10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ________.

Commission File Number: 0-25238

NATURAL HEALTH TRENDS CORP.

Incorporated in Florida	I.R.S. Employer Identification No.
	59-2705336

12901 Hutton Drive
Dallas, Texas 75234
(972) 241-4080

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [   ].

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act). Yes [   ] No [X]

As of November 1, 2004, the number of shares outstanding of the registrant’s class of common stock, par value $0.001 per share, was 6,819,573.

NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES
Quarterly Report on Form 10-Q
September 30, 2004

INDEX

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets	1
Unaudited Interim Consolidated Statements of Operations	2
Unaudited Interim Consolidated Statements of Cash Flows	3
Notes to the Unaudited Interim Consolidated Financial Statements	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3. Quantitative and Qualitative Disclosures about Market Risk	20
Item 4. Controls and Procedures	21
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3. Defaults Upon Senior Securities	23
Item 4. Submission of Matters to a Vote of Security Holders	23
Item 5. Other Information	23
Item 6. Exhibits	23
SIGNATURES	24

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)

	September			December
	30, 2004			31, 2003
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	5,419		$	11,133
Restricted cash		2,321			1,363
Accounts receivable		433			239
Inventories, net		11,793			3,580
Prepaid expenses and other current assets		1,031			1,646
Total current assets		20,997			17,961
Property and equipment, net		658			883
Software, net		5,200			—
Database, net		514			509
Goodwill		13,971			208
Deferred tax asset		1,649			—
Deposits and other assets		801			779
Total assets	$	43,790		$	20,340
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,869		$	3,820
Income taxes payable		2,421			1,443
Accrued distributor commissions		1,669			568
Other accrued expenses		3,310			831
Deferred revenue		6,592			6,634
Deferred tax liability		196			—
Current portion of debt		2,641			314
Other current liabilities		329			513
Total current liabilities		21,027			14,123
Debt		15			31
Total liabilities		21,042			14,154
Commitments and contingencies
Minority interest		449			711
Mezzanine common stock		960			—
Stockholders’ equity:
Preferred stock, $1,000 par value; 1,500,000 shares authorized; none issued and outstanding		—			—
Common stock, $0.001 par value; 500,000,000 shares authorized; 5,449,869 and 4,656,409 shares issued and outstanding at September 30, 2004 and December 31, 2003, respectively		5			4
Additional paid-in capital		48,835			34,007
Accumulated deficit		(26,997	)		(28,389	)
Accumulated other comprehensive loss		(504	)		(147	)
Total stockholders’ equity		21,339			5,475
Total liabilities and stockholders’ equity	$	43,790		$	20,340

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

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NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Per Share Data)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
				2003						2003
	2004			As Restated			2004			As Restated
Net sales	$	40,482		$	16,740		$	96,604		$	39,964
Cost of sales		8,323			3,671			19,539			7,450
Gross profit		32,159			13,069			77,065			32,514
Operating expenses:
Distributor commissions		17,421			6,988			50,205			16,498
Selling, general and administrative expenses		8,836			4,133			25,078			10,983
Total operating expenses		26,257			11,121			75,283			27,481
Income from operations		5,902			1,948			1,782			5,033
Other expense:
Loss on foreign exchange		(6	)		(88	)		(22	)		(99	)
Other expense, net		(56	)		(27	)		(11	)		(38	)
Interest expense, net		(29	)		(35	)		(89	)		(55	)
Total other expense, net		(91	)		(150	)		(122	)		(192	)
Income before income taxes and minority interest		5,811			1,798			1,660			4,841
Income tax expense		(857	)		(500	)		(109	)		(1,200	)
Minority interest benefit (expense)		74			(22	)		(159	)		(45	)
Net income		5,028			1,276			1,392			3,596
Preferred stock dividends		—			—			—			1
Income available to common stockholders	$	5,028		$	1,276		$	1,392		$	3,595
Basic income per common share	$	0.92		$	0.27		$	0.27		$	0.78
Diluted income per common share	$	0.75		$	0.22		$	0.22		$	0.63
Weighted-average number of shares outstanding:
Basic		5,450			4,656			5,189			4,626
Diluted		6,692			5,821			6,439			5,663

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

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NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)

	Nine Months Ended
	September 30,
				2003
	2004			As Restated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,392		$	3,596
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		871			467
Stock issued for services		13			50
Minority interest expense		159			45
Imputed compensation		99			—
Deferred income taxes		(1,453	)		—
Changes in assets and liabilities, excluding acquisitions:
Accounts receivable		(194	)		(563	)
Inventories, net		(8,213	)		(949	)
Prepaid expenses and other current assets		(656	)		849
Deposits and other assets		(47	)		(597	)
Accounts payable		1,864			(939	)
Income taxes payable		1,029			1,200
Accrued distributor commissions		1,101			(523	)
Other accrued expenses		2,401			868
Deferred revenue		(42	)		(1,450	)
Other current liabilities		(184	)		(146	)
Net cash (used in) provided by operating activities		(1,860	)		1,908
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquired		(1,337	)		—
Purchase of minority interest		(142	)		—
Database purchase		—			(163	)
Purchases of property and equipment		(180	)		(449	)
Increase in restricted cash		(958	)		(852	)
Net cash used in investing activities		(2,617	)		(1,464	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on debt		(892	)		(279	)
Proceeds from issuance of common stock		12			—
Net cash used in financing activities		(880	)		(279	)
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS		(357	)		57
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(5,714	)		222
CASH AND CASH EQUIVALENTS, beginning of period		11,133			3,864
CASH AND CASH EQUIVALENTS, end of period	$	5,419		$	4,086
SUPPLEMENTAL CASH FLOW INFORMATION:
Non-cash investing and financing activities:
Common stock issued for acquisitions	$	15,498		$	433
Debt issued for acquisitions		3,203			—

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

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NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. OVERVIEW AND BASIS OF PRESENTATION

Overview

     Natural Health Trends Corp. (“NHTC” or the “Company”) is a Florida corporation incorporated in 1988. NHTC is an international direct-selling company which operates through subsidiaries that distribute products to promote health, wellness and vitality. Lexxus International, Inc., a wholly-owned subsidiary, and other Lexxus subsidiaries, sell certain cosmetic products as well as “quality of life” products. eKaire.com, Inc., a wholly-owned subsidiary, distributes nutritional supplements aimed at general health and wellness. Other active wholly or majority owned subsidiaries of NHTC and their countries of incorporation include:

• Lexxus International (SW Pacific) Pty. Ltd. (Australia)

• Kaire Nutraceuticals Australia Pty. Ltd. (Australia)

• Lexxus International (NZ) Ltd. (New Zealand)

• Kaire Nutraceuticals New Zealand Ltd. (New Zealand)

• Lexxus International Co., Ltd. (Taiwan)

• MyLexxus Europe AG (Switzerland)

• KGC Networks Pte. Ltd. (Singapore)

• Lexxus International Co., Ltd. (Hong Kong)

• Lexxus International Marketing, Pte. Ltd. (Singapore)

• Lexxus International Network Marketing, Inc. (the Philippines)

• LXK Ltd. (South Korea)

• I Luv My Pet, Inc. (U.S.)

• Marketvision Communications Corp. (Delaware)

• Lexxus Korea, Inc. (Delaware)

• MyLexxus Personal Care International (India) Pvt. Ltd.

     NHTC’s common stock, par value, $0.001 per share, is listed on the NASD OTC Bulletin Board. In March 2003, NHTC effected a 1-for-100 reverse stock split with respect to its outstanding shares of common stock. In addition, the trading symbol for the shares of its common stock changed from “NHTC” to “NHLC”. All share references will give effect to the reverse stock split. On May 27, 2004, the Company filed a listing application with The NASDAQ Stock Market (“NASDAQ”) for quotation of its shares of common stock. No assurance can be given that the Company will be approved by NASDAQ, or if approved, when the Company’s shares will be quoted thereon.

Basis of Presentation

     The unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. As a result, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the Company’s financial information as of September 30, 2004, and for the nine months and

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three months ended September 30, 2004 and 2003. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the fiscal year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our 2003 Annual Report on Form 10-KSB.

     Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on previously reported net income or stockholders’ equity.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

     The accompanying interim consolidated financial statements include the accounts of NHTC and all of its wholly and majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

     The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses, including the recoverability of inventory. The Company’s estimates and assumptions are continually evaluated based on available information and experience. Because the use of estimates is inherent in the financial reporting process, actual results could differ from estimates. If there is a significant unfavorable change to current conditions, it would likely result in a material adverse impact to the Company’s business, operating results and financial condition.

Revenue Recognition

     The Company’s revenues are primarily derived from sales of products, sales of starter and renewal administrative enrollment packs and shipping fees. Product sales and direct expenses are recognized when the products are shipped. The Company defers revenue from the sale of its starter and renewal administrative enrollment packs and recognizes the revenue and its associated direct costs over the term of the membership, generally twelve months. As of September 30, 2004, the Company had deferred revenue of approximately $6,592,000, of which approximately $2,441,000 pertained to goods ordered that will be shipped in the fourth quarter of 2004 and approximately $4,151,000 pertained to unamortized administrative enrollment packs.

     The Company also estimates and records a sale return allowance for possible sales refunds based on its historical experience on a country-by-country basis.

Shipping and Handling Cost

     The Company records freight and shipping revenue collected from distributors as revenue. The Company records shipping and handling costs associated with customer shipments as cost of sales.

Distributor Commissions

     Distributors are paid commissions based on their direct and indirect commissionable net sales and downline growth. Commissions are earned over 52 business periods and are paid three weeks in arrears. Commissions are accrued when earned.

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Accounting for Stock-Based Compensation

     Currently, NHTC follows Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and its related interpretations for stock options granted to employees and members of its board of directors. Under the recognition and measurement principles of APB 25, NHTC is not required to recognize any compensation expense unless the market price of the stock exceeds the exercise price on the date of grant, the terms of the grant are subsequently modified or in the case of variable options. The Financial Accounting Standards Board (“FASB”) has recently issued a proposal to change the recognition and measurement principles for equity-based compensation granted to employees and board members. Under the proposed rules, NHTC would be required to recognize compensation expense related to stock options granted to employees and board members effective for periods beginning after June 15, 2005. The compensation expense would be calculated based on the expected number of options expected to vest and would be recognized over the stock options’ vesting period. If this proposal is passed, NHTC would be required to recognize compensation expense related to stock options granted to its employees or board members, which could have a material effect on its consolidated financial condition and results of operations.

     For disclosure purposes in according with Statement of Financial Accounting Standards 123 (“SFAS 123”), the fair value of options is estimated on the date of grant using the Black-Scholes option pricing model. If NHTC had recognized compensation cost in accordance with SFAS 123, NHTC’s income available to common stockholders and income per common share would have been as follows (in thousands, except per share data):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
				2003						2003
	2004			As Restated			2004			As Restated
Income available to common stockholders	$	5,028		$	1,276		$	1,392		$	3,595
Add: Stock-based employee compensation expense included in reported net income, net of tax effect		—			—			—			—
Deduct: Stock-based employee compensation expense determined under fair value based method, net of tax effect		(19	)		(10	)		(3,848	)		(29	)
Pro forma income available to common stockholders	$	5,009		$	1,266		$	(2,456	)	$	3,566
Basic income per common share:
As reported	$	0.92		$	0.27		$	0.27		$	0.78
Pro forma	$	0.92		$	0.27		$	(0.47	)	$	0.77
Diluted income per common share:
As reported	$	0.75		$	0.22		$	0.22		$	0.63
Pro forma	$	0.75		$	0.22		$	(0.47	)	$	0.63

Earnings Per Share

     Basic income per common share is computed based on the weighted-average number of common shares outstanding during the periods presented. Diluted income per common share data gives effect to all potentially dilutive common shares that were outstanding during the periods presented. Income per

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     common share for the three and nine months ended September 30, 2004 and 2003 are as follows (in thousands, except per share data):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
			2003				2003
	2004		As Restated		2004		As Restated
Basic Calculation:
Income available to common stockholders	$	5,028	$	1,276	$	1,392	$	3,595
Weighted-average number of shares outstanding		5,450		4,656		5,189		4,626
Basic income per common share	$	0.92	$	0.27	$	0.27	$	0.78
Diluted Calculation:
Income available to common stockholders	$	5,028	$	1,276	$	1,392	$	3,595
Weighted-average number of shares outstanding		5,450		4,656		5,189		4,626
Net effect of dilutive stock options and warrants based upon treasury stock method		1,242		1,165		1,250		1,037
Weighted-average number of shares outstanding assuming full conversion of all potentially dilutive securities		6,692		5,821		6,439		5,663
Diluted income per common share	$	0.75	$	0.22	$	0.22	$	0.63

Accounting for Software

     As part of the Marketvision Communications Corp. acquisition (see Note 4), the Company acquired approximately $5,600,000 of computer software and programs. The valuation of the software was determined by a third party appraisal firm. The software is classified as a non-current asset in the balance sheet and is being amortized over a seven-year period beginning April 1, 2004.

Recently Issued Accounting Standards

     During the first quarter of 2004, the Company adopted FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities — An Interpretation of ARB No. 51.” The adoption of this accounting standard did not have a material effect on the Company’.

3. COMPREHENSIVE INCOME (In Thousands)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
			2003					2003
	2004		As Restated		2004			As Restated
Net income	$	5,028	$	1,276	$	1,392		$	3,596
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment		51		42		(357	)		57
Comprehensive income	$	5,079	$	1,318	$	1,035		$	3,653

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4. BUSINESS COMBINATIONS

     The Company entered into the following business combinations during the nine months ended September 30, 2004:

Purchase of the Minority Interest of Lexxus International, Inc.

     On March 29, 2004, the Company purchased 4,900 shares of common stock owned by the minority stockholders of Lexxus International, Inc., a Delaware corporation (“Lexxus”), (representing the 49% interest in Lexxus not owned by the Company) in exchange for 100,000 shares of restricted NHTC common stock. The total purchase price, including acquisition related costs of approximately $7,000, was approximately $1,969,000 based upon the average closing price of NHTC common stock of $23.08 discounted by 15% due to the restrictions contained in the purchase agreement. The average closing price of $23.08 was calculated based on the closing price of NHTC common stock a few days before and after the acquisition was announced. The purchase price was allocated between the additional net assets acquired of approximately $164,000 and goodwill.

Purchase of Marketvision Communications Corp.

     On March 31, 2004, the Company entered into a merger agreement with Marketvision Communications Corp. (“Marketvision”), pursuant to which the Company acquired all of the outstanding capital stock of Marketvision in exchange for the issuance of 690,000 shares of NHTC restricted common stock (the “Issued Shares”), promissory notes in the aggregate principle amount of approximately $3,203,000, a cash payment of approximately $1,337,000 in April 2004, less pre-acquisition net payables due to Marketvision of approximately $646,000, for a total purchase price of approximately $17,583,000, including acquisition costs of approximately $153,000. The Issued Shares were valued at the average closing price of NHTC common stock of $23.08 discounted by 15% due to certain restrictions contained in the purchase agreement. The average closing price of $23.08 was calculated based on the closing price of NHTC common stock a few days before and after the acquisition was announced. Marketvision is the exclusive developer and service provider of direct selling internet technology used by the Company since 2001. Marketvision hosts and maintains the internet technology for the Company and charges an annual fee for this service based upon the number of enrolled distributors of the Company’s products. Marketvision earned revenues for this service of approximately $1,839,000 and $579,000 for the year ended December 31, 2003 and three months ended March 31, 2004, respectively.

     Management believes that this transaction was in the best interests of the Company because (i) the success of the Company’s business is dependent upon Marketvision’s direct selling software and (ii) the Company projects enrolling a significant number of new distributors in the future, which would be very expensive under the former compensation agreement between the Company and Marketvision. Since the former owners of Marketvision include Terry LaCore, a member of the Company’s Board of Directors and the Chief Executive Officer of Lexxus International, Inc., a wholly owned subsidiary of NHTC, the Board of Directors hired the independent appraisal firm of Bernstein, Conklin & Balcombe to assess the fairness of the transaction with Marketvision from a financial point of view. In March 2004, Bernstein, Conklin & Balcombe delivered its opinion to the Company’s Board of Directors that the Marketvision transaction is fair to the Company from a financial point of view.

     In addition, the Company entered into a Shareholder’s Agreement with the former stockholders of Marketvision. Such agreement contained customary terms and conditions, including restrictions on transfers of the Issued Shares, rights of first refusal and indemnification. Further, the Shareholder’s Agreement contains a one time put right related to 240,000 Issued Shares for the benefit of the former stockholders of Marketvision (other than Mr. LaCore) that requires NHTC, during the six month period commencing eighteen months following the earlier of (i) the first anniversary of the closing date, or (ii)

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the date on which the Issued Shares are registered with the Securities and Exchange Commission (the “SEC”) for resale to the public, to repurchase all or part of such shares still owned by the such stockholders for $4.00 per share less any amount previously received by such stockholders from the sale of their shares of the Issued Shares. The Company has recorded this obligation of $960,000 as mezzanine common stock in the consolidated balance sheet. The agreement also provided the former stockholders of Marketvision with piggyback registration rights in the event NHTC files a registration statement with the SEC, other than on Forms S-4 or S-8, stock option grants for the former stockholders (other than Mr. LaCore) as well as three-year employment agreements for the former stockholders, other than Mr. LaCore. In the event that the Company defaults on its payment obligations under the notes or the employment agreements, an entity owned by the former stockholders of Marketvision (other than Mr. LaCore) has certain rights to use, develop, modify, market, distribute and sublicense the Marketvision software to third parties.

