SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                  -------------
                                   FORM 10-KSB


(Mark one)
 X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
   1934.

                   For the fiscal year ended December 31, 2001
                                       OR
   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
   OF 1934.

              For the transition period from ________ to ________.

                         Commission file number 0-011228

                           NATURAL HEALTH TRENDS CORP.
                 (Name of Small Business Issuer in Its Charter)

           Florida                                       59-2705336
      (State or Other Jurisdiction of                 (I.R.S. Employer
        Incorporation or Organization)                 Identification No.)

                     5605 N. MacArthur Boulevard, 11th Floor
                               Irving, Texas 75038
                     (Address of principal executive office)

                                 (972) 819-2035
                (Issuer's Telephone Number, Including Area Code)

         Securities registered under Section 12(b) of the Exchange Act:

         Title of Each Class                        Name of Each Exchange
                               On Which Registered
              None                                         None

      Securities registered pursuant to Section 12(g) of the Exchange Act:

                          Common Stock, par value $.001
                                (Title of Class)

                                Class A Warrants
                                (Title of Class)

                                Class B Warrants
                                (Title of Class)

                                      Units
                                (Title of Class)

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 ____

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this Form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB or any amendment to this Form 10-KSB.

Issuer's revenues for its most recent fiscal year: $24,794,036.

The number of shares of Common Stock held by nonaffiliates of the registrant
(as determined for the purpose of this Form 10-KSB only) as of April 1, 2002 was
290,633,450 with an approximate aggregate market value of $7,236,773, (based
upon the closing price  of such shares as of such date). The number of shares of
the Common Stock of the issuer outstanding as of April 1, 2002 was 290,633,450.


<PAGE>

                           Natural Health Trends Corp.
                         2001 Form 10-KSB Annual Report


           Table of Contents                                          Page

                                     Part I

Item 1    Description of Business                                       1
Item 2    Description of Property                                      10
Item 3    Legal Proceedings                                            10
Item 4    Submission of Matters to a
           Vote of Security Holders                                    11

                                     Part II

Item 5    Market for Common Equity and
           Related Stockholder Matters                                 11
Item 6    Management's Discussion and
           Analysis or Plan of Operation                               13
Item 7    Financial Statements and Supplementary Data                  16
Item 8    Changes in and Disagreements
           with Accountants on Accounting
           and Financial Disclosure                                    16

                                    Part III

Item 9    Directors, Executive Officers,
           Promoters and Control Persons;
           Compliance With Section 16(a)                               16
Item 10   Executive Compensation                                       18
Item 11   Security Ownership of Certain
           Beneficial Owners and Management                            20
Item 12   Certain Relationships and Related
           Transactions                                                21
Item 13   Exhibits, Lists
           Schedules, and Reports on Form 8-K                          22
Signatures                                                             23


                                      -1-


<PAGE>




                                     PART I


ITEM 1.          DESCRIPTION OF BUSINESS.

Corporate History

     Natural  Health Trends Corp.  ("NHTC") is a Florida  corporation.  NHTC was
incorporated on December 1, 1988 as "Florida Institute of Massage Therapy, Inc."
and changed its name to "Natural  Health Trends Corp." on June 24, 1993.  NHTC's
common stock,  par value $0.001 per share (the "Common  Stock") is listed on the
Over-the-Counter Bulletin Board (the "OTCBB") under the symbol "NHTC".

     NHTC is a holding  company that operates two  businesses  which  distribute
products  that  promote  health,   wellness  and  sexual  vitality  through  the
multi-level  marketing  ("MLM") channel.  NHTC's largest  operation is by Lexxus
International,  Inc.,  ("Lexxus"),  a Delaware  corporation and a majority-owned
subsidiary  of NHTC.  Lexxus  sells  products  that  heighten  mental and sexual
arousal,  particularly  in  women.  NHTC's  other  business,   eKaire.com,  Inc.
("eKaire"),  distributes,  nutritional  supplements  aimed at general health and
wellness  through the internet and other channels.  eKaire consists of companies
operating  in the U.S.,  in Canada as Kaire  International  Canada Ltd.  ("Kaire
Canada"),  in Australia as Kaire  Nutraceuticals  Australia  Pty.  Ltd.  ("Kaire
Australia"),  in New Zealand as Kaire Nutraceuticals New Zealand Limited ("Kaire
New Zealand"), and in Trinidad as Kaire Trinidad, Ltd. ("Kaire Trinidad").

     In  January   2001,   NHTC  entered  into  a  joint   venture  with  Lexxus
International and formed a new majority-owned subsidiary,  Lexxus International,
Inc.,  a  Delaware  corporation.  "(Lexxus"), the  original  founders  of Lexxus
International received an aggregate of 10,000,000 shares of Common Stock.

     In February 1999,  through a wholly-owned  subsidiary NHTC acquired certain
assets (the "Kaire Assets") of Kaire International, Inc., a Delaware corporation
("KII").  The assets  included,  but not limited  to, the  corporate  name,  all
variations and any other product name,  registered and unregistered  trademarks,
tradenames,  servicemarks, patents, logos and copyrights of KII, and independent
associate  lists.  In exchange  for the Kaire  Assets,  NHTC made the  following
issuances:

o        to 11 secured creditors of KII,  $2,800,000  aggregate  stated value of
         Series F preferred stock, par value $1,000 per share, of NHTC (the
         "Series F Preferred Stock");

o        to two secured  creditors of KII,  $350,000  aggregate  stated value of
         Series G preferred  stock, par value $1,000 per share, of NHTC (the
         "Series G Preferred Stock");

o        to Kaire International, Inc., five-year warrants to purchase 200,000
         shares of NHTC's Common Stock exercisable at $4.06 per share.

     In March 2001, Global Health Alternatives, Inc., a Delaware corporation and
wholly-owned subsidiary of NHTC ("GHA"), and Ellon, Inc., a Delaware corporation
and  wholly-owned  subsidiary of GHA  ("Ellon"),  filed for Chapter 7 bankruptcy
liquidation in the United States  Bankruptcy  Court of the Northern  District of
Texas.  Neither GHA nor Ellon had operations during the years 2000 or 2001. Both
GHA and Ellon were dissolved in June 2001.

      In the second quarter of 2001, NHTC incorporated Lexxus International
(SW Pacific) Pty. Ltd., an Australian corporation and majority-owned subsidiary
of NHTC, which does business in Australia ("Lexxus Australia"). In addition,
NHTC incorporated Lexxus International (New Zealand) Limited, a New Zealand
corporation and majority-owned subsidiary of NHTC, which does business in New
Zealand ("Lexxus New Zealand").

      In June 2001, NHTC incorporated Lighthouse Marketing Corporation ("LMC"),
a Delaware Corporation and a wholly-owned subsidiary of NHTC. As of December 31,
2001, LMC had not conducted any business, but intends to conduct business in the
future.

                                      -2-
<PAGE>

      In June 2001, NHTC sold 100% of the Common Stock in Kaire Nutraceuticals,
Inc., Delaware Corporation, to a South African firm for a purchase price of the
greater of (i) $50,000 per year for a period of five years, or (ii) for five
years, a percentage of net income based on a progressive scale of net sales
figures of the South African firm. As of December 31, 2001, no income has been
recognized on this transaction.

      On November 16, 2001,  NHTC  incorporated  Lexxus  International  Co.,
Ltd., a  corporation  organized  under the laws of the Republic of China and a
majority-owned subsidiary of NHTC ("Lexxus Taiwan").

      On January 28, 2002, NHTC incorporated MyLexxus Europe AG, a corporation
organized under the laws of Switzerland and is a majority-owned subsidiary of
NHTC ("Lexxus Europe"). This company manages the sales of product into sixteen
eastern European countries, including Russia.

      In March 2002, NHTC incorporated  Lexxus  International  Co., Ltd., a
corporation  organized under the laws of Hong Kong and a majority-owned
subsidiary of NHTC ("Lexxus Hong Kong").


Industry Overview

         Natural Health and "Quality of Life" Products

     NHTC believes that there is a general  desire in today's  marketplace to be
fit, stay healthy,  look younger, and lead a more satisfying life. Consumers are
finding that factors  contributing to a longer life can be controlled by changes
in lifestyle, which include a regiment of vitamins and supplements, exercise and
relaxation  and  pampering.  Consumers are looking for a healthier  lifestyle in
this  fast-paced  society.  They are also looking for the quick fix (eating out,
working out,  quick  luxuries).  NHTC  believes  that this general  mindset will
create a positive and profitable market for the products of Lexxus and eKaire.

      The market for natural products and supplements is driven by the media
which continues to highlight problems with diet, including the fact that
consumers are becoming increasingly disenchanted with and skeptical about many
conventional medical approaches to disease treatment, growing consumer interest
in and acceptance of natural and alternative therapies and products, and recent
clarifications and changes of food and drug laws that have significantly eased
the regulatory burdens associated with the introduction and sale of dietary
supplements.

     NHTC believes that public  awareness of the positive effects of nutritional
supplements  and  natural  remedies  on  health  has been  heightened  by widely
publicized  reports and  medical  research  findings  indicating  a  correlation
between  the  consumption  and use of a wide  variety of  nutrients  and natural
remedies and the reduced incidence of certain diseases.

     NHTC believes that the aging of the United States population, together with
an increased focus on preventative  and alternative  health care measures,  will
continue to fuel increased demand for certain  nutritional  supplement  products
and natural  remedies.  Management  also believes that the  continuing  shift to
managed  healthcare  delivery  systems  will place  greater  emphasis on disease
prevention and health maintenance,  areas with which natural health products are
most identified.

     While distribution of natural health products, through small to large sized
natural health food stores remains significant, the bulk of the growth is in the
mass  merchandisers and health food chains,  such as General Nutrition  Centers,
which now represent the majority of sales and are the fastest  growing  channels
of distribution.

                                      -3-

<PAGE>

Products

      The following is a list of our principal products.

