FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1998
[ ] 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.
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(Exact name of Small Business Issuer as specified in its charter)
Florida 59-2705336
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
193 Middle Street, Suite 201
Portland, Maine 04101
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(Address of Principal Executive Offices)
(207) 772-7234
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(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
The number of shares outstanding of the issuer's Common Stock, $.001
par value, as of September 30, 1998 was 4,041,598 shares.
NATURAL HEALTH TRENDS CORP.
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of September 30, 1998 1
(unaudited)
Consolidated Statements of Operations (unaudited) for the
Three and Nine months ended September 30, 1998 and 2
1997
Consolidated Statements of Cash Flows (unaudited) for the
Nine months ended September 30, 1998 and 1997 3
Notes to the financial statements 4-6
Item 2. Management's discussion and analysis of financial
condition and results of operations 7-10
PART II - OTHER INFORMATION 10-12
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to a Vote of Security Holders
Item 5 Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature 13
NATURAL HEALTH TRENDS CORP.
CONSOLIDATED BALANCE SHEET
September 30, 1998
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $1,021,626
Accounts Receivable 19,031
Inventories 436,915
Prepaid Expenses 514,413
----------
TOTAL CURRENT ASSETS 1,991,985
PROPERTY, PLANT AND EQUIPMENT 46,265
PATENTS AND CUSTOMER LISTS 4,733,363
GOODWILL 844,780
DEPOSITS AND OTHER ASSETS 249,951
----------
$7,866,344
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $989,589
Accrued Expenses 789,833
Accrued Expenses for Discontinued Operations 314,593
Current Portion of Long-Term Debt 587,184
Accrued Consulting Contract 360,131
Other Current Liabilities 104,939
----------
TOTAL CURRENT LIABILITIES 3,146,269
COMMON STOCK SUBJECT TO PUT 380,000
STOCKHOLDERS' EQUITY:
Preferred Stock, $.001 par value; 1,500,000
shares authorized; 4,330 shares issued and
outstanding at September 30, 1998 3,789,525
Common Stock, $.001 par value; 50,000,000 shares
authorized; 4,041,598 shares issued and
outstanding at September 30, 1998 4,042
Additional Paid-in Capital 14,530,911
Retained Earnings (Accumulated Deficit) (13,604,403)
Common Stock Subject to Put (380,000)
----------
TOTAL STOCKHOLDERS' EQUITY 4,340,075
----------
$7,866,344
==========
1
See Notes to Consolidated Financial Statements
NATURAL HEALTH TRENDS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
----------------------------- --------------------------------
REVENUES $168,650 $535,202 $1,001,481 $535,202
COST OF SALES 59,852 125,073 283,206 125,073
---------- ----------- --------- ---------
GROSS PROFIT 108,798 410,129 718,275 410,129
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 772,862 1,810,771 2,470,312 2,092,885
---------- ----------- --------- ---------
OPERATING INCOME (LOSS) (664,064) (1,400,642) (1,752,037) (1,682,756)
OTHER INCOME (EXPENSE):
Interest (net) (67,261) (80,481) (336,314) (715,542)
---------- ----------- --------- ---------
LOSS FROM CONTINUED OPERATIONS
BEFORE INCOME TAXES (731,325) (1,481,123) (2,088,351) (2,398,298)
PROVISION FOR INCOME TAXES 0 0 0 0
---------- ----------- --------- ---------
LOSS FROM CONTINUED OPERATIONS (731,325) (1,481,123) (2,088,351) (2,398,298)
DISCONTINUED OPERATIONS:
Loss From Discontinued Operations 31,154 (2,107,366) (33,289) (2,655,412)
Gain (Loss) on Disposal 595,379 (613,406) 595,379 (613,406)
---------- ----------- --------- ---------
GAIN (LOSS) FROM DISCONTINUED OPERATIONS 626,533 (2,720,772) 562,090 (3,268,818)
---------- ----------- --------- ---------
LOSS BEFORE EXTRAORDINARY GAIN (104,792) (4,201,895) (1,526,261) (5,667,116)
EXTRAORDINARY GAIN - FORGIVENESS OF DEBT (638,576) 0 869,516 0
