**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

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** **

**FORM 10-Q**

 

**(Mark one)**

 
| **ý** |   | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF  1934** |
|------------|--------|------------------------------------------------------------------------------------------------|

 

**FORTHE QUARTERLY PERIOD ENDED JUNE 30, 2003**

 

**OR**

 
| **o** |   | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF  1934** |
|-------|--------|-------------------------------------------------------------------------------------------------|

 

**FORTHE TRANSITION PERIODFROM             TO             **

** **

**COMMISSIONFILE NO: 0-24567**

 

**NATROL, INC.**

(Exact name ofregistrant as specified in its charter)

 
| **DELAWARE**             |   | **95-3560780**                       |
|--------------------------|--------|--------------------------------------|
| (State of Incorporation) |   | (I.R.S. Employer Identification No.) |

 

**21411 PRAIRIE STREETCHATSWORTH, CALIFORNIA 91311**(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

 

**(818) 739-6000**(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

 

INDICATE BY A CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALLREPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGEACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THEREGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCHFILING REQUIREMENTS FOR THE PAST 90 DAYS.

YES  ý   NO  o

 

Indicate by check mark whether the registrant is an accelerated filer(as defined in Exchange Act Rule  12b-2). Yes o  No ý

 

Indicate the number of shares outstanding of the issuer’s common stock,as of the latest practicable date:

 

| **Class**                     |   | **July 31, 2003** |
|-------------------------------|--------|-------------------|
| Common stock, $0.01 par value |   | **12,907,981**    |

 

 

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PART 1. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

** **

**Natrol, Inc.and Subsidiaries**

**Consolidated Balance Sheets**

(In thousands, except share and per share data)

(Unaudited)

 
|                                                                                                                                 |   | **June 30,  2003** |   | **December 31,  2002** |   |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|--------|------------------------|--------|
|                                                                                                                                 |   |               |   |                   |   |
| **Assets**                                                                                                                           |   |               |   |                   |   |
| Current assets:                                                                                                                      |   |               |   |                   |   |
| Cash and cash equivalents                                                                                                            |   | $                  | 9,086  |                   | $      | 10,077 |   |
| Accounts receivable, net of allowances for  doubtful accounts of $521 and $409 at June 30, 2003 and December 31, 2002,  respectively |   | 9,492              |   | 6,790                  |   |
| Inventory                                                                                                                            |   | 7,988              |   | 8,669                  |   |
| Income taxes receivable                                                                                                              |   | 425                |   | —                 |   |
| Deferred income taxes                                                                                                                |   | 665                |   | 665                    |   |
| Prepaid expenses and other current assets                                                                                            |   | 674                |   | 1,452                  |   |
| Total  current assets                                                                                                                |   | 28,330             |   | 27,653                 |   |
| Property and equipment:                                                                                                              |   |               |   |                   |   |
| Building and improvements                                                                                                            |   | 15,612             |   | 15,607                 |   |
| Machinery and equipment                                                                                                              |   | 5,009              |   | 5,067                  |   |
| Furniture and office equipment                                                                                                       |   | 3,186              |   | 3,003                  |   |
|                                                                                                                                 |   | 23,807             |   | 23,677                 |   |
| Accumulated depreciation and amortization                                                                                            |   | (6,615             | )      | (5,867                 | )      |
|                                                                                                                                 |   | 17,192             |   | 17,810                 |   |
| Deferred income taxes                                                                                                                |   | 3,853              |   | 3,853                  |   |
| Goodwill, net of accumulated amortization  and impairment charge of $37,381                                                          |   | 4,026              |   | 4,026                  |   |
| Other assets                                                                                                                         |   | 41                 |   | 39                     |   |
| Total assets                                                                                                                         |   | $                  | 53,442 |                   | $      | 53,381 |   |
|                                                                                                                                 |   |               |   |                   |   |
| **Liabilities and  stockholders’ equity**                                                                                       |   |               |   |                   |   |
| Current liabilities:                                                                                                                 |   |               |   |                   |   |
| Accounts payable                                                                                                                     |   | $                  | 6,148  |                   | $      | 4,395 |   |
| Accrued expenses                                                                                                                     |   | 2,281              |   | 3,358                  |   |
| Accrued payroll and related liabilities                                                                                              |   | 1,079              |   | 693                    |   |
| Income taxes payable                                                                                                                 |   | —             |   | 205                    |   |
| Current portion of long-term debt                                                                                                    |   | 312                |   | 301                    |   |
| Total current liabilities                                                                                                            |   | 9,820              |   | 8,952                  |   |
| Long-term debt, less current portion                                                                                                 |   | 7,616              |   | 7,778                  |   |
| Commitments and contingencies                                                                                                        |   |               |   |                   |   |
| Stockholders’ equity:                                                                                                           |   |               |   |                   |   |
| Preferred stock, par value of $0.01 per  share:                                                                                      |   |               |   |                   |   |
| Authorized shares—2,000,000                                                                                                     |   |               |   |                   |   |
| Issued and outstanding shares—none                                                                                              |   |               |   |                   |   |
| Common stock, par value of $0.01 per share:                                                                                          |   |               |   |                   |   |
| Authorized shares—50,000,000                                                                                                    |   |               |   |                   |   |
| Outstanding shares—13,812,495 and  13,788,720 at June 30, 2003 and December 31, 2002, respectively                              |   | 138                |   | 138                    |   |
| Additional paid-in capital                                                                                                           |   | 62,034             |   | 62,005                 |   |
| Accumulated deficit                                                                                                                  |   | (23,285            | )      | (22,611                | )      |
|                                                                                                                                 |   | 38,887             |   | 39,532                 |   |
| Shares held in treasury, at cost-921,900  shares at June 30, 2003 and December 31, 2002                                              |   | (2,881             | )      | (2,881                 | )      |
| Total stockholders’ equity                                                                                                      |   | 36,006             |   | 36,651                 |   |
| Total liabilities and stockholders’ equity                                                                                      |   | $                  | 53,442 |                   | $      | 53,381 |   |

 

See accompanying notes

 

2

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**Natrol, Inc.and Subsidiaries**

