SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 21, 2005
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NATURAL HEALTH TRENDS CORP.
(Exact Name of registrant as specified in its charter)
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Florida 0-26272 59-2705336
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
12901 Hutton Drive
Dallas, Texas 75234
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (972) 241-4080
Former Name or Former Address, if Changed Since Last Report: Not applicable
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On March 23, 2005, Natural Health Trends Corp. (the "Company") issued a press
release announcing its financial results for the fourth quarter of 2004 and for
the year ended December 31, 2004. A copy of the press release is furnished as
Exhibit 99.1 to this report and is incorporated herein by reference.
The information in this Item, including the Exhibit 99.1 attached hereto, is
being furnished and shall not be deemed "filed" for the purposes of Section 18
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
otherwise subject to the liabilities of that Section. The information in this
report shall not be incorporated by reference into any filing under the
Securities Act of 1933, or the Exchange Act, except as otherwise expressly
stated in such filing.
ITEM 4.02 NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS OR A RELATED
AUDIT REPORT OR COMPLETED INTERIM REVIEW.
During its review of its financial statements for the quarter ended March 31,
2004, the Company learned that commission and transportation-related expenses
incurred as of December 31, 2003 were under-accrued by approximately $640,000
(on a pre-tax basis) for the quarter and year ended December 31, 2003. Adjusting
entries of approximately $640,000 were included as expenses in the financial
statements for the quarter ended March 31, 2004.
At that time, the Company concluded that the error was not material, and
therefore, did not warrant a restatement of the 2003 financial statements. Based
upon the Company's pre-tax income of approximately $4.0 million for the first
quarter of 2004 combined with the Company's historical sales and net income
growth rates, the Company believed that the recording of $640,000 of pre-tax
expenses during the first quarter of 2004 would not have a material effect on
the Company's net income for the 2004 fiscal year.
However, while sales continued to grow significantly, net income for the 2004
fiscal year declined substantially. As a consequence, the adjusting entries made
in the first quarter of 2004 are now considered by management to materially
affect the Company's net income for fiscal 2004.
During its review of its financial statements for the year ended December 31,
2004, the Company discovered that certain revenues not earned until 2004 were
improperly recorded as revenue by its Eastern European business, KGC Networks
Ptd. Ltd., for the year ended December 31, 2003. The amount of revenues that was
over-stated for the 2003 fiscal year was approximately $310,000.
On March 21, 2005, the Company and its Audit Committee determined that the
inclusion of the aforementioned two items in the financial statements for the
quarter ended March 31, 2004 would materially affect the Company's net income
for the year ended December 31, 2004, and the Company believes that an amendment
to its financial statements for the year ended December 31, 2003 is warranted.
The restatement of the adjustments into the financial statements for the year
ended December 31, 2003 will reduce the Company's revenue by approximately
$310,000, increase cost of goods sold by approximately $180,000, increase
distributor commission expense by approximately $460,000, reduce minority
interest expense by approximately $300,000, and reduce after-tax net income by
approximately $650,000 for the quarter as well as the year ended December 31,
2003.
For the quarter ended March 31, 2004, the restatement will increase the
Company's revenue by approximately $310,000, reduce cost of goods sold by
approximately $180,000, reduce distributor commission expense by approximately
$460,000, increase minority interest expense by approximately $300,000, and
increase after-tax net income by approximately $650,000 for the quarter ended
March 31, 2004.
The Company, after consultation with its Audit Committee, concluded that the
consolidated financial statements for the fourth quarter of 2004 and the year
ended December 31, 2003 as well as the first quarter of 2004 should no longer be
relied upon, including the consolidated financial statements and other financial
information in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2003 and the Quarterly Report on Form 10-Q for the first quarter
ended March 31, 2004. Although the financial statements for the three month
periods ended June 30, 2004 and September 30, 2004 are unaffected by this error,
the consolidated financial statements for the second and third quarters of 2004
include inaccurate information on a year to date basis because they include the
erroneous information from the first quarter of 2004 which financial statements
should not be relied upon.
As of today, the Company plans to file with the Securities and Exchange
Commission its Annual Report on Form 10-K for the year ended December 31, 2004
by March 31, 2005, which will include the restated results for the year ending
December 31, 2003. The Company also intends to file in the near future an
amended Annual Report on Form 10-KSB for the year ended December 31, 2003, and
amended Quarterly Reports on Form 10-Q for the first three quarters of 2004.
Certain statements in this Current Report on Form 8-K, including statements
about our plans, objectives, intentions, and expectations are "forward-looking
statements" within the meaning of the Securities Exchange Act of 1934, as
amended. Forward-looking statements are based on the opinions and estimates of
management at the time the statements are made and are subject to known and
unknown risks and uncertainties and inaccurate assumptions that could cause
actual results to differ materially from those expected or implied by the
forward-looking statements. The Company's actual results could differ materially
from those anticipated in the forward-looking statements for many reasons,
including the risk that additional "material weaknesses" or other internal
control deficiencies with the meaning of Section 404 of the Sarbanes-Oxley Act
of 2002 are identified, the risk that additional accounting errors are
identified, and the risk that the Company is required to restate its prior
financial statements for periods other than the fourth quarter of 2003, the
fiscal year ended December 31, 2003 and the first quarter ended March 31, 2004.
Readers are cautioned not to place undue reliance upon these forward-looking
statements, which speak only as the date hereof.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
Exhibit
Number Description
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99.1 Press Release of Natural Health Trends Corp., dated March 23, 2005,
reporting financial results for the fourth quarter of 2004 and for
the year ended December 31, 2004
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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 hereunto duly authorized.
Natural Health Trends Corp.
(Registrant)
Date: March 23, 2005 By: /s/ MARK D. WOODBURN
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Mark D. Woodburn
President
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