---------- ----------- --------- ---------
NET INCOME (LOSS) ($743,368) ($4,201,895) ($656,745) ($5,667,116)
---------- ----------- --------- ---------
INCOME (LOSS) PER COMMON SHARE:
Continued Operations ($0.45) ($3.11) ($2.30) ($6.57)
Discontinued Operations 0.22 (5.71) 0.31 (8.95)
Extraordinary Gain (0.23) 0.00 0.49 0.00
---------- ----------- --------- ---------
Net Income (Loss) ($0.46) ($8.82) ($1.50) ($15.52)
---------- ----------- --------- ---------
WEIGHTED AVERAGE COMMON SHARES USED 2,828,559 476,499 1,786,500 365,116
========== =========== ========= =========
2
See Notes to Consolidated Financial Statements
NATURAL HEALTH TRENDS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30
1998 1997
----------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss ($656,745) ($5,667,116)
Adjustments to reconcile Net Loss to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and amortization 513,401 334,660
Non-cash imputed compensation expense 0 425,000
Loss on disposal of fixed assets, net 0 87,191
Interest settled by issuance of stock 112,971 90,650
Write-off of Goodwill 322,219 1,325,605
Amortization of note payable discount 0 433,333
Proceeds from sale of Discontinued Operations (1,783,333) 0
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 1,960,917 (732,460)
(Increase) Decrease in Inventories 590,084 (175,712)
(Increase) in Prepaid Expenses (329,837) (213,155)
Decrease in Property and Equipment 1,197,603 0
(Increase) Decrease in Deposits & Other Assets 202,621 (213,083)
Increase (Decrease) in Accounts Payable (2,036,847) 861,312
Increase (Decrease) in Accrued Expenses (410,054) 559,379
Increase (Decrease) in Deferred Revenue (1,089,647) 596,660
Increase (Decrease) in Other Current Liabilities (220,176) 31,081
Increase (Decrease) in Accrued Expenses for Discontinued Operations (41,469) 613,105
Increase in Accrued Consulting Contract 0 360,131
----------- -------------
TOTAL ADJUSTMENTS (1,011,547) 4,383,697
----------- -------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (1,668,292) (1,283,419)
----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (51,997) (184,026)
Net cash provided by acquisitions 0 20,240
Proceeds from disposition of Discontinued Operations 4,132,106 0
Pre-acquisition loan to Global Health Alternatives, Inc. 0 (1,964,000)
----------- -------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 4,080,109 (2,127,786)
----------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in due from officer 0 (4,904)
Decrease in Restricted Cash 250,000 8,932
Proceeds from preferred stock 5,283,000 2,200,000
Proceeds from sale of debentures 0 1,626,826
Payments of debentures 0 (355,650)
Loan origination costs - preferred stock 0 (299,299)
Proceeds from note payable and long-term debt 196,517 119,873
Payments of notes payable and long-term debt (3,506,695) (286,458)
Cancellation of common stock (96,197) 0
Redemptions of preferred stock (3,621,600) 0
----------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES (1,494,975) 3,009,320
----------- -------------
NET INCREASE (DECREASE) IN CASH 916,842 (401,885)
CASH, BEGINNING OF PERIOD 104,784 517,323
----------- -------------
CASH, END OF PERIOD $1,021,626 $115,438
=========== =============
3
See notes to consolidated financial statements.
NATURAL HEALTH TRENDS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying financial statements are unaudited, but reflect all
adjustments which, in the opinion of management, are necessary for a
fair presentation of financial position and the results of operations
for the interim periods presented. All such adjustments are of a normal
and recurring nature. The results of operations for any interim period
are not necessarily indicative of the results attainable for a full
fiscal year.
EARNINGS (LOSS) PER SHARE
Basic per share information is computed based on the weighted average
number of shares outstanding during the period. Prior year per share
information has been restated to reflect the one for 40 reverse split
which was effected in April 1998.