**ConsolidatedStatements of Operations**

**(In thousands, except share and per sharedata)**

**(Unaudited)**

** **
|                                                                                                         |   | **Three  months ended  June 30,** |   | **Six months  ended  June 30,** |   |
|--------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|--------|---------------------------------|--------|
|                                                                                                         |   | **2003**                          |   | **2002**                        |   | **2003** |   | **2002** |   |
|                                                                                                         |   |                              |   | **(as restated)**               |   |   |   | **(as restated)** |   |
| Net sales                                                                                                    |   | $                                 | 18,988 |                            | $      | 17,843 |   | $ | 38,155 |   | $ | 35,382 |   |
| Cost of goods sold                                                                                           |   | 12,301                            |   | 10,744                          |   | 23,205 |   | 21,704 |   |
| Gross profit                                                                                                 |   | 6,687                             |   | 7,099                           |   | 14,950 |   | 13,678 |   |
|                                                                                                         |   |                              |   |                            |   |   |   |   |   |
| Selling and marketing expenses                                                                               |   | 4,367                             |   | 4,526                           |   | 9,686 |   | 8,411 |   |
| General and administrative expenses                                                                          |   | 3,036                             |   | 2,222                           |   | 6,033 |   | 4,567 |   |
| Total operating expenses                                                                                     |   | 7,403                             |   | 6,748                           |   | 15,719 |   | 12,978 |   |
| Operating income (loss)                                                                                      |   | (716                              | )      | 351                             |   | (769 | ) | 700 |   |
|                                                                                                         |   |                              |   |                            |   |   |   |   |   |
| Interest income                                                                                              |   | 4                                 |   | 26                              |   | 14 |   | 45 |   |
| Interest expense                                                                                             |   | (162                              | )      | (171                            | )      | (324 | ) | (341 | ) |
| Income (loss) before income tax provision  (benefit) and cumulative effect of accounting change              |   | (874                              | )      | 206                             |   | (1,079 | ) | 404 |   |
| Income tax provision (benefit)                                                                               |   | (324                              | )      | 76                              |   | (405 | ) | 153 |   |
| Income (loss) before cumulative effect of  change in accounting principle                                    |   | (550                              | )      | 130                             |   | (674 | ) | 251 |   |
| Cumulative effect of change in accounting  principle, net of income tax benefit of $4,139                    |   | —                            |   | —                          |   | — |   | (6,819 | ) |
| Net income (loss)                                                                                            |   | $                                 | (550   | )                               | $      | 130 |   | $ | (674 | ) | $ | (6,568 | ) |
| Income (loss) per share: Income (loss) per  share before cumulative effect of change in accounting principle |   | $                                 | (0.04  | )                               | $      | 0.01 |   | $ | (0.05 | ) | $ | 0.02 |   |
| Income (loss) per share attributable to  cumulative effect of change in accounting principle                 |   | —                            |   | —                          |   | — |   | (0.53 | ) |
| Income (loss) per share                                                                                      |   | $                                 | (0.04  | )                               | $      | 0.01 |   | $ | (0.05 | ) | $ | (0.51 | ) |
|                                                                                                         |   |                              |   |                            |   |   |   |   |   |
| Weighted-average shares outstanding—basic  and diluted                                                  |   | 12,886,746                        |   | 12,842,714                      |   | 12,878,722 |   | 12,838,365 |   |
|                                                                                                         |   |                              |   |                            |   |   |   |   |   |

 

See accompanying notes

 

3

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# **Natrol, Inc. and Subsidiaries**

**Consolidated Statements of Cash Flows**

(In thousands)

 
|                                                                                                     |   | **Six Months  Ended June 30,** |   |
|----------------------------------------------------------------------------------------------------------|--------|--------------------------------|--------|
|                                                                                                     |   | **2003**                       |   | **2002** |   |
|                                                                                                     |   | **(Unaudited)**                |   |
| **Operating activities**                                                                                 |   |                           |   |   |   |
| Net Loss                                                                                                 |   | $                              | (674   | ) | $ | (6,568 | ) |
| Cumulative effect of change in accounting  principle, net of income taxes benefit of $4,139 in 2002 |   | —                         |   | (6,819 | ) |
| Income (loss) before cumulative effect of  change in accounting principle                                |   | (674                           | )      | 251 |   |
| Adjustments to reconcile net  loss to net cash provided by operating activities:                         |   |                           |   |   |   |
| Depreciation and amortization                                                                            |   | 748                            |   | 676 |   |
| Provision for bad debts                                                                                  |   | 112                            |   | 235 |   |
| Shares issued for services                                                                               |   | 15                             |   | 14 |   |
| Changes in operating assets and  liabilities:                                                            |   |                           |   |   |   |
| Accounts receivable                                                                                      |   | (2,814                         | )      | (1,882 | ) |
| Inventories                                                                                              |   | 681                            |   | 1,777 |   |
| Income taxes receivable/payable                                                                          |   | (630                           | )      | 1,830 |   |
| Prepaid expenses and other  current assets                                                               |   | 778                            |   | 686 |   |
| Accounts payable                                                                                         |   | 1,753                          |   | 1,620 |   |
| Accrued expenses                                                                                         |   | (1,077                         | )      | 947 |   |
| Accrued payroll and related  liabilities                                                                 |   | 386                            |   | 80 |   |
| Net cash provided (used) by  operating activities                                                        |   | (722                           | )      | 6,234 |   |
|                                                                                                     |   |                           |   |   |   |
| **Investing activities**                                                                                 |   |                           |   |   |   |
| Purchases of property and  equipment                                                                     |   | (130                           | )      | (540 | ) |
| Other assets                                                                                             |   | (2                             | )      | 5 |   |
| Net cash used in investing  activities                                                                   |   | (132                           | )      | (535 | ) |
|                                                                                                     |   |                           |   |   |   |
| **Financing activities**                                                                                 |   |                           |   |   |   |
| Repayments on long-term debt                                                                             |   | (151                           | )      | (138 | ) |
| Proceeds from stock purchase  plan                                                                       |   | 13                             |   | 7 |   |
| Proceeds from exercise of stock  options                                                                 |   | 1                              |   | 98 |   |
| Net cash used in financing  activities                                                                   |   | (137                           | )      | (33 | ) |
| Net increase (decrease) in cash  and cash equivalents                                                    |   | (991                           | )      | 5,666 |   |
| Cash and cash equivalents,  beginning of period                                                          |   | 10,077                         |   | 5,485 |   |
| Cash and cash equivalents, end  of period                                                                |   | $                              | 9,086  |   | $ | 11,151 |   |
|                                                                                                     |   |                           |   |   |   |
| **Supplemental disclosures of cash flow  information:**                                                  |   |                           |   |   |   |
| Cash paid for interest                                                                                   |   | $                              | 325    |   | $ | 341 |   |