     Operations of Marketvision subsequent to March 31, 2004 have been included in the Company’s consolidated financial statements. The transaction was accounted for using the purchase method of accounting and the purchase price was allocated among the assets acquired based on their estimated fair market values. The assets of Marketvision included certain computer equipment and developed software.

     The purchase price was calculated as follows (in thousands):

690,000 shares of NHTC Common Stock valued at $23.08 per share less 15% discount for restrictions associated with the stock issued	$	13,536
Cash paid in April 2004		1,337
Promissory notes issued at closing		3,203
Preacquisition net payables due to Marketvision		(646	)
Acquisition costs		153
Total purchase price	$	17,583

     The purchase price was allocated among assets acquired based on their estimated fair market values as follows (in thousands):

Property and equipment	$	25
Amortizable intangible assets		5,600
Goodwill		11,958
Deferred taxes		(1,904	)
Deferred tax asset recognized for the Company’s loss carry forward based upon offset against Marketvision’s deferred tax liabilities		1,904
Total purchase price allocation	$	17,583

     Amortizable intangibles acquired will be amortized over their estimated life of seven years. The purchase price allocation is based on preliminary estimates, including estimates of federal tax contingencies, which are subject to change once additional information becomes available. Changes to these estimates could result in changes to the purchase price allocation.

Purchase of the Minority Interest of Lexxus International Co., Ltd. (Taiwan)

     On April 19, 2004, the Company purchased 510,000 shares of common stock owned by the minority stockholders of Lexxus International Co., Ltd. (Taiwan), a Taiwan limited liability corporation (“Lexxus Taiwan”), (representing the 30% interest in Lexxus Taiwan not owned by the Company or Lexxus) in exchange for approximately $136,000 in cash. The cash consideration given approximated the

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book value of the shares acquired and no goodwill resulted from the transaction. All Lexxus Taiwan minority shareholders were unrelated to the Company.

5. CONTINGENCIES

     During the fall of 2003, the customs agency of the government of South Korea brought a charge against LXK, Ltd., the Company’s wholly owned subsidiary operating in South Korea (“LXK”), with respect to the importation of the Company’s Alura product. The customs agency alleges that Alura is not a cosmetic product, but rather should be categorized and imported as a pharmaceutical product. The matter is currently being considered in the courts. During the ongoing hearings, LXK intends to present expert testimony that Alura is not a pharmaceutical product, and therefore, LXK should be permitted to sell and distribute Alura in South Korea. The failure to sell Alura in South Korea is not anticipated to have a material adverse effect on the financial condition, results of operations, cash flow or business prospects of LXK.

     On or around March 31, 2004, Lexxus International, Inc. (“Lexxus”) received a letter from John Loghry, a former Lexxus distributor, alleging that Lexxus had wrongfully terminated an alleged oral distributorship agreement with Mr. Loghry and that the Company had breached an alleged oral agreement to issue shares of the Company’s common stock to Mr. Loghry. The letter demanded a settlement payment of $35 million without any explanation as to the amount of the claim. After Mr. Loghry threatened to commence suit against Lexxus and the Company in Nebraska, on May 13, 2004, Lexxus and the Company filed an action for declaratory relief against Mr. Loghry in the United States District Court for the Northern District of Texas seeking, inter alia, a declaration that Mr. Loghry was not wrongfully terminated and is not entitled to recover anything from Lexxus or the Company. Mr. Loghry has filed counterclaims against the Company and Lexxus asserting his previously articulated claims. Discovery has commenced and the Company intends to vigorously defend itself in this case.

     In September 2004, Mr. Loghry filed third party claims against certain officers of the Company and Lexxus, including against Terry LaCore and Mark Woodburn for fraud, LaCore, Woodburn, and Lisa Grossman for conspiracy to commit the same, and Grossman for tortuous interference. A motion to dismiss this action has been filed.

     On November 1, 2004, Toyota Jidosha Kabushiki Kaisha (d/b/a Toyota Motor Corporation) and Toyota Motor Sales, U.S.A. (collectively, “Toyota”) filed a complaint against the Company and Lexxus International, Inc. (“Lexxus”) in United States District Court for the Central District of California (CV04-9028). The complaint alleges trademark and service mark dilution, unfair competition, trademark and service mark infringement, and trade name infringement, each with respect to Toyota’s Lexus trademark. Toyota seeks to enjoin the Company and Lexxus from using the Lexxus mark and otherwise competing unfairly with Toyota, to transfer the ownership of the mylexxus.com and lexxusinternational.com Internet sites to Toyota, and reimbursement of costs and reasonable attorney fees incurred by Toyota in connection with this matter. The Company denies the allegations contained in the complaint and intends to vigorously defend this action. In the event that the Company is unsuccessful in defending this action, the Company may be required to change the name of some or all of its Lexxus subsidiaries and domain names which could have a material adverse effect on the financial condition, results of operations, cash flow or business prospects of the Company.

     From time to time, the Company is involved in legal proceedings incidental to the course of its business. The Company believes that all pending actions, individually and in the aggregate, will not have a material adverse effect on the financial condition, results of operations, cash flows or business prospects.

6. RELATED PARTY TRANSACTIONS

     In August 2001, the Company entered into an agreement with S&B Partnership, an affiliate of Brad LaCore, the brother of Terry LaCore. Under the terms of the agreement, S&B Partnership provides warehouse facilities, manages and ships inventory, and disburses payments to independent distributors. The Company paid approximately $116,500 and $112,300 for such services during the nine months ended September 30, 2004 and 2003, respectively.

     In September 2001, the Company entered into an oral consulting agreement with William Woodburn, the father of Mark Woodburn, the Company’s president, pursuant to which William Woodburn provided the Company with management advice and other advisory assistance. The Company paid $118,750 and $125,000 for such services during the nine months ended September 30, 2004 and 2003, respectively. The consulting agreement between the Company and Mr. Woodburn was terminated as of September 30, 2004.

     The Company’s former controller is married to Mark Woodburn. Her employment ended in August 2004. The Company paid her approximately $75,000 for the nine month periods ended September 30, 2004 and 2003.

7. SUBSEQUENT EVENTS

     On October 6, 2004, the Company entered into a securities purchase agreement with certain institutional and accredited investors as well as certain officers and directors of the Company. Pursuant to the agreement, the Company agreed to sell 1,369,704 units at a price of $12.595 per unit. Each unit consist of one share of the Company’s common stock and one stock purchase warrant exercisable for one share of the Company’s common stock at any time through October 6, 2009 at an exercise price of $12.47 per share. Proceeds are approximately $15.9 million, net of transaction fees.

     In connection with the Marketvision acquisition, the Company issued three different promissory notes in the aggregate principal amount of approximately $3,203,000 (see Note 4). As of September 30, 2004, two of these promissory notes in the aggregate amount of $1.5 million became due and payable. On October 12, 2004, the Company repaid approximately $1.6 million and the notes due on September 30, 2004 have been paid in full.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The following Management’s Discussion and Analysis should be read in conjunction with Management’s Discussion and Analysis included in our Annual Report on Form 10-KSB for the year ended December 31, 2003, filed with the Securities and Exchange Commission (“SEC”), and our other filings, including Current Reports on Form 8-K, filed with the SEC through the date of this Report.

Company Overview

     NHTC is an international direct-selling organization. NHTC controls subsidiaries that distribute products through three separate direct selling networks that promote health, wellness and vitality. Lexxus International, Inc. and other Lexxus subsidiaries (collectively, “Lexxus”) sell certain cosmetic products as well as “quality of life” products. eKaire.com, Inc., (“eKaire”), a wholly-owned subsidiary, distributes nutritional supplements aimed at general health and wellness. I Luv My Pet, Inc., (“ILMP”), a wholly-owned subsidiary, distributes nutritional supplements for dogs and cats. NHTC operates its Lexxus, eKaire and ILMP direct selling operations as a single segment and primarily sells its products through a network of commissioned distributors. NHTC aggregates the Lexxus and eKaire operating segments because it believes it operates as a single reportable segment selling its products in similar distribution channels in each of its operations. Operations of ILMP are not material for the nine months ended September 30, 2004 and are under evaluation for potential change in strategies.

     Net Sales. NHTC derives its revenue from sales of its products, sales of its starter and renewal administrative enrollment packs, and from shipping fees. Substantially all of its product sales are to independent distributors at published wholesale prices. NHTC believes the vast majority of its product sales are for personal consumption; however, NHTC cannot distinguish its personal consumption sales from its other sales because it has no involvement in its products after delivery other than usual and customary product returns.

     Cost of sales. Cost of sales of products purchased from third-party manufacturers, costs of promotional materials sold to NHTC’s distributors, freight, provisions for slow moving or obsolete inventories and, prior to the closing of the merger with Marketvision as of March 31, 2004, the cost of NHTC’s third party software service provider.

     Distributor commissions. Distributor commissions are dependent on the sales mix and, for 2004, typically range between 42% and 55% of net sales. Commissions are paid to NHTC’s independent distributors in accordance with its global compensation plan based on commissionable net sales, which consist of finished products.

     Foreign exchange. NHTC is exposed to certain market risks, including changes in currency exchange rates as measured against the United States dollar. The value of the United States dollar may affect NHTC’s financial results. Changes in exchange rates could positively or negatively affect its financial results, as expressed in United States dollars. The effect of the translation of the Company’s foreign operations are included in accumulated other comprehensive income within stockholders’ equity and such do not impact the statement of operations.

     Effect of inflation. NHTC believes inflation has not had a material impact on its operations or profitability.

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Critical Accounting Policies and Estimates

     For a complete review of NHTC’s critical accounting policies and new accounting pronouncements that may impact NHTC’s operations, refer to the Annual Report on Form 10-KSB for the year ended December 31, 2003. In response to SEC Release No. 33-8040, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” and SEC Release Number 33-8056, “Commission Statement about Management’s Discussion and Analysis of Financial Condition and Results of Operations,” NHTC has identified certain policies that are important to the portrayal of its consolidated financial condition and consolidated results of operations. These policies require the application of significant judgment by NHTC’s management. NHTC periodically analyzes the need for certain estimates, including the need for such items as reserves for inventory valuation, impairment of long-lived assets, revenue recognition, sales returns, and contingencies. NHTC bases any estimates needed on its historical experience, industry standards, and various other assumptions that may be reasonable under the circumstances. NHTC cautions its readers that actual results could differ from its estimates under different assumptions or conditions. If circumstances change relating to the various assumptions or conditions used in such estimates NHTC could experience an adverse effect on its consolidated financial condition, changes in financial condition, and results of operations. NHTC’s critical accounting policies at September 30, 2004 include the following:

Inventory Valuation

     NHTC’s inventory carrying value is reviewed and compared to the net realizable value of its inventory and any inventory value in excess of net realizable value is written down. In addition, NHTC reviews its inventory for obsolescence and any inventory identified as obsolete is reserved or written off. NHTC’s determination of obsolescence is based on assumptions about the demand for its products, product expiration dates, estimated future sales, and management’s future plans.

Asset Impairment

     NHTC reviews the book value of its property and equipment and other long-term assets whenever an event or change in circumstances indicates that the net book value of an asset or group of assets may be unrecoverable. NHTC’s impairment review includes a comparison of future projected cash flows (undiscounted and without interest charges) generated by the asset or group of assets with its associated carrying value. NHTC believes its expected future cash flows approximate or exceed its net book value. However, if circumstances change and the net book value of the asset or group of assets exceeds expected cash flows, NHTC would have to recognize an impairment loss to the extent the net book value of an asset exceeds its fair value.

Allowance for Sales Returns

     The Company maintains an allowance for sales returns and refunds based on the return practices and policies by country and our historical experience. The allowance for sales returns may need to be adjusted if actual sales returns differ from estimates.

Revenue Recognition

     Product sales are recognized when shipped. NHTC defers revenue received from the sale of its starter and renewal administrative packs due to the term of the membership, generally twelve months. Such fees are recognized as revenue on a straight-line basis over the term of the membership. Although NHTC has no immediate plans to significantly change the terms or conditions of the starter or renewal

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memberships, any changes in the future could result in additional revenue deferrals or could cause NHTC to recognize its deferred revenue over a longer period of time.

Tax Valuation Allowances

     The Company evaluates the probability of realizing the future benefits of any of its deferred tax assets and records a valuation allowance when it believes a portion or all of its deferred tax assets may not be realized. If the Company is unable to realize the expected future benefits of its deferred tax assets, it would be required to provide an additional valuation allowance.

Results of Operations

Three Months Ended September 30, 2004 Compared to the Three Months Ended September 30, 2003

     The following table summarizes NHTC’s consolidated operating results as a percentage of net sales for each of the years indicated:

	Three Months Ended
	September 30,
	2004			2003
Net sales		100.0	%		100.0	%
Cost of sales		20.6	%		21.9	%
Gross profit		79.4	%		78.1	%
Operating expenses:
Distributor commissions		43.0	%		41.8	%
Selling, general and administrative expenses		21.8	%		24.7	%
Total operating expenses		64.8	%		66.5	%
Income from operations		14.6	%		11.6	%
Other expense, net		(0.2	%)		(0.9	%)
Income before income taxes and minority interest		14.4	%		10.7	%
Income taxes and minority interest		(2.0	%)		(3.1	%)
Net income		12.4	%		7.6	%

Overview of the Results of Operations for the Three Months ended September 30, 2004

     On April 12, 2004, an investigative television program was aired nationwide in the People’s Republic of China with respect to the operations of the Company’s Lexxus Hong Kong subsidiary and the Lexxus representative office located in Beijing. The television program alleged that the Company engaged in a pyramid scheme and sold products without proper permits.

     After a thorough internal investigation of the issues raised in the television program, the Company concluded that additional training and development of certain Lexxus independent distributors located in Hong Kong was warranted. Accordingly, the Company began intensive training of its independent distributors with respect to (i) applicable Chinese legal requirements, and (ii) the need for distributors to accurately and fairly describe business opportunities available to potential distributors. In May 2004, the Company elected to suspend shipment of product to certain Hong Kong distributors until

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they had completed the required training. This resulted in an unshipped sales backlog of orders to be shipped of approximately $6,598,000 as of June 30, 2004. As of September 30, 2004, training of the distributors has been substantially completed.

     Furthermore, in order to accommodate the concerns of many independent distributors, Lexxus extended its existing 14-day return policy in Hong Kong to 180 days to allow distributors and customers who purchased products during the two-week period prior to, and the two-week period after, the airing of the television program to return purchased merchandise for a full refund. In accordance with Statement of Financial Accounting Standards No. 48 “Revenue Recognition when Right of Return Exists”, the Company was unable to estimate the sales returns that would result from this change in policy and accordingly deferred revenue recognition on sales orders of approximately $5,404,000 as of June 30, 2004 until the 180-day return period has expired. During the third quarter, the Company reversed the entire deferral and recognized approximately $5,284,000 in revenue, net of approximately $120,000 in sales returns.

     Further, the Company decided not to seek recovery for any commissions already paid to its distributors related to product sales recorded during this period that were subsequently returned. In addition, the Company incurred approximately $1,030,000 additional costs during the second quarter to conduct the training efforts and to further remediate the adverse publicity in the Hong Kong region.

     Due to the adverse publicity caused by the airing of the television program, gross sales (before returns and refunds) for the Lexxus Hong Kong operations declined from an average of approximately $285,000 per day during the quarter ended March 31, 2004 to an average of approximately $170,000 and $155,000 per day during the quarters ended June 30, 2004 and September 30, 2004, respectively. The Company cannot predict when, if ever, sales from the Lexxus Hong Kong operations will increase to levels comparable to that of the first quarter.

     A summary of the net impact to the Company’s results of operations for the three months ended September 30, 2004 due to the deferred revenue is as follows (in thousands):

Item	Amount (Unaudited)
Hong Kong Deferred Revenue:
Orders entered in Q2 but shipped in Q3	$	6,598
Less: estimated cost of sales		(1,188	)
Less: estimated distributor commissions		(3,299	)
		2,111
Revenue deferred to Q3 under SFAS No. 48		5,404
Less: estimated cost of sales		(973	)
		4,431
Hong Kong Training and Remediation Costs:
Incremental sales returns under the special extended return privilege		(120	)
Estimated cost of sale on sales returns		22
		(98	)
Total	$	6,444

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     A summary of the net impact to the Company’s results of operations for the nine months ended September 30, 2004 is as follows (in thousands):

Item	Amount
	(Unaudited)
Incremental sales returns under the special extended return privilege	$	2,083
Less: estimated cost of sales on incremental sales returns		(375	)
Additional fees paid for retention of distributors		360
Facilities and related costs to conduct distributor training		590
Advertising, legal and media related costs		80
	$	2,738

Net Sales

     Net sales were approximately $40,482,000 for the three months ended September 30, 2004 compared to $16,740,000 for the three months ended September 30, 2003. This net increase of approximately $23,742,000 or 141.8% was primarily attributable to the increase in the number of active Lexxus distributors, re-orders and sales of new products. Excluding the $11.9 million revenue deferred from the second quarter ($6.6 million orders entered but not shipped until the third quarter and $5.4 million shipped in the second quarter but not recognized until the third quarter, offset by $0.1 million incremental special product returns), net sales for the quarter were $28.6 million, not including approximately $2.4 million orders taken but shipped during the third quarter.