GAIN ON FORGIVENESS OF DEBT
During the three months ended September 30, 1998, the Company's
subsidiary Global Health Alternatives, Inc.(GHA) failed to make
payments to three large creditors pursuant to settlement agreements
entered into earlier in the year. Accordingly, the Company reduced its
realized gain on the work-out of various debt and payables of GHA by
approximately $639,000 to about $870,000 year-to-date.
PREFERRED STOCK
In February 1998, the Company sold 300 shares of its convertible Series
B preferred stock for $1,000 a share realizing proceeds of $261,500.
As of September 30, 1998, all 300 shares of the Series B preferred
stock had been converted into a total of 541,330 shares of common
stock.
In April 1998, the Company sold 4,000 shares of its convertible Series
C preferred stock for $1,000 a share realizing proceeds of $3,507,000.
The preferred stock pays dividends at the rate of 10% per annum payable
in cash or shares of the Company's common stock valued at 75% of the
closing bid price. The preferred stock has a liquidation preference of
$1,000 per share. The preferred stock is convertible commencing 41 days
after issuance at the rate of 75% of the average closing bid price of
the common stock over the five days preceding the notice of conversion.
From the proceeds raised, the Company paid $2,500,000 to retire
$1,568,407 face value of Series A preferred stock outstanding. As of
September 30, 1998, 1,320 shares of the Series C preferred stock had
been converted into a total of 1,418,912 shares of common stock.
In July 1998, the Company sold 75 shares of its convertible Series D
preferred stock for
4
$1,000 a share realizing proceeds of $75,000. The preferred stock was
redeemed at 120 percent of the stated value, plus 8% per annum
dividend, in August 1998 upon the sale of the Company's vocational
schools (see Note 6).
In August 1998, the Company sold 1,650 shares of its convertible Series
E preferred stock for $1,000 a share realizing proceeds of $1,439,000.
The preferred stock pays dividends at the rate of 10% per annum payable
in cash or shares of the Company's common stock valued at 75% of the
closing bid price. The preferred stock has a liquidation preference of
$1,000 per share. The preferred stock is convertible commencing 60 days
after issuance at the rate of 75% of the average closing bid price of
the common stock over the five days preceding the notice of conversion.
CONVERSION OF NOTES PAYABLE
In August 1998, $595,000 of short-term notes payable, plus $104,113 of
accrued interest thereon, were converted into 1,195,472 shares of the
Company's common stock.
DISCONTINUED OPERATIONS
In August 1998, the Company sold its three vocational schools and
certain related businesses. Revenues for the vocational school
operations were $ 2,316,028 for the six months ended June 30, 1998 and
$ 2,459,429 for the comparable period in 1997.
Following is a calculation of the gain on the disposition of the
Company's vocational school operations:
Proceeds from sale of schools:
Cash $1,778,333
Market value of redeemed NHTC Stock 96,197
-------------
$1,874,530
Less book value of school assets transferred:
Cash $(50,710)
Restricted Cash 256,577
Accounts Receivable 1,697,777
Inventories 398,953
Prepaid Expenses 110,757
Property Plant & Equipment 161,335
Deposits & Other Assets 112,491
-------
(2,687,180)
Add liabilities assumed by purchaser:
Accounts Payable $578,076
Accrued Expenses 374,852
Revolving Credit Line 227,953
Deferred Revenue 1,115,983
Other Current Liabilities 110,359
Long-Term Debt 152,026
-------
2,559,249
Less Goodwill written off (322,220)
----------
Gain from sale of schools $1,424,379
==========
5
In November 1998, the Company sold an office building located in
Pompano Beach, Florida that previously accommodated the Company's
corporate headquarters and one of its vocational schools. Following is
a calculation of the estimated loss on the disposition of the building:
Proceeds from sale of building $2,900,000
Less estimated closing costs (314,000)
Less net book value of assets transferred (3,261,000)
Less write off of deferred financing costs (154,000)
---------
Estimated Loss from sale of building ($829,000)
==========
The Company has realized the estimated loss on building sale during the
current quarter under Discontinued Operations. Also, the assets and
liabilities related to the building, including the long-term mortgage
debt obligation, have been reclassified as Net Assets Held for Disposal
of $248,951 and are included in Other Assets as of September 30, 1998.