 

See accompanying notes

 

4

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NATROL, INC.NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

 

1. BASIS OF PRESENTATION

 

The accompanyingunaudited interim financial statements of Natrol, Inc. have been prepared inaccordance with accounting principles generally accepted in the United Statesof America and Article 10 of the Securities and Exchange Commission’sRegulation S-X.  Accordingly, they do not include all of the informationand footnotes required by accounting principles generally accepted in theUnited States of America for complete financial statements.  Inmanagement’s opinion, the unaudited financial statements contain alladjustments, consisting of normal recurring adjustments, necessary for presentfairly the Company’s financial statements as of June 30, 2003 and for allinterim period presented.  The financial statements should be read inconjunction with the audited financial statement included in the Annual Reportof the Company filed on Form 10-K with the Securities and Exchange Commissionfor the year ended December 31, 2002 file No. 000-24567.  The results ofoperations for the period ended June 30, 2003 is not necessarily indicative ofthe results that may be expected for the fiscal year ending December 31, 2003.

 

 

2.      STOCK BASED COMPENSATION

 

The Company accounts for its employee stock option plan under theintrinsic value method prescribed by Accounting Principles Board Opinion No.25, *Accounting for Stock Issued toEmployees,*and related interpretations.  The Company  has astock-based compensation plan.  The  Company’s operating results do not include acompensation charge related to this plan, as all options granted had anexercise price equal to the market value of the underlying common stock on thedate of grant.  The following tableillustrates the effect on the operating results and per share amounts as if thefair value recognition provisions of Statement of Financial AccountingStandards No. 123, *Accounting forStock-Based Compensation,*had been applied to stock-based employeecompensation*:*

* *
|                                                                                                                                          |   | **3 Months Ended  June 30,** |   | **6 Months Ended  June 30,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|------------------------------|--------|
|                                                                                                                                          |   | **2003**                     |   | **2002**                     |   | **2003** |   | **2002** |   |
| Income (loss) before cumulative effect of  accounting change                                                                                  |   | $                            | (550   | )                            | $      | 130 |   | $ | (674 | ) | $ | 251 |   |
|                                                                                                                                          |   |                         |   |                         |   |   |   |   |   |
| Total stock-based expense determined under fair valuebased method for all awards, net of related  tax benefits “Stock compensation” |   | $                            | 148    |                         | $      | 132 |   | $ | 191 |   | $ | 160 |   |
| Income (loss) before cumulative effect of accounting change-pro-forma                                                                         |   | $                            | (698   | )                            | $      | (2 | ) | $ | (865 | ) | $ | 91 |   |
|                                                                                                                                          |   |                         |   |                         |   |   |   |   |   |
| Net income (loss)                                                                                                                             |   | $                            | (550   | )                            | $      | 130 |   | $ | (674 | ) | $ | (6,568 | ) |
| Stock Compensation                                                                                                                            |   | 148                          |   | 132                          |   | 191 |   | 160 |   |
| Pro forma net loss                                                                                                                            |   | $                            | (698   | )                            | $      | (2 | ) | $ | (865 | ) | $ | (6,728 | ) |
|                                                                                                                                          |   |                         |   |                         |   |   |   |   |   |
| Income (loss) per share before cumulative effect of accounting  change:                                                                       |   |                         |   |                         |   |   |   |   |   |
| Basic and diluted - as reported                                                                                                               |   | $                            | (0.04  | )                            | $      | 0.01 |   | $ | (0.05 | ) | $ | (0.02 | ) |
| Basic and diluted - pro forma                                                                                                                 |   | $                            | (0.05  | )                            | $      | (0.00 | ) | $ | (0.06 | ) | $ | (0.00 | ) |
|                                                                                                                                          |   |                         |   |                         |   |   |   |   |   |
| Net income (loss) per share:                                                                                                                  |   |                         |   |                         |   |   |   |   |   |
|                                                                                                                                          |   |                         |   |                         |   |   |   |   |   |
| Basic and diluted - as reported                                                                                                               |   | $                            | (0.04  | )                            | $      | 0.01 |   | $ | (0.05 | ) | $ | (0.51 | ) |
| Basic and diluted - pro forma                                                                                                                 |   | $                            | (0.05  | )                            | $      | (0.00 | ) | $ | (0.06 | ) | $ | (0.52 | ) |

 

5

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During the six months ended June 30, 2003, 160,000 stock options weregranted with exercise prices equal to the fair value of the underlying CommonStock on the date of grant.  The fairmarket value of the underlying Common Stock on the dates of the grant rangesbetween $1.15 and $2.04 per share.

 

3.   INVENTORY

 

Inventories consist of the following:

 
|                                |   | **June 30,  2003** |       | **December 31,  2002** |       |
|-------------------------------------|--------|--------------------|------------|------------------------|------------|
|                                |   |               | ** ** |                   | ** ** |
| Raw material and packaging supplies |   | $                  | 3,380      |                   | $          | 2,950 |   |
| Work in Process                     |   | 1,051              |       | 1,354                  |       |
| Finished goods                      |   | 3,557              |       | 4,365                  |       |
|                                |   | $                  | 7,988      |                   | $          | 8,669 |   |

 

4. SHIPPING AND HANDLING COSTS

 

Outbound shipping costs are classified as selling and marketingexpenses and totaled $1.6 million and $1.2 million for the six months endedJune 30, 2003 and 2002, respectively.

 

5. EARNINGS PER SHARE

 

Basic earnings per share has been computed by dividing net income(loss) by the weighted average number of common shares outstanding during theperiod. Diluted earnings per share has been computed by dividing net income bythe weighted average number of common shares and dilutive common stockequivalents (stock options).  Dilutedearnings per share is not computed for periods in which the Company incurs aloss.