Lexxus

     Viacreme TM is a topically  applied  creme  designed to increase the sexual
satisfaction of women and accounted for approximately 70% of Lexxus' revenues in
2001. In the fall of 2001, Lexxus introduced two new "quality of life" products,
LexLips  and La Vie.  LexLips is a lip  enhancing  gloss for women  designed  to
create the effect of fuller lips and to reduce wrinkles around the mouth. La Vie
is a dietary supplement described as a non-alcoholic  Bordeaux. In January 2002,
Lexxus  launched a  revolutionary  "30-minute  non-surgical  facelift"  product,
Skindulgence  TM, that  management  expects will rival Viacreme TM in popularity
and sales volume.

eKaire

Energizing Products

      The energizing product line consists primarily of natural stimulants
designed to enhance and increase vitality and endurance both mentally and
physically. Products in this category include Ginkgo Shield and Momentum.

o          Ginkgo Shield assists in mental alertness and the circulatory system.

o          Momentum helps increase and balance energy levels.

Enhancing Products

     The enhancing product line is designed to support an individual's overall
health and includes such products as Immunol, Colloidal SilverKaire, Synerzyme,
Arthrokaire, Osteo Formula, Royal Hawaiian Noni and SlimKaire.

o          Immunol is a shark liver oil based capsule which NHTC believes aids
           in the human immune system. This product is imported exclusively by
           eKaire into the United States.

o          Colloidal Silverkaire is a solution of silver particles
           electro-magnetically suspended in deionized water that provides
           dietary support for the immune system.

o          Synerzyme, a combination of naturally occurring enzymes and trace
           minerals that enhance the efficacy of, enzymes that assists the body
           with the breakdown and assimilation of various foods and fats.

o          ArthroKaire is a dietary supplement containing glucosamine, which
           helps to maintain the structural integrity of cartilage, tendons and
           blood vessels.

o          Osteo Formula is a dietary supplement that contains calcium which
           aids in bone strength and overall skeletal system health.

o          Noni is derived from a fruit grown only in the Central and South
           Pacific, and contains high levels of naturally occurring vitamins,
           minerals, trace elements, enzymes, and phytochemicals.

o          Slimkaire is a time-release, thermogenic weight management program
           with five herbal blends, including a thyroid support blend.
           Slimkaire is designed to assist in safe weight loss while giving the
           user a higher level of vitality and maintaining a healthy body. This
           product contains Ma Huang, a natural ephedrine extract. NHTC
           believes that its proprietary formula is superior to competitor
           blends for the health conscious individual, because it has no
           synthetic stimulant.

                                      -4-
<PAGE>

           Kaire also offers a thermogenic weight management  program, SK II,
           for individuals seeking a product without Ma Huang (ephedrine).

Optimizing Products

      The optimizing product line provides many of the basic vitamins and
nutrients, which are missing in the typical adult diet, through products such as
MSM Complex, Bio10 and Celltonic Plus.

o          MSM Complex supports an increased production of collagen and elastin
           fibers and increases cell permeability.

o          Bio10 is a live source of all 12 lactobacillus  bacteria  which helps
           improve digestion, and the process and  absorption of nutrients.

o          Celltonic Plus is an organic mineral solution containing over 72
           minerals and trace elements within an electrolyte drink.

Renewing Products

     The renewing product line consists of moisturizing products designed to
soothe  and  refresh.  These  products  include  Aloe  Gel and  DermaKaire  with
Pycnogenol(R).

o          Aloe Gel is a topical creme that soothes and refreshes the skin.

o          DermaKaire with Pycnogenol(R) is a moisturizing, whole-leaf Aloe
           product combined with a powerful antioxidant to maintain healthy-
           looking skin.


Reviving Products

      The reviving product line consists primarily of nutritional supplements
based on antioxidants including Maritime Prime with Pycnogenol (R) and EnzoKaire
Complete.

o          Maritime Prime with Pycnogenol (R) is a dietary supplement that
           contains Pycnogenol (R) which helps maintain healthy circulation by
           strengthening capillary walls, by protecting against free radical
           damage caused by stress, pollution and chemical additives, and by
           improving skin and collagen texture, elasticity and smoothness.
           Pycnogenol (R) is a patented extract from the bark of the Maritime
           Prime trees grown in southwestern France.

o          EnzoKaire Complete is a dietary supplement containing Enzogenol TM
           which is a natural antioxidant that provides protection for cells
           against the effects of free radicals. It also increases energy and
           endurance, and slows the aging process. Enzogenol TM is derived from
           the bark of the New Zealand pine tree, Pinus radiata.

     Most  of the  products  in this  product  line  are  based  on  proprietary
formulations  in several  combinations  containing  natural  products  including
Pycnogenol (R) and Enzogenol TM. Products containing Pycnogenol (R) have not yet
been approved for direct importation into Australia.

     Viacreme TM and  Pycnogenol  (R) and  Enzogenol  TM are  trademarks  of our
manufacturers.

                                      -5-
<PAGE>

Marketing and Distribution

      NHTC, through it subsidiaries Lexxus and eKaire, seeks to be a leader in
the personal health and wellness marketplace by driving its products into as
many venues and into as many markets as possible through its multi-level
marketing ("MLM") operations. NHTC's two-tiered mission is to enrich the lives
of the users of its products while enabling associates to take control of their
financial future and personal lives. In light of the wide variety of products
that NHTC and its subsidiaries offer, neither are dependent on any one specific
customer.

      Each of NHTC's subsidiaries is set up as a MLM company using a network of
associates to sell products. Associates are independent contractors who purchase
products directly from the respective subsidiary for resale to retail consumers
or for personal consumption. Associates may elect to work on a full-time or a
part-time basis. The growth of an associate's business depends largely upon the
ability to recruit down-line associates and the strength of NHTC's products in
the marketplace.

     To become a Lexxus  associate,  a person must sign an  agreement  to comply
with the policies and procedures of the applicable  subsidiary and pay a nominal
$100 fee. To be considered "active",  the associate must order a minimum of $100
of  products  from the  appilcable  Lexxussubsidiary  during  each year.  Lexxus
currently has approximately 24,000 "active" associates.

      To become an eKaire associate, a person must sign an agreement to comply
with the policies and procedures of the applicable subsidiary. To remain
"active", the associate must order a minimum of $50 of products from such
subsidiary during each year. Out of an approximately 60,000 accounts, eKaire
currently has approximately 6,000 "active" associates.

      NHTC pays commissions to qualified associates based on sales volumes for
each commission period. NHTC offers one of the highest payouts in the MLM
sector, a 60% commission rate on Lexxus product orders and 40% commission rate
on eKaire product orders. NHTC believes that the uniqueness and efficacy of its
products, combined with the highest payout in the business, creates a highly
desirable business opportunity and work environment for its associates.

      Additionally, Lexxus is implementing a new marketing plan by developing
vending machines for the distribution of Viacreme TM in such venues as
pharmacies, hotels and nightclubs. NHTC plans to debut the machines in the
marketplace during the third quarter of 2002. The machines will be closely
monitored to determine the venues where they are the most successful. This data
will be compiled and will provide NHTC with detailed data to assist in the
development of the rollout strategy for the machines.

      NHTC sponsors opportunity meetings and participates in motivational
training events in key cities. These events are designed to inform prospective
and existing associates about both existing and new product lines and selling
techniques. Associates share their MLM experiences, their individual selling
styles, and their recruiting methods. Prospective associates are educated about
the structure, dynamics and benefits of the network marketing industry. NHTC
continues to develop marketing strategies and programs to motivate associates.
These programs are designed to increase associates' monthly product sales and
the recruiting of new associates.

      To help maintain communication with the associate network, NHTC offers the
following support programs to its associates:

 Touchtalk and Faxback

      Touchtalk is an automated telephone system that associates can call 24
hours a day to receive reports on the sales activity of their organization and
listen to selected messages on special offers, marketing program updates, and
product information. Certain information is also available via facsimile to the
associate.

                                      -6-

<PAGE>

 Weekly Teleconference

     Both Lexxus and eKaire hold a weekly teleconference with company management
and associate field leadership on various subjects such as technical product
discussions, associate organization building and management techniques.

 Internet

      NHTC maintains web-sites at www.nhtc.ws, www.kaire.com,
www.lexxusinternational.com and www.mylexxus.com. On each website, the user can
read company news, learn more about various products, place orders and sign up
to be an associate.

 Product Literature

      NHTC offers a variety of literature to its associates, including product
catalogs, informational brochures, pamphlets, and posters for individual
products.

 Toll Free Access

     Kaire  offers a toll  free  number,  to place  orders  and to  sponsor  new
associates. Both eKaire and Lexxus offer "live" consumer support.

 Broadcast Fax/Broadcast E-mail

      Announcements about Lexxus and eKaire and product specials are
automatically sent via facsimile and/or e-mail to associates.

Direct Selling

     According to the Direct Selling  Association,  network  marketing is one of
the fastest  growing  segments  for the  distribution  of  products.  The Direct
Selling Association reports that, over 38.7 million individuals are now involved
in direct selling  worldwide (of which network marketing is a major segment) and
that those  involved in direct  selling  generate  $82  billion in annual  sales
around the world.  Network marketing sales in the United States are estimated to
be approximately $25.6 billion annually.

      Currently, NHTC has associates in all fifty states, the District of
Columbia, Puerto Rico, Guam, Canada, Australia, New Zealand, Trinidad and
Tobago, Taiwan, Hong Kong, and sixteen countries in eastern Europe, including
Russia, in order to maximize its direct selling efforts. NHTC believes that
significant market potential exists for its products in additional international
markets.

New Product Development

      In January 2002, Lexxus introduced a "30-minute non-surgical facelift",
Skindulgence TM. The 30-Minute FaceLift process temporarily creates a more
youthful appearance by toning and firming facial muscles, diminishing fine lines
and wrinkles and by improving skin tone and color through a unique blend of
botanical extracts from both plants and trees. The masque is coupled with a
cleanser and moisturizer.

      In early 2002, eKaire introduced a new Whey Protein product, a
pharmaceutical-grade milk serum protein isolate which enhances the immune
system.

      Management believes that its ability to introduce new products increases
its associates' visibility and competitiveness in the marketplace. NHTC
maintains its own product review and evaluation staff and relies upon
independent research consultants and vendor research departments for product
research, development and formulation.