6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and notes contained in Item 1 hereof.
Forward-Looking Statements
When used in Form 10-QSB and in future filings by the Company with the
Securities and Exchange Commission, the words "will likely result", and "the
Company expects", "will continue", "is anticipated", "estimated", "project", or
"outlook" or similar expressions are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Act of 1995.
The Company wishes to caution readers not to place undue reliance on such
forward-looking statements, each of which speak only as of the date made. Such
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical earnings and those presently
anticipated or projected. The Company has no obligation to publicly release the
result of any revisions which may be made to any forward- looking statements to
reflect anticipated or unanticipated events or circumstances occurring after the
date of such statements.
Results of Operations
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Prior to August 1997, the Company's operations consisted entirely of medical
clinics and vocational schools. Upon the acquisition of Global Health
Alternatives, Inc. (GHA) on July 23, 1997, the Company began to market and
distribute a line of natural, over-the-counter homeopathic pharmaceutical
products. The Company subsequently discontinued its medical clinic line of
business during the third quarter of 1997, and sold the schools in August 1998.
For most of the nine month period ended September 30, 1997, the Company's
current ongoing line of business (GHA natural products) was not in operation,
not having been acquired until July 1997. Accordingly, comparison of
year-to-date Revenues, Cost of Sales, and Selling, General & Administrative
Expenses between 1998 and 1997 is not meaningful. The discussion below includes
comparisons of operations for the quarter ended September 30, 1998 with the
three immediately preceding quarters - the only previous quarters which include
a full three months of GHA operations.
Revenues:
Total revenues for continued operations for the quarter ended September 30, 1998
were $168,650, as compared to quarterly revenues of $402,947, $429,884 and
$455,969 (excluding the $142,555 proceeds from a truck theft settlement) for the
three preceding quarters. The current quarter's decrease of 61 percent from the
prior three quarters' average is primarily attributable to a decrease in sales
of the Company's Natural Relief 1222 product to mass market and major drug chain
stores. Prior to the current quarter, sales of Natural Relief 1222 had been
comprised primarily of major account customers' opening fill orders, which
typically are significantly larger than reorders. Unlike in previous quarters,
there were no opening fill order sales of Natural Relief 1222 to major account
customers during the third quarter of 1998.
7
Cost of Sales:
Cost of Sales for the quarter ended September 30, 1998 were $59,852 (35.5% of
revenues), as compared to $111,255 (27.6% of revenues), $112,099 (26.1% of
revenues) and $249,961 (41.8% of revenues) for the three preceding quarters. The
increase in Cost of Sales as a percentage of revenues that occurred in the most
recent quarter is attributable to a substantial decrease in sales of Natural
Relief 1222, which has a higher margin than the Company's other products, and
higher shipping costs as a percentage of revenues. Cost of Sales in the quarter
ended December 31, 1997 were significantly higher due to higher royalty costs
and year end inventory write-downs.
Selling, General and Administrative Expenses:
Selling, general and administrative expenses for the quarter ended September 30,
1998 were $772,862, as compared to $858,325 $839,125 and $1,826,870 for the
three preceding quarters. The decrease in the most recent quarter is due
primarily to reduced spending on advertising, selling and promotion, and to
lower overhead costs. The higher cost structure in place during the quarter
ended December 31, 1997 included operations in the United Kingdom and a retail
operation that were discontinued in December 1997 and January 1998,
respectively, as well as significantly higher advertising costs (by
approximately $525,000) and minimum royalty charges (of $139,661) that were
eliminated effective December 31, 1997.
Interest Expense:
Interest expense for the nine months ended September 30, 1998 was $336,314 as
compared to $715,542 for the comparable period in 1997. Excluding the
amortization of notes payable discount (related to the Company's convertible
debentures) which amounted to $433,333 in 1997, interest expense increased by 19
percent. The increase is due to the interest payable on GHA's pre-acquisition
notes, partially offset by a reduction in the parent company's interest expense,
resulting from the conversion of its convertible debentures in the fourth
quarter of 1997 and January 1998.