 

6.  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

In June 2002, theFinancial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting Standards (“SFAS”) No. 146, *Accountingfor Costs Associated with Exit or Disposal Activities*. SFAS No. 146requires that the liability for costs associated with an exit or disposalactivities be initially measured at fair value and recognized when theliability is incurred. As required, the Company will apply the provisions ofSFAS No. 146 prospectively to exit or disposal activities, if any,initiated after December 31, 2002.

 

In November 2002, the FASBissued Interpretation No. 45, *Guarantor’sAccounting and Disclosure Requirements for Guarantees, Including IndirectGuarantees of Indebtedness of Others* (“FIN 45”).  This interpretation elaborates ondisclosures to be made by a guarantor in its interim and annual financialstatements with regard to its obligations under certain guarantees that it hasissued.  It also clarifies that aguarantor is required to recognize, at the inception of a guarantee, aliability for the fair value of the obligation undertaken in issuing theguarantee.  The disclosure requirementsof FIN 45 are effective prospectively for guarantees issued or modified afterDecember 31, 2002.  The adoption of therecognition and initial measurement requirements of FIN 45 did not have amaterial impact on the Company’s financial position or results of operations.

 

In January 2003, the FASBissued Interpretation No. 46, *Consolidationof Variable Interest Entities* (“FIN 46”).  This interpretation of Accounting Research Bulletin No. 51,“Consolidated Financial Statements,” addresses consolidation by businessenterprises of variable interest entities. Under current practice, two enterprises generally have been included inconsolidated financial statements because one enterprise controls the otherthrough voting interests.  FIN 46defines the concept of “variable interests” and requires existing unconsolidatedvariable interest entities to be consolidated by their primary beneficiaries ifthe entities do not effectively disperse risks among the parties involved.  This interpretation applies immediately tovariable interest entities in which an enterprise holds a variable interestthat it acquired after January 31, 2003. This interpretation may be appliedimmediately to variable interest entities in which an enterprise holds avariable interest that it acquired before February 1, 2003.  The interpretation may be appliedprospectively with a cumulative-effect adjustment as of the date on which it isfirst applied or by restating previously issued financial statements for one ormore years with a cumulative-effect adjustment as of the beginning of the firstyear restated.  The adoption of FIN 46did not have a material impact on the Company’s financial position or resultsof operations.

 

6

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InMay 2003, the FASB issued SFAS No. 150 *Accountingfor Financial Instruments with the Characteristics of Both Liabilities andEquities*.  SFAS No. 150 establishes standards regarding themanner in which an issuer classifies and measures certain types of financialinstruments having characteristics of both liabilities and equity. Pursuant to SFAS No. 150, such freestanding financial instruments (i.e., thoseentered into separately from an entity’s other financial instruments or equitytransactions or that are legally detachable and separately exercisable) must beclassified as liabilities or, in some cases, assets.  In addition, SFASNo. 150 requires that financial instruments containing obligations torepurchase the issuing entity’s equity shares and, under certain circumstances,obligations that are settled by delivery of the issuer’s shares be classifiedas liabilities.  The Statement is effective for financial instrumentsentered into or modified after May 31, 2003 and for other instruments atthe beginning of the first interim period beginning after June 15,2003.  The Company is currently evaluating the provisions of SFAS No. 150and has not determined the impact, if any, they will have on the Company’sfinancial statements.

 

7.  OPERATING SEGMENTS

 

TheCompany has three operating segments.

•      The Natrol operating segment whichmanufactures and markets Natrol and Laci LeBeau branded products, and which,under the EPI name, contract manufactures products and sells raw materialingredients

•      Prolab Nutrition, Inc. (“Prolab”) which develops, manufactures andmarkets sports nutrition products

•      Annasa, Inc. (“Annasa”) was establishedduring 2002 to develop a direct-to-consumer, multi-level marketing business.

Segment information for thethree and six month periods ended June 30, 2003 and June 30, 2002 is as follows(in thousands):

 
|                                  |   | **Natrol** |   | **Prolab** |   | **Annasa** |   | **Total** |   |
|---------------------------------------|--------|------------|--------|------------|--------|------------|--------|-----------|--------|
|                                  |   |       |   |       |   |       |   |      |   |
| **Three months ended  June 30, 2003** |   |       |   |       |   |       |   |      |   |
| Net sales                             |   | $          | 13,777 |       | $      | 5,095      |   | $         | 116    |   | $ | 18,988 |   |
| Gross profit                          |   | 5,994      |   | 615        |   | 78         |   | 6,687     |   |
| Income (loss) from operations         |   | 400        |   | (732       | )      | (384       | )      | (716      | )      |
| Other (expense) income                |   | (161       | )      | 3          |   | —     |   | (158      | )      |
| Income (loss) before taxes            |   | 239        |   | (729       | )      | (384       | )      | (874      | )      |
| Depreciation and amortization         |   | 353        |   | 21         |   | 1          |   | 375       |   |
| Segment assets                        |   | 42,481     |   | 10,803     |   | 158        |   | 53,442    |   |
| Additions to property and equipment   |   | 30         |   | 28         |   | 3          |   | 61        |   |
|                                       |        |            |        |            |        |            |        |           |        |  |  |  |  |

 
|                                  |   | **Natrol** | ** ** | **Prolab** | ** ** | **Annasa** | ** ** | **Total** | ** ** |
|---------------------------------------|--------|------------|------------|------------|------------|------------|------------|-----------|------------|
|                                  |   |       |       |       |       |       |       |      |       |
| **Three months ended  June 30, 2002** |   |       |       |       |       |       |       |      |       |
| Net sales                             |   | $          | 12,715     |       | $          | 5,128      |       |      | —     |   | $ | 17,843 |   |
| Gross profit                          |   | 5,860      |       | 1,239      |       | —     |       | 7,099     |       |
| Income (loss) from operations         |   | 472        |       | 56         |       | $          | (177       | )         | 351        |   |
| Other (expense) income                |   | (155       | )          | 10         |       | —     |       | (145      | )          |
| Income (loss) before taxes            |   | 317        |       | 66         |       | (177       | )     | 206       |       |
| Depreciation and amortization         |   | 306        |       | 22         |       | —     |       | 328       |       |
| Segment assets                        |   | 39,690     |       | 11,711     |       | —     |       | 51,401    |       |
| Additions to property and equipment   |   | 474        |       | 4          |       | —     |       | 478       |       |
|                                       |        |            |            |            |            |            |            |           |            |  |  |  |  |