Cost of Sales

     Cost of sales was approximately $8,323,000 or 20.6% of net sales for the three months ended September 30, 2004 compared with approximately $3,671,000 or 21.9% of net sales for the three months ended September 30, 2003. This increase of approximately $4,652,000 or 126.7% was primarily attributable to increased net sales. Cost of sales as a percentage of net sales decreased due to the elimination of commissions paid to Marketvision, which was acquired by the Company on March 31, 2004.

Gross Profit

     Gross profit was approximately $32,159,000 or 79.4% of net sales for the three months ended September 30, 2004 compared with approximately $13,069,000 or 78.1% of net sales for the three months ended September 30, 2003. This increase of approximately $19,090,000 or 146.1% was attributable to the increase in sales overall.

Distributor Commissions

     Distributor commissions were approximately $17,421,000 or 43.0% of net sales for the three months ended September 30, 2004 compared with approximately $6,988,000 or 41.8% of net sales for the three months ended September 30, 2003. This increase of approximately $10,433,000 or 149.3% was driven by the increase in net sales, the terms of the compensation plans, and promotions held during the third quarter of 2004. Commissions paid of approximately $2.7 million, related to the $5.4 million revenue deferred from the second quarter to the third quarter were already recorded in the second quarter of 2004.

Selling, General and Administrative Expenses

     Selling, general and administrative expenses were approximately $8,836,000 or 21.8% of net sales for the three months ended September 30, 2004 compared with approximately $4,133,000 or 24.7% of net sales for the three months ended September 30, 2003. The decrease in selling, general and administrative costs as a percentage of net sales was due to greater revenue. The increase in selling,

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general and administrative expenses of approximately $4,703,000 or 113.8% was mainly attributable to the more marketing and promotional activities world-wide.

Other Expenses, Net

     Other expenses, net were approximately $91,000 for the three months ended September 30, 2004 compared with approximately $150,000 for the three months ended September 30, 2003. This decrease of approximately $59,000 was due to a decrease in currency-related losses.

Income Taxes

     Income tax expense was approximately $857,000 or 14.7% of income before income taxes and minority interest for the three months ended September 30, 2004 compared with income tax expense of $500,000 or 27.8% of income before income taxes and minority interest for the three months ended September 30, 2003. The decrease in effective tax rate was attributable to use of net operating losses in the U.S. and lower effective tax rates on foreign earnings in 2004.

Minority Interest,

     Minority interest benefit was approximately $74,000 for the three months ended September 30, 2004, as compared to minority interest expense of approximately $22,000 for the three months ended September 30, 2003. The change was driven mainly by the change in profitability of KGC Networks Pte. Ltd.

Net Income

     Net income was approximately $5,028,000 or 12.4% of net sales for the three months ended September 30, 2004 compared to net income of approximately $1,276,000 or 7.6% of net sales for the three months ended September 30, 2003. The increase in net income was mainly attributable to increased revenue.

Nine Months Ended September 30, 2004 Compared to the Nine Months Ended September 30, 2003

     The following table summarizes NHTC’s consolidated operating results as a percentage of net sales for each of the years indicated:

	Nine Months Ended
	September 30,
	2004			2003
Net sales		100.0	%		100.0	%
Cost of sales		20.2	%		18.6	%
Gross profit		79.8	%		81.4	%
Operating expenses:
Distributor commissions		52.0	%		41.3	%
Selling, general and administrative expenses		26.0	%		27.5	%
Total operating expenses		78.0	%		68.8	%
Income from operations		1.8	%		12.6	%
Other expense, net		(0.1	%)		(0.5	%)
Income before income taxes and minority interest		1.7	%		12.1	%
Income taxes and minority interest		(0.3	%)		(3.1	%)
Net income		1.4	%		9.0	%

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Overview of the Results of Operations for the Nine Months ended September 30, 2004

Net Sales

     Net sales were approximately $96,604,000 for the nine months ended September 30, 2004 compared to $39,964,000 for the nine months ended September 30, 2003. This net increase of approximately $56,640,000 or 141.7% was primarily attributable to the increased number of active Lexxus distributors, Lexxus’s expansion into new markets, including South Korea in the second quarter of 2003 and sales of new products.

Cost of Sales

     Cost of sales was approximately $19,539,000 or 20.2% of net sales for the nine months ended September 30, 2004 compared with approximately $7,450,000 or 18.6% of net sales for the nine months ended September 30, 2003. This increase of approximately $12,089,000 or 162.3% was primarily driven by increased sales. Cost of sales as a percentage of net sales increased primarily due to greater air freight costs to ship product from the US to Asia and Europe in 2004, partly offset by the elimination of the commissions paid to Marketvision after its acquisition by the Company on March 31, 2004.

Gross Profit

     Gross profit was approximately $77,065,000 or 79.8% of net sales for the nine months ended September 30, 2004 compared with approximately $32,514,000 or 81.4% of net sales for the nine months ended September 30, 2003. This increase of approximately $44,551,000 or 137.0% was attributable to the increase in sales.

Distributor Commissions

     Distributor commissions were approximately $50,205,000 or 52.0% of net sales for the nine months ended September 30, 2004 compared with approximately $16,498,000 or 41.3% of net sales for the nine months ended September 30, 2003. This increase of approximately $33,707,000 or 204.3% and as a percentage of sales was related to the increase in sales, the terms of the compensation plans, and promotions held during the nine months ended September 30, 2004. Commissions of approximately $1.1 million paid on returns and refunds pertaining to the special product return privilege granted to certain Hong Kong distributors in the second quarter also increased commissions as a percentage of sales in 2004.

Selling, General and Administrative Expenses

     Selling, general and administrative costs were approximately $25,078,000 or 26.0% of net sales for the nine months ended September 30, 2004 compared with approximately $10,983,000 or 27.5% of net sales for the nine months ended September 30, 2003. This increase of approximately $14,095,000 or 128.3% was mainly attributable to the increased marketing and promotional activities world-wide, special expenses the Company incurred as a result of the negative television program aired on CCTV and the administrative expenses associated with the new office in Seoul, South Korea, which was opened in the second quarter of 2003. The 2004 selling, general and administrative costs as a percentage of net sales was less than a year ago over the comparable period, mainly due to much higher revenue.

Other Expense, Net

     Other expense, net was approximately $122,000 for the nine months ended September 30, 2004 compared with expense of approximately $192,000 for the nine months ended September 30, 2003. This decrease of approximately $70,000 was mainly due to less currency-related losses.

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Income Taxes

     Income tax expense was approximately $109,000 or 6.6% of income before income taxes and minority interest for the nine months ended September 30, 2004 compared with $1,200,000 or 24.8% of income before income taxes and minority interest for the nine months ended September 30, 2003. The decrease in effective tax rate was attributable to use of net operating losses in the U.S. and lower effective tax rates on foreign earnings in 2004.

Minority Interest

     Minority interest expense was approximately $159,000 for the nine months ended September 30, 2004, compared to approximately $45,000 of expense for the nine months ended September 30, 2003. The increase in the expense relates primarily to the improved profitability of our subsidiary, KGC Networks Pte. Ltd.

Net Income

     Net income was approximately $1,392,000 or 1.4% of net sales for the nine months ended September 30, 2004 compared to net income of approximately $3,596,000 or 9.0% of net sales for the nine months ended September 30, 2003. The decrease in net income was due to higher commissions paid to distributors and marketing expenses, partly offset by higher volume.

Liquidity and Capital Resources

     Cash generated from operations is the main funding source for the Company’s working capital and capital expenditure. In the past, NHTC also borrowed from institutions and individuals and issued preferred stock. In October 2004, the Company raised approximately $15.9 million net of transaction fees through a private equity placement.

     At September 30, 2004, the ratio of current assets to current liabilities was 1.00 to 1.00 and NHTC had working capital deficit of approximately $30,000. Working capital as of September 30, 2004 increased since June 30, 2004 mainly due to a decrease in deferred revenue, and declined from the December 31, 2003 mainly because of increased accrued expenses and the issuance of promissory notes in connection with the Marketvision acquisition.

     Cash used in operations for the nine months ended September 30, 2004 was approximately $1,860,000. Cash used in investing activities during the period was approximately $2,617,000, which primarily relates to the cash payment made to Marketvision as part of the acquisition together with an increase of restricted cash related to the credit card reserve, purchase of minority interest and capital expenditures. Cash used in financing activities during the period was approximately $880,000 utilized for the repayment of Marketvision-related notes payable and long-term debt. Total cash decreased by approximately $5,714,000 during the period.

     With cash generated from profitable business operations and the net proceeds from the private placement closed in October 2004, NHTC believes that its existing liquidity and cash flows from operations, including its cash and cash equivalents, should be adequate to fund normal business operations expected in the future.

     NHTC intends to continue to open additional operations in new foreign markets in coming years. The Company is in the process of planning for its entry into the Mexican and Japanese markets. The estimated initial cost for entering into the Mexican market is $2 million to $3 million, and $5 million to $7 million for the Japanese market.

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     China is currently the Company’s most important business development project. Direct selling, or multi-level marketing, is currently prohibited in China. The Chinese government is committed to opening the direct selling market and has published drafts of pertinent legislation, which is expected to be formally adopted some time next year. Before the formal adoption of direct selling laws, many of the international direct selling companies have started to operate in China in a retail format. In June 2004, Lexxus obtained a license to engage in retail business in China. The license stipulates a capital requirement of $12 million over a three-year period. As of November 2, 2004, the Company has not funded this capital requirement for the retail license. In planning for a retail operation, the Company estimates that each retail store will cost approximately $50,000 to $100,000 and is evaluating the number, location, timing and format of store openings.

     Since the airing of a negative program on Chinese television on April 12, 2004, the Company has been unable to determine whether any governmental investigations have been initiated or are under consideration by the Chinese government as a result of such adverse publicity. The Company is also unable to predict whether it will be successful in obtaining a direct selling license to operate in China, and if it is successful, when it will be permitted to commence direct selling operations there. Further, even if the Company is successful in obtaining a direct selling license to do business in China, it is uncertain as to whether the Company will generate profits from such operations.

     In connection with the Marketvision acquisition, the Company issued three different promissory notes in the aggregate principal amount of approximately $3.2 million. As of September 30, 2004, two of these promissory notes in the aggregate amount of $1.5 million became due and payable. On October 12, 2004, the Company repaid approximately $1.6 million and the notes due on September 30, 2004 have been paid in full.

Off – Balance Sheet Arrangements

     NHTC does not utilize off-balance sheet financing arrangements other than in the normal course of business. NHTC finances the use of certain facilities, office and computer equipment, and automobiles under various operating lease agreements.

Forward Looking Statements

     Certain statements contained in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements included in this Quarterly Report, 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 Quarterly Report, the words “will,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We cannot guarantee future results, levels of activity, performance or achievements, and you should not place undue 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. 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 day this Quarterly Report was first filed with the SEC 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.

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     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 Quarterly Report. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in forward-looking statements include, among others, the following:

• our relationship with our distributors;

• our need to continually recruit new distributors;

• our internal controls and accounting methods may require further modification;

• regulatory matters governing our products and network marketing system;

• adverse publicity associated with our products or network marketing organizations;

• our relationship with minority interest partners;

• product liability claims;

• our reliance on outside manufacturers;

• risks associated with operating internationally, including foreign exchange risks;

• product concentration;

• dependence on increased penetration of existing markets;

• the competitive nature of our business; and

• our ability to generate sufficient cash to operate and expand our business.

     Market data and other statistical information used throughout this report is based on independent industry publications, government publications, reports by market research firms or other published independent sources and on our good faith estimates, which are derived from our review of internal surveys and independent sources. Although we believe that these sources are reliable, we have not independently verified the information and cannot guarantee its accuracy or completeness.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     NHTC does not engage in trading market risk sensitive instruments and does not purchase investments as hedges or for purposes “other than trading” that are likely to expose it to certain types of market risk, including interest rate, commodity price or equity price risk. NHTC has not issued any debt instruments, entered into any forward or future contracts, purchased any options or entered into any swaps.

Currency Risk and Exchange Rate Information

     Some of NHTC’s revenue and some of their expenses are recognized outside of the United States, except for inventory purchases, which are primarily transacted in U.S. dollars from vendors in the United States. The local currency of each subsidiary’s primary markets is considered the functional currency. Revenue and expenses are translated at the weighted average exchange rates for the periods reported. Therefore, the reported revenue and earnings will be positively impacted by a weakening of the U.S. dollar and will be negatively impacted by a strengthening of the U.S. dollar. Given the uncertainty of exchange rate fluctuations, we cannot estimate the effect of these fluctuations on our future business, product pricing, and results of operations or financial condition.

Seasonality

     In addition to general economic factors, NHTC is impacted by seasonal factors and trends such as major cultural events and vacation patterns. For example, most Asian markets celebrate their respective local New Year in the first quarter, which generally has a negative impact on that quarter. We believe

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that direct selling in the United States and Europe is also generally negatively impacted during the month of August, which is in our third quarter, when many individuals, including our distributors, traditionally take time off for vacations.

Item 4. Controls and Procedures

          We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our President and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

          During the quarters ended September 30 and December 31, 2003, the Company re-evaluated its financial statements for the years ended December 31, 2002 and 2001, the quarterly periods included in such years and the quarterly periods ended March 31, June 30 and September 30, 2003. As a result of such review, the Company determined that it inadvertently applied the incorrect accounting treatment with respect to the following items:

(i)	revenue recognition with respect to administrative enrollment fees;
(ii)	revenue cut-off between 2002 and 2003;
(iii)	accounts receivable reconciliation to supporting documents;
(iv)	reserves established for product returns and refunds;
(v)	the gain recorded in connection with the sale of a subsidiary in 2001;
(vi)	income tax provisions; and
(vii)	stock option based compensation.

          Consequently, the Company amended and restated its financial statements for each quarter in 2001, 2002 and 2003 as well as for the years ended December 31, 2001 and 2002 with respect to each of the foregoing items (collectively, the “Restatement Items”).

          An evaluation of the Company’s disclosure controls and procedures (as defined in Section 13(a)-14(c) of the Exchange Act) as of September 30, 2004 was carried out under the supervision and with the participation of the Company’s President and Chief Financial Officer and other members of the Company’s senior management. The Company’s President and Chief Financial Officer concluded that the Company’s disclosure controls and procedures as currently in effect are effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (i) accumulated and communicated to the Company’s management (including the President and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. During the nine months ended September 30, 2004, the Company made changes to improve its internal controls over financial reporting with respect to (i) each of the Restatement Items, and (ii) monthly financial reports provided to the Company by its subsidiaries. The Company hired a new Chief Financial Officer in August 2004 and a new Chief Accounting Officer in September 2004 and is still hiring additional accounting staff to supplement existing personnel. In addition, the Company has commenced its documentation required under the Sarbanes-Oxley Act of 2002 and is developing additional policies and procedures to further strengthen its international reporting, including the areas of revenue recognition, sales and expense cut-off and sales returns. The Company hired a reporting specialist in November 2004 to coordinate the world-wide Sarbanes-Oxley compliance work. The Company plans to implement additional controls and procedures sufficient to accurately report their financial performance on a timely basis. A regional Chief

21

Financial Officer was recruited to improve financial reporting and operational efficiency in the region of Greater China and Southeast Asia. There have been no other changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the quarter ended September 30, 2004, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

     The Company intends to continually review and evaluate the design and effectiveness of its disclosure controls and procedures and to improve its controls and procedures over time and to correct any deficiencies that it may discover in the future. The goal is to ensure that senior management has timely access to all material financial and non-financial information concerning the Company’s business. While the Company believes the present design of its disclosure controls and procedures is effective to achieve its goal, future events affecting its business may cause the Company to modify its disclosure controls and procedures.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

     During the fall of 2003, the customs agency of the government of South Korea brought a charge against LXK, Ltd., the Company’s wholly owned subsidiary operating in South Korea (“LXK”), with respect to the importation of the Company’s Alura product. The customs agency alleges that Alura is not a cosmetic product, but rather should be categorized and imported as a pharmaceutical product. The matter is currently being considered in the courts. During the ongoing hearings, LXK intends to present expert testimony that Alura is not a pharmaceutical product, and therefore, LXK should be permitted to sell and distribute Alura in South Korea. The failure to sell Alura in South Korea is not anticipated to have a material adverse effect on the financial condition, results of operations, cash flow or business prospects of LXK.