Discontinued Operations:
In October 1997, the Company closed its medical clinic located in Boca Raton,
Florida. In February 1998, the Company sold its remaining medical clinic in
Pompano Beach, Florida. All anticipated losses on these discontinued operations
were reflected in the fiscal year ended December 31, 1997. In August 1998, the
Company sold its three vocational schools and certain related businesses,
recognizing a gain of $1,424,379 from the sale. In November 1998, the Company
sold an office building which previously accommodated its corporate headquarters
and one of its schools, realizing an estimated loss of $829,000 which was
reflected in the quarter ended September 30, 1998.
Gain on Forgiveness of Debt:
During the three months ended September 30, 1998, the Company's subsidiary
Global Health Alternatives, Inc.(GHA) failed to make payments to three large
creditors pursuant to settlement agreements entered into earlier in the year.
Accordingly, the Company reduced its realized gain on the work-out of various
debt and payables of GHA by approximately $639,000 to approximately $870,000.
8
Net Income (Loss):
For the nine months ended September 30, 1998, the net loss was $656,745, as
compared to a net loss of $5,667,116 for the corresponding period in 1997. The
decrease in net loss is primarly attributable to lower interest expense,
Discontinued Operations and the Extraordinary Gain.
Liquidity and Capital Resources
The Company has funded its working capital and capital expenditure requirements
from cash provided through borrowing from institutions and individuals, and from
the sale of the Company's securities in private placements. The Company's other
ongoing source of cash receipts has been from the sale of GHA's products.
In February 1998, the Company issued $300,000 face amount of Series B
convertible preferred stock, net of expenses of $38,500.
In April 1998, the Company issued $4,000,000 face amount of Series C convertible
preferred stock, net of expenses of $493,000. The preferred stock pays a
dividend of 10% per annum and is convertible into common stock at 75% of the
market value of the common stock, commencing 41 days after issuance. From the
proceeds raised, the Company paid $2,500,000 to retire $1,568,407 face value of
Series A preferred stock outstanding.
In July 1998, the Company issued $75,000 face amount of Series D convertible
preferred stock .
In August 1998, the Company issued $1,650,000 face amount of Series E
convertible preferred stock, net of expenses of $211,000. The preferred stock
pays dividends of 10% per annum and is convertible into common stock valued at
75% of the market value of the common stock.
In August 1998, the Company sold its three vocational schools and certain
related businesses for $1,778,333 and other consideration. From the school sale
proceeds, the Company paid $1,030,309 to retire the remaining $631,593 face
value of Series A preferred stock outstanding, and $91,291 to redeem all of the
Series D preferred stock outstanding. The remaining proceeds were used to pay
down notes payable.
At September 30, 1998 the ratio of current assets to current liabilities was .63
to 1.0. There was a working capital deficit of $1,154,284.
Cash used by operations for the nine months ended September 30, 1998 was
$1,668,292, attributable to the net loss of $656,745 and significant reductions
in accounts payable and accrued expenses. Capital expenditures used $51,997 of
cash.
The Company anticipates that further additional financing will be required to
finance the Company's continued operations during the next six months,
principally to fund the continued development and growth of GHA's product sales
and to finance any acquisitions. Management has revised its business plan of
marketing development and support for GHA's products, decreasing its emphasis on
mass market advertising. Instead, the Company plans to use its resources for
the development of other less capital-intensive distribution channels (e.g.,
multi-level marketing), possibly via acquisition. If the Company is successful
in completing an acquisition, of which there can be no assurance, management
expects that an additional $1.0 to $2.0 million in debt or equity financing will
need to be obtained. The Company is in the process
9
of negotiating debt settlements with several of GHA's creditors. If the Company
is unable to reduce these debt obligations, an additional $0.5 to $1.0
million in financing will need to be obtained. There can be no assurance that
the Company will be able to secure such additional debt or equity financing. The
failure of the Company to obtain additional financing would have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On July 13, 1998, Preferred Real Estate Investments, Ltd. commenced an action in
the Circuit Court of Florida, in and for Palm Beach County, for unpaid rent
against the Company and its wholly-owned subsidiary. The Company claims that
there was a settlement and that there are no additional amounts due to the
landlord.