                                      -7-

<PAGE>

Competition

     NHTC competes with a significant number of other retailers that are engaged
in similar lines of business,  including both sellers of health-related products
and MLMs. The two most well known and established of the MLMs are Avon Products,
Inc. and Amway Corp., each with over three million associates  worldwide.  Other
non-MLM  retailers with which NHTC competes include retail pharmacies and health
stores such as GNC and Internet companies such as VitaminShoppe.com.  The market
for nutritional  supplements is rapidly growing and is highly  competitive.  The
MLM channel  tends to sell  products at a higher  price  compared to  retailers,
which does pose a degree of  competitive  risk with respect to price points.  In
the case of NHTC,  however,  several of NHTC's  products  are  patented,  or are
exclusive  formulations.  As a result,  NHTC believes  that it is  significantly
insulated from this risk because duplication of the exact blends and proportions
of  ingredients  used by NHTC in its  patented  and  exclusive  formulations  is
extremely difficult.

      The market for Lexxus products shows tremendous potential, especially for
NHTC's flagship product, Viacreme TM. According to the Journal of the American
Medical Association, 46% of women have reportedly indicated to their physicians
that they have an interest in a product that would increase sexual desire and
satisfaction.

     The  eKaire  products  target  consumers  in  the  vitamin,   mineral,  and
nutritional  supplement  market,  which  generates  nearly $50 billion per year.
eKaire offers a variety of nutraceutical products, some of which are proprietary
and exclusive to NHTC, making duplication very difficult.

Seasonality

     NHTC believes  that the  recruitment  of  associates  and the general sales
volume fluctuates on a pattern opposite of typical retail sales. Since NHTC is a
home-based  business,  the associates  tend to take "typical"  vacations such as
summer and winter  holidays,  thus,  slowing down the sales  volume  during such
vacation periods.

Manufacturing

     NHTC does not intend to develop its own  manufacturing  capabilities due to
the fact that NHTC  believes the  availability  of  manufacturing  services from
third parties on a contract basis is adequate to meet its anticipated production
needs.

      NHTC currently purchases all products from third parties that manufacture
such products to meet specific criteria and standards. All nutritional
supplements, raw materials and finished products are subject to sample testing,
weight testing and purity testing by independent laboratories.

     Lexxus has a contractual arrangement with the manufacturer,  40 J's L.L.C.,
of Viacreme TM through the end of 2002.  The  arrangement  grants  worldwide MLM
rights to NHTC to sell the  product,  Viacreme  TM.  The  arrangement  calls for
perpetuity unless both parties agree to terminate the relationship.

     For other products, NHTC places orders for finished goods and manufacturing
services  to meet the  demand of the  market.  These  orders  are based on price
quotations and other terms obtained from selected manufacturers.

Intellectual Property

     In November 2001, Lexxus' product Viacreme TM was awarded a patent to its
formulator.

     Most of the  eKaire  and  Lexxus  products  are  packaged  under a "private
label." NHTC has registered  trademarks for the names, logos and various product
names in the  countries  into  eKaire and  Lexxus  currently  operate.  NHTC has
applied for trademark registration for names, logos and various product names in
several  countries that into which eKaire and Lexxus are considering  expanding.
NHTC currently has approximately 15 trademark registrations in the United States
and  approximately  two  trademark  applications  pending with the United States
Patent  and  Trademark  Office.  NHTC's  registered  trademark  expire or become
renewalble  between the date ranges of March 2005 to October 2008. NHTC's policy
is to pursue registrations for all the

                                      -8-

<PAGE>

trademarks associated with its key products and try to protect its legal rights
concerning its trademarks. NHTC relies on common law trademark rights to protect
its unregistered trademarks. These common law trademark rights do not provide
NHTC with the same level of protection as afforded by a United States federal
registration trademark. Common law trademark rights are limited to the
geographic area in which the trademark is actually utilized, while a United
States federal registration of a trademark enables the registrant to discontinue
the unauthorized use of the trademark by a third party anywhere in the United
States even if the registrant has never used the trademark in the geographic
area where the trademark is being used, provided however, that the unauthorized
third party user has not, prior to the registration date, perfected its common
law rights in the trademark in that geographic area.

Government Regulation

      NHTC believes that all of our existing products are either cosmetics or
dietary supplements which do not require governmental approvals prior to
marketing in the United States though they are regulated by the Food & Drug
Administration ("FDA"). The processing, formulation, packaging, labeling and
advertising of such products, however, are subject to regulation by one or more
federal agencies including the FDA, the Federal Trade Commission, the Consumer
Products Safety Commission, the Department of Agriculture, the Department of
Alcohol, Tobacco and Firearms and the Environmental Protection Agency. NHTC's
activities are also subject to regulation by various agencies of the states and
localities in which its products are sold. In addition, the sale of NHTC's
products by associates in foreign markets are subject to regulation and
oversight by various federal, state and local agencies in those markets. At any
time, the FDA may increase the regulation of NHTC's products by deeming certain
ingredients used in the products to be drugs.

     In January 2000, the FDA issued a final ruling, effective February 7, 2000,
related to structure/function statements that may be claimed on dietary
supplement product labels. The rule provides for clarification of when a
structure/function claim may be made without prior FDA approval and when a claim
constitutes disease related claims. The final rule provides for the adoption of
previously issued language by the Nutrition Labeling and Education Act ("NLEA")
for 'disease or health related conditions' and among other things allows for
express and implied disease claims to be made through the name of a product,
through a statement about the formulation of a product, or through the use of
pictures, vignettes, or symbols. The finalized rule now interprets DSHEA to
permit structure/function claims for the effects of "natural states" or common
conditions associated with natural states and may include such phrases as
"maintains a healthy circulatory system".

     NHTC believes that the above finalized rule loosens the restrictions on its
labeling of products regarding dietary supplements and structure/function claims
provided that any such statements by NHTC do not suggest that the supplement is
intended to augment or replace a specific prescription drug or therapy for a
disease.

      NHTC is unaware of any legal actions pending or threatened by the FDA or
any other governmental authority against NHTC or any of its products.

      Certain ingredients utilized in our weight management products, primarily
ephedrine, are increasingly subject to regulations being promulgated by various
state agencies. These regulations generally limit the amount of the ingredient
or require a conspicuous warning label be affixed to each product. In addition,
certain states have prohibited the sale of ephedrine-based products to minors or
at all. There can be no assurances that NHTC will not be subject to additional
regulation on its weight management product line.

      Direct selling activities are regulated by various governmental agencies.
These laws and regulations are generally intended to prevent fraudulent or
deceptive schemes, often referred to as "pyramid" or "chain sales" schemes, that

                                      -9-

<PAGE>

promise quick rewards for little or no effort, require high entry costs, use
high pressure recruiting methods and/or do not involve legitimate products.

      Based on research conducted in opening its existing markets the nature and
scope of inquiries from government regulatory authorities and our history of
operations in such markets to date, NHTC believes that its methods of
distribution are in compliance in all material respects with the laws and
regulations relating to direct selling activities of the countries in which it
currently operates. Even though NHTC believes that laws governing direct selling
are generally becoming more permissive, many countries currently have laws in
place that would prohibit NHTC from conducting business in such markets. There
can be no assurance that NHTC will be allowed to continue to conduct business in
each of its existing markets that it currently services or any new market it may
enter in the future.

      NHTC believes that it is in material compliance with all regulations
applicable to our products and operations. Despite this belief, NHTC may be
found not to be in material compliance with existing regulations as a result of,
among other things, the considerable interpretative and enforcement discretion
given to regulators or misconduct by associates. There can be no assurances that
NHTC will not be subject to inquiries and regulatory investigations or disputes
and the effects of any adverse publicity resulting therefrom. Any assertion or
determination that NHTC or any of its associates are not in compliance with
existing laws or regulations could have a material adverse effect on the
business and results of operations. In addition, in any country or jurisdiction,
the adoption of new laws or regulations or changes in the interpretation of
existing laws or regulations could generate negative publicity and/or have a
material adverse effect on the business and results of operations. NHTC cannot
determine the effect, if any, that future governmental regulations or
administrative orders may have on the business and results of operations.
Moreover, governmental regulations in countries where NHTC may commence or
expand its operations may prevent, delay or limit market entry of certain
products or require the reformulation of such products. Regulatory action,
whether or not it results in a final determination adverse to NHTC, has the
potential to create negative publicity, with detrimental effects on the
motivation and recruitment of associates and consequently, on sales and
earnings.

Research and Development

      NHTC has incurred minimal research and development costs in the years
ended December 31, 2001 and December 31, 2000. NHTC purchases finished goods
from manufacturers and sells directly to its associates for their resale or
personal consumption.

Environmental Matters

     There  are  no  environmental   hazards  that  NHTC  believes  effects  its
operations.

Employees

     NHTC  has its  principle  offices  in  Irving,  Texas,  and the  subsidiary
companies  have a total of eight  offices in both the U.S. and abroad.  NHTC has
offices and warehouses in Queensland,  Australia, Auckland, New Zealand, British
Columbia, Canada, Kaohsiung, Taiwan, Moscow, Russia and Zurich, Switzerland. The
combined  total of  employees  for Lexxus and eKaire is 43 at December 31, 2001,
including  eight  senior  management,   five  administrative  assistants,   five
warehouse  employees,  and 25 "general  operations"  employees,  which  includes
employees in customer  service and  administrative  roles.  Forty  employees are
full-time  and  five  are  part-time.   NHTC  has  approximately  30,000  active
associates  (combined  Lexxus and eKaire),  who act as  independent  contractors
selling NHTC's products and who are not employees of NHTC. None of the employees
are represented by a union, and NHTC believes that employee relations are good.

                                      -10-

<PAGE>

Product Warranties and Returns

Lexxus

      The Lexxus refund policies and procedures closely follow industry
standards. Associates may return unopened product in resalable condition for a
partial refund. All product purchased prior to October 1, 2001 had a 30-day
refund policy. All products purchased after October 1, 2001 must be returned
within twelve months of the original purchase date for refund eligibility.
Lexxus must be notified of the return in writing and such written requests will
be considered termination notice of the distributorship.

eKaire

      eKaire product warranties and refund policies are similar to those of
other companies in the industry. If an associate is not satisfied with the
product then he/she can return to eKaire within 90 days of the first time the
product was purchased for a full refund. An associate may return or exchange
products that are unopened and in resalable condition for 30 days after the date
of purchase.