 

7

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|                                |   | **Natrol** |   | **Prolab** |   | **Annasa** |   | **Total** |   |
|-------------------------------------|--------|------------|--------|------------|--------|------------|--------|-----------|--------|
| **Six months ended June 30, 2003**  |   |       |   |       |   |       |   |      |   |
| Net sales                           |   | $          | 27,707 |       | $      | 10,182     |   | $         | 266    |   | $ | 38,155 |   |
| Gross profit                        |   | 12,867     |   | 1,893      |   | 190        |   | 14,950    |   |
| Income (loss) from operations       |   | 1,288      |   | (1,164     | )      | (893       | )      | (769      | )      |
| Other income (expense)              |   | (318       | )      | 8          |   | —     |   | (310      | )      |
| Income (loss) before taxes          |   | 970        |   | (1,156     | )      | (893       | )      | (1,079    | )      |
| Depreciation and amortization       |   | 705        |   | 41         |   | 2          |   | 748       |   |
| Segment assets                      |   | 42,481     |   | 10,803     |   | 158        |   | 53,442    |   |
| Additions to property and equipment |   | 97         |   | 29         |   | 4          |   | 130       |   |
|                                     |        |            |        |            |        |            |        |           |        |  |  |  |  |

 
|                                |   | **Natrol** | ** ** | **Prolab** | ** ** | **Annasa** | ** ** | **Total** | ** ** |
|-------------------------------------|--------|------------|------------|------------|------------|------------|------------|-----------|------------|
| **Six months ended  June 30, 2002** |   |       |       |       |       |       |       |      |       |
| Net sales                           |   | $          | 25,400     |       | $          | 9,982      |       | —    |       | $ | 35,382 |   |
| Gross profit                        |   | 11,215     |       | 2,463      |       | —     |       | 13,678    |       |
| Income (loss) from operations       |   | 600        |       | 277        |       | $          | (177       | )         | 700        |   |
| Other income (expense)              |   | (317       | )          | 21         |       | —     |       | (296      | )          |
| Income (loss) before taxes          |   | 283        |       | 298        |       | (177       | )          | 404       |       |
| Depreciation and amortization       |   | 631        |       | 45         |       | —     |       | 676       |       |
| Segment assets                      |   | 39,690     |       | 11,711     |       | —     |       | 51,401    |       |
| Additions to property and equipment |   | 531        |       | 9          |       | —     |       | 540       |       |
|                                     |        |            |            |            |            |            |            |           |            |  |  |  |  |

 

8.    RESTATEMENT OF JUNE 30, 2002 FINANCIAL STATEMENTS

 

The Company adopted SFAS No.142, *Goodwill and Other Intangible Assets*,on January 1, 2002.  As initiallyapplied, the Company reclassified approximately $3.6 million out of goodwilland into a separately identified intangible asset related to a supplycontract.  The supply contract hadoriginally been acquired as part of the Company’s acquisition of EPI.  The supply contract had a remaining life ofsix years, and during the six months ended June 30, 2002 the Company hadrecorded amortization expense of $300,000 and an increase in income taxexpenses of $112,000.  During the fourthquarter of 2002, the Company determined that the supply contract should nothave been reclassified out of goodwill as it had not been assigned a cost equalto its estimated fair value at the date the EPI acquisition was initiallyrecorded, and because the amount had not been separately identified in theaccounting records or previously amortized over its useful life.  As a result, the $3.6 million wasreallocated to goodwill retroactive to January 1, 2002.  Pursuant to the requirements of SFAS No.142, goodwill is not amortized, but subject to an annual impairment test.  The Company recorded an impairment charge of$10,958,000 as a cumulative effect of a change in accounting principle in thefirst quarter of 2002.  The $3.6 milliondescribed above was included in that amount.

 

The interim financialstatements for the three and six month periods ended June 30, 2002 haverespectively been restated to reflect a reduction in amortization expense of$150,000 and $300,000 respectively.

 
|                                                              |   | **Three Months ended  June 30, 2002** |   | **Six Months ended  June 30, 2002** |   |
|-------------------------------------------------------------------|--------|---------------------------------------|--------|-------------------------------------|--------|
|                                                              |   | **As Previously  Reported**           |   | **As Restated**                     |   | **As Previously  Reported** |   | **As Restated** |   |
|                                                              |   | **(in  thousands)**                   |   | **(in  thousands)**                 |   |
|                                                              |   |                                  |   |                                |   |   |   |   |   |
| Net Sales                                                         |   | $                                     | 17,843 |                                | $      | 17,843 |   | $ | 35,382 |   | $ | 35,382 |   |
| Gross profit                                                      |   | 7,099                                 |   | 7,099                               |   | 13,678 |   | 13,678 |   |
| Operating expenses                                                |   |                                  | 6,898  |                                |   | 6,748 |   |   | 13,278 |   |   | 12,978 |   |
| Income before cumulative effect of change in accounting principle |   | 36                                    |   | 130                                 |   | 63 |   | 251 |   |

 

8

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9.     SUBSEQUENT EVENTS

 

Subsequent to June 30,2003, the Company placed $5.0 million of its cash with an insurer as part of aself-insurance program for product liability insurance.  This cash will be classified on theCompany’s balance sheet as restricted cash. The cash will be returned to the Company at the end of the five-yearterm of the self-insurance program.  Thecash, which serves as collateral for the self-insurance program, will earninterest income during the investment period. The Company will not have access to this cash for the five-year life ofthe self-insurance program.  However, thepolicy is cancelable by the Company at any time and should the Company chooseto cancel the self-insurance program, the cash will be returned to the Company.