Item 2. Changes in Securities and Use of Proceeds
In February 1998, the Company sold 300 shares of its convertible Series B
preferred stock for $1,000 a share realizing net proceeds of $261,500 pursuant
to Regulation S. As of September 30, 1998, all 300 shares of the Series B
preferred stock had been converted into a total of 541,330 shares of common
stock.
In April 1998, the Company sold 4,000 shares of its convertible Series C
preferred stock for $1,000 a share realizing net proceeds of $3,507,000 pursuant
to Regulation S. From the proceeds raised, the Company paid $2,500,000 to retire
$1,568,407 face value of Series A preferred stock outstanding. As of September
30, 1998, 1,320 shares of the Series C preferred stock had been converted into a
total of 1,418,912 shares of common stock. On October 1, 1998, an additional 975
shares of Series C preferred stock were converted into 832,182 shares of common
stock.
In July 1998, the Company sold 75 shares of series D preferred stock to two
investors in a private placement under section 4(2) and/or Regulation D of the
Securities Act of its convertible Series D preferred stock for $1,000 a share
realizing net proceeds of $75,000. The preferred stock was redeemed at 120
percent of the stated value, plus 8% per annum dividend, in August 1998 upon
the sale of the Company's vocational schools. The proceeds were used for
working capital.
In August 1998, $595,000 of short-term notes payable, plus $104,113 of accrued
interest thereon, were converted into 1,195,472 shares of common stock.
In August 1998, the Company sold 1,650 shares of its convertible Series E
preferred stock for $1,000 a share realizing net proceeds of $1,439,000 in a
private placement under section 4(2) and/or Regulation D of the Securities Act.
The preferred stock pays dividends at the rate of 10% per annum payable in cash
or shares of the Company's common stock valued at 75% of the closing bid price.
The preferred stock has a liquidation preference of $1,000 per share. The
preferred stock is convertible commencing 60 days after issuance at the rate of
75% of the average closing bid price of the common stock over the five days
preceding the notice of conversion. The proceeds were utilized for working
capital.
10
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
On July 24, 1998, the Company held an annual meeting of its stockholders. The
stockholders voted to approve and ratify the following:
The election of Sir Brian Wolfson, Neal R. Heller, Elizabeth S. Heller,
Martin C. Licht and Dirk D. Goldwasser to the Board of Directors.
The retention of Feldman Sherb Ehrlich & Co., P.C. as the Company's
independent auditors for the year ended December 31, 1998. The shares of
Common Stock were voted as follows: 1,154,400 voted for ratification; 5,736
voted against ratification; and 310 abstained.
The Company's 1998 Stock Option Plan. The shares of Common Stock were
voted as follows: 650,541 voted for approval; 16,856 voted against
approval; and 858 abstained.
The sale of the Company's three vocational schools and certain related
businesses to a Florida corporation controlled by Neal R. Heller and
Elizabeth S. Heller, both of whom are officers, directors and principal
stockholders of the Company, for a purchase price of approximately
$1,800,000. The shares of Common Stock were voted as follows: 658,666
voted for ratification; 9,327 voted against ratification; and 262
abstained.
An increase in the number of authorized shares of Common Stock
from 5,000,000 to 50,000,000 shares. The shares of Common Stock were
voted as follows: 649,407 voted for approval; 20,470 voted against
approval; and 835 abstained.
The conversion of 4,000 shares of Series C Preferred Stock issued in the
Company's April 1998 private placement into shares of Common Stock pursuant
to the terms of such preferred stock, to the extent that the number of
shares of Common Stock issued exceeds 20 percent of the total number of
Common shares then outstanding. The shares of Common Stock were voted as
follows: 651,099 voted for approval; 14,470 voted against approval; and
2,686 abstained.
