Naturade Inc. Reports a 3.5% Sales Reduction in 3rd Quarter 2002; Quarterly Loss Significantly Reduced Versus 2001

IRVINE, Calif. -- Naturade Inc. (OTCBB:NRDC), a leading marketer of soy protein products under the brand name Naturade Total Soy(R), today reported net sales of $3,676,706 for the three months ended Sept. 30, 2002, a decrease of 3.5% over the same period in 2001 and net sales of $10,513,325 for the nine months ended Sept. 30, 2002, down 16% over the same period in 2001.

Major trends occurring in the quarter ended Sept. 30, 2002 included:

-- Initial distribution to a major warehouse club customer;

-- Decline in sales of some key mass market customers and health food distributors plus impact from the continuing U.S. economic softness since September 2001.

-- Continued use of the proceeds from the January 2002 raising of $2.5 million for operating purposes.

The company reported a significantly lower net loss of $480,558 ($0.01 per share) for the third quarter compared with a $890,967 loss ($0.11 per share) in the third quarter of 2001. The net loss of $1,806,667 ($0.04 per share) for the first nine months of 2002 is 20% below the loss of $2,270,442 ($0.30 per share) experienced for the first nine months of 2001.

The decline in quarterly net loss reflects a significant reduction in interest expense due to a previously reported financial restructuring in January 2002, an increase in gross margin and significantly lower selling and general and administrative expenses.

According to Naturade CEO Bill Stewart: "We made good progress during the third quarter. We gained new distribution in a major warehouse club chain and launched two new brands, Quick Fizz(TM) and Power Shake(TM) to drive extra second half volume. We also began shipping new Naturade Total Soy formulations with revised label graphics that position the brand for weight loss as well as heart health. We've already seen indications that the new labels will be a strong stimulus to increased sales.

"Our focus on directly aligning promotional costs with proven sales opportunities is paying off," Stewart continued. "In the third quarter, we were able to reduce brand expenses for trade and consumer promotion by almost $200,000 to 19.2% of net sales while actually increasing sales of Naturade Total Soy with most of our mass market customers. Other reductions in interest expense and warehouse costs resulted in a 46% reduction in our third quarter net loss."

Overall mass market growth for the quarter was 0.5%. Sales to health food accounts declined 7% in the third quarter. The health food channel accounted for 48% of net sales in third quarter and 53% of net sales for the first nine months of 2002.

Non-cash accounting recognition of a $52,445 expense for preferred stock dividends resulted in a net loss attributable to common shareholders for the third quarter of $533,003. Dividends on the company's Series B Redeemable Convertible Preferred Stock accrue at an annual rate of 10% and accumulate if unpaid.

With headquarters in Irvine, Naturade -- since 1926 -- has been committed to marketing innovative natural products to improve the health and well being of consumers. Well known for its 50 years of leadership in soy protein, Naturade is the number one brand name of natural soy protein powders sold in food, drug and mass merchandise stores.

Its premier product, Naturade Total Soy, is a complete line of ready-to-drink, bars and shake mix meal replacement products sold at major supermarkets and drug, health food, club and mass merchandise stores throughout the United States. The company's other brands include Power Shake(R), Quick Fizz(TM) and Aloe Vera 80(R). For more information, visit

Note: The private securities litigation reform act of 1995 provides a "safe harbor" for certain forward-looking statements. The statements contained in this news release that are not historical facts are forward-looking statements based on the company's current expectations and beliefs concerning future developments and their potential effects on the company, including, without limitation, statements concerning the company's strategies and initiatives to improve business results. There can be no assurance that future developments affecting the company will be those anticipated by the company. Actual results may differ from those projected in the forward-looking statements. These forward-looking statements involve significant risks and uncertainties (some of which are beyond the control of the company) and are subject to change based upon various factors. These factors include the impact of government regulations, less stable demand in the mass market, the decline of the health food sector, the company's ability to secure new mass market customers, the company's ability to convert new distribution to repeat sales, the company's ability to effectively continue to reduce brand expenses, variability of quarterly earnings, business interruption due to terrorism, ability to continue as a going concern and potential future earnings losses, dependence on key customers, dependence on current and ongoing financing, dilution due to future equity sales, technological changes, dependence on third-party manufacturers, pricing pressures and other competitive factors, dependence on qualified personnel, product liability exposure, inability to identify strategic growth partners, instability of the dietary supplement industry, impact of adverse publicity, limited success of new products, insufficient protection of intellectual property, stock price volatility and close control of company stock. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For a more detailed discussion of some of the ongoing risks and uncertainties of the company's business, see the company's filings with the Securities and Exchange Commission.


Three Months Ended (unaudited) 9/30/02 9/30/01

Net Sales $3,676,706 $3,811,001
Gross Profit $1,666,198 $1,705,443
Gross Margin % 45.3% 44.8%
Net Loss ($480,558) ($890,767)
Net Loss applicable to common shares ($533,003) ($890,767)
Net Loss per common share ($0.01) ($0.11)
Weighted average common shares outstanding 44,236,333 7,823,639


Sept. 30, 2002 Dec. 31, 2001 (unaudited) (audited)

Current assets $ 2,847,093 $ 3,631,370
Property and equipment, net 248,723 307,362
Other assets 78,594 54,763
Total assets $ 3,174,410 $ 3,993,495

Current liabilities $ 4,237,719 $ 5,495,486
Long-term debt, less current maturities 45,374 5,507,382
Redeemable convertible preferred stock & warrant 2,415,657
Stockholders' deficit (3,524,340) (7,009,373)
Total liabilities and shareholders' deficit $ 3,174,410 $ 3,993,495

Naturade Inc.,
John Hazlin,
714/573-4800 ext. 221

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