Management Information Systems

      NHTC utilizes a third party to process associate orders and to calculate
the associate commission payments. The eKaire commission system provides each
associate with a detailed monthly accounting of all sales and recruiting
activity. These statements eliminate the need for substantial record keeping on
behalf of the associate. Lexxus maintains a web-based system to communicate
volume and commissions to its associates.

Insurance

      NHTC currently carries general liability insurance in the amount of
$1,000,000 per occurrence and $1,000,000 in the aggregate. There can be no
assurance, however, that this insurance will be sufficient to cover potential
claims or that an adequate level of coverage will be available in the future at
a reasonable cost, if at all. A successful claim could have a material adverse
effect on NHTC.



                                      -11-
<PAGE>




ITEM  2. DESCRIPTION OF PROPERTY.

     NHTC  utilizes  approximately  1,000 square feet of office space in Irving,
Texas on an as needed basis,  through an arrangement  with Regus Business Centre
which  provides  business  solutions for  companies.  NHTC pays a minimum annual
rental fee of $2,100.  Lexxus leases an aggregate of approximately 16,000 square
feet of office  and  warehouse  space in  Dallas,  Texas.  The lease  term is 38
months,  expiring on September 30, 2004,  and the current rent is  approximately
$151,500  per year.  Additional  warehousing  for Lexxus is located in  Branson,
Missouri  where Lexxus  utilizes  approximately  35,000 square feet of warehouse
space.  The lease term is on a  month-to-month  basis at a rent of  $18,000  per
year. The Canadian office and warehouse of Lexxus and eKaire leases office space
in Langley,  British  Columbia,  totaling  approximately  3,600 square feet. The
lease term is 36 months,  expiring on  December 1, 2004 and the current  rent is
approximately $25,000 per year.

     Kaire Australia, Kaire New Zealand, Lexxus Australia and Lexxus New Zealand
lease office space and warehouse facilities of approximately 2,475 square feet
in Queensland, Australia. The lease term is 60 months, expiring on January 1,
2007, and the current rent is approximately $20,000 per year.

     In March 2002, Lexxus Taiwan entered into a two-year lease for 6,314 square
feet of office space at a current rent of approximately $75,000 per year.

     Kaire Trinidad leases approximately 1,100 square feet of office space in
downtown Port-of-Spain, Trinidad. The lease term is on a month-to-month basis.

     NHTC is currently in the process of finding adequate office space for its
subsidiaries in Hong Kong and Russia.

     NHTC believes that such properties are suitable and adequate for the
current operating needs.

ITEM  3. LEGAL PROCEEDINGS.

     On August 4, 1997, Samantha Haimes brought an action in the Fifteenth
Judicial Circuit of Palm Beach County, Florida, against NHTC and National Health
Care Centers of America, Inc., a wholly-owned subsidiary of NHTC. NHTC asserted
counterclaims against Samantha Haimes and Leonard Haimes. The complaint arises
out of the defendants' alleged breach of contract in connection with NHTC's
natural health care center, which was located in Boca Raton, Florida. NHTC
agreed to settle such actions for shares of Common Stock with a fair market
value of $325,000, but not less than 125,000 shares of Common Stock and agreed
to register such shares. On October 10, 2000, due to noncompliance with the
settlement, a judgment was taken against NHTC in the amount of $325,000 plus
interest. On October 12, 2001, NHTC entered into a payment arrangement to settle
this obligation. NHTC has recorded a liability of $325,000 plus interest at ten
percent (10%) per annum, which is included in the financial statements for the
year ended December 31, 2001.

     On July 10, 2000, the State of Texas obtained a judgment against NHTC in
the amount of $109,170 for unpaid sales taxes, penalties, interest, and attorney
fees. NHTC has entered into a voluntary payment arrangement and has recorded a
liability of $109,170 plus interest at seven percent (7%) per annum, which is
included in the financial statements for the year ended December 31, 2001.

     On December 29, 2000, Merrill Corporation obtained a judgment against NHTC
in the amount of $145,497, plus interest at eight percent (8%) per annum, which
is included in the financial statements for the year ended December 31, 2001.

     On  October  30,  2001,  Omni  Group  LLC  filed an  action in the State of
Vermont,  Addison  Superior  Court against NHTC,  alleging that NHTC  tortuously
interfered  with  Omni  Groups's  existing  contractual  relationships  and made
representations  about  Omni Group  that were  untrue.  Omni Group is seeking $5
million in

                                      -12-

<PAGE>

compensatory damages and $5 million in punitive damages. NHTC is defending this
action. NHTC filed an answer on April 2, 2002 in which NHTC denied any
wrongdoing.

     On November 22, 2001,  Pfizer,  Inc.  filed an action in the United  States
District  Court,  Southern  District of New York,  against Lexxus  alleging that
Lexxus'  distribution  and  marketing  of  Viancreme  TM  infringes  on Pfizer's
federally registered  trademark,  Viagra (R). Pfizer's complaint alleges federal
false designation of origin and unfair competition,  federal trademark dilution,
federal  false  advertising  and  unfair   competition,   common  law  trademark
infringement,  trademark  dilution and  deceptive  acts and  practices.  NHTC is
defending this action and is currently in settlement discussions with Pfizer.

     On March 21, 2002, NFL  Properties,  Inc.  brought an action in the Supreme
Court of the  County  of  Onondaga  in the  State of New York  against  NHTC and
Natural Health Laboratories in the amount of approximately  $126,000 for alleged
breach of contract.  NHTC's management believes that the action naming NHTC as a
defendant was a case of mistaken identity,  and is currently trying to have NHTC
removed as a defendant in this action.

ITEM  4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     During the last quarter of 2001, NHTC did not submit any matter to the vote
of the shareholders.


ITEM  5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

                           PRICE RANGE OF COMMON STOCK

     NHTC's Common Stock is currently quoted on the OTCBB under the symbol
"NHTC". NHTC's Common Stock was delisted from the NASDAQ Small Cap Market in
July 2000 for failure to meet the NASDAQ requirements for continued listing. The
following table sets forth the range of high and low closing sale prices as
reported by the NASDAQ Small Cap Market through June 2000 and the high and low
bid prices as reported by the OTCBB since June 2000.

                             NASDAQ SMALL CAP MARKET



          Date                 High Closing        Low Closing

          2000

First Quarter                           2.000             1.219
Second Quarter                          1.219             0.281

                                      OTCBB

          Date                   High Bid            Low Bid

          2000
Third Quarter                           0.438             0.031
Fourth Quarter                          0.078             0.016

          2001

First Quarter                           0.047             0.016
Second Quarter                          0.150             0.016
Third Quarter                           0.070             0.030
Fourth Quarter                          0.050             0.020

                                      -13-
<PAGE>

     The OTCBB quotations reflect inter-dealer prices, without retail mark-ups,
mark-downs or commissions, and may not represent actual transactions.

     In January 2001, NHTC increased the number of authorized shares of its
Common Stock to 500,000,000 by a majority vote of its Board of Directors.

Holders

     As of March 4, 2002, NHTC had approximately 263 record holders of Common
Stock and approximately 1,200 beneficial holders of Common Stock.

Dividends

     NHTC has not paid any cash dividends on Common Stock to date and does not
anticipate declaring or paying any cash dividends in the foreseeable future. In
addition, future financing arrangements, if any, may preclude or otherwise
restrict the payment of dividends.

Recent Sales of Unregistered Securities

     In April 2001, NHTC issued 50 shares of Series H Preferred Stock with a
face value of $1,000 per share to an accredited investor, pursuant to Section
4(2) of the Securities Act of 1933, as amended (the "Act") and/or Rule 506 of
Regulation D, as promulgated by the Act.

     In April 2001, NHTC issued 500,000 shares of Common Stock to certain
management employees, pursuant to Section 4(2) of the Act.

     In May 2001, NHTC issued 50 shares of Series H preferred stock with a face
value of $1,000 per share, to an accredited investor, pursuant to Section 4(2)
of the Act and/or Rule 506 of Regulation D, as promulgated by the Act.

     During 2001,  NHTC issued  35,523,045  shares of Common Stock to accredited
investors upon conversion of $946,768, face amount of Series E Preferred Stock
pursuant to Section 4(2) of the Act and/or Rule 506 of Regulation D, as
promulgated by the Act.

     During 2001, 51,559,177 shares of Common Stock to accredited investors upon
conversion of  $1,416,408,  face amount of Series F Preferred  Stock pursuant to
Section 4(2) of the Act and/or Rule 506 of Regulation D, as
promulgated by the Act.

      During 2001, NHTC issued 15,732,164 shares of Common Stock to accredited
investors upon conversion of $344,200, face amount of Series G Preferred Stock
pursuant to Section 4(2) of the Act and/or Rule 506 of Regulation D, as
promulgated by the Act.

     During 2001, NHTC issued 27,699,368 shares of Common Stock to accredited
investors upon conversion of $614,542, face amount of Series H Preferred Stock
pursuant to Section 4(2) of the Act and/or Rule 506 of Regulation D, as
promulgated by the Act.

    During 2001, NHTC issued 12,260,376 shares of Common Stock to an accredited
investor upon conversion of $206,194, face amount of Series J Preferred Stock
pursuant to Section 4(2) of the Act and/or Rule 506 of Regulation D, as
promulgated by the Act.


                                      -14-

ITEM  6.          MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

BACKGROUND

     Prior to August 1997, the operations of NHTC consisted of the operation of
natural health care centers and vocational schools. Upon the acquisition of GHA
on July 23, 1997, NHTC commenced the marketing and distribution of a line of
natural, over-the-counter homeopathic pharmaceutical products. Upon the
acquisition of certain Kaire assets in 1999, NHTC started the marketing and
distribution of a line of natural, herbal-based dietary supplements and personal
care products through a network marketing distribution system. NHTC discontinued
the operations of GHA during the fourth quarter of 1999 and filed for Chapter 7
bankruptcy in March 2001 on behalf of GHA and Ellon. In January 2001, NHTC
acquired Lexxus, which primarily sells "quality-of-life" products.

