NATURAL HEALTH TRENDS CORP. CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share Data) December 31, September 30, 2008 2009 ------------ ------------ (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 3,491 $ 1,473 Restricted cash 340 399 Accounts receivable 71 97 Inventories, net 2,141 1,804 Other current assets 735 987 ------------ ------------ Total current assets 6,778 4,760 Property and equipment, net 1,173 882 Goodwill 1,764 1,764 Intangible assets, net 1,800 1,200 Restricted cash 3,646 393 Other assets 1,464 905 ------------ ------------ Total assets $ 16,625 $ 9,904 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,746 $ 2,394 Income taxes payable 187 252 Accrued distributor commissions 554 637 Other accrued expenses 2,456 3,399 Deferred revenue 2,841 2,397 Current portion of convertible debentures, net of discount of $2,320 at December 31, 2008 1,534 - Deferred tax liability 351 351 Other current liabilities 1,170 1,053 ------------ ------------ Total liabilities 10,839 10,483 Commitments and contingencies Stockholders' equity (deficit): Preferred stock, $0.001 par value; 5,000,000 shares authorized; 1,761,900 shares designated Series A convertible preferred stock, 138,400 shares issued and outstanding at December 31, 2008 and September 30, 2009, aggregate liquidation value of $275 124 124 Common stock, $0.001 par value; 50,000,000 shares authorized; 10,691,582 and 10,833,709 shares issued and outstanding at December 31, 2008 and September 30, 2009, respectively 11 11 Additional paid-in capital 79,711 80,158 Accumulated deficit (74,853) (81,774) Accumulated other comprehensive income: Foreign currency translation adjustments 759 902 ------------ ------------ Total Natural Health Trends stockholders' equity (deficit) 5,752 (579) Noncontrolling interest 34 - ------------ ------------ Total stockholders' equity (deficit) 5,786 (579) ------------ ------------ Total liabilities and stockholders' equity $ 16,625 $ 9,904 ============ ============ NATURAL HEALTH TRENDS CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In Thousands, Except Per Share Data) Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------ 2008 2009 2008 2009 -------- -------- -------- -------- Net sales $ 11,016 $ 5,698 $ 34,734 $ 24,039 Cost of sales 3,050 1,874 9,585 7,176 -------- -------- -------- -------- Gross profit 7,966 3,824 25,149 16,863 Operating expenses: Distributor commissions 4,573 1,997 13,170 9,098 Selling, general and administrative expenses (including stock-based compensation expense of $128 and $81 during the three months ended September 30, 2008 and 2009, respectively, and $421 and $447 during the nine months ended September 30, 2008 and 2009, respectively) 4,358 3,196 13,226 10,685 Depreciation and amortization 338 324 1,090 992 Impairment of long-lived assets 2 - 30 - -------- -------- -------- -------- Total operating expenses 9,271 5,517 27,516 20,775 -------- -------- -------- -------- Loss from operations (1,305) (1,693) (2,367) (3,912) Other income (expense), net: Loss on foreign exchange (345) (82) (92) (125) Interest income 18 3 86 27 Interest expense (including amortization of debt issuance costs and accretion of debt discount of $559 and $411 during the three months ended September 30, 2008 and 2009, respectively, and $1,370 and $2,039 during the nine months ended September 30, 2008 and 2009, respectively) (666) (565) (1,609) (2,420) Loss on redemption of convertible debentures - (683) - (683) De-recognition of commission liabilities - 221 - 221 Other 19 (24) 5 (10) -------- -------- -------- -------- Total other income (expense), net (974) (1,130) (1,610) (2,990) -------- -------- -------- -------- Loss before income taxes (2,279) (2,823) (3,977) (6,902) Income tax provision (37) (28) (116) (63) -------- -------- -------- -------- Net loss (2,316) (2,851) (4,093) (6,965) Plus: Net loss attributable to the noncontrolling interest - 23 - 44 -------- -------- -------- -------- Net loss attributable to Natural Health Trends (2,316) (2,828) (4,093) (6,921) Preferred stock dividends (4) (4) (12) (12) -------- -------- -------- -------- Net loss attributable to common stockholders of Natural Health Trends $ (2,320) $ (2,832) $ (4,105) $ (6,933) ======== ======== ======== ======== Loss per share of Natural Health Trends - basic and diluted $ (0.24) $ (0.28) $ (0.42) $ (0.69) ======== ======== ======== ======== Weighted-average number of shares outstanding 9,719 10,261 9,670 10,079 ======== ======== ======== ======== NATURAL HEALTH TRENDS CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In Thousands) Nine Months Ended September 30, ------------------ 2008 2009 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (4,093) $ (6,965) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization of property and equipment 490 392 Amortization of intangibles 600 600 Amortization of debt issuance costs 234 502 Accretion of debt discount 1,136 1,537 Loss on redemption of convertible debentures - 683 Stock-based compensation 421 447 Impairment of long-lived assets 30 - Changes in assets and liabilities: Accounts receivable 159 (24) Inventories, net 1,540 332 Other current assets 432 (243) Other assets 285 91 Accounts payable (773) 647 Income taxes payable 9 59 Accrued distributor commissions (901) 74 Other accrued expenses (826) 938 Deferred revenue (1,363) (445) Other current liabilities (200) (123) -------- -------- Net cash used in operating activities (2,820) (1,498) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (276) (95) Decrease in restricted cash 665 3,212 -------- -------- Net cash provided by investing activities 389 3,117 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from debt 145 - Payments on debt (145) (3,754) -------- -------- Net cash used in financing activities - (3,754) -------- -------- Effect of exchange rates on cash and cash equivalents 118 117 -------- -------- Net decrease in cash and cash equivalents (2,313) (2,018) CASH AND CASH EQUIVALENTS, beginning of period 6,282 3,491 -------- -------- CASH AND CASH EQUIVALENTS, end of period $ 3,969 $ 1,473 ======== ========
Contact Information: Contact: Jean Bono Natural Health Trends Corp.