     On or around March 31, 2004, Lexxus International, Inc. (“Lexxus”) received a letter from John Loghry, a former Lexxus distributor, alleging that Lexxus had wrongfully terminated an alleged oral distributorship agreement with Mr. Loghry and that the Company had breached an alleged oral agreement to issue shares of the Company’s common stock to Mr. Loghry. The letter demanded a settlement payment of $35 million without any explanation as to the amount of the claim. After Mr. Loghry threatened to commence suit against Lexxus and the Company in Nebraska, on May 13, 2004, Lexxus and the Company filed an action for declaratory relief against Mr. Loghry in the United States District Court for the Northern District of Texas seeking, inter alia, a declaration that Mr. Loghry was not wrongfully terminated and is not entitled to recover anything from Lexxus or the Company. Mr. Loghry has filed counterclaims against the Company and Lexxus asserting his previously articulated claims. Discovery has commenced and the Company intends to vigorously defend itself in this case.

     In September 2004, Mr. Loghry filed third party claims against certain officers of the Company and Lexxus, including against Terry LaCore and Mark Woodburn for fraud, LaCore, Woodburn, and Lisa Grossman for conspiracy to commit the same, and Grossman for tortuous interference. A motion to dismiss this action has been filed.

     On November 1, 2004, Toyota Jidosha Kabushiki Kaisha (d/b/a Toyota Motor Corporation) and Toyota Motor Sales, U.S.A. (collectively, “Toyota”) filed a complaint against the Company and Lexxus International, Inc. (“Lexxus”) in United States District Court for the Central District of California (CV04-9028). The complaint alleges trademark and service mark dilution, unfair competition, trademark and service mark infringement, and trade name infringement, each with respect to Toyota’s Lexus trademark. Toyota seeks to enjoin the Company and Lexxus from using the Lexxus mark and otherwise competing unfairly with Toyota, to transfer the ownership of the mylexxus.com and lexxusinternational.com Internet sites to Toyota, and reimbursement of costs and reasonable attorney fees incurred by Toyota in

22

connection with this matter. The Company denies the allegations contained in the complaint and intends to vigorously defend this action. In the event that the Company is unsuccessful in defending this action, the Company may be required to change the name of some or all of its Lexxus subsidiaries and domain names which could have a material adverse effect on the financial condition, results of operations, cash flow or business prospects of the Company.

     From time to time, the Company is involved in legal proceedings incidental to the course of its business. The Company believes that all pending actions, individually and in the aggregate, will not have a material adverse effect on the financial condition, results of operations, cash flows or business prospects.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

4.1	Form of Common Stock Purchase Warrant issued to investors in private placement in October 2004.
10.1	Employment Agreement dated as of August 1, 2004 between the Company and Chris Sharng.
10.2	Form of Registration Rights Agreement between the Company and the investors in the Company’s private placement in October 2004.
31.1	Certification of President required by Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of President required by Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002.

23

SIGNATURES

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

NATURAL HEALTH TRENDS CORP.

By: /s/ Mark D. Woodburn

Mark D. Woodburn

President

By: /s/ Chris Sharng

Chris Sharng

Executive Vice President and Chief Financial Officer

Date: November 11, 2004

24

EX-4.1

                                                                     EXHIBIT 4.1

                                                                [EXECUTION COPY]

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR DISTRIBUTION
MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR
AN OPINION OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

                           NATURAL HEALTH TRENDS CORP.

                      FORM OF COMMON STOCK PURCHASE WARRANT

Warrant No.  : _______
Number of Shares: ____________
Date of Issuance: October 6, 2004 ("Issuance Date")

         Natural Health Trends Corp., a Florida corporation (the "Company"),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, [INSERT NAME OF BUYER], the
registered holder hereof or its permitted assigns (the "Holder"), is entitled,
subject to the terms set forth below, to purchase from the Company, at the
Exercise Price (as defined below) then in effect, upon surrender of this Common
Stock Purchase Warrant (including all Common Stock Purchase Warrants issued in
exchange, transfer or replacement hereof, the "Warrant"), at any time or times
on or after the date hereof, but not after 11:59 P.M., New York Time, on the
Expiration Date (as defined below), _________________ (____) fully paid
nonassessable shares of Common Stock (as defined below) (the "Warrant Shares").
Except as otherwise defined herein, capitalized terms in this Warrant shall have
the meanings set forth in Section 13. This Warrant is one of the Common Stock
Purchase Warrants (the "SPA Warrants") issued pursuant to (i) Section 1 of that
certain Securities Purchase Agreement, or (ii) Article 3 of that certain
Subscription Agreement, each dated as of October 6, 2004 (the "Subscription
Date"), among the Company and the investors (the "Buyers") referred to therein
(the "Purchase Agreements").

         1. EXERCISE OF WARRANT.

         (a) MECHANICS OF EXERCISE. Subject to the terms and conditions hereof,
this Warrant may be exercised by the Holder on any day on or after the date
hereof, in whole or in part, by (i) delivery of a written notice, in the form
attached hereto as EXHIBIT A (the "Exercise Notice"), of the Holder's election
to exercise this Warrant and (ii) payment to the Company of an amount equal to
the applicable Exercise Price multiplied by the number of Warrant Shares as to
which this Warrant is being exercised (the "Aggregate Exercise Price") in cash
or by wire transfer of immediately available funds. The Holder shall not be
required to deliver the original Warrant in order to effect an exercise
hereunder. Execution and delivery of the Exercise Notice with respect to less
than all of the Warrant Shares shall have the same effect as cancellation of



the original Warrant and issuance of a new Warrant evidencing the right to
purchase the remaining number of Warrant Shares. On or before the first Business
Day following the date on which the Company has received each of the Exercise
Notice and the Aggregate Exercise Price (the "Exercise Delivery Documents"), the
Company shall transmit by facsimile an acknowledgment of confirmation of receipt
of the Exercise Delivery Documents to the Holder and the Company's transfer
agent (the "Transfer Agent"). On or before the tenth Business Day following the
date on which the Company has received all of the Exercise Delivery Documents
(the "Share Delivery Date"), the Company shall (X) provided that the Transfer
Agent is participating in The Depository Trust Company ("DTC") Fast Automated
Securities Transfer Program, upon the request of the Holder, credit such
aggregate number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise to the Holder's or its designee's balance account with
DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the
Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and dispatch by overnight courier to the address as
specified in the Exercise Notice, a certificate, registered in the name of the
Holder or its designee, for the number of shares of Common Stock to which the
Holder is entitled pursuant to such exercise. Upon delivery of the Exercise
Notice and Aggregate Exercise Price referred to in clause (ii) above, the Holder
shall be deemed for all corporate purposes to have become the holder of record
of the Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date of delivery of the certificates evidencing such Warrant
Shares. If this Warrant is submitted in connection with any exercise pursuant to
this Section 1(a) and the number of Warrant Shares represented by this Warrant
submitted for exercise is greater than the number of Warrant Shares being
acquired upon an exercise, then the Company shall as soon as practicable and in
no event later than three Business Days after any exercise and at its own
expense, issue a new Warrant (in accordance with Section 6(d)) representing the
right to purchase the number of Warrant Shares purchasable immediately prior to
such exercise under this Warrant, less the number of Warrant Shares with respect
to which this Warrant is exercised. No fractional shares of Common Stock are to
be issued upon the exercise of this Warrant, but rather the number of shares of
Common Stock to be issued shall be rounded up to the nearest whole number.

         (b) EXERCISE PRICE. For purposes of this Warrant, "Exercise Price"
means $12.47, subject to adjustment as provided herein.

         2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The
Exercise Price and the number of Warrant Shares shall be adjusted from time to
time as follows:

         (a) ADJUSTMENT UPON SUBDIVISION OR COMBINATION OF COMMON STOCK. If the
Company at any time on or after the Issuance Date subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the Exercise
Price in effect immediately prior to such subdivision will be proportionately
reduced and the number of Warrant Shares will be proportionately increased. If
the Company at any time on or after the Issuance Date combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination will be proportionately increased and the
number

                                       2


of Warrant Shares will be proportionately decreased. Any adjustment under this
Section 2(a) shall become effective at the close of business on the date the
subdivision or combination becomes effective.

         3. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTION.

         (a) PURCHASE RIGHTS. In addition to any adjustments pursuant to Section
2 above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
"Purchase Rights"), then the Holder will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
holder could have acquired if such holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant (without regard
to any limitations on the exercise of this Warrant) immediately before the date
on which a record is taken for the grant, issuance or sale of such Purchase
Rights, or, if no such record is taken, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.

         (b) FUNDAMENTAL TRANSACTIONS. The Company shall not enter into or be
party to a Fundamental Transaction unless the Successor Entity assumes in
writing all of the obligations of the Company under this Warrant and the other
Transaction Documents in accordance with the provisions of this Section 3(b)
pursuant to written agreements in form and substance reasonably satisfactory to
the Required Holders and approved by the Required Holders prior to such
Fundamental Transaction. Upon consummation of the Fundamental Transaction, the
Successor Entity shall deliver to the holder of this Warrant in exchange
therefor, a warrant substantially identical in form and substance to this
Warrant, except that there shall be issuable upon exercise of such warrant at
any time after the consummation of the Fundamental Transaction but prior to the
Expiration Date, in lieu of the shares of the Company's Common Stock (or other
securities, cash, assets or other property) purchasable upon the exercise of the
Warrant prior to such Fundamental Transaction, such shares of stock, securities,
cash, assets or any other property whatsoever (including warrants or other
purchase or subscription rights) which the Holder would have been entitled to
receive upon the happening of such Fundamental Transaction had the Warrant been
exercised immediately prior to such Fundamental Transaction, as adjusted in
accordance with the provisions of this Warrant. Provisions made pursuant to this
Section shall be in a form and substance reasonably satisfactory to the Required
Holders. The provisions of this Section shall apply similarly and equally to
successive Fundamental Transactions and shall be applied without regard to any
limitations on the exercise of this Warrant.

         4. NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Articles of Incorporation, as amended or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this
Warrant, and will at all times in good faith carry out all the provisions of
this Warrant and take all action as may be required to protect the rights of the
Holder. Without limiting the generality of the foregoing, the Company (i) will
not increase the par value of any

                                       3


shares of Common Stock receivable upon the exercise of this Warrant above the
Exercise Price then in effect, (ii) will take all such actions as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock upon the exercise of this
Warrant, and (iii) will, so long as any of the SPA Warrants are outstanding,
take all action necessary to reserve and keep available out of its authorized
and unissued Common Stock, solely for the purpose of effecting the exercise of
the SPA Warrants, the number of shares of Common Stock as shall from time to
time be necessary to effect the exercise of the SPA Warrants then outstanding
(without regard to any limitations on exercise).

         5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise
specifically provided herein, the Holder, solely in such Person's capacity as a
holder, of this Warrant shall not be entitled to vote or receive dividends or be
deemed the holder of shares of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the Holder, solely in such
Person's capacity as a holder of this Warrant, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the Holder of the Warrant Shares which such Person is then entitled
to receive upon the due exercise of this Warrant. In addition, nothing contained
in this Warrant shall be construed as imposing any liabilities on such Holder to
purchase any securities (upon exercise of this Warrant or otherwise) or as a
stockholder of the Company, whether such liabilities are asserted by the Company
or by creditors of the Company. Notwithstanding this Section 5, the Company will
provide the Holder with copies of the same notices and other information given
to the stockholders of the Company generally, contemporaneously with the giving
thereof to the stockholders.

         6. REISSUANCE OF WARRANTS.

         (a) TRANSFER OF WARRANT. The Holder may transfer this Warrant and the
rights hereunder only in accordance with applicable securities laws. If this
Warrant is to be transferred, the Holder shall surrender this Warrant to the
Company, whereupon the Company will forthwith issue and deliver upon the order
of the Holder a new Warrant (in accordance with Section 6(d)), registered as the
Holder may request, representing the right to purchase the number of Warrant
Shares being transferred by the Holder and, if less then the total number of
Warrant Shares then underlying this Warrant is being transferred, a new Warrant
(in accordance with Section 6(d)) to the Holder representing the right to
purchase the number of Warrant Shares not being transferred.

         (b) LOST, STOLEN OR MUTILATED WARRANT. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant, and, in the case of loss, theft or destruction,
of any indemnification undertaking by the Holder to the Company in customary
form, in the case of mutilation, upon surrender and cancellation of this
Warrant, the Company shall execute and deliver to the Holder a new Warrant (in
accordance with Section 6(d)) representing the right to purchase the Warrant
Shares then underlying this Warrant.

                                       4


         (c) WARRANT EXCHANGEABLE FOR MULTIPLE WARRANTS. This Warrant is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Warrant or Warrants (in accordance with Section 6(d))
representing in the aggregate the right to purchase the number of Warrant Shares
then underlying this Warrant, and each such new Warrant will represent the right
to purchase such portion of such Warrant Shares as is designated by the Holder
at the time of such surrender; provided, however, that no Warrants for
fractional shares of Common Stock shall be given.

         (d) ISSUANCE OF NEW WARRANTS. Whenever the Company is required to issue
a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall
be of like tenor with this Warrant, (ii) shall represent, as indicated on the
face of such new Warrant, the right to purchase the Warrant Shares then
underlying this Warrant (or in the case of a new Warrant being issued pursuant
to Section 6(a) or Section 6(c), the Warrant Shares designated by the Holder
which, when added to the number of shares of Common Stock underlying the other
new Warrants issued in connection with such issuance, does not exceed the number
of Warrant Shares then underlying this Warrant), (iii) shall have an issuance
date, as indicated on the face of such new Warrant which is the same as the
Issuance Date, and (iv) shall have the same rights and conditions as this
Warrant.

         7. NOTICES. Whenever notice is required to be given under this Warrant,
unless otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement. The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this Warrant,
including in reasonable detail a description of such action and the reason
therefore. Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) promptly upon any adjustment of the
Exercise Price or number of Warrant Shares or number or kind of securities
purchasable upon exercise of this Warrant, setting forth in reasonable detail,
and certifying, the facts requiring such adjustment and the calculation of such
adjustment and (ii) prior to the date on which the Company closes its books or
takes a record (A) with respect to any dividend or distribution upon the Common
Stock, (B) with respect to any grants, issues or sales of any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property to holders of Common Stock or (C) for determining rights to vote
with respect to any Fundamental Transaction, dissolution or liquidation,
provided in each case that such information shall be made known to the public
prior to or in conjunction with such notice being provided to the Holder.

         8. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Required
Holders; provided that no such action may increase the exercise price of any SPA
Warrant or decrease the number of shares or class of stock obtainable upon
exercise of any SPA Warrant without the written consent of the Holder. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the SPA Warrants then outstanding.

         9. GOVERNING LAW. This Warrant shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and

                                       5


performance of this Warrant shall be governed by, the internal laws of the State
of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York.

         10. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly
drafted by the Company and all the Buyers and shall not be construed against any
person as the drafter hereof. The headings of this Warrant are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Warrant.

         11. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant or any other Transaction Document
(as defined in the Purchase Agreements), at law or in equity (including a decree
of specific performance and/or other injunctive relief), and nothing herein
shall limit the right of the holder of this Warrant right to pursue actual
damages for any failure by the Company to comply with the terms of this Warrant.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Holder and that the remedy at law for any such
breach may be inadequate. The Company therefore agrees that, in the event of any
such breach or threatened breach, the holder of this Warrant shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or
other security being required.

         12. TRANSFER. This Warrant may be offered for sale, sold, transferred
or assigned without the consent of the Company, subject to applicable securities
laws; provided however, in no event shall the Holder effect a public
distribution of this Warrant without the prior written consent of the Company
which consent maybe withheld in the Company's sole discretion.

         13. CERTAIN DEFINITIONS. For purposes of this Warrant, the following
terms shall have the following meanings:

         (a) "COMMON STOCK" means (i) the Company's common stock, par value
$.001 per share, and (ii) any capital stock into which such Common Stock shall
have been changed or any capital stock resulting from a reclassification of such
Common Stock.

         (b) "CONVERTIBLE SECURITIES" means any stock or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
for Common Stock.

         (c) "EXPIRATION DATE" means the date sixty months after the Issuance
Date or, if such date falls on a day other than a Business Day or on which
trading does not take place on the Principal Market (a "Holiday"), the next date
that is not a Holiday.

         (d) "FUNDAMENTAL TRANSACTION" means that the Company shall, directly or
indirectly, in one or more related transactions, (i) consolidate or merge with
or into (whether or not the Company is the surviving corporation) another Person
(except for a migratory merger

                                       6


pursuant to which the Company changes its state of incorporation), or (ii) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company to another Person, or (iii) allow another
Person to make a purchase, tender or exchange offer that is accepted by the
holders of more than the 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (iv) consummate a stock purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, or spin-off) with another Person whereby such
other Person acquires more than the 50% of the outstanding shares of Common
Stock (not including any shares of Common Stock held by the other Person or
other Persons making or party to, or associated or affiliated with the other
Persons making or party to, such stock purchase agreement or other business
combination).