RESULTS OF OPERATIONS

Year Ended December 31, 2001 Compared to the Year Ended December 31, 2000

 Revenues

     Revenues for the year ended December 31, 2001 were approximately
$24,794,000 as compared to revenues for the year ended December 31, 2000 of
approximately $8,320,000, an increase of approximately $16,474,000 or
approximately 298%. The increased sales for the year ended December 31, 2001
were primarily from the sale of Lexxus products with eKaire showing a slight
rise in sales from the year ended December 31, 2000.

 Cost of Sales

     Cost of sales for the year ended December 31, 2001 was approximately
$5,876,000 or 24% of revenues. Cost of sales for the year ended December 31,
2000 was $2,410,000 or 29% of revenues. The total cost of sales increased by
approximately $3,466,000 or 244% most of which was attributable to Lexxus
product mix and sales volume compared to 2000 sales of only eKaire products. The
decrease in the cost of sales as a percentage of revenues is attributable to
lower manufactured cost of Lexxus products in conjunction with the higher sales
volume of Lexxus products are eKaire products.

 Gross Profit

     Gross profit increased from approximately $5,910,000 in the year ended
December 31, 2000 to approximately $18,918,000 in the year ended December 31,
2001. The increase was approximately $13,008,000 or 320%. The increase was
attributable to the increase in gross sales by both Lexxus and eKaire.

 Commissions

     Associate commissions were approximately $12,449,000 or 50% of revenues in
the year ended December 31, 2001 compared with approximately $3,682,000 or 44%
of revenues for the year ended December 31, 2000. The increase of commission
expense is directly related to the increase in gross sales and the terms of the
compensation plans. Lexxus carries an average payout of 60% of product sales
whereas eKaire has an average payout of 40% of product sales.

 Selling, General and Administrative Expenses

     Selling, general and administrative costs decreased from approximately
$5,777,000 or 69% of revenues in the year ended December 31, 2000 to
approximately $5,187,000 or 21% of revenues in the year ended December 31, 2001,
a decrease of approximately $590,000 or 11% which is attributable to the
downsizing of eKaire operations and shared overhead costs between Lexxus and
eKaire.



                                       15
<PAGE>

Interest Expense

     Interest expense was approximately $260,000 or 3% of revenues in the year
ended December 31, 2000 compared with approximately $157,000 or 1% of revenues
in the year ended December 31, 2001, a decrease of approximately $103,000 due to
a decrease in debt borrowings, a decrease in the beneficial conversion feature
of certain debt instruments, and conversion of convertible debt into Common
Stock in 2001.

 Income Taxes

     Income tax benefits were not reflected in either period. The anticipated
benefits of utilizing net operating losses against future profits was not
recognized in the years ended December 31, 2001 or 2000 under the provisions of
Financial Standards Board Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", utilizing its loss carry forwards as a component
of income tax expense. A valuation allowance equal to the net deferred tax asset
has been recorded as management has not been able to determine that it is more
likely than not that the deferred tax assets will be realized.

  Income (Loss) from Continuing Operations

     Net income from continuing operations was approximately $1,202,000 in the
year ended December 31, 2001 or approximately 5% of revenues as compared to the
net loss from continuing operations of approximately $12,803,000 or
approximately (154) % of revenues in the year ended December 31, 2000.

Discontinued Operations

     NHTC discontinued the operations of its wholly-owned subsidiary in the
United Kingdom in February 2000 and recognized a loss of $15,000 on the
liquidation of this asset for the year ended December 31, 2000.

Gain on Forgiveness of Debt

     During the year ended December 31, 2001, NHTC realized a gain of
approximately $820,000 on the various debt and payables related to the sale of
Kaire Nutraceuticals, Inc. During the year ended December 31, 2000, NHTC
realized a gain of approximately $2,148,000 on the various debt and payables of
GHA due to the filing of a Chapter 7 bankruptcy.

Liquidity and Capital Resources

     NHTC has funded the working capital and capital expenditure requirements
primarily from cash provided through sales of products, borrowings from
institutions and individuals, and from the sale of securities in private
placements.

     In March 2000, NHTC sold 1,000 shares of Series J Preferred Stock, par
value $1,000 per share, (the "Series J Preferred Stock") realizing net proceeds
of $1,000,000. Series J Preferred Stock pays a dividend at the rate of 10% per
annum. Series J Preferred Stock and the accrued dividends thereon are
convertible into shares of Common Stock at a conversion price equal to the lower
of the closing bid price on the conversion date or 70% of the average closing
bid price of the Common Stock for the lowest three trading days during the
twenty day period immediately preceding the date on which NHTC receives notice
of conversion from a holder thereof. In connection with the offering of the
Series J Preferred Stock, NHTC issued warrants to purchase 141,907 shares of
Common Stock at an exercise price of $1.41 per share. During 2001, $206,194,
face amount of Series J Preferred Stock was converted into 12,260,376 shares of
Common Stock.

     In May 2000, NHTC borrowed $20,700 from Tyler Pipeline, Inc. This
indebtedness was evidenced by NHTC's issuance of a convertible promissory note.
The note bears interest at 10% per annum and is payable on demand. The note is
convertible into shares of Common Stock at a discount equal to 60% of the
average closing bid price of the Common Stock on the three days preceding notice
of conversion of the note. In April 2001, this note was fully satisfied through
conversion into an aggregate of 2,163,710 shares of Common Stock.



                                       16
<PAGE>

     In October 2000, NHTC issued 50 shares of Series H Preferred Stock for
$50,000 realizing net proceeds of $43,500. The Series H Preferred Stock pays
dividends of 10% per annum and is convertible into shares of Common Stock at the
lower of the closing bid price on the conversion date or 75% of the market value
of the Common Stock on the conversion date.

     In October 2000, NHTC borrowed $10,000 from Meridian Investments, Inc. This
indebtedness was evidenced by NHTC's issuance of a convertible promissory note.
The note bears interest at 10% per annum and is payable on demand. The note is
convertible into shares of Common Stock at a discount equal to 60% of the
average closing bid price of the Common Stock on the three days preceding notice
of conversion. The note was repaid in November 2001.

     In November 2000, NHTC borrowed $25,000 from Filin Corp. This indebtedness
was evidenced by NHTC's issuance of a convertible promissory note. The note
bears interest at 10% per annum and is payable on demand. The note is
convertible into shares of Common Stock at a discount equal to 60% of the
average closing bid price of the Common Stock on the three days preceding notice
of conversion. The note was converted into an aggregate of 1,452,805 shares of
Common Stock in August 2001.

           In January 2001, NHTC entered into a joint venture with Lexxus
International and formed a new majority-owned subsidiary, Lexxus. The original
founders of Lexxus International received an aggregate of 10,000,000 shares of
Common Stock.

           In April 2001, NHTC borrowed $100,000 from Augusta Street LLC. This
indebtedness was evidenced by NHTC's issuance of a convertible promissory note.
The note bears interest at 10% per annum and is payable on demand. The note is
convertible into shares of Common Stock at a discount equal to 75% of the
average closing bid price of the Common Stock on the five days preceding notice
of conversion.

      In April 2001, NHTC issued an aggregate of 200,000 shares of Common Stock
to an individual in exchange for a loan of $50,000.

     In April 2001, NHTC issued 50 shares of Series H Preferred Stock for
$50,000 realizing net proceeds of $43,500. The Series H Preferred Stock pays
dividends of 10% per annum and is convertible into shares of Common Stock at the
lower of the closing bid price on the conversion date or 75% of the market value
of the Common Stock on the conversion date.

     In May 2001, NHTC issued 50 shares of Series H Preferred Stock for $50,000
realizing net proceeds of $43,500. The Series H Preferred Stock pays dividends
of 10% per annum and is convertible into shares of Common Stock at the lower of
the closing bid price on the conversion date or 75% of the market value of the
Common Stock on the conversion date

     At December 31, 2001, the ratio of current assets to current liabilities
was .31 to 1.0 and NHTC had a working capital deficit of approximately
$3,522,000.

     Cash provided by operations for the period ended December 31, 2001 was
approximately  $35,000.  Cash used by investing activities during the period was
approximately  $302,000,  which  primarily  relates to the  acquisition of fixed
assets of  approximately  $141,000 and websites of  $133,000.  Cash  provided by
financing  activities  during the period was approximately  $449,000,  primarily
from the issuance of preferred  stock of $100,000 and notes payable of $382,000.
Total cash increased by approximately $216,000 during the year.

                                       17


<PAGE>
ITEM  7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     NHTC's consolidated financial statements, including the notes thereto,
together with the report of independent certified public accountants thereon,
are presented beginning at page F-1.


ITEM  8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE.


         None.



                                    PART III


ITEM  9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
         PERSONS; COMPLIANCE WITH SECTION 16(a).

                                   MANAGEMENT

Directors and Executive Officers

     The following table sets forth certain information concerning the directors
and executive officers.

  Name                     Age                  Position

Mark D. Woodburn            31       President, Chief Financial Officer,
                                     Secretary and sole director


The following is a brief summary of NHTC's sole executive officer and director:

Mark D. Woodburn  became  Secretary of NHTC in April 1999. In August 2000,  Mr.
Woodburn also became a director of NHTC.  Mr.  Woodburn became the President of
NHTC in September  2000.  Between April 1999 and September  2000, Mr. Woodburn
served as NHTC's Chief Financial Officer.  Since 1992,  Mr.  Woodburn  served as
a director and the  Secretary of Kaire  International,  Inc.  Currently,  Mr.
Woodburn serves as Chief Financial Officer of Lexxus International, Inc. and
eKaire.com, Inc.

Compliance with Section 16(a) of the Exchange Act

Based solely upon a review of (i) Forms 3 and 4 and amendments thereto furnished
to the Company pursuant to Rule 16a-3(e), promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act"), during the Company's fiscal year
ended December 31, 2001, and (ii) Forms 5 and amendments thereto and/or written
representations furnished to NHTC by any director, officer or ten percent
security holder of NHTC (collectively "Reporting Persons") stating that he or
she was not required to file a Form 5 during the fiscal year ended December 31,
2001, it has been determined that no Reporting Person is delinquent with respect
to his or her reporting obligations set forth in Section 16(a) of the Exchange
Act.