 

ITEM 2:MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

This report contains “forward looking statements.” Natrol, Inc., aDelaware corporation organized in 1980, (the “Company”), is including thisstatement for the express purpose of availing itself of protections of the safeharbor provided by the Private Securities Litigation Reform Act of 1995 withrespect to all such forward looking statements. Examples of forward lookingstatements include, but are not limited to, the use of forward-lookingterminology such as “believes,” “expects,” “may,” “will,” “should,” “intend,”“estimate,” “assume,” “plan,” or “anticipates” or the negative thereof, othervariations thereon, or comparable terminology, or by discussions of strategythat predict or indicate future events or trends or that are not historicalfacts. The Company cannot assure the future results or outcome of the mattersdescribed in these statements; rather, these statements merely reflect itscurrent expectations of the approximate outcome of the matter discussed. TheCompany does not undertake any obligation and does not currently intend toupdate any such statements at any time in the future.

 

The Company’s ability to predict results orthe effect of certain events on the Company’s operating results is inherentlyuncertain. Forward-looking statements should not be unduly relied onsince they involve known and unknown risks, uncertainties and other factors,some of which are beyond the Company’s control. These risks, uncertainties andother factors may cause actual results, performance or achievements to differmaterially from the anticipated future results, performance or achievementsexpressed or implied by such forward-looking statements. Therefore, theCompany wishes to caution each reader of this report to carefully consider thefollowing factors and certain other factors discussed herein and factorsdiscussed in other past reports. The factors discussed herein may not beexhaustive. Therefore, the factors contained herein should be read togetherwith other reports and documents that are filed by the Company with the SECfrom time to time, which may supplement, modify, supersede or update thefactors listed in this document.

 

Factors that could cause or contribute to the Company’s actual resultsdiffering materially from those discussed herein or for the Company’s stockprice to be affected adversely include, but are not limited to: (i) industrytrends, including a general downturn or slowing of the growth of the dietarysupplement industry; (ii) increased competition from current competitorsand new market entrants including but not limited to increased competition fromprivate label house brands supported by retailers seeking to increase themarket share of their proprietary house brands; (iii) adverse publicityregarding the dietary supplement industry or the Company’s products includingrecent publicity regarding ephedrine-based products; (iv) exposureto product liability claims including product liability claims for which theCompany self insures; (v) exposure to and the expense of resolving anddefending potential liability claims that are left uncovered by the Company’sinsurance policies other than product liability for which the company selfinsures; (vi) the Company’s dependence upon its ability to develop newproducts; (vii) a continued high rate (or increase in the rate) of returnsof the Company’s products; (viii) the Company’s ability to manageinventory or sell its inventory before such inventory becomes outdated,(xix) the Company’s ability to gain or expand or maintain distributionwithin new or existing customers and new or existing channels of trade;(x) an increase in the cost of obtaining and maintaining shelf space withmajor national retailers who demand various forms of incentives from theirsuppliers such as slotting fees, coop advertising, or rebates;(xi) adverse changes in government regulation or changes in local ornational laws; (xii) dependence on significant customers; (xiii) theCompany’s ability to keep and attract key management employees; (xiv) theCompany’s inability to manage growth and execute its business plan, or theCompany’s ability to modify its business plan in response to market conditions,including, but not limited to, its ability to enter into new businesses andcapitalize upon new business opportunities; (xv) the Company’s ability toconsummate future acquisitions and its 

 

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ability to integrate acquired businesses; (xvi) the absence ofconclusive clinical studies for many of the Company’s products; (xvii) theCompany’s inability to obtain raw materials that are in short supply includingits ability to obtain garlic powders under its supply agreement with ConAgrafor its Essentially Pure Ingredient (EPI) raw material sales division;(xviii) sales and earnings volatility, (xix) volatility of the stockmarket; (xx) the Company’s ability to manufacture its productsefficiently; (xxi) the Company’s reliance on independent brokers to sellits products; (xxii) the inability of the Company to protect itsintellectual property; (xxiii) control of the Company by principalshareholders, (xxiv) the possible sale of large amounts of stock bycontrolling stockholders; (xxv) a general downturn in the national economyas a whole; (xxvi) continued market acceptance of Natrol supplements, LaciLe Beau teas, Prolab’s sports nutrition products and EPI’s raw materialproducts; (xxvii) increases in the cost of borrowings;(xxviii) unavailability of additional debt or equity capital;(xix) legal actions brought forth by governmental and private agencies;and, (xx) that its investment in a new multi-level marketing company,Annasa Inc., will prove not to be profitable in the near or long-term.

 

RESULTS OF OPERATIONS

 

The following discussion of the results of operations and the financialcondition of the Company should be read in conjunction with the response toPART 1. ITEM 1 of this report.

 

THREE MONTHS ENDED JUNE 30, 2003 AND JUNE 30, 2002

 

NET SALES. Sales are recognizedat the time product is shipped, FOB shipping point. Net sales are net ofdiscounts, allowances, estimated returns and credits, slotting fees, rebatesand other expenses that reduce the cost of product to the Company’scustomers.  Net sales increased 6.4%, or$1.1 million, to $19.0 million for the three months ended June 30, 2003 from$17.9 million for the three months ended June 30, 2002.  The increase in net sales was primarily dueto a $1.0 million reduction in the cost of returns, damages and outdates in thequarter when compared to the second quarter of 2002.  Returns and damage claims are netted against gross sales whencalculating net sales.  During thequarter ended June 30, 2003, returns as a percentage of gross sales were 4.3%as compared to 9.4% in the quarter ended June 30, 2002.

 

GROSS PROFIT.  Gross profitdecreased 5.8%, or $412,000, to $6.7 million for the three months ended June30, 2003 from $7.1 million for the three months ended June 30, 2002.  Gross margin decreased to 35.2% for thethree months ended June 30, 2003 from 39.8% for the three months ended June 30,2002.  The decrease in gross margin wasdue to the write down of outdated inventory in both the Natrol and Prolaboperating segments.  As part of itsinternal controls, the Company regularly evaluates its inventory, checking itfor expiration dates and Company usage volumes against the amount of inventoryon hand.  The Company writes downmaterial related to discontinued items or material that cannot be sold due topackaging changes.  When deemedappropriate, the Company will write down inventory which, in the Company’s bestjudgment, cannot be sold or disposed of at full carrying value. For all of theabove reasons, the Company wrote off approximately $578,000 of Prolab inventoryand $762,000 of Natrol inventory during the quarter ended June 30, 2003.