The conversion of $595,000 of the Company's 12.5% promissory notes and the
interest thereon into the number of shares of Common Stock equal to the
principal and accrued interest thereon divided by 85% of the closing bid
price of the Common Stock for five consecutive trading days ending on May
15, 1998. The shares of Common Stock were voted as follows: 662,209 voted
for approval; 5,736 voted against approval; and 310 abstained.
11
Item 5. Other Information
On August 4, 1998, the Company sold three vocational schools pursuant to the
agreement dated April 29, 1998 by and among Natural Health Trends Corp., Neal R.
Heller and Elizabeth S. Heller and Florida College of Natural Health, Inc. for a
purchase price of $1,783,333 plus 79,175 shares of Company common stock with a
market value of $96,197, together with the assumption of certain liabilities.
See Note 6 to Financial Statements.
In October 1998, the Company received notification from NASDAQ that the
Company's common stock will continue to be listed on the NASDAQ Small Cap
market, subject to the Company demonstrating continued compliance with the
NASDAQ listing requirements through February 1, 1999.
In November 1998, the Company sold an office building located in Pompano Beach,
Florida for a purchase price of $2.9 Million.
Item 6. Exhibits and Other Reports on Form 8-K
The Company filed a current report of form 8-K on September 8, 1998, disclosing
the signing of a letter of intent between the Company and Kaire International,
Inc., in which the Company has agreed to acquire all of the assets of Kaire for
a contemplated purchase price of $6,610,000. The closing of the acquisition is
subject to, among other conditions, the Kaire assets being in satisfactory
condition to Company management.
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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/Roger Guerin
Roger Guerin
Chief Financial Officer
Date: November 19, 1998
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NATURAL HEALTH TRENDS CORP. EXHIBIT INDEX
Number Description of Exhibit
2.1 Assets Purchase Agreement dated April 29, 1998 by and among Natural Health Trends
Corp., Neal R. Heller & Elizabeth S. Heller and Florida College of Natural Health, Inc.
#
3.1 Amended and Restated Certificate of Incorporation of the Company.*
3.2 Amended and Restated By-Laws of the Company.*
4.1 Specimen Certificate of the Company's Common Stock.*
4.2 Form of Class A Warrant.*
4.3 Form of Class B Warrant.*
4.4 Form of Warrant Agreement between the Company and Continental Stock Transfer &
Trust Company.*
4.5 Form of Underwriter's Warrants.*
4.6 1994 Stock Option Plan.*
4.7 Form of Debenture.**
4.8 Registration Rights Agreement dated July 23, 1997 by and among the Company, Global
and the Global Stockholders.+
4.9 Agreement as to Transfers dated July 23, 1997 by and between Capital Development, S.A.
and the Company.+
4.10 Articles of Amendment of Articles of Incorporation of the Company.***
4.11 Florida Statutes Sections 607.1301, 607.1302, 607.1320 Regarding Appraisal Rights. #
4.12 Articles of Amendment of Articles of Incorporation Series C Preferred Stock. ##
4.13 Articles of Amendment of Articles of Incorporation Series E Preferred Stock. ##
10.1 Agreement among Natural Health Trends Corp. Health Wellness Nationwide Corp.,
Samantha Haimes and Leonard Haimes.++
10.10 Agreement among Natural Health Trends Corp. Health Wellness Nationwide Corp.,
Samantha Haimes and Leonard Haimes.
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Number Description of Exhibit
27.1 Financial Data Schedule.
* Previously filed with the Company's Registration Statement No. 33-991184.
** Previously filed with the Company's Form 10-QSB for the quarter ended March 31, 1997.
*** Previously filed with the Company's Form 10-QSB dated June 30, 1997.
+ Previously filed with the Company's Form 8-K dated August 7, 1997.
++ Previously filed with the Company's Form 10-KSB for the year ended December 31, 1996.
+++ Previously filed with the Company's Registration Statement No. 333-35935.
# Previously filed with the Company's Proxy Statement on Schedule 14A, dated May 14, 1998 .
## filed here with.
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