ITEM 10.  EXECUTIVE COMPENSATION.


NHTC does not have a bonus, profit sharing, or deferred compensation plan for
the benefit of employees, officers or directors.

                                       18
<PAGE>


                  The following table provides a summary of cash and non-cash
compensation for each of the last three fiscal years ended December 31, 2001,
2000 and 1999 with respect to the following officers.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

                                                                                        Long Term Compensation
                                                    Annual Compensation                          Awards
  Name and Other Principal Position      Year    Salary ($) Bonus     Other Annual     Restricted     Securities
                                                              ($)     Compensation        Stock       Underlying
                                                                         ($)(1)       Award(s) ($)   Options/SARs
                                                                                                          (#)
<S>                <C>                   <C>      <C>
  Mark D. Woodburn (2)                   2001     17,000       -            -              -               -
  President                              2000     34,000       -            -              -               -
                                         1999     55,750       -            -              -               -


  Terry LaCore (3)                       2001    115,000       -            -              -          3,000,000
  CEO of Lexxus International, Inc.      2000    100,000       -          16,016           -               -
                                         1999     80,769       -            -              -               -

  Robert L. Richards, (4)                2001       -          -            -              -               -
  Former President & CEO                 2000     68,692       -            -              -               -
                                         1999     96,923       -            -              -               -


  Joseph P. Grace (5)                    1999    133,333       -            -              -               -
</TABLE>



(1)  Excludes perquisites and other personal benefits that in the aggregate do
     not exceed 10% of each of such individual's total annual salary and bonus.
(2)  Mr.  Woodburn  became NHTC's  President in September  2000. He became
     NHTC's  Secretary in April 1999.  Between April 1999 and September 2000, he
     served as NHTC's Chief Financial Officer.
(3)  Mr. LaCore is the CEO of Lexxus.
(4)  Mr. Richards became NHTC's President in September 1999 and resigned in
     August 2000.
 (5) Mr. Grace resigned in September 1999.

                                       19
<PAGE>


Stock Options

         In January 2001, NHTC granted the following options to purchase Common
Stock to the executive officers named above.

<TABLE>
<CAPTION>


         Name                Number of         Percent of total    Exercise base price     Expiration Date
                             securities          options/SARs           ($/share)
                             underlying           granted to
                        options/SARs granted     employees in
                                                  fiscal year

<S>     <C>
Mark Woodburn                    -                     -                    -                     -

Terry LaCore                 3,000,000               100%              $.011/share          January 2011

</TABLE>
(1) Does not include the 3,000,000 options issued to Benchmark Consulting Group.

         During the fiscal year ended December 31, 2001, Mr. LaCore had not
exercised any of these options. The shares issued to Mr. LaCore have certain
anti-dilutive features. The anti-dilutive provision provides for additional
options to be granted in the event NHTC issues additional Common Stock.

Consulting Agreement

     In January 2001, NHTC entered into a consulting contract with Benchmark
Consulting Group, pursuant to which Benchmark agreed to advise NHTC in
connection with the acquisition of, startup of, and/or merger with other
companies introduced to NHTC by Benchmark, and any divesture of NHTC's assets,
subsidiaries, or the sale of NHTC itself. NHTC issued to Benchmark options to
purchase an aggregate of 3,000,000 shares of Common Stock at an exercise price
of $.011 per share. These shares have certain anti-dilutive features. The
anti-dilutive provision provides for additional options to be granted in the
event NHTC issues additional Common Stock.

Directors' Compensation

         Neither the director of NHTC nor those of any of its subsidiaries
receive any fixed compensation for their services as directors. Directors are
reimbursed for their reasonable out-of-pocket expenses incurred in connection
with performance of their duties. Neither NHTC nor any of its subsidiaries paid
its directors any cash or other form of compensation for acting in such
capacity, although directors who were also executive officers received cash
compensation for acting in the capacity of executive officers.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT.


     The following table sets forth certain information as to the Common Stock
ownership of each of the directors, executive officers, all executive officers
and directors as a group, and all persons known to us to be the beneficial
owners of more than five percent of NHTC's Common Stock as of January 31, 2002.


 Name and address of          Amount and nature of           % of Class
  Beneficial Owner              Beneficial Owner

 Mark D. Woodburn                      -                         *
 c/o NHTC
 5605 N. MacArthur Blvd.
 11th Floor
 Irving, TX 75038

                                       20
<PAGE>

 The Endeavour Capital             25,349,643                   9.9%
 Investment Fund SA
 Cumberland House
 #27 Cumberland Street
 Nassau, New Providence,
 The Bahamas

 All Executive Officers and            -                         *
 Directors as a Group (1 person)

* Owns less than one (1%) percent.

     Unless otherwise noted, all persons named in the table have sole voting and
     dispositive power with respect to all shares of Common Stock beneficially
     owned by them.

     The table does not include shares of Common Stock issuable upon the
     conversion of the Series F, H, and J preferred stock, which are the only
     classes of Preferred Stock that have not been entirely converted into
     shares of Common Stock. Pursuant to the terms of the Series F, H, and J
     preferred stock, the holders thereof generally are not entitled to convert
     such instruments to the extent that such conversion would increase the
     holders' beneficial ownership of Common Stock to an amount in excess of
     4.9%, except in the event of mandatory conversion. On the date of a
     mandatory conversion of the Series F, H, and J preferred stock, a change in
     control may occur, based upon the number of shares of Common Stock issuable
     to such holders.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      As of December 31, 2001, NHTC owed approximately $70,000 to Robert L.
Richards, its former president and a former director, in connection with
liabilities assumed in connection with the KII acquisition.

     NHTC believes that the transactions between NHTC and any of the officers,
directors and/or five percent (5%) stockholders have been on terms no less
favorable to NHTC than could have been obtained from independent third parties.
Future transactions, if any, between NHTC and any of its officers, directors,
and/or five percent (5%) stockholders will be on terms no less favorable to NHTC
than could be obtained from independent third parties and will be approved by a
majority of the independent, disinterested directors. In addition, any
forgiveness of indebtedness of officers, directors or five percent (5%)
stockholders will be approved by a majority of disinterested directors who do
not have an interest in the transactions and who have access, at NHTC's expense,
to counsel.


ITEM  13.         EXHIBITS, LISTS AND REPORTS ON FORM 8-K.

         (a) Exhibits

Index to Exhibits

NUMBER  DESCRIPTION OF EXHIBIT

2.2      Acquisition Agreement among NHTC, NHTC Acquisition
         Corp. and Kaire International, Inc. (the "Acquisition
         Agreement").(3)

                                       21
<PAGE>

2.3      Acquisition Agreement among NHTC and Lexxus International *
3.1      Amended and Restated Certificate of Incorporation of the
         Company.(4)
3.2      Amended and Restated By-Laws of NHTC.(4)
4.1      Specimen Certificate of NHTC's Common Stock.(4)
4.2      Form of Class A Warrant.(4)
4.3      Form of Class B Warrant.(4)
4.4      Form of Warrant Agreement between NHTC and
         Continental Stock Transfer & Trust Company for Class A and B
         Warrants.(4)
4.5      1994 Stock Option Plan.(4)
4.6      1997 Stock Option Plan.(11)
4.7      1998 Stock Option Plan.(11)
4.8      Articles of Amendment of Articles of Incorporation of the
         Company.(6)
4.9      Articles of Amendment of Articles of Incorporation- Series C
         Preferred Stock.(7)
4.10     Articles of Amendment of Articles of Incorporation- Series E
         Preferred Stock.(3)
4.11     Articles of Amendment of Articles of Incorporation- Series F
         Preferred Stock.(3)
4.12     Articles of Amendment of Articles of Incorporation- Series G
         Preferred Stock.(3)
4.13     Articles of Amendment of Articles of Incorporation- Series H
         Preferred Stock.(3)
4.14     Form of Warrant in connection with the Acquisition
         Agreement.(3)
4.15     Articles of Amendment of Articles of Incorporation - Series J Preferred
         Stock (13)
4.16     Stock Option Agreement among NHTC and Terry LaCore *
4.17     Stock Option Agreement among NHTC and Benchmark Consulting Group *
10.17    Convertible Promissory Note among NHTC and Augusta Street LLC *
10.18    Convertible Promissory Note among NHTC and Augusta Street LLC *
10.19    Consulting Agreement between NHTC and Summit Trading Limited *
10.20    Lease for Registrant's Irving, Texas facility *
10.21    Distributor Agreement-40J's *
21.1     List of Subsidiaries.*


--------------
 (*)     Filed herewith.

 (3)     Previously  filed with NHTC's  Proxy  Statement on Schedule 14A,
         dated January 25, 1999.

(4)      Previously filed with Registration Statement No. 33-91184.

(5)      Previously filed with NHTC's Form 8-K dated August 7, 1997.

(6)      Previously filed with NHTC's Form 10-QSB dated June 30, 1997.

(7)      Previously  filed  with  the  Company's Form 10-QSB dated September 30,
         1998.

(8)      Previously  filed  with  the  Company's  Form 10-KSB for the year ended
         December 31, 1996.

(9)      Previously filed with NHTC's Form 10-KSB for the year ended
         December 31, 1998.

(11)     Previously filed with NHTC's Registration Statement, File
         No. 333-80465.

(13)     Previously filed with NHTC's Form 8-K dated March 17, 2000.

         (b)      Reports on Form 8-K

               No reports on Form 8-K were filed during the quarter ended
               December 31, 2001.
                                       22
<PAGE>


                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, we have duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

                           Natural Health Trends Corp.