 

SELLING AND MARKETING EXPENSES. Selling and marketing expenses consist primarily of advertising andpromotional expenses, cost of distribution, and related payroll expenses andcommissions. Selling and marketing expenses decreased 3.5%, or $159,000, to$4.4 million for the three months ended June 30, 2003 from $4.5 million for thethree months ended June 30, 2002. The Company incurred $221,000 of selling andmarketing expenses as part of its launch of its Annasa multi-level marketingsubsidiary during the quarter ended June 30, 2003.  The Company incurred $65,000 of Annasa related selling andmarketing expenses in the second quarter of 2002. Sales and marketing expensesof the Company’s Prolab segment were approximately $850,000 during both thesecond quarter of 2003 and the second quarter of 2002.

 

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses consist primarily of personnel costsrelated to general management functions, finance, accounting and informationsystems, as well as professional fees related to legal, audit and tax mattersand depreciation. General and administrative expenses increased 36.6%, or$814,000, to $3.0 million for the three months ended June 30, 2003 from $2.2million for the three months ended June 30, 2002.  Approximately $130,000 of the increase was due to increasedexpenses for Annasa as compared to the second quarter of 2002.  Insurance costs for the quarter ended June30, 2002 were approximately $260,000 more than in the same quarter of2002.  The remaining increase inexpenses was primarily due to increased payroll, legal and other professionalfees.

 

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INTEREST EXPENSE.  The Companyrecorded interest expense of $162,000 for the three months ended June 30, 2003as compared to interest expense of $171,000 for the three months ended June 30,2002. The Company pays interest on approximately $7.9 million of long-termmortgage debt and the difference in interest expense was due to amortizationschedules related to these loans.

 

INCOME TAX PROVISION. For the three months ended June 30, 2003 theCompany’s effective tax rate was approximately 37.5%.  For the three months ended June 30, 2002 the Company’s effectivetax rate was 37.1%.

 

SIX MONTHS ENDED JUNE 30, 2003 AND JUNE 30, 2002

 

NET SALES. Net sales increased7.8%, or $2.8 million, to $38.2 million for the six months ended June 30, 2003from $35.4 million for the six months ended June 30, 2002.  The increase in net sales was primarily dueto a $3.4 million reduction in the cost of returns, damages and outdates in thequarter when compared to the second quarter of 2002.  Returns and damage claims are netted against gross sales whencalculating net sales.  During thequarter ended June 30, 2003, returns as a percentage of gross sales were 4.0%as compared to 12.0% in the quarter ended June 20, 2002.

 

GROSS PROFIT.  Gross profit increased 9.3%, or $1.3million, to $15.0 million for the six months ended June 30, 2003 from $13.7million for the six months ended June 30, 2002. Gross margin increased to 39.2%for the six months ended June 30, 2003 from 38.7% for the six months ended June30, 2002. The increase in gross margin was due to a small decrease in thepercentage cost of materials offset by inventory write-offs and increases inoverhead.

 

SELLING AND MARKETING EXPENSES. Selling and marketing expenses consist primarily of advertising andpromotional expenses, cost of distribution, and related payroll expenses andcommissions. Selling and marketing expenses increased 15.2%, or $1.3 million,to $9.7 million for the six months ended June 30, 2003 from $8.4 million forthe six months ended June 30, 2002. The Company incurred $552,000 of sellingand marketing expenses as part of its launch of its Annasa multi-levelmarketing subsidiary during the six months ended June 30, 2003 as opposed to $65,000of Annasa related selling and marketing expenses incurred during the six monthsended June 30, 2002. Sales and marketing expenses of the Company’s Prolabsegment were approximately $500,000 more during the six months ended June 30,2003 than in the six months ended June 30, 2002.

 

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses consist primarily of personnel costsrelated to general management functions, finance, accounting and informationsystems, research and development expenses, as well as professional feesrelated to legal, audit and tax matters and depreciation and amortization.General and administrative expenses increased 32.1%, or $1.4 million, to $6.0million for the six months ended June 30, 2003 from $4.6 million for the sixmonths ended June 30, 2002.  Of theincrease, $355,000 was due to the build up of Annasa during its launch phase,$632,000 was due to increased insurance costs, $179,000 was due to increasedlegal expenses and the remainder was due to increased professional fees andincreased payroll expenditures.

 

CUMMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE. In January, 2002,the Company adopted SFAS No. 142, *Goodwilland Other Intangible Assets.* SFAS No. 142 requires thatgoodwill not be amortized. In accordance with such adoption, the Companyidentified all reporting units in conjunction with the provisions of SFASNo. 142 and allocated all goodwill accordingly. Goodwill is evaluated forimpairment annually, or whenever events or changes in circumstances indicatethat the carrying amount of goodwill may not be recoverable. As it adopted SFASNo. 142, the Company tested goodwill for impairment using the two-step processprescribed in SFAS No.142. The first step is a screen for potential impairment,while the second step measures the amount of the impairment, if any. TheCompany performed the first step of the impairment test, and determined thatthe there was no impairment of the Prolab segment, but that there was potentialimpairment of the Natrol segment. The Company performed the second step as ofJanuary 1, 2002 for the Natrol segment and determined that its goodwillbalance of $10,958,000 was impaired. The impairment loss was recorded as acumulative effect of a change in accounting principle in the accompanyingconsolidated statement of operations for the six months ended June 30, 2002.

 

INTEREST EXPENSE.  Interestexpense decreased to $324,000 for the six months ended June 30, 2003 from$341,000 for the six months ended June 30, 2002. The Company pays interest onapproximately $7.9 million of long-term mortgage debt and the difference ininterest expense was due to amortization schedules related to these loans.

 

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INCOME TAXPROVISION. The Company’s effective tax rate was approximately 37.5% in the sixmonths ended June 30, 2003 as compared to 39.7% in the six months ended June30, 2002.

 

**LIQUIDITY AND CAPITALRESOURCES**

 

At June 30, 2003, the Company had working capital of $18.5 million ascompared to $18.7 million in working capital at December 31, 2002. TheCompany’s cash balance at June 30, 2003 was approximately $9.1 million.