         (e) "OPTIONS" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.

         (f) "PARENT ENTITY" of a Person means an entity that, directly or
indirectly, controls the applicable Person and whose common stock or equivalent
equity security is quoted or listed on an Eligible Market, or, if there is more
than one such Person or Parent Entity, the Person or Parent Entity with the
largest public market capitalization as of the date of consummation of the
Fundamental Transaction.

         (g) "PERSON" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.

         (h) "PRINCIPAL MARKET" means the principal exchange or market on which
the Common Stock is listed and trades, which initially is the OTC Bulletin
Board.

         (i) "REGISTRATION RIGHTS AGREEMENT" means that certain registration
rights agreement by and among the Company and the Buyers.

         (j) "REQUIRED HOLDERS" means the holders of the SPA Warrants
representing at least a majority of the shares of Common Stock underlying the
SPA Warrants then outstanding.

         (k) "SUCCESSOR ENTITY" means the Person, which may be the Company,
formed by, resulting from or surviving any Fundamental Transaction or the Person
with which such Fundamental Transaction shall have been made, provided that if
such Person is not a publicly traded entity whose common stock or equivalent
equity security is quoted or listed for trading on an Eligible Market, Successor
Entity shall mean such Person's Parent Entity.

         IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase
Common Stock to be duly executed as of the Issuance Date set out above.

                                       7


                                        NATURAL HEALTH TRENDS CORP.

                                        By:_____________________________
                                            Name:  Mark D. Woodburn
                                            Title: President

                                       8


                                    EXHIBIT A

                                 EXERCISE NOTICE
            TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
                        WARRANT TO PURCHASE COMMON STOCK

                           NATURAL HEALTH TRENDS CORP.

         The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Common Stock ("Warrant Shares") of Natural
Health Trends Corp., a Florida corporation (the "Company"), evidenced by the
attached Warrant to Purchase Common Stock (the "Warrant"). Capitalized terms
used herein and not otherwise defined shall have the respective meanings set
forth in the Warrant.

         1. PAYMENT OF EXERCISE PRICE. The holder shall pay the Aggregate
Exercise Price in the sum of $________ in immediately available funds to the
Company in accordance with the terms of the Warrant.

         2. ACCREDITED INVESTOR. The Holder is an "accredited investor" as
defined in Rule 501(c) under the Securities Act of 1933, as amended.

         3. DELIVERY OF WARRANT SHARES. The Company shall deliver to the holder
_______ Warrant Shares in accordance with the terms of the Warrant.

Date: _______________ __, ______

Name of Registered Holder

By:______________________________
   Name:
   Title:



                                 ACKNOWLEDGMENT

         The Company hereby acknowledges this Exercise Notice and hereby directs
Continental Stock Transfer and Trust Company to issue the above indicated number
of shares of Common Stock in accordance with the Transfer Agent Instructions
dated October 6, 2004 from the Company and acknowledged and agreed to by
Continental Stock Transfer and Trust Company.

                                        NATURAL HEALTH TRENDS CORP.

                                        By:______________________________
                                           Name:  Mark D. Woodburn
                                           Title: President

EX-10.1

                                                                    EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT

         EMPLOYMENT AGREEMENT, dated as of June 24, 2004 and effective as of
August 1, 2004, by and between Natural Health Trends Corp., a Florida
corporation (the "Company"), of 12901 Hutton Drive, Dallas, Texas 75234 and
Chris Sharng, an individual residing at 1352 Saddlebrook Court, Bartonville,
Texas 76226 (the "Executive").

                                  WITNESSETH:

         WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, upon the terms and conditions hereinafter
set forth.

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties mutually agree as
follows:

         SECTION 1. EMPLOYMENT. The Company agrees to employ Executive and the
Executive hereby accepts such employment, as the Company's Executive Vice
President and Chief Financial Officer, subject to the terms and conditions set
forth in this Agreement.

         SECTION 2. DUTIES; EXCLUSIVE SERVICES; BEST EFFORTS. The Executive
shall perform all duties incident to the position of Executive Vice President
and Chief Financial Officer as well as any other duties as may from time to time
be assigned by the President of the Company or his designee, and agrees to abide
by all By-laws, policies, practices, procedures or rules of the Company. The
Executive agrees to devote his best efforts, energies and skill to the discharge
of the duties and responsibilities attributable to his position, and to this
end, he will devote his full time and attention exclusively to the business and
affairs of the Company. The Executive also agrees that he shall not take
personal advantage of any business opportunities which arise during his
employment and which may benefit the Company. All material facts regarding such
opportunities must be promptly

                                       1


reported to the President for consideration by the Company. Notwithstanding the
foregoing, the Executive may donate his time and efforts to charitable causes so
long as such endeavors do not effect his ability to perform his duties under
this Agreement. If requested by the Company, the Executive shall serve on the
Board of Directors or any committee thereof without additional compensation.

         SECTION 3. TERM OF EMPLOYMENT; VACATION.

                  (a) Unless extended in writing by both the Company and the
Executive, the term of this Agreement shall commence on the effective date
hereof and terminate on December 31, 2007, subject to earlier termination by the
parties pursuant to Sections 5 and 6 hereof (the "Term").

                  (b) The Executive shall be entitled to two (2) weeks vacation
during each year of the Term.

         SECTION 4. COMPENSATION OF EXECUTIVE.

                  4.1 SALARY. The Company shall pay to Executive a base salary
of two hundred thirty thousand ($230,000) dollars for the twelve-month period
commencing August 1st, 2004 (the "Base Salary"), less such deductions as shall
be required to be withheld by applicable law and regulations. The Base Salary
payable to Executive shall be paid at such regular weekly, biweekly or
semi-monthly time or times as the Company makes payment of its regular payroll
in the regular course of business. Commencing on the first anniversary of the
date hereof, the Base Salary shall be increased to two hundred and fifty
thousand ($250,000) and be effective for the rest of the Term.

                  4.2 STOCK OPTIONS. On the date hereof and upon the execution
of this Agreement by the parties, the Executive shall receive non-qualified
stock options exercisable for an aggregate of 34,124 shares of the Company's
common stock ("Common Stock") at an exercise price equal to the closing price of
the Company's common stock on the date hereof, as reported on the OTC Bulletin
Board. An equal number of Options (or approximately 832 Options) shall vest
monthly during the Term; provided however, that no Options shall vest

                                       2


during the six (6) month period commencing on the date hereof and ending on
January 31st, 2005, and on January 31st, 2005, 4,992 Options shall vest. The
Options shall be granted pursuant to the Company's 2002 Stock Plan (the "Plan")
and subject to the terms and conditions thereof.

                  4.3 PERFORMANCE BONUSES. During the term of this Agreement,
the Executive shall be entitled to receive an annual cash performance bonus (the
"Annual Bonus") for each year during the Term commencing on January 1st and
ending on the following December 31st based upon (i) the Executive's performance
of his duties, and (ii) the Company's financial performance, each as determined
by the Company's Compensation Committee (or lieu thereof, the Company's Board of
Directors) in its reasonable discretion. The Executive and the Company shall
agree on certain minimum and maximum annual performance criteria. If (i) the
minimum target is not achieved, the Executive will not be entitled to any Annual
Bonus, (ii) the minimum target is achieved, the Executive will be entitled to an
Annual Bonus equal to 25% of his Base Salary in effect on January 1st of the
applicable year, or (iii) the maximum target is achieved, the Executive will be
entitled to an Annual Bonus equal to 50% of his Base Salary in effect on January
1st of the applicable year. Such Annual Bonus, if any, shall be paid within
forty five (45) days following the end of such yearly bonus period.
Notwithstanding the foregoing, the Executive shall receive a cash bonus of no
less than $50,000 for each of the calendar years ending December 31, 2004 and
2005.

                  4.4 EXPENSES. During the Term, the Company shall promptly
reimburse the Executive for all reasonable and necessary travel expenses
(including business class on all international flights over 5 hours in duration)
and other disbursements incurred by the Executive on behalf of the Company, in
performance of the Executive's duties hereunder, assuming Executive has received
prior approval for such travel expenses and disbursements by the Company to the
extent possible consistent with corporate practices with respect to the
reimbursement of expenses incurred by the Company's senior executives. In
addition, the

                                       3


Company shall pay or reimburse Executive for any membership fees and dues for
various professional organizations in an amount not to exceed $2,000.00.

                  4.5 BENEFITS. The Executive shall be permitted during the Term
to participate in any hospitalization or disability insurance plans, health
programs, pension plans, bonus plans or similar benefits that may be available
to other executives of the Company (including coverage under any officers and
directors liability insurance policy), subject to such eligibility rules as are
applied to senior managers generally. The Company shall, if possible, waive any
waiting period applicable to the Executive under any benefit plan.

         SECTION 5. DISABILITY OF THE EXECUTIVE. If the Executive is
incapacitated or disabled by accident, sickness or otherwise so as to render the
Executive mentally or physically incapable of performing the services required
to be performed under this Agreement for a period of 90 consecutive days or 120
days in any period of 360 consecutive days (a "Disability"), the Company may, at
the time or during the period of such Disability, at its option, terminate the
employment of the Executive under this Agreement immediately upon giving the
Executive written notice to that effect.

         SECTION 6. TERMINATION.

                  6.1 WITH CAUSE. The Company may terminate the employment of
the Executive and all of the Company's obligations under this Agreement at any
time for Cause (as hereinafter defined) by giving the Executive notice of such
termination, with reasonable specificity of the details thereof. "Cause" shall
include, without limitation, the following:

                  (i) failure or neglect, by the Executive to perform the duties
of the Executive's position;

                  (ii) failure of the Executive to obey orders given by the
Company or his supervisors;

                  (iii) misconduct by the Executive in connection with the
performance of any of his duties, including, without limitation,
misappropriation of funds or property of the

                                       4


Company, securing or attempting to secure personally any profit in connection
with any transaction entered into on behalf of the Company, misrepresentation to
the Company, or any violation of law or regulations on Company premises or to
which the Company is subject;

                  (iv) commission by the Executive of an act involving moral
turpitude, dishonesty, theft or unethical business conduct, or conduct which
impairs or injures the reputation of, or harms, the Company;

                  (v) disloyalty by the Executive, including without limitation,
aiding a competitor;

                  (vi) failure by the Executive to devote his full time and best
efforts to the Company's business and affairs;

                  (vii) failure by the Executive to work exclusively for the
Company;

                  (viii) failure to fully cooperate in any investigation by the
Company;

                  (ix) any breach of this Agreement or Company rules;

                  (x) any other act of misconduct by the Executive;

                  (xi) the Executive's abuse of alcohol or other drugs or
controlled substances; or

                  (xii) the Executive's death or resignation hereunder; provided
however, that if the Executive resigned for Good Reason (as hereinafter defined)
or in connection with a Change of Control (as hereinafter defined) in accordance
with Section 6.3, such resignation shall not be considered "Cause" hereunder. A
termination pursuant to this Section 6.1 shall take effect 10 days after the
giving of written notice to the Executive unless the Executive shall, during
such 10-day period, remedy to the reasonable satisfaction of the Board of
Directors of the Company the misconduct, disregard, abuse or breach specified in
such notice; provided, however, that such termination shall take effect
immediately upon the giving of such notice if the Board of Directors of the
Company shall, in its reasonable discretion, have determined that such
misconduct, disregard, abuse or breach is not remediable (which determination
shall be stated in such notice).

                                       5


                  6.2 WITHOUT CAUSE. The Company may terminate the employment of
the Executive and all of the Company's obligations under this Agreement (except
as hereinafter provided) at any time during the Term without Cause by giving the
Executive written notice of such termination, to be effective 10 days following
the giving of such written notice.

                  6.3 CHANGE OF CONTROL. The Executive may terminate this
Agreement by delivering written notice to the Company within six (6) months
following the effective date of a Change of Control. As used herein, the term
"Change of Control" shall mean: (i) when any "person" as defined in Section
3(a)(9) of the Securities and Exchange Act of 1934, as amended (the "Exchange
Act"), and as used in Section 13(d) and 14(d) thereof, including a "group" as
defined in Section 13(d) of the Exchange Act, but excluding the Company or any
subsidiary or any affiliate of the Company or any employee benefit plan
sponsored or maintained by the Company or any subsidiary of the Company
(including any trustee of such plan acting as trustee), becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act) of securities of the
Company representing more than 50% of the combined voting power of the Company's
then outstanding securities; or (ii) when, during any period of twenty-four (24)
consecutive months, the individuals who, at the beginning of such period,
constitute the Board of Directors (the "Incumbent Directors") cease for any
reason other than death to constitute at least a majority thereof, provided,
however, that a director who was not a director at the beginning of such
24-month period shall be deemed to have satisfied such 24-month requirement (and
be an Incumbent Director) if such director was elected by, or on the
recommendation of or with the approval of, at least two-thirds of the directors
who then qualified as Incumbent Directors either actually (because they were
directors at the beginning of such 24-month period) or through the operation of
this proviso; or (iii) the occurrence of a transaction requiring stockholder
approval under applicable state law for the acquisition of the Company by an
entity other than the Company or a subsidiary or an affiliated company of the
Company through purchase of assets, or by merger, or otherwise.

                                       6


                  6.4 WITH GOOD REASON. The Executive may terminate his
employment hereunder (and the Term) for Good Reason after the occurrence of such
event constituting a material breach of this Agreement by the Company that has
not been fully cured within ten (10) days after written notice thereof has been
given by the Executive to the Company. "Good Reason" shall mean the occurrence
of any of the following without the written consent of the Executive of his
approval: (i) the assignment to Executive of duties inconsistent with the
Agreement or a change in his title or authority; (ii) any change in reporting
responsibility so that Executive reports to any person other than the President
of the Company; (iii) the requirement of the Executive to relocate to a location
outside the Dallas/Forth Worth metropolitan area; or (iv) any material breach of
the Agreement by the Company.

         For convenience of reference, the date upon which any termination of
the employment of the Executive pursuant to Sections 5 or 6 shall be effective
shall be hereinafter referred to as the "Termination Date".

         SECTION 7. EFFECT OF TERMINATION OF EMPLOYMENT.

                  7.1 WITH CAUSE. Upon the termination of the Executive's
employment for Cause, neither the Executive nor the Executive's beneficiaries or
estate shall have any further rights to compensation under this Agreement or any
claims against the Company arising out of this Agreement, except the right to
receive (i) the unpaid portion of the Base Salary provided for in Section 4.1,
earned through the Termination Date (the "Unpaid Salary Amount"), (ii)
reimbursement for any expenses for which the Executive shall not have
theretofore been reimbursed, as provided in Section 4.6 (the "Expense
Reimbursement Amount") and (iii) payment for accrued and unused vacation time
(the "Vacation Amount"). All options granted to the Executive shall terminate on
the Termination Date, except in the event that the Executive has been terminated
for Cause due to Executive's death or resignation, in which case the Executive's
right to exercise his vested options shall expire ninety (90) days after the
Termination Date.

                                       7


                  7.2. FOR DISABILITY. Upon the termination of the Executive's
employment as a result of a Disability, neither the Executive nor the
Executive's beneficiaries or estate shall have any further rights to
compensation under this Agreement or any claims against the Company arising out
of this Agreement, except the right to receive (i) the Unpaid Salary Amount,
(ii) the Expense Reimbursement Amount and (iii) the Vacation Amount. Following a
termination for a Disability, the Executive's right to exercise his vested
options shall not expire until ninety (90) days after the Termination Date.

                  7.3 WITHOUT CAUSE OR FOR GOOD REASON. Upon the termination of
the Executive's employment by the Company without Cause (and not as a result of
a Disability) or by the Executive for Good Reason, neither the Executive nor the
Executive's beneficiaries or estate shall have any further rights to
compensation under this Agreement or any claims against the Company arising out
of this Agreement, except the Executive shall have the right to receive (i) the
Unpaid Salary Amount, (ii) the Expense Reimbursement Amount, and (iii) the
Vacation Amount, and (iv) severance compensation equal to the then Base Salary
for six (6) months if such Termination Date is on or before January 31, 2005, or
twelve (12) months if such Termination Date is on or after February 1, 2005 ,
all of which is payable within thirty (30) days following the Termination Date.
The Executive shall not be entitled to receive any severance payment until and
after (i) he has consulted with qualified independent legal counsel regarding
his employment and termination with the Company, (ii) he has executed a full
general release of all claims against the Company, its affiliates, officers,
directors, employees, agents and representatives, in form and substance
satisfactory to the Company, and delivered such general release to the Company,
and (iii) all applicable waiting periods, if any, with respect to the
irrevocable nature of the general release has have elapsed. Following a
termination not for Cause or by the Executive for Good Reason, the Executive's
right to exercise his vested options shall not expire until ninety (90) days
after the Termination Date (collectively, the "General Release Requirement").