Signature                                   Title                   Date


/s/ Mark D. Woodburn         President and Chief Financial
--------------------------   Officer                             April 16, 2002
    Mark D. Woodburn         (Principal Financial and Accounting
                              Officer)





     Pursuant to the requirements of Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Signature                                  Title                    Date

/s/ Mark D. Woodburn                   Sole Director             April 16, 2002
-------------------------
    Mark D. Woodburn
                                       23
<PAGE>
                  NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES
                          INDEX TO FINANCIAL STATEMENTS


The following  consolidated  financial statements of Natural Health Trends Corp.
are included in response to Item 7:



                                                                         PAGE


Report of Independent Auditors........................................... F-2

Consolidated Balance Sheet................................................F-3

Consolidated Statements of Operations.....................................F-4

Consolidated Statements of Stockholders' Deficit..........................F-5

Consolidated Statements of Cash Flows.....................................F-6

Notes to Consolidated Financial Statements................................F-7



                                       F-1




<PAGE>

                          INDEPENDENT AUDITORS' REPORT



Board of Directors
Natural Health Trends Corp. and Subsidiaries
Irving, Texas

         We have audited the accompanying consolidated balance sheet of Natural
Health Trends Corp. and Subsidiaries as of December 31, 2001 and the related
consolidated statements of operations, stockholders' deficit and cash flows for
the years ended December 31, 2001 and 2000. These financial statements are the
responsibility of NHTC's management. Our responsibility is to express an opinion
on these financial statements based on our audit.

         We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

         In our opinion, the financial statements referred to above present
fairly, the financial position of Natural Health Trends Corp. and Subsidiaries
as of December 31, 2001 and the results of its operations and its cash flows for
the years ended December 31, 2001 and 2000, in conformity with accounting
principles generally accepted in the United States of America.

        The accompanying financial statements have been prepared assuming that
NHTC will continue as a going concern. The Company had incurred a loss in year
ended December 31, 2000 and as more fully described in Note 2, the Company
anticipates that additional funding will be necessary to sustain the Company's
operations through the fiscal year ending December 31, 2001. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


                                                   /s/ Feldman Sherb & Co., P.C.
                                                       Feldman Sherb & Co., P.C.
                                                    Certified Public Accountants

New York, New York
April 5, 2001


                                       F-2
<PAGE>

                  NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                December 31, 2001


Current Assets
       Cash                                                          $324,315
       Account receivables                                            119,817
       Inventories                                                    924,761
       Prepaid expenses and other current assets                      247,191
                                                             -----------------
                Total Current Assets                                1,616,084

       Restricted cash                                                100,809
       Property and Equipment, net                                    147,919
       Goodwill                                                       207,765
       Website                                                         99,750
       Deposits and Other Assets                                      324,685
                                                             -----------------
                Total Assets                                       $2,497,012
                                                             =================

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:
       Accounts payable                                            $4,035,674
       Accrued expenses                                               146,048
       Accrued bonus payable                                          119,852
       Notes Payable                                                  558,088
       Current portion of long term debt                              171,070
       Other current liabilities                                      107,223
                                                             -----------------
                Total Current Liabilities                           5,137,955

       Long Term Notes Payable                                        292,313
                                                             -----------------
                Total Liabilities                                   5,430,268
                                                             -----------------

Stockholders' Deficit:
       Preferred stock                                              2,324,298
       Common stock                                                   220,938
       Additional paid in capital                                  29,218,823
       Accumulated deficit                                       (34,278,824)
       Deferred compensation                                        (416,250)
       Cumulative currency translation adjustment                     (2,241)
                                                             -----------------
                Total Stockholders' Deficit                       (2,933,256)
                                                             -----------------
            Total Liabilities and Stockholders' Deficit           $2,497,012
                                                             =================



                 See Notes to Consolidated Financial Statements

                                       F-3


<PAGE>




                  NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                              2001                   2000
                                                        ------------------    -------------------

<S>                                                      <C>                  <C>
   Revenues                                              $       24,794,036   $          8,320,105
   Cost of Sales                                                  5,875,970              2,410,096
                                                          ------------------    -------------------
   Gross Profit                                                  18,918,066              5,910,009
   Associate commissions                                         12,449,357              3,681,646
   Write-down of patents and goodwill                                     -              9,002,582
   Selling, general and administrative expenses                   5,186,633              5,777,474
                                                          ------------------    -------------------
   Operating income (loss)                                        1,282,076            (12,551,693)
   Minority Interest in Loss of Subsidiary                          105,686                      -
   Gain (loss) on foreign exchange                                   (5,861)                 9,076
   Other income (expense)                                           (23,229)                     -
   Interest (net)                                                  (156,549)              (260,160)
                                                          ------------------    -------------------
   Income (loss) from continuing operations                       1,202,123            (12,802,777)

   Discontinued Operations:
   Loss on disposal                                                       -                (15,000)
                                                          ------------------    -------------------
   Income (loss) before extraordinary gain                        1,202,123            (12,817,777)
   Extraordinary gain - forgiveness of debt                         820,498              2,148,478
                                                          ------------------    -------------------
   Net income (loss)                                              2,022,621            (10,669,299)

   Preferred stock dividends                                      1,089,231              1,277,251
                                                          ------------------    -------------------
   Net income (loss) to common shareholders             $           933,390   $        (11,946,550)
                                                          ==================    ===================

   Basic income (loss) per common share:
   Continuing Operations                                $              0.01   $              (1.47)
   Discontinued Operations                                             0.00                   0.00
   Extraordinary gain                                                  0.00                   0.22
                                                          ------------------    -------------------
   Net income (loss) to common shareholders             $              0.01   $              (1.25)
                                                          ==================    ===================
   Basic weighted common shares used                            134,206,832              9,588,718
                                                          ==================    ===================

   Diluted income (loss) per common share:
     Continuing Operations                              $              0.00   $             (1.47)
     Discontinued Operations                                           0.00                  0.00
  Extraordinary gain                                                   0.00                  0.22
                                                          ------------------    -------------------
   Net income (loss) to common shareholders             $              0.00   $             (1.25)
                                                          ==================    ===================
   Diluted weighted common shares used                          239,317,475             9,588,718
                                                          ==================    ===================
</TABLE>



                 See Notes to Consolidated Financial Statements.

                                       F-4

<PAGE>
<TABLE>
<CAPTION>
                  NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

                        Common Stock          Preferred Stock                 Accumulated   Foreign    Deferred
                      Shares      Amount    Shares     Amount       APIC        Deficit     Currency     Comp       Total
<S>                  <C>          <C>       <C>     <C>         <C>          <C>                       <C>         <C>
           BALANCE   7,989,846    $7,990    5,164   $5,163,696  $21,443,914  $(23,165,664)        -    $(666,000)  $2,783,936
     -December 31,
              1999
       Issuance of           -         -    1,000    1,000,000      (62,530)            -         -            -      937,470
       Convertible
          Series J
   Preferred stock
       Issuance of           -         -        -            -      100,000      (100,000)        -            -            -
      Common Stock
          warrants
     Conversion of     434,660       435     (359)    (359,154)     385,068       (26,349)        -            -            -
          Series H
   Preferred stock
     Conversion of   3,935,171     3,934        -            -    1,216,053             -         -            -     1,219,987
  Notes Payable to
      Common Stock
     Conversion of   2,984,122     2,984      (94)     (93,232)      90,248             -          -           -             -
          Series E
   Preferred Stock
     Conversion of     279,852       280       (6)      (5,800)       5,520             -          -           -             -
          Series G
   Preferred Stock
       Issuance of           -         -       50       50,000            -             -          -           -        50,000
       Convertible
          Series H
   Preferred stock
     Conversion of     138,318       138       (3)      (3,100)       2,962             -          -           -             -
          Series F
   Preferred stock
        Write down           -         -        -            -     (555,000)            -          -     555,000             -
          deferred
      compensation
          Amortize           -         -        -            -            -             -          -     111,000       111,000
          Deferred
      Compensation
  Foreign currency           -         -        -            -            -             -    (37,203)          -       (37,203)
       translation
   Preferred Stock           -         -        -            -    1,250,902    (1,250,902)         -           -             -
          Dividend
       Adjust Note           -         -        -            -     (133,333)            -          -           -      (133,333)
    Payable due in
      Common Stock
          Net Loss           -         -        -            -            -   (10,669,299)         -           -   (10,669,299)

 BALANCE -December
          31, 2000  15,761,970    15,761    5,752    5,752,410   23,743,804   (35,212,214)   (37,203)          -    (5,737,442)

     Conversion of  35,523,045    35,523     (947)    (946,768)     911,245             -          -           -             -
       Convertible
          Series E
   Preferred stock
     Conversion of  51,559,177    51,559   (1,416)  (1,416,408)   1,364,849             -          -           -             -
       Convertible
          Series F
   Preferred Stock
     Conversion of 15,732,164     15,732     (344)    (344,200)     328,468             -          -           -             -
       Convertible
          Series G
   Preferred Stock
     Conversion of 27,699,368     27,700     (615)    (614,542)     586,842             -          -           -             -
       Convertible
          Series H
   Preferred Stock
       Issuance of          -          -      100      100,000            -             -          -           -       100,000
       Convertible
          Series H
   Preferred stock
          Series J 12,260,376     12,261     (206)    (206,194)     193,933             -          -           -             -
     Conversion of
   Note Payable to 22,887,006     22,887        -            -      400,126             -          -           -       423,013
      Common Stock
 Shares Issued for 21,224,601     21,225        -            -      500,325             -          -        (416,250)  105,300
          Services
         Penalties  8,290,013      8,290        -            -            -             -          -           -         8,290
   Preferred Stock          -          -        -            -    1,089,231    (1,089,231)         -           -             -
         Dividends
  Foreign currency          -          -        -            -            -             -      34,962          -        34,962
       translation
       Acquisition 10,000,000     10,000        -            -      100,000             -           -          -       110,000
        Net Income          -          -        -            -            -     2,022,621           -          -     2,022,621
                   -----------------------------------------------------------------------------------------------------------
BALANCE-December  220,937,720   $220,938    2,324   $2,324,298  $29,218,823  $(34,278,824)    $(2,241) $(416,250)  $(2,933,256)
      31, 2001     ===========================================================================================================
</TABLE>

                 See Notes to Consolidated Financial Statements.
                                       F-5


<PAGE>

                           NATURAL HEALTH TRENDS CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                 Year Ended December 31,
                                          --------------------------------------
                                                2001                  2000
                                          ---------------     ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                           $ 2,022,621            $(10,669,299)

