, is no longer required to
purchase a certain amount of drums per quarter. The Company is currently evaluating
possible alternative sources for the product or similar products. The Company will revise
its disclosure in future filings accordingly.</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Item&nbsp;9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure,
page 70</U>
</DIV>


<DIV style="margin-top: 6pt">
<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%" nowrap align="left">23.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We note your disclosure that you changed auditors in 2006. In future filings, please note
that Item&nbsp;304(a)(1)(i) of Regulation&nbsp;S-K requires that you disclose whether the former
accountant resigned, declined to stand for re-election or was dismissed and the date thereof.</TD>
</TR>



<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt"><FONT size="1">

</FONT></TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>In July&nbsp;2006, the Audit Committee of the Company&#146;s Board of Directors issued a request for
proposals to four (4)&nbsp;independent registered public accounting firms, including BDO Seidman,
LLP. BDO did not respond to the proposal. On September&nbsp;7, 2006, the Audit Committee with
the approval of the Company&#146;s Board of Directors selected Lane Gorman Trubitt, L.L.P. as its
independent registered public accounting firm. Under these circumstances, it was not clear to the Company
whether BDO resigned, declined to stand for re-election or was dismissed. BDO recently clarified that it declined to stand for re-election, so the Company will revise its disclosure in future filings to reflect this clarification.</B></TD>
</TR>
<TR>
    <TD style="font-size: 6pt"><FONT size="1">

</FONT></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Exhibits 31.1 and 32.1</U>
</DIV>


<DIV style="margin-top: 6pt">
<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%" nowrap align="left">24.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In future filings please exclude the titles of certifying officers in your introductory
sentences. The wording in each certification should be in the extract format provided by Item
601(b)(31) of Regulation&nbsp;S-K. Please confirm for us, if true, the certifications of your
officers are not limited in their individual capacities by the inclusion of their professional
titles.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>The Company will exclude the titles of certifying officers in the introductory sentences to
the certifications required by Item&nbsp;</B><B>601(b)(31)</B><B> of Regulation&nbsp;S-K. The</B></TD>
</TR>

</TABLE>
</DIV>
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</DIV>

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">H. Christopher Owings<BR>
Securities and Exchange Commission<BR>
December&nbsp;28, 2007

</DIV>

<DIV style="margin-top: 6pt">
<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%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Company does hereby confirm that the certifications of its officers are not limited in their
individual capacities by the inclusion of their professional titles.</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Quarterly Report on Form&nbsp;10-Q for the Fiscal Period Ended September&nbsp;30, 2007</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>6. Related Party Transactions, page 9</U>

</DIV>

<DIV style="margin-top: 6pt">
<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%" nowrap align="left">25.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We refer you to the last paragraph on page 11. Please tell us your basis for using the
average of closing prices for 20 consecutive days preceding the share surrender to estimate
the fair value of common shares from Messrs.&nbsp;LaCore and Woodburn. Include a detailed analysis
of the dates and prices as compared to the outstanding payable and the applicable GAAP to
support your conclusion.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Company&#146;s Response</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>The average of closing prices for 20 consecutive days was agreed upon during intensive
settlement negotiations of disputed claims in October&nbsp;2006 and was not based on any
particular analysis. Among other things, the settlement negotiations resulted in an
agreement to give the Company a non-recourse promissory note secured by the Company&#146;s common
stock. The promissory note included the right to repay the promissory note with common
stock based on the average of the Company&#146;s common stock for the previous 20 consecutive
days. Both parties were concerned about volatility of the market and determined that 20
days was a sufficient amount of time to minimize the effect of market volatility and would
result in a price that was reflective of the true market value of the stock. On August&nbsp;24,
2007, Messrs.&nbsp;Woodburn and LaCore elected to repay the promissory note by surrendering the
required shares of common stock. The Company accepted the notice to surrender on August&nbsp;30,
2007.</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We trust that the foregoing responses adequately address your comments and are helpful to you
in your review of the Amendment. Please do not hesitate to contact us with any questions you may
have.
</DIV>

<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">Best regards,<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ John B. McKnight
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">John B. McKnight&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">JBM:ss<BR>
Enclosures<BR>
cc: Gary C. Wallace

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->16<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Schedule&nbsp;II &#151; Valuation and Qualifying Accounts</B>
</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="42%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Column A</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Column B</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Column C</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Column D</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Column E</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Balance at</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Charged to Costs and</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">Balance at</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Beginning</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Expenses/Against</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">End of</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Description</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">of Period</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Net Sales (1)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Deductions (2)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Period</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<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="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reserve for obsolete inventory <br>
Year ended December&nbsp;31, 2007<br>
Year ended December&nbsp;31, 2006<br>
Year ended December&nbsp;31, 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>
    <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="padding-top: 0em">
    <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="padding-top: 0em">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reserve for KGC receivable <br>
Year ended December&nbsp;31, 2007<br>
Year ended December&nbsp;31, 2006<br>
Year ended December&nbsp;31, 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>
    <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="padding-top: 0em">
    <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="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrual for sales returns <br>
Year ended December&nbsp;31, 2007<br>
Year ended December&nbsp;31, 2006<br>
Year ended December&nbsp;31, 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>
    <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 Body -->
</TABLE>
</DIV>




<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Additions to the reserve for obsolete inventory are charged to cost of sales. Additions to the accrual for sales returns
are recorded as a reduction to net sales.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Deductions to the reserve for obsolete inventory reflect disposals of obsolete inventory. Deductions to the accrual for
sales returns reflect amounts refunded.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->17<!-- /Folio -->
</DIV>

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