                                       8


7.4 CHANGE OF CONTROL. Upon the termination of this Agreement by the Executive
in connection with a Change of Control and in accordance with Section 6.3,
neither the Executive nor the Executive's beneficiaries or estate shall have any
further rights to compensation under this Agreement or any claims against the
Company arising out of this Agreement, except the Executive shall have the right
to receive (i) the Unpaid Salary Amount, (ii) the Expense Reimbursement Amount,
(iii) the Vacation Amount, and (iv) severance compensation equal to the Base
Salary for the greater of (x) the remaining term of this Agreement (as if this
Agreement was not terminated) and (y) two (2) years. The Executive shall not be
entitled to receive any severance payment until and after he has complied with
the General Release Requirement. For the purpose of defining the Executive's
right to stock options, the Executive's termination of employment for a Change
of Control shall be equivalent to an involuntary termination of employment. The
Executive's right to his vested options shall not expire until ninety (90) days
after the Termination Date.

         SECTION 8. RESTRICTIVE COVENANTS.

                  8.1 CERTAIN DEFINITIONS. For purposes of this Section 8, the
following terms shall have the following meanings:

                    "COMPETITIVE ACTIVITY" means any activity conducted in the
Restricted Area which competes with any substantial aspect or part of Employer's
business whether as a proprietor, partner, shareholder, owner, member, employer,
employee, independent contractor, venturer or otherwise.

                    "COMPETITOR" means any Person, other than Employer or its
successor, which at any time during the Restriction Period engages in any
Competitive Activity.

                    "CONFIDENTIAL INFORMATION" means all information of or
relating to Employer, its business or practice, which is not generally known or
available to the public (whether or not in written or tangible form) including,
without limitation, customer lists,

                                       9


supplier lists, processes, know-how, trade secrets, pricing policies and other
confidential business information.

                  "CONFIDENTIAL MATERIALS" means any and all documents, records,
reports, lists, notes, plans, materials, customer lists, distributor lists,
programs, software, disks, recordings, manuals, correspondence, memoranda,
magnetic media or any other tangible media (including, without limitation,
copies or reproductions of any of the foregoing) in which any Confidential
Information may be contained.

                  "EMPLOYER" means Parent, Employer and its Subsidiaries,
whether now or in the future.

                  "PERSON" means an individual, proprietorship, partnership,
joint venture, corporation, limited liability company, association, trust,
estate, unincorporated organization, a government or any branch, subdivision,
department or agency thereof, or any other entity.

                  "PERSONNEL" means any and all employees, contractors, agents,
consultants or other Persons rendering services to Employer for compensation in
any form, whether employed by or independent of Employer.

                  "RESTRICTED AREA" means the United States, Canada and Asia and
their respective territories and possessions, and worldwide with respect to any
Competitive Activity involving the Internet, World Wide Web, telemarketing or
other electronic or similar media.

                  "RESTRICTION PERIOD" means the period of time, commencing on
the date hereof and expiring two (2) years after the termination of Executive's
employment with Employer pursuant to this Agreement, voluntarily or
involuntarily, for any reason whatsoever, subject to extension pursuant to
Section 8.6 below.

                  8.2 CONFIDENTIALITY.

                  (a) CONFIDENTIAL INFORMATION. Subject to Section 8.2(c):

                                       10


                  (1) DUTY TO MAINTAIN CONFIDENTIALITY. Executive shall maintain
in strict confidence and duly safeguard to the best of his ability any and all
Confidential Information in his possession or under his control.

                  (2) COVENANT NOT TO DISCLOSE, USE OR EXPLOIT. Except as
reasonably necessary to perform his duties, Executive shall not, directly or
indirectly, disclose, divulge or otherwise communicate to anyone or use or
otherwise exploit for the benefit of anyone, other than Employer, any
Confidential Information.

                  (3) CONFIDENTIAL MATERIALS. All Confidential Information and
Confidential Materials are and shall remain the exclusive property of Employer
and no Confidential Materials may be copied or otherwise reproduced, removed
from the premises of Employer or entrusted to any Person (other than Employer or
the Personnel entitled to such materials) by Executive, except as reasonably
necessary to perform his duties, without prior written permission from Employer.

                  (b) SURVIVAL OF COVENANTS. Notwithstanding anything herein to
the contrary, the covenants set forth in this Section 8.2 shall survive the
termination of this Agreement and any other agreement among any or all of the
parties hereto (regardless of the reason for such termination), unless
terminated by a written instrument that expressly terminates by specific
reference the covenants set forth in this Section 8.2.

                  (c) PERMITTED ACTIVITIES. If Executive receives a request or
demand for Confidential Information (whether pursuant to a discovery request,
subpoena or otherwise), Executive shall immediately give Employer written notice
thereof and shall exert his best efforts to resist disclosure, within the limits
of the law, including, without limitation, by fully cooperating and assisting
Employer in whatever efforts it may make to resist or limit disclosure or to
obtain a protective order or other appropriate remedy to limit or prohibit
further disclosure or use of such Confidential Information. If Executive
complies with the preceding sentence but nonetheless becomes legally compelled
to disclose Confidential

                                       11


Information, Executive shall disclose only that portion of the Confidential
Information that he is legally compelled to disclose.

                  8.3 COVENANT NOT TO COMPETE. During the Restriction Period,
Executive shall not, directly or indirectly, whether as a sole practitioner,
owner, partner, shareholder, investor, employee, employer, venturer, independent
contractor, consultant or other participant, (i) own, manage, invest in or
acquire any economic stake or interest in any Person involved in a Competitive
Activity, (ii) derive economic benefit from or with respect to any Competitive
Activity or (iii) otherwise engage or participate in any manner whatsoever in
any Competitive Activity; provided, however, this Section 8.3 shall not restrict
Executive from owning less than 2% of the publicly traded debt or equity
securities issued by a corporation or other entity or from having any other
passive investment that creates no conflict of loyalty or interest with any duty
owed to Employer. Executive shall be deemed to have derived economic benefit in
violation of this Section 8.3 if, among other things, any of his compensation or
income is in any way related to any Competitive Activity conducted by any
Person. Further, during the Restriction Period Executive shall not directly or
indirectly advance, cooperate in or help or aid any Competitor in the conduct of
any Competitive Activity.

                  8.4 COVENANT NOT TO INTERFERE. During the Restriction Period,
Executive shall not, directly or indirectly, recruit, solicit or otherwise
induce or influence any Personnel of Employer to discontinue, reduce the extent
of, discourage the development of or otherwise harm such Personnel's
relationship or commitment to Employer. Conduct prohibited under this Section
8.4 shall include, without limitation, seeking to employ or causing, aiding,
inducing or influencing a Competitor to employ or seek to employ any Personnel
of Employer.

                  8.5 EQUITABLE RELIEF. Each of the parties acknowledges that
the provisions and restrictions of this Section 8 are reasonable and necessary
for the protection of the legitimate interests of Employer. Each of the parties
further acknowledges that the

                                       12


provisions and restrictions of this Section 6 are unique and that any breach or
threatened breach of any of such provisions or restrictions will provide
Employer with no adequate remedy at law, and the result will be irreparable harm
to Employer. Therefore, the parties hereto agree that upon a breach or
threatened breach of the provisions or restrictions of this Section 8, Employer
shall be entitled, in addition to any other rights and remedies which may be
available to it, to institute and maintain proceedings at law or in equity, to
recover damages, to obtain an equitable accounting of all earnings, profits or
other benefits resulting from such breach or threatened breach and to obtain
specific performance or a temporary and permanent injunction.

                  8.6 FULL RESTRICTION PERIOD. If Executive violates any
restrictive covenant contained herein and Employer institutes action for
equitable relief, Employer, as a result of the time involved in obtaining such
relief, shall not be deprived of the benefit of the full Restriction Period.
Accordingly, the Restriction Period shall be deemed to have the duration
specified in Section 8.1, computed from and commencing on the date on which
relief is granted by a final order from which there is no appeal, but reduced,
if applicable, by the length of time between the date the Restriction Period
commenced and the date of the first violation of any restrictive covenant by
Executive.

                  8.7 EQUITABLE ACCOUNTING. Employer shall have the right to
demand and receive equitable accounting with respect to any consideration
received by Executive in connection with activities in breach of the restrictive
covenants herein, and Employer shall be entitled to payment from Executive of
such consideration on demand.

                  8.8 PRIOR BREACHES. Neither the expiration of the Restriction
Period nor the termination of the status of any Customer or Personnel as such
(whether or not due to a breach hereof by Executive) shall preclude, limit or
otherwise affect the rights and remedies of Employer against Executive based
upon any breach hereof during the Restriction Period or before such status of
Customer or Personnel terminated.

                                       13


                  8.9 NONCIRCUMVENTION OF COVENANTS. Executive acknowledges and
agrees that, for purposes of this Agreement, an action shall be considered to
have been taken by Executive "indirectly" if taken by or through, with
Executive's knowledge, (a) any member of his immediate family , (b) any Person
owned or controlled, solely or with others, directly or "indirectly" by
Executive or a member of his family, (c) any Person of which he is an owner,
partner, employer, employee, trustee, independent contractor or agent, (d) any
employees, partners, owners or independent contractors of any such Person or (e)
any other one or more representatives or intermediaries, it being the intention
of the parties that Executive shall not directly or indirectly circumvent any
restrictive covenant contained herein or the intent thereof.

                  8.10 NOTICE OF RESTRICTIONS. During the Restriction Period,
Executive shall notify each prospective employer, partner or co-venturer of the
restrictions contained in this Agreement. Employer is hereby authorized to
contact any of such Persons for the purpose of providing notice of such
restrictions.

                  8.11 REDUCTION OF RESTRICTIONS BY COURT ACTION. Each of the
provisions hereof including, without limitation, the periods of time, geographic
areas and types and scopes of duties of, and restrictions on the activities of,
the parties hereto specified herein are and are intended to be divisible, and if
any portion thereof (including any sentence, clause or word) shall be held
contrary to law or invalid or unenforceable in any respect in any jurisdiction,
or as to one or more periods of time, areas or business activities or any part
thereof, the remaining provisions shall not be affected but shall remain in full
force and effect, and any such invalid or unenforceable provision shall be
deemed, without further action on the part of any party hereto or other Person,
modified and amended to the minimum extent necessary to render the same valid
and enforceable in such jurisdiction.

                  8.12 FAIRNESS OF RESTRICTIONS. Executive acknowledges and
agrees that (a) compliance with the restrictive covenants set forth herein would
not prevent him from earning a living that involves his training and skills
without relocating, but only from

                                       14


engaging in unfair competition with, misappropriating a corporate opportunity
of, or otherwise unfairly harming Employer and (b) the restrictive covenants set
forth herein are intended to provide a minimum level of protection necessary to
protect the legitimate interests of Employer. In addition, the parties
acknowledge that nothing herein is intended to or shall, limit, replace or
otherwise affect any other rights or remedies at law or in equity for protection
against unfair competition with, misappropriation of corporate opportunities of,
disclosure of confidential and proprietary information of, or defamation of
Employer, or for protection of any other rights or interest of Employer.

         SECTION 9. MISCELLANEOUS.

                  9.1 GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER THE LAWS OF TEXAS AND FOR ALL PURPOSES SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SAID STATE APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED WITHIN SAID STATE.

                  9.2 ENTIRE AGREEMENT. This Agreement (together with the
exhibits attached hereto, which hereby are incorporated by reference) contains
the entire agreement of the parties hereto relating to the employment of
Executive by the Company and the other matters discussed herein and supersedes
all prior agreements and understandings with respect to such subject matter, and
the parties hereto have made no agreements, representations or warranties
relating to the subject matter of this Agreement which are not set forth herein.

                  9.3 WITHHOLDING TAXES. The Company may withhold from any
compensation or other benefits payable under this Agreement all federal, state,
city or other taxes as shall be required pursuant to any law or governmental
regulation or ruling.

                  9.4 SUPPLEMENTS AND AMENDMENTS. This Agreement may be
supplemented or amended only upon the written consent of each of the parties
hereto.

                  9.5 ASSIGNMENT. Except as expressly provided below, this
Agreement shall not be assignable, in whole or in part, by either party without
the prior written consent

                                       15


of the other party. The Company may, without the prior written consent of
Executive, assign its rights and obligations under this Agreement to any other
corporation, firm or other business entity with or into which the Company may
merge or consolidate, or to which the Company may sell or transfer all or
substantially all of its assets, or of which 50% or more of the equity
investment and of the voting control is owned, directly or indirectly, by, or is
under common ownership with, the Company; provided, however, that such
assignment may be made without Executive's prior written consent only if (a)
such assignment has a valid business purpose and is not for the purpose of
avoiding the Company 's obligations hereunder or Executive's realization of the
benefits of this Agreement and (b) the assignee expressly assumes in writing all
obligations and liabilities to Executive hereunder. The Company will cause any
purchaser of all or substantially all of the assets of the Company, by agreement
in form and substance reasonably satisfactory to Executive, to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such purchase had taken
place. This Agreement shall be binding upon and inure to the benefit of the
Company and their respective successors and permitted assigns. This Agreement
and all rights of Executive hereunder shall inure to the benefit of and be
enforceable by Executive's heirs, personal or legal representatives and
beneficiaries. If this Agreement is terminated pursuant to clause (a) of Section
8.1 hereof, all amounts payable pursuant to clause (a) of Section 8.2 hereof
shall be paid to Executive's designated beneficiaries or, if no such
beneficiaries have been designated, to Executive's estate.

                  9.6 NO WAIVER. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any estoppel to enforce any
provisions of this Agreement, except by a statement in writing signed by the
party against whom enforcement of the waiver or estoppel is sought. Any written
waiver shall not be deemed a continuing waiver unless specifically stated, shall
operate only as to the specific term or condition

                                       16


waived and shall not constitute a waiver of such term or condition for the
future or as to any act other than that specifically waived.

                  9.7 SEVERABILITY. The provisions of this Agreement are
severable, and if any one or more provisions may be determined to be judicially
unenforceable and/or invalid by a court of competent jurisdiction, in whole or
in part, the remaining provisions shall nevertheless be binding, enforceable and
in full force and effect.

                  9.8 TITLES AND HEADINGS. The titles and headings of the
various Sections of this Agreement are intended solely for convenience of
reference and not intended for any purpose whatsoever to explain, modify or
place any construction upon any of the provisions hereof.

                  9.9 ATTORNEYS' FEES. In the event that any party hereto brings
suit against the other party, based upon or arising out of a breach or violation
of this Agreement, each party hereto agrees that the party who is successful on
the merits, upon final adjudication from which no further appeal can be taken or
is taken within the time allowed by law, shall be entitled to recover his or its
reasonable attorneys, fees and expenses from the party which is not successful.

                  9.10 INJUNCTIVE RELIEF. Executive agrees that it would be
difficult to compensate the Company fully for damages for any violation of the
provisions of Sections 6 and 8.3 hereof. Accordingly, Executive specifically
agrees that the Company shall be entitled to temporary and permanent injunctive
relief to enforce such provisions of this Agreement. This provision with respect
to injunctive relief shall not, however, diminish the right of the Company to
claim and recover damages in addition to injunctive relief.

                  9.11 NOTICES. For the purpose of this Agreement, notices and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when hand delivered (which shall include
personal delivery and delivery by courier, messenger or overnight delivery
service) or mailed by certified mail, return receipt requested, postage prepaid,
addressed as follows:

                                       17


                  If to Executive: At his home address in accordance with the
Company's records.

                  If to the Company:

                  Natural Health Trends Corp.
                  12901 Hutton Drive
                  Dallas, Texas 75234
                  Attention: President

                  If to the Executive:

                  Chris Sharng
                  1352 Saddlebrook Court
                  Bartonville, Texas 76226

or to such other address of which either party gives notice to the other party
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.

                  9.12 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.

                  9.13 JURISDICTION. Each of the parties hereto hereby
irrevocably consents and submits to the exclusive jurisdiction of the courts of
the State of Texas, located in Dallas County, and of the United States District
Court for the Northern District of Texas in connection with any suit, action or
other proceeding concerning the interpretation of this Agreement or enforcement
of Sections 8 or 9 of this Agreement. The Executive waives and agrees not to
assert any defense that the court lacks jurisdiction, venue is improper,
inconvenient forum or otherwise. The Executive waives the right to a jury trial
and agrees to accept service of process by certified mail at the Executive's
last known address.

                  9.14 POST EMPLOYMENT OBLIGATIONS. (a) All records, files,
lists, including computer generated lists, drawings, documents, equipment and
similar items relating to the Company's business which the Executive shall
prepare or receive from the Company shall remain the Company's sole and
exclusive property. Upon termination of this Agreement, the

                                       18


Executive shall promptly return to the Company all property of the Company in
his possession. The Executive further represents that he will not copy or cause
to be copied, print out or cause to be printed out any software, documents or
other materials originating with or belonging to the Company. The Executive
additionally represents that, upon termination of his employment with the
Company, he will not retain in his possession any such software, documents or
other materials.

                  (b) The Executive agrees that both during and after his
employment he shall, at the request of the Company, render all assistance and
perform all lawful acts that the Company considers necessary or advisable in
connection with any litigation involving the Company or any director, officer,
employee, shareholder, agent, representative, consultant, client or vendor of
the Company.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.