Adjustments to reconcile net income
(loss) to net cash provided by (used
 in) operating activities:
  Loss on dissolution                                 -                  15,000
  Depreciation and amortization                  90,578                 364,400
  Loss on disposal of fixed asset                     -                (666,856)
   Write down of patents and goodwill                 -               9,002,582
   Gain on forgiveness of debt                 (820,498)             (2,148,478)
  Issuance of common stock in
   settlement of interest                             -                   6,059
  Minority interest in loss of subsidiary      (105,686)                      -
  Common stock issued for
   services and penalties                       529,840                       -
     Changes in assets and liabilities:
 Accounts receivable                            (68,049)                355,722
 Inventories                                   (727,692)                863,065
 Prepaid expenses                              (229,599)                157,117
 Deposits and other assets                     (237,646)                (11,432)
 Accounts payable and cash overdraft          1,209,237                 683,473
 Accrued expenses                            (1,332,182)                 52,731
 Accrued consulting contract                          -                 666,000
 Deferred revenue                              (119,413)               (408,418)
 Other current liabilities                     (177,432)                  7,545
                                       -----------------     -------------------
    Total Adjustments                        (1,988,542)              8,938,510
                                       ------------------    -------------------
NET PROVIDED BY (USED IN)
 OPERATING ACTIVITIES                            34,079              (1,730,789)
                                       ------------------    -------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                         (141,199)                 (7,421)
  Proceeds from the sale of
   fixed assets                                       -                  10,533
  Business acquisitions,
   net of cash acquired                               -                 (27,587)
  Purchase of websites                         (133,000)                      -
  Increase in restricted cash                   (27,975)                      -
                                       ------------------    -------------------
NET CASH USED IN INVESTING
 ACTIVITIES                                    (302,174)                (24,475)
                                       ------------------    -------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Increase from cash overdraft                         -                 (43,284)
 Decrease in restricted cash                          -                  79,671
 Proceeds from preferred stock                  100,000               1,050,000
 Proceeds from notes payable
  and long-term debt                            382,216                 512,976
 Payments of notes payable
  and long-term debt                            (33,187)               (169,743)
 Redemption of preferred stock                        -                       -
                                       ------------------    -------------------
NET CASH PROVIDED BY
 FINANCING ACTIVITIES                           449,029               1,429,620
                                       ------------------    -------------------

Effect of Exchange rates                         34,962                       -

NET INCREASE IN CASH                            215,896                (325,644)

CASH, BEGINNING OF YEAR                         108,419                 434,063

                                       -------------------   -------------------
CASH, END OF YEAR                             $ 324,315               $ 108,419
                                       ===================   ===================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
     INFORMATION:

SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES:

 Conversion of preferred stock to common
  stock                                       $3,528,112          $    461,286
                                              ==============    ================
 Conversion of debentures, notes payable
  and related accrued interest
  to common stock                             $  521,550          $  1,219,987
                                              ==============    ================
 Preferred stock dividends                    $1,089,231          $  1,277,251
                                              ==============    ================
 Common stock issued for acquisition          $  110,000          $       -
                                              ==============    ================


                See Notes to Consolidated Financial Statements.
                                       F-6
<PAGE>
                  NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 and 2000.


1. ORGANIZATION

     Natural  Health Trends Corp.  ("NHTC") is a Florida  corporation.  NHTC was
incorporated on December 1, 1988 as "Florida Institute of Massage Therapy, Inc."
and changed its name to "Natural  Health Trends Corp." on June 24, 1993.  NHTC's
common stock,  par value $0.001 per share (the "Common  Stock") is listed on the
Over-the-Counter Bulletin Board (the "OTCBB") under the symbol "NHTC".

     NHTC is a holding  company that operates two  businesses  which  distribute
products  that  promote  health,   wellness  and  sexual  vitality  through  the
multi-level  marketing  ("MLM")  channel.  NHTC's  largest  operation  is Lexxus
International,  Inc.  ("Lexxus"),  a Delaware  corporation and a  majority-owned
subsidiary  of NHTC.  Lexxus  sells  products  that  heighten  mental and sexual
arousal,  particularly  in  women.  NHTC's  other  business,   eKaire.com,  Inc.
("eKaire"),  distributes  nutritional  supplements  aimed at general  health and
wellness  through the Internet and other channels.  eKaire consists of companies
operating  in the U.S.,  in Canada as Kaire  International  Canada Ltd.  ("Kaire
Canada"),  in Australia as Kaire  Nutraceuticals  Australia  Pty.  Ltd.  ("Kaire
Australia"),  in New Zealand as Kaire Nutraceuticals New Zealand Limited ("Kaire
New Zealand"), and in Trinidad as Kaire Trinidad, Ltd. ("Kaire Trinidad").

     In  January   2001,   NHTC  entered  into  a  joint   venture  with  Lexxus
International and formed a new majority-owned subsidiary,  Lexxus International,
Inc.  ("Lexxus"),  a  Delaware  corporation.  The  original  founders  of Lexxus
International received an aggregate of 10,000,000 shares of Common Stock.

     In February 1999, NHTC, through a wholly-owned subsidiary, acquired certain
assets (the "Kaire Assets") of Kaire International, Inc., a Delaware corporation
("KII").  The assets  included,  but not limited  to, the  corporate  name,  all
variations and any other product name,  registered and unregistered  trademarks,
trade names, servicemarks, patents, logos and copyrights of KII, and independent
associate  lists.  In exchange  for the Kaire  Assets,  NHTC made the  following
issuances:

   o      to 11 secured creditors of KII, $2,800,000 aggregate stated value of
          Series F preferred  stock,  par value  $1,000 per share,  of NHTC (the
          "Series F Preferred Stock");

   o      to two secured creditors of KII, $350,000  aggregate stated value of
          Series G preferred  stock,  par value  $1,000 per share,  of NHTC (the
          "Series G Preferred Stock");

   o      to Kaire International, Inc., 5 year warrants to purchase 200,000
          shares of NHTC's Common Stock exercisable at $4.06 per share.

     In March 2001, Global Health Alternatives, Inc., a Delaware corporation and
wholly-owned subsidiary of NHTC ("GHA"), and Ellon, Inc., a Delaware corporation
and  wholly-owned  subsidiary of GHA  ("Ellon"),  filed for Chapter 7 bankruptcy
liquidation in the United States  Bankruptcy  Court of the Northern  District of
Texas.  Neither GHA nor Ellon had operations during the years 2000 or 2001. Both
GHA and Ellon were dissolved in June 2001.

     In the second quarter of 2001, NHTC incorporated  Lexxus  International (SW
Pacific) Pty. Ltd., an Australian  corporation and majority-owned  subsidiary of
NHTC, which does business in Australia ("Lexxus Australia").  In addition,  NHTC
incorporated   Lexxus   International  (New  Zealand)  Limited,  a  New  Zealand
corporation and  majority-owned  subsidiary of NHTC,  which does business in New
Zealand ("Lexxus New Zealand").

     In June 2001, NHTC incorporated Lighthouse Marketing Corporation ("LMC"), a
Delaware  Corporation and a wholly-owned  subsidiary of NHTC. As of December 31,
2001, LMC had not conducted any business, but intends to conduct business in the
future.


                                       F-7
<PAGE>

     In June 2001,  NHTC sold 100% of the Common Stock in Kaire  Nutraceuticals,
Inc., Delaware Corporation,  to a South African firm for a purchase price of the
greater of (i)  $50,000  per year for a period of five  years,  or (ii) for five
years,  a  percentage  of net income based on a  progressive  scale of net sales
figures of the South  African  firm. As of December 31, 2001, no income has been
recognized on this transaction.

     On November 16, 2001, NHTC incorporated  Lexxus  International Co., Ltd., a
corporation   organized   under  the  laws  of  the  Republic  of  China  and  a
majority-owned subsidiary of NHTC ("Lexxus Taiwan").

     On January 28, 2002,  NHTC  incorporated  MyLexxus Europe AG, a corporation
organized under the laws of Switzerland and a majority-owned  subsidiary of NHTC
("Lexxus  Europe").  This  company  manages  the sales of product  into  sixteen
eastern European countries, including Russia.

     In  March  2002,  NHTC  incorporated  Lexxus  International  Co.,  Ltd.,  a
corporation  organized  under  the  laws  of  Hong  Kong  and  a  majority-owned
subsidiary of NHTC ("Lexxus Hong Kong").


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          A.  Principles  of  Consolidation  -  The  accompanying   consolidated
          financial  statements  include the accounts of Natural  Health  Trends
          Corp. and its subsidiaries.  All material  inter-company  transactions
          have been eliminated in consolidation.

          B.  Accounts  Receivable  -  Accounts  receivable  are  stated  net of
          allowance for doubtful accounts of approximately $0.

          C.  Inventories  -  Inventories  consisting  primarily of  nutritional
          supplements  and "quality of life" products are stated at the lower of
          cost or  market.  Cost is  determined  using the  first-in,  first-out
          method.

          D.  Property  and  Equipment - Property and  equipment  are carried at
          cost. Depreciation is computed using the straight-line method over the
          useful lives of the various assets.

          E.  Cash  Equivalents  - Cash  equivalents  consist  of  money  market
          accounts and commercial paper with an initial term of fewer than three
          months.  For purposes of the statement of cash flows,  NHTC  considers
          highly  liquid debt  instruments  with  original  maturities  of three
          months or less to be cash equivalents.

          F. Earnings (Loss) Per  Share-Accounting  Standards No. 128, "Earnings
          Per Share"  SFAS 128  requires a  presentation  of "Basic"  and (where
          applicable)  "Diluted" earnings per share.  Generally,  Basic earnings
          per share is computed on only the  weighted  average  number of common
          shares  actually  outstanding  during  the  period,  and  the  Diluted
          computation  considers  potential  shares  issuable  upon  exercise or
          conversion  of other  outstanding  instruments  where  dilution  would
          result.  Diluted  earnings  per share is not  being  shown in the year
          ended  December 31, 2000 due to the fact that this year has a net loss
          and the conversion of the preferred stock and Common Stock outstanding
          during that year would be anti-dilutive.

          G. Accounting  Estimates - The preparation of financial  statements in
          accordance  with generally  accepted  accounting  principles  requires