 

Net cash used in operatingactivities was $722,000 for the six months ended June 30, 2003 versus net cashprovided of $6.2 million for the six months ended June 30, 2002. Cash used inoperating activities during the six month period ended June 30, 2003 wasprimarily due to the Company’s net loss of $674,000, an increase in accountsreceivable and other receivables of $2.8 million, offset by an increase in netaccounts payables and other accruals of $1.1 million, depreciation andamortization of $748,000 and a decrease in inventory of $681,000.

 

Net cash used in investing activities was $132,000 for the six monthsended June 30, 2003 versus net cash used of $535,000 during the six monthsended June 30, 2002. Nearly all of the cash used in investing activities inboth periods was for property and equipment. During 2002, the Company investedin SAP software and installation as it upgraded its computerized managementsystems.  The total investment in SAPsoftware and installation and required hardware during 2002 amounted toapproximately $1.2 million.

 

Net cash used in financingactivities was $137,000 for the six months ended June, 2003 as opposed to$33,000 used by financing activities during the six months ended June 30, 2002.During the six months ended June, 2003, the Company made principal payments of$151,000 on  its long-term mortgage debt.  During the six months ended June 30, 2002,the Company made principal payments of $138,000 on its long-term mortgage debtand received $105,000 from the proceeds of the exercise of stock options andthe sale of stock to employees through its employee stock purchase program.

 

As of June 30, 2003, the Company had $7.9 million of outstanding debt,all of which is the result of long-term mortgage debt on the Company’smanufacturing/headquarters facility and on the Company’s shipping facility.Because of the Company’s working capital position and its estimates of futurecash flows, the Company does not maintain a line of credit.

 

The Company expects its cash balances to decline during the nextseveral quarters as it invests in the operations of its Annasa multi-levelmarketing subsidiary.

 

Subsequent to June 30, 2003, the Company placed $5.0 million of itscash with an insurer as part of a self-insurance program for product liabilityinsurance.  This cash will be classifiedon the Company’s balance sheet as restricted cash.  The cash will be returned to the Company at the end of thefive-year term of the self-insurance program. The cash, which serves as collateral for the self-insurance program,will earn interest income during the investment period.  The Company will not have access to thiscash for the five-year life of the self-insurance program.  However, the policy is cancelable by theCompany at any time and should the Company choose to cancel the self-insuranceprogram the cash will be returned to the Company.

 

Despite the decline in available cash due to the self-insurance programand cash required for ongoing operations, the Company believes that its currentcash balance will be sufficient to fund its anticipated working capital needsand capital expenditures for the next 12 months.  If the Company’s expectations are not met and the Company has toborrow funds, the cost of borrowing may be unfavorable and the terms of suchborrowings may limit the Company’s ability to grow.

 

## **CRITICAL ACCOUNTING POLICIES**

 

Management’s beliefs regardingsignificant accounting policies have not changed significantly from thosediscussed in Item 7 of the Company’s Annual Report on Form 10-K for the yearended December 31, 2002.

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

There has been no materialchange during the six months ended June 30, 2003 from the disclosures aboutmarket risk provided in the Company’s Annual Report on Form 10-K for the yearended December 31, 2002.

 

Item 4.    CONTROLS AND PROCEDURES

 

(a)   Evaluationof disclosure controls and procedures.

 

As required by newRule 13a-15 under the Securities Exchange Act of 1934 (the “ExchangeAct”), within the 90 days prior to this report, we carried out anevaluation under the supervision and with the participation of our management,including our Chief Executive Officer and Chief Financial Officer, of theeffectiveness of the design and operation of our disclosure controls andprocedures. In designing and evaluating our disclosure controls and procedures,we and our management recognize that any controls and procedures, no matter howwell designed and operated, can provide only reasonable assurance of achievingthe desired control objectives, and our management necessarily was required toapply its judgment in evaluating and implementing possible controls andprocedures. Based on evaluations as of a date within 90 days of the filing dateof this report, our Chief Executive Officer and Chief Financial Officer, withthe participation of our management team, have concluded that our disclosurecontrols and procedures are reasonably effective to ensure that informationrequired to be disclosed by us in the reports we file or submit under theExchange Act is recorded, processed, summarized and reported, within the timeperiods specified in the rules and forms of the Securities and ExchangeCommission.

 

(b)   Changesin internal controls

 

None.

 

PART II

OTHER INFORMATION

 

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

 
| a) |   | The 2002 Annual Meeting of Stockholders of Natrol, Inc. (the “Annual  Meeting”) was held on June 12, 2002. |
|----|--------|----------------------------------------------------------------------------------------------------------------------|
| b) |   | At the Annual Meeting, the following were re-elected to the Company’s  Board of Directors:                      |

 

|                |   | **Votes For** |   | **Votes  Withheld** |   |
|---------------------|--------|---------------|--------|---------------------|--------|
| Vernon Brunner      |   | 12,433,458    |   | 32,042              |   |
| Ronald J. Consiglio |   | 12,433,458    |   | 32,042              |   |

 

The following individuals are members of the Company’s Board ofDirectors whose terms of office as directors continued after the AnnualMeeting.

 

Elliott BalbertVernon BrunnerGordon F. BrunerDennis De Concini

Dennis R. Jolicoeur

Ronald J.  Consiglio

 

 

ITEM 6.  EXHIBITS AND REPORTS ONFORM 8-K

 
| Exhibit 99.1 |   | Certification of Chief Financial Officer |
|--------------|--------|------------------------------------------|
| Exhibit 99.2 |   | Certification of President/CEO/Chairman  |

 

Reports on Form 8-K

 

Form 8-K with respect to a press release dated June 13, 2003, whichcorrected a previous press release dated June 3, 2003, was filed on June 13,2003.

 

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SIGNATURES

 

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

 
|          | NATROL, INC. |
|---------------|--------------|
|          |         |
| Date: 8/14/03 | By:          | /s/ Elliott Balbert |   |
|          |         | Chairman, President and Chief  Executive Officer |
|          |         |   |
| Date: 8/14/03 | By:          | /s/ Dennis R. Jolicoeur |   |
|          |         | Chief Financial Officer and Executive  Vice President |
|               |              |  |  |  |

 

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