                                        NATURAL HEALTH TRENDS CORP.

                                        By:____________________________
                                           Name:
                                           Title:

                                        ________________________________
                                        Chris Sharng

                                       19

EX-10.2

                                                                    EXHIBIT 10.2

                                                                [EXECUTION COPY]

                      FORM OF REGISTRATION RIGHTS AGREEMENT

                  REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
October 6, 2004, by and among Natural Health Trends Corp. a Florida corporation,
with headquarters located at 1201 Hutton Drive, Dallas, Texas 75234 (the
"COMPANY"), and the undersigned buyers (each, a "BUYER" and collectively, the
"BUYERS").

                  WHEREAS:

                  A. In connection with (i) the Securities Purchase Agreement
and (ii) the Subscription Agreements, by and among the Company and the parties
hereto of even date herewith (the "PURCHASE AGREEMENTS"), the Company has
agreed, upon the terms and subject to the conditions of the Purchase Agreements,
to issue and sell to each Buyer units ("UNITS") consisting of (i) shares (the
"COMMON SHARES") of the Company's common stock, par value $0.001 per share (the
"COMMON STOCK"), and (ii) common stock purchase warrants (the "WARRANTS")
exercisable for shares of Common Stock (the "WARRANT SHARES");

                  B. To induce the Buyers to execute and deliver the Purchase
Agreements, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 ACT"), and
applicable state securities laws.

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Buyers hereby agree as follows:

                  1. Definitions.

                  As used in this Agreement, the following terms shall have the
following meanings:

                           a. "BUSINESS DAY" means any day other than Saturday,
Sunday or any other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.

                           b. "INVESTOR" means a Buyer, any transferee or
assignee thereof to whom a Buyer assigns its rights under this Agreement and who
agrees to become bound by the provisions of this Agreement in accordance with
Section 9 and any transferee or assignee thereof to whom a transferee or
assignee assigns its rights under this Agreement and who agrees to become bound
by the provisions of this Agreement in accordance with Section 9.

                           c. "PERSON" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and governmental or any department or agency
thereof. a.

                                       1


                           d. "REGISTER," "REGISTERED," and "REGISTRATION" refer
to a registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415 and the declaration or ordering of effectiveness of such Registration
Statement(s) by the SEC.

                           e. "REGISTRABLE SECURITIES" means (i) the Common
Shares included in the Units, (ii) the Warrant Shares issued or issuable upon
exercise of the Warrants, and (iii) any shares of capital stock issued or
issuable with respect to the Common Shares, the Warrant Shares or the Warrants
as a result of any stock split, stock dividend, recapitalization, exchange or
similar event or otherwise.

                           f. REGISTRATION STATEMENT" means a registration
statement or registration statements of the Company filed under the 1933 Act
covering the Registrable Securities.

                           g. "RULE 415" means Rule 415 under the 1933 Act or
any successor rule providing for offering securities on a continuous or delayed
basis.

                           h. "SEC" means the United States Securities and
Exchange Commission.

                  Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Purchase Agreements.

                  2. Registration.

                           a. Initial Mandatory Registration. The Company shall
prepare, and, as soon as practicable but in no event later than 60 days after
the Closing Date (as defined in the Purchase Agreements) (the "FILING
DEADLINE"), file with the SEC the Registration Statement on Form S-1 covering
the resale of all Registrable Securities. The Registration Statement shall
contain (except if otherwise directed by the holders of at least a majority of
the Registrable Securities) the "Selling Stockholders" section in substantially
the form attached hereto as Exhibit B and the "Plan of Distribution" section
attached hereto as Exhibit B. The Company shall use its best efforts to have the
Registration Statement declared effective by the SEC as soon as practicable, but
in no event later than the date which is 180 days after the Closing Date (the
"EFFECTIVENESS DEADLINE").

                           b. Allocation of Registrable Securities. The initial
number of Registrable Securities included in any Registration Statement and each
increase in the number of Registrable Securities included therein shall be
allocated pro rata among the Investors based on the number of Registrable
Securities held by each Investor at the time the Registration Statement covering
such initial number of Registrable Securities or increase thereof is declared
effective by the SEC. In the event that an Investor sells or otherwise transfers
any of such Investor's Registrable Securities, each transferee shall be
allocated a pro rata portion of the then remaining number of Registrable
Securities included in such Registration Statement for such transferor. Any
shares of Common Stock included in a Registration Statement and which remain
allocated to any Person which ceases to hold any Registrable Securities covered
by such Registration Statement shall be allocated to the remaining Investors,
pro rata based on the number of

                                       2


Registrable Securities then held by such Investors which are covered by such
Registration Statement. The Company may include Company securities held by other
security holders on any Registration Statement without the prior written consent
of Buyers.

                           c. Legal Counsel. Subject to Section 5 hereof, the
Buyers holding at least a majority of the Registrable Securities shall have the
right to select one legal counsel to review and oversee any registration
pursuant to this Section 2 ("LEGAL COUNSEL"), which shall be Bass Berry & Sims
PLC, or such other counsel as thereafter designated by the holders of at least a
majority of the Registrable Securities. The Company and Legal Counsel shall
reasonably cooperate with each other in performing the Company's obligations
under this Agreement.

                           d. Effect of Failure to File and Obtain and Maintain
Effectiveness of Registration Statement. If (i) a Registration Statement
covering all the Registrable Securities required to be covered thereby and
required to be filed by the Company pursuant to this Agreement is not declared
effective by the SEC on or before the Effectiveness Deadline or (ii) on any day
after such Registration Statement has been declared effective by the SEC sales
of all the Registrable Securities required to be included on such Registration
Statement cannot be made (other than during an Allowable Grace Period (as
defined in Section 3(l)) pursuant to such Registration Statement (including,
without limitation, because of a failure to keep such Registration Statement
effective, to disclose such information as is necessary for sales to be made
pursuant to such Registration Statement or to register sufficient shares of
Common Stock), then, as full and entire relief for any damages to any holder by
reason of any such delay in or reduction of its ability to sell any Registrable
Securities, the Company shall pay to each holder of Registrable Securities an
amount in cash equal to the product of (i) the Purchase Price paid by such Buyer
(as such term is defined in the Purchase Agreements) multiplied by (ii) 0.005.
The payment to which a holder shall be entitled pursuant to this Section 2(d) is
referred to herein as a "REGISTRATION DELAY PAYMENT." A Registration Delay
Payment shall be paid on the last day of the calendar quarter during which such
Registration Delay Payment is incurred. In the event the Company fails to make a
Registration Delay Payment in a timely manner, such Registration Delay Payment
shall bear interest at the rate of 10% per annum until paid in full. A
Registration Delay Payment due and owing by the Company to an Investor shall be
Investor's sole remedy for a breach by the Company of its obligations under
Section 2 of this Agreement.

                  3. Related Obligations.

                  At such time as the Company is obligated to file a
Registration Statement with the SEC pursuant to Section 2(a), the Company will
use commercially reasonable efforts to effect the registration of the
Registrable Securities in accordance with the intended method of disposition
thereof and, pursuant thereto, the Company shall have the following obligations:

                           a. The Company shall submit to the SEC, within ten
(10) Business Days after the Company learns that no review of the Registration
Statement will be made by the staff of the SEC or that the staff has no further
comments on the Registration Statement, as the case may be, a request for
acceleration of effectiveness of such Registration Statement to a time and date
not later than 48 hours after the submission of such request. The Company shall
keep the Registration Statement effective pursuant to Rule 415 at all times
until the earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities covered by such

                                       3


Registration Statement without restriction pursuant to Rule 144(k) (or successor
thereto) promulgated under the 1933 Act or (ii) the date on which the Investors
shall have sold all the Registrable Securities covered by such Registration
Statement (the "REGISTRATION PERIOD").

                           b. The Company shall prepare and file with the SEC
such amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement (including pursuant to
this Section 3(b)) by reason of the Company filing a report on Form 10-K, Form
10-Q or Form 8-K or any analogous report under the Securities Exchange Act of
1934, as amended (the "1934 ACT"), the Company shall have incorporated such
report by reference into such Registration Statement, if applicable, or shall
file such amendments or supplements with the SEC on the same day on which the
1934 Act report is filed which created the requirement for the Company to amend
or supplement such Registration Statement.

                           c. The Company shall (A) permit Legal Counsel to
review and comment upon (i) a Registration Statement at least five (5) days
prior to its filing with the SEC and (ii) all amendments and supplements to all
Registration Statements (except for Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K and any similar or
successor reports) within a reasonable number of days prior to their filing with
the SEC, and (B) not file any Registration Statement or amendment or supplement
thereto in a form to which Legal Counsel reasonably objects. The Company shall
not submit a request for acceleration of the effectiveness of a Registration
Statement or any amendment or supplement thereto without the prior approval of
Legal Counsel, which consent shall not be unreasonably withheld. The Company
shall furnish to Legal Counsel, without charge, (i) copies of any correspondence
from the SEC or the staff of the SEC to the Company or its representatives
relating to any Registration Statement, (ii) promptly after the same is prepared
and filed with the SEC, one copy of any Registration Statement and any
amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference, if requested by an Investor, and
all exhibits and (iii) upon the effectiveness of any Registration Statement, one
copy of the prospectus included in such Registration Statement and all
amendments and supplements thereto. The Company shall reasonably cooperate with
Legal Counsel in performing the Company's obligations pursuant to this Section
3.

                           d. The Company shall furnish to each Investor whose
Registrable Securities are included in any Registration Statement, without
charge, (i) upon the effectiveness of any Registration Statement, five (5)
copies of the prospectus included in such Registration Statement and all
amendments and supplements thereto (or such other number of copies as such
Investor may reasonably request) and (ii) such other documents, including copies
of any

                                       4


preliminary or final prospectus, as such Investor may reasonably request from
time to time in order to facilitate the disposition of the Registrable
Securities owned by such Investor.

                           e. The Company shall use its best efforts to (i)
register and qualify, unless an exemption from registration and qualification
applies, the resale by Investors of the Registrable Securities covered by a
Registration Statement under such other securities or "blue sky" laws of all
applicable jurisdictions in the United States, (ii) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(e), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
Legal Counsel and each Investor who holds Registrable Securities of the receipt
by the Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale
under the securities or "blue sky" laws of any jurisdiction in the United States
or its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.

                           f. The Company shall notify Legal Counsel and each
Investor in writing of the happening of any event, as promptly as practicable
after becoming aware of such event, as a result of which the prospectus included
in a Registration Statement, as then in effect, includes an untrue statement of
a material fact or omission to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (provided that in no
event shall such notice contain any material, nonpublic information), and,
subject to Section 3(l), promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and deliver
ten (10) copies of such supplement or amendment to Legal Counsel and each
Investor (or such other number of copies as Legal Counsel or such Investor may
reasonably request). The Company shall also promptly notify Legal Counsel and
each Investor in writing (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and when a Registration Statement or
any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to Legal Counsel and each Investor by facsimile
on the same day of such effectiveness and by overnight mail), (ii) of any
request by the SEC for amendments or supplements to a Registration Statement or
related prospectus or related information, and (iii) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate.

                           g. The Company shall use its best efforts to prevent
the issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify Legal Counsel and each Investor who
holds Registrable Securities

                                       5


being sold of the issuance of such order and the resolution thereof or its
receipt of actual notice of the initiation or threat of any proceeding for such
purpose.

                           h. The Company shall hold in confidence and not make
any disclosure of information concerning an Investor provided to the Company
unless (i) disclosure of such information is necessary to comply with federal or
state securities laws, (ii) the disclosure of such information is necessary to
avoid or correct a misstatement or omission in any Registration Statement, (iii)
the release of such information is ordered pursuant to a subpoena or other
final, non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.

                           i. The Company shall cooperate with the Investors who
hold Registrable Securities being offered and, to the extent applicable,
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legend) representing the Registrable Securities to be offered
pursuant to a Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the Investors may reasonably
request and registered in such names as the Investors may request.

                           j. The Company shall use its best efforts to comply
with all applicable rules and regulations of the SEC in connection with any
registration hereunder.

                           k. Within five (5) Business Days after a Registration
Statement which covers Registrable Securities is ordered effective by the SEC,
the Company shall deliver, and shall cause legal counsel for the Company to
deliver, to the transfer agent for such Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) confirmation that such Registration Statement has been declared
effective by the SEC in the form attached hereto as Exhibit A.

                           l. Notwithstanding anything to the contrary herein,
at any time after the Registration Statement has been declared effective by the
SEC, the Company may delay the disclosure of material, non-public information
concerning the Company the disclosure of which at the time is not, in the good
faith opinion of the Board of Directors of the Company and its counsel, in the
best interest of the Company and, in the opinion of counsel to the Company,
otherwise required (a "GRACE PERIOD"); provided, that the Company shall promptly
(i) notify the Investors in writing of the existence of material, non-public
information giving rise to a Grace Period (provided that in each notice the
Company will not disclose the content of such material, non-public information
to the Investors) and the date on which the Grace Period will begin, and (ii)
notify the Investors in writing of the date on which the Grace Period ends; and,
provided further, that no Grace Period shall exceed forty-five (45) consecutive
days (an "ALLOWABLE GRACE PERIOD") and during any three hundred sixty-five (365)
day period there shall be no more than two (2) Allowable Grace Periods.

                                       6


                  4. Obligations of the Investors.

                           a. At least seven (7) Business Days prior to the
first anticipated filing date of a Registration Statement, the Company shall
notify each Investor in writing of the information the Company requires from
each such Investor if such Investor elects to have any of such Investor's
Registrable Securities included in such Registration Statement. It shall be a
condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended method of disposition of the Registrable Securities held by it
as shall be reasonably required to effect the effectiveness of the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request.

                           b. Each Investor, by such Investor's acceptance of
the Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from such Registration Statement.

                           c. Each Investor agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 3(g) or the first sentence of 3(f), such Investor will immediately
discontinue disposition of Registrable Securities pursuant to any Registration
Statement(s) covering such Registrable Securities until such Investor's receipt
of the copies of the supplemented or amended prospectus contemplated by Section
3(g) or the first sentence of 3(f) or receipt of notice that no supplement or
amendment is required. Notwithstanding anything to the contrary, the Company
shall cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee of an Investor in accordance with the terms of the Purchase
Agreements in connection with any sale of Registrable Securities with respect to
which an Investor has entered into a contract for sale prior to the Investor's
receipt of a notice from the Company of the happening of any event of the kind
described in Section 3(g) or the first sentence of 3(f) and for which the
Investor has not yet settled.

                  5. Expenses of Registration.

                  All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company shall be paid by the Company.
The Company shall also reimburse the Investors for the fees and disbursements of
Legal Counsel in connection with registration, filing or qualification pursuant
to Sections 2 and 3 of this Agreement which amount shall be limited to $5,000
for the Registration Statement.

                  6. Indemnification.

                  In the event any Registrable Securities are included in a
Registration Statement under this Agreement:

                                       7


                           a. To the fullest extent permitted by law, the
Company will, and hereby does, indemnify, hold harmless and defend each
Investor, the directors, officers, members, partners, employees, agents,
representatives of, and each Person, if any, who controls any Investor within
the meaning of the 1933 Act or the 1934 Act (each, an "INDEMNIFIED PERSON"),
against any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, reasonable attorneys' fees, amounts paid in settlement or
expenses, joint or several, (collectively, "CLAIMS") incurred in investigating,
preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the SEC,
whether pending or threatened, whether or not an indemnified party is or may be
a party thereto ("INDEMNIFIED DAMAGES"), to which any of them may become subject
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or other
"blue sky" laws of any jurisdiction in which Registrable Securities are offered
("BLUE SKY FILING"), or the omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in the light of the circumstances under which the statements therein
were made, not misleading, (iii) any violation or alleged violation by the
Company of the 1933 Act, the 1934 Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement or (iv) any material violation of this Agreement (the
matters in the foregoing clauses (i) through (iv) being, collectively,
"VIOLATIONS"). Subject to Section 6(c), the Company shall reimburse the
Indemnified Persons, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified
Person arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by such
Indemnified Person for such Indemnified Person expressly for use in connection
with the preparation of the Registration Statement or any such amendment thereof
or supplement thereto, if such prospectus was timely made available by the
Company pursuant to Section 3(d); (ii) with respect to any preliminary
prospectus, shall not inure to the benefit of any such Person from whom the
Person asserting any such Claim purchased the Registrable Securities that are
the subject thereof (or to the benefit of any Person controlling such Person) if
the untrue statement or omission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or supplemented, if
such prospectus was timely made available by the Company pursuant to Section
3(d), and the Indemnified Person was promptly advised in writing not to use the
incorrect prospectus prior to the use giving rise to a violation and such
Indemnified Person, notwithstanding such advice, used it or failed to deliver
the correct prospectus as required by the 1933 Act and such correct prospectus
was timely made available pursuant to Section 3(d); (iii)

                                       8


shall not be available to the extent such Claim is based on a failure of the
Investor to deliver or to cause to be delivered the prospectus made available by
the Company, including a corrected prospectus, if such prospectus or corrected
prospectus was timely made available by the Company pursuant to Section 3(d);
and (iv) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld or delayed. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.

                           b. In connection with any Registration Statement in
which an Investor is participating, each such Investor agrees to severally and
not jointly indemnify, hold harmless and defend, to the same extent and in the
same manner as is set forth in Section 6(a), the Company, each of its directors,
each of its officers who signs the Registration Statement and each Person, if
any, who controls the Company within the meaning of the 1933 Act or the 1934 Act
(each, an "INDEMNIFIED PARTY"), against any Claim or Indemnified Damages to
which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim or Indemnified Damages arise out of or are
based upon any Violation, in each case to the extent, and only to the extent,
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and, subject to Section 6(c), such
Investor will reimburse any legal or other expenses reasonably incurred by an
Indemnified Party in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
and the agreement with respect to contribution contained in Section 7 shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld or delayed; provided, further, however, that the Investor
shall be liable under this Section 6(b) for only that amount of a Claim or
Indemnified Damages as does not exceed the net proceeds to such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.

                           c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding) involving
a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section
6, deliver to the indemnifying party a written notice of the commencement
thereof, and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one counsel for such
Indemnified

                                       9


Person or Indemnified Party to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding at least two-thirds in
interest of the Registrable Securities included in the Registration Statement to
which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or Claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or Claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
reasonably apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent, provided, however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the prior written consent of the Indemnified Party or Indemnified
Person, consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party or Indemnified Person of a
release from all liability in respect to such Claim or litigation. Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or corporations relating to the matter for
which indemnification has been made. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action.

                           d. The indemnification required by this Section 6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or Indemnified
Damages are incurred.

                           e. The indemnity agreements contained herein shall be
in addition to (i) any cause of action or similar right of the Indemnified Party
or Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.

                  7. Contribution.

                  To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no Person involved in the sale of Registrable Securities which Person is
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) in connection with such sale shall be entitled to contribution
from any Person involved in such sale of Registrable Securities who was not
guilty of fraudulent

                                       10


misrepresentation; and (ii) contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities pursuant to such Registration
Statement.

                  8. Reports Under the 1934 Act.

                  With a view to making available to the Investors the benefits
of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("RULE 144"), the
Company agrees to:

                           a. make and keep public information available, as
those terms are understood and defined in Rule 144;

                           b. file with the SEC in a timely manner all reports
and other documents required of the Company under the 1933 Act and the 1934 Act
so long as the Company remains subject to such requirements (it being understood
that nothing herein shall limit the Company's obligations under Section 4(c) of
the Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and

                           c. furnish to each Investor so long as such Investor
owns Registrable Securities, promptly upon request, (i) a written statement by
the Company, if true, that it has complied with the reporting requirements of
Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed
by the Company, and (iii) such other information as may be reasonably requested
to permit the Investors to sell such securities pursuant to Rule 144 without
registration.

                  9. Assignment of Registration Rights.

                  The rights under this Agreement shall be automatically
assignable by the Investors to any transferee of all or any portion of such
Investor's Registrable Securities if: (i) the Investor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned; (iii) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws;
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein; and (v)
such transfer shall have been made in accordance with the applicable
requirements of the Purchase Agreements, as applicable.

                  10. Amendment of Registration Rights.

                  Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only

                                       11


with the written consent of the Company and Investors who then hold at least a
majority of the Registrable Securities. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and the
Company. No such amendment shall be effective to the extent that it applies to
less than all of the holders of the Registrable Securities. No consideration
shall be offered or paid to any Person to amend or consent to a waiver or
modification of any provision of any of this Agreement unless the same
consideration also is offered to all of the parties to this Agreement.

                  11. Miscellaneous.

                           a. A Person is deemed to be a holder of Registrable
Securities whenever such Person owns or is deemed to own of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the such record owner of such Registrable
Securities.

                           b. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one Business Day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:

                           If to the Company:

                             Natural Health Trends Corp.
                             12901 Hutton Drive
                             Dallas, Texas  75234
                             Telephone: (972) 241-6525
                             Facsimile: (972)243-5430
                             Attention: Chief Financial Officer

                             with a copy to:

                             Brown Rudnick Berlack Israels LLP
                             120 West 45th Street
                             New York, New York  10036
                             Telephone: (212) 209-4812
                             Facsimile: (212) 704-0196
                             Attention: Alan N. Forman, Esq.

                                       12


                           If to Legal Counsel:

                             Bass Berry & Sims PLC
                             315 Deaderick Street
                             Nashville, TN 37238
                             Telephone: (615) 742-6253
                             Facsimile: (615) 742-2753
                             Attention: J. Page Davidson, Esq.

If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers attached hereto, with copies to such Buyer's representatives as set forth
on the Schedule of Buyers, or to such other address and/or facsimile number
and/or to the attention of such other Person as the recipient party has
specified by written notice given to each other party five (5) days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.

                           c. Failure of any party to exercise any right or
remedy under this Agreement or otherwise, or delay by a party in exercising such
right or remedy, shall not operate as a waiver thereof.

                           d. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the non- exclusive jurisdiction of the state and federal courts
sitting The City of New York, Borough of Manhattan, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit,
action or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION

                                       13


HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.

                           e. This Agreement, the Purchase Agreements, the
Warrant and the instruments referenced herein and therein constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. This Agreement, the
Securities Purchase Agreement, the Warrant and the instruments referenced herein
and therein supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.

                           f. Subject to the requirements of Section 9, this
Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.

                           g. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.

                           h. This Agreement may be executed in identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.

                           i. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

                           j. All consents and other determinations required to
be made by the Investors pursuant to this Agreement shall be made, unless
otherwise specified in this Agreement, by Investors holding at least a majority
of the Registrable Securities, determined as if all of the Warrants held by
Investors then outstanding have been exercised for Registrable Securities.

                           k. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent and no
rules of strict construction will be applied against any party.

                           l. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not
for the benefit of, nor may any provision hereof be enforced by, any other
Person.

                                   * * * * * *

                                       14


         IN WITNESS WHEREOF, each Buyer and the Company have caused this
Registration Rights Agreement to be duly executed as of the date first written
above.

COMPANY:                                     BUYERS:

NATURAL HEALTH TRENDS CORP.                  [NAME]

                                             By:________________________________
By:_____________________________                Name:
   Name: Mark D. Woodburn                       Title:
   Title: President

                                       15


                               SCHEDULE OF BUYERS



                    INVESTOR ADDRESS         INVESTOR'S REPRESENTATIVE'S ADDRESS
INVESTOR          AND FACSIMILE NUMBER              AND FACSIMILE NUMBER
- --------          --------------------              --------------------
                                       




                                                                       EXHIBIT A

                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT

Continental Stock Transfer and Trust Company
17 Battery Place
New York, NY 10004
Attn:  Roger Bernhammer

                  Re:      Natural Health Trends Corp.

Ladies and Gentlemen:

                  We are counsel to Natural Health Trends Corp., a Florida
corporation (the "COMPANY"), and have represented the Company in connection with
that certain Securities Purchase Agreement (the "SECURITIES PURCHASE AGREEMENT")
entered into by and among the Company and the buyers named therein
(collectively, the "HOLDERS") pursuant to which on October 6, 2004 the Company
issued to the Holders units consisting of shares (the "COMMON SHARES") of the
Company's Common Stock, par value $0.001 per share (the "COMMON STOCK"), and
common stock purchase warrants ("WARRANTS") exercisable for shares of Common
Stock (the "WARRANT SHARES"). Pursuant to the Securities Purchase Agreement, the
Company also has entered into a Registration Rights Agreement with the Holders
(the "REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company agreed,
among other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the Common Shares and Warrant Shares,
as amended (the "1933 ACT"). In connection with the Company's obligations under
the Registration Rights Agreement, on ____________ ___, 200_, the Company filed
a Registration Statement on Form S-1 (File No. 333-_____________) (the
"REGISTRATION STATEMENT") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities which names each of the Holders as
a selling stockholder thereunder.

                  In connection with the foregoing, we advise you that a member
of the SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.

                                        Very truly yours,

                                        BROWN RUDNICK BERLACK ISRAELS LLP

                                        By:____________________________
                                           Name:
                                           Title:

CC:      [LIST NAMES OF HOLDERS]

                                      A-1



                                                                       EXHIBIT B

                              SELLING STOCKHOLDERS

         The shares of common stock being offered by the selling stockholders
are shares of common stock, and shares of common stock issuable upon exercise of
the warrants which were sold by the Company in a private placement transaction.
[Add description of sales by selling stockholders having piggyback registration
rights from the MarketVision transaction] For additional information regarding
the common shares and warrants, see "Private Placement of Units" above. 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. Except for the
ownership of the shares and warrants, the selling stockholders have not had any
material relationship with us within the past three years.

         The table below lists the selling stockholders and other information
regarding the beneficial ownership of the common stock by each of the selling
stockholders. The second column lists the number of shares of common stock
beneficially owned by each selling stockholder, based on its ownership of the
common shares and warrants, as of _____ __, 200_, assuming exercise of all
warrants held by the selling stockholders on that date, without regard to any
limitations on warrants exercise.

         The third column lists the shares of common stock being offered by this
prospectus by the selling stockholders.

         In accordance with the terms of registration rights agreements with the
holders of the Company's shares of common stock and warrants, this prospectus
generally covers the resale of a number of shares of common stock equal to the
number of shares of common stock issued to the selling stockholders plus the
number of shares of common stock issuable upon exercise of the warrants,
determined as if the outstanding warrants were exercised in full, as of the
trading day immediately preceding the date this registration statement was
initially filed with the SEC. Because the exercise price of the warrants may be
adjusted for anti-dilution protection, the number of shares that will actually
be issued may be more or less than the number of shares being offered by this
prospectus. The fourth column assumes the sale of all of the shares offered by
the selling stockholders pursuant to this prospectus.

         The selling stockholders may sell all, some or none of their shares in
this offering. See "Plan of Distribution."



                                                            MAXIMUM NUMBER OF SHARES
                                NUMBER OF SHARES OWNED    TO BE SOLD PURSUANT TO THIS    NUMBER OF SHARES OWNED
NAME OF SELLING STOCKHOLDER       PRIOR TO OFFERING               PROSPECTUS                 AFTER OFFERING
- ---------------------------       -----------------               ----------                 --------------
                                                                                
                                        [___]                        [___]                         [0]

[Other Buyers]                          [___]                        [___]                         [0]


                                       B-1



                              PLAN OF DISTRIBUTION

         We are registering the shares of common stock owned by the selling
stockholders, and the shares of common stock issuable upon exercise of the
warrants owned by the selling stockholders, to permit the resale of these shares
of common stock by the holders from time to time after the date of this
prospectus. We will not receive any of the proceeds from the sale by the selling
stockholders of the shares of common stock. We will bear all fees and expenses
incident to our obligation to register the shares of common stock.

         The selling stockholders may sell all or a portion of the shares of
common stock beneficially owned by them and offered hereby from time to time
directly or through one or more underwriters, broker-dealers or agents. If the
shares of common stock are sold through underwriters or broker-dealers, the
selling stockholders will be responsible for underwriting discounts or
commissions or agent's commissions. The shares of common stock may be sold in
one or more transactions at fixed prices, at prevailing market prices at the
time of the sale, at varying prices determined at the time of sale, or at
negotiated prices. These sales may be effected in transactions, which may
involve crosses or block transactions,

         -        on any national securities exchange or quotation service on
                  which the securities may be listed or quoted at the time of
                  sale,

         -        in the over-the-counter market,

         -        in transactions otherwise than on these exchanges or systems
                  or in the over-the-counter market,

         -        through the writing of options, whether such options are
                  listed on an options exchange or otherwise,

         -        ordinary brokerage transactions and transactions in which the
                  broker-dealer solicits purchasers;

         -        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;

         -        purchases by a broker-dealer as principal and resale by the
                  broker-dealer for its account;

         -        an exchange distribution in accordance with the rules of the
                  applicable exchange;

         -        privately negotiated transactions;

         -        through the settlement of short sales

         -        pursuant to Rule 144 under the Securities Act;

                                       B-2



         -        broker-dealers may agree with the selling securityholders to
                  sell a specified number of such shares at a stipulated price
                  per share

         -        a combination of any such methods of sale; and

         -        any other method permitted pursuant to applicable law.

         If the selling stockholders effect such transactions by selling shares
of common stock to or through underwriters, broker-dealers or agents, such
underwriters, broker-dealers or agents may receive commissions in the form of
discounts, concessions or commissions from the selling stockholders or
commissions from purchasers of the shares of common stock for whom they may act
as agent or to whom they may sell as principal (which discounts, concessions or
commissions as to particular underwriters, broker-dealers or agents may be in
excess of those customary in the types of transactions involved). In connection
with sales of the common stock or otherwise, the selling stockholders may enter
into hedging transactions with broker-dealers, which may in turn engage in short
sales of the common stock in the course of hedging in positions they assume. The
selling stockholders may also sell shares of common stock short and deliver
shares of common stock covered by this prospectus to close out short positions.
The selling stockholders may also loan or pledge shares of common stock to
broker-dealers that in turn may sell such shares.

         The selling stockholders may pledge or grant a security interest in
some or all of the warrants or shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the warrants or shares of common stock from time to
time pursuant to this prospectus or any amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933, as
amended, amending, if necessary, the list of selling stockholders to include the
pledgee, transferee or other successors in interest as selling stockholders
under this prospectus. The selling stockholders also may transfer and donate the
shares of common stock in other circumstances in which case the transferees,
donees, pledgees or other successors in interest will be the selling beneficial
owners for purposes of this prospectus.

         The selling stockholders and any broker-dealer participating in the
distribution of the shares of common stock may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commission paid, or any
discounts or concessions allowed to, any such broker-dealer may be deemed to be
underwriting commissions or discounts under the Securities Act. At the time a
particular offering of the shares of common stock is made, a prospectus
supplement, if required, will be distributed which will set forth the aggregate
amount of shares of common stock being offered and the terms of the offering,
including the name or names of any broker-dealers or agents, any discounts,
commissions and other terms constituting compensation from the selling
stockholders and any discounts, commissions or concessions allowed or reallowed
or paid to broker-dealers.

         Under the securities laws of some states, the shares of common stock
may be sold in such states only through registered or licensed brokers or
dealers. In addition, in some states the shares of common stock may not be sold
unless such shares have been registered or qualified for

                                       B-3



sale in such state or an exemption from registration or qualification is
available and is complied with.

         There can be no assurance that any selling stockholder will sell any or
all of the shares of common stock registered pursuant to the shelf registration
statement, of which this prospectus forms a part.

         The selling stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder, including,
without limitation, Regulation M of the Exchange Act, which may limit the timing
of purchases and sales of any of the shares of common stock by the selling
stockholders and any other participating person. Regulation M may also restrict
the ability of any person engaged in the distribution of the shares of common
stock to engage in market-making activities with respect to the shares of common
stock. All of the foregoing may affect the marketability of the shares of common
stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of common stock.

         We will pay all expenses of the registration of the shares of common
stock pursuant to the registration rights agreement, estimated to be $[ ] in
total, including, without limitation, Securities and Exchange Commission filing
fees and expenses of compliance with state securities or "blue sky" laws;
provided, however, that a selling stockholder will pay all underwriting
discounts and selling commissions, if any. We will indemnify the selling
stockholders against liabilities, including some liabilities under the
Securities Act, in accordance with the registration rights agreements, or the
selling stockholders will be entitled to contribution. We may be indemnified by
the selling stockholders against civil liabilities, including liabilities under
the Securities Act, that may arise from any written information furnished to us
by the selling stockholder specifically for use in this prospectus, in
accordance with the related registration rights agreements, or we may be
entitled to contribution.

         Once sold under the shelf registration statement, of which this
prospectus forms a part, the shares of common stock will be freely tradable in
the hands of persons other than our affiliates.

                                       B-4

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT

I, Mark Woodburn, the President of Natural Health Trends Corp., do certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Natural Health Trends Corp.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))-and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
b.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a.	All significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ Mark Woodburn
	Mark Woodburn
Date: November 11, 2004	President

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT

I, Chris Sharng, the Chief Financial Officer of Natural Health Trends Corp., do certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Natural Health Trends Corp.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))-and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
b.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a.	All significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ Chris Sharng
	Chris Sharng
	Executive Vice President and
Date: November 11, 2004	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Natural Health Trends Corp. (the “Company”) on Form 10-Q for the three and nine months ending September 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark Woodburn, President of the Company, certify, to the best of my knowledge that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

	/s/ Mark Woodburn
	Mark Woodburn
Date: November 11, 2004	President

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Natural Health Trends Corp. (the “Company”) on Form 10-Q for the three and nine months ending September 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Chris Sharng, Chief Financial Officer of the Company, certify, to the best of my knowledge that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

	/s/ Chris Sharng
	Chris Sharng
	Executive Vice President and
Date: November 11, 2004	Chief Financial Officer