Natural Health Trends Corp. Reports Strong Growth in Sales and Operating Income for Both the Three and Nine Months Ended September 30, 2003

Net Sales for Three and Nine Months Increase in Excess of 50%; Company Restates Financial Statements

DALLAS, Nov 19, 2003 (BUSINESS WIRE) -- Natural Health Trends Corp. (OTC BB: NHLC), an international direct-selling company, announced today its financial results for the third quarter and nine months ended September 30, 2003.

Nine-Month Results

Net sales for the nine months rose by 60% to $39.4 million from $24.6 million (as restated) for the same period in 2002. The increased sales were primarily from additional sales of Lexxus products and the expansion of Lexxus into new international markets, including the launch of Lexxus into South Korea in June 2003. In addition, revenues increased due to the deferral of revenue related to the administrative enrollment fee of distributors, partially offset by a reserve for refunds and sales returns coupled with a slight decrease in the sales of eKaire products.

Gross profit for the nine months ended September 30, 2003 climbed to $31.9 million from $20.1 million (as restated) for the same period in 2002. The increase in gross profit was attributable to higher sales volumes by Lexxus and also attributable to the deferral of both revenue and cost of sales related to the administrative enrollment fee of distributors.

The nine months ending September 30, 2003 boasted an operating income of $4.9 million, which was a substantial increase over the results in the same period of 2002 of $0.5 million (as restated).

Net income for the period rose to $3.4 million, or $0.75 per basic share and $0.61 per diluted share, from $0.8 million, or $0.28 per basic and diluted share for the same restated period in 2002. In the intervening year, the number of basic shares rose to 4.6 million (5.7 million diluted) as of September 30, 2003 from 2.9 million (2.9 million diluted) as of September 30, 2002. The increase in net income is due to increased sales and efficient cost containment efforts partially offset by an income tax provision.

Restatement of Financial Statements

During the third quarter, the Company determined that under Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" administrative enrollment fees received from distributors actually received and recorded as current sales in prior quarters should have been deferred and recognized systematically to income over the twelve-month period for which the fees are earned. A restatement resulted in net sales for the three and nine-month periods ended September 30, 2002 being decreased by approximately $156,000 and $1,537,000, respectively. The restatement in net sales resulted in a corresponding adjustment to cost of sales for direct costs paid to a third party associated with the administrative enrollment fees received from distributors. Compared to amounts previously reported, the cost of sales decreased by approximately $115,000 and $324,000 for the three and nine-month periods ended September 30, 2002, respectively.

In addition, the Company reviewed the adequacy of its reserves for distributor sales returns and refunds as of September 30, 2003 and for comparative prior periods. Based upon an analysis of the Company's historical returns and refund trends by country, it was determined that the reserves for returns and refunds for prior quarters were not adequate and should be restated. The restatement resulted in net sales for the three and nine-month periods ended September 30, 2002 being decreased by approximately $88,000 and $262,000, respectively, with corresponding adjustments to cost of sales for the estimated cost of products returned.

As previously disclosed in the Company's 2001 and 2002 Form 10-KSB, the Company sold in 2001 all of the outstanding common stock in Kaire Nutraceuticals, Inc. ("Kaire"), a Delaware corporation and wholly-owned subsidiary, to a third party. The gain on the sale of Kaire of approximately $3.1 million was previously deferred. The Company subsequently recognized into income approximately $1.9 million from the transaction over the period from Q4 2001 through Q2 2003. Based upon a review of the transaction, the Company now believes the gain on sale of Kaire should have been recognized only in 2001 and 2002. There is no impact of this restatement for the three or nine months ended September 30, 2002.

The Company disclosed in it's 2002 Form 10-KSB that it had a net operating loss carry forward at December 31, 2002 of approximately $6,000,000, subject to certain limitations. Consequently, the Company made no provision for income taxes for any period in either 2001 or 2002. Upon further review, it has been determined that the available net operating loss is not expected to be sufficient to offset all of the taxable income in 2002 and 2003 and that an estimated income tax provision in the amount of $600,000 and $1,200,000 is necessary for the year ended December 31, 2002 and the nine months ended September 30, 2003, respectively. There is, however, no impact of this restatement for the three or nine months ended September 30, 2002.

Mark Woodburn, President of Natural Health Trends Corp., stated, "We are extremely pleased with our current results, which have set a company record for revenue." He added, "We were, however, very disappointed that these accounting issues arose and had the effect of delaying the announcement of these results. However, in the current climate, it is vital for us to make certain that everything is properly reviewed and recorded in accordance with generally accepted accounting principles in the US."

Three-Month Results

Net sales for the third quarter 2003 climbed to $16.7 million from $10.8 million in the restated third quarter 2002. Gross profit in the third quarter 2003 reached $13.1 million versus $8.8 million for the same restated period of 2002.

Operating income for the third quarter 2003 increased to $1.9 million from $1.3 million for the same restated period prior year. An income tax provision of $500,000 was recorded in the third quarter 2003, which directly affects the third quarter net income amount. Net income for the third quarter of 2003 held strong at $1.3 million, or $0.27 per basic share and $0.22 per diluted share, from $1.5 million in same restated period prior year, or $0.49 per basic and diluted share.

Natural Health Trends Corp. is an international direct-selling company operating in more than 30 markets throughout Asia, North America and Eastern Europe. The Company markets premium quality personal care products under the Lexxus brand and markets its nutritional supplement products under the Kaire brand. Additional information can be found on the Company's website, www.naturalhealthtrendscorp.com, and management encourages interested parties to register for updated corporate information via e-mail on the Company's homepage.

Statements in this press release that are not statements of historical or current fact constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, and other unknown factors that could cause the actual results of the Company to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements. In addition to statements which explicitly describe such risks and uncertainties, readers are urged to consider statements labeled with the terms "believes," "belief," "expects," "intends," "anticipates," "will," or "plans" to be uncertain and forward-looking. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in the Company's reports and registration statements filed with the Securities and Exchange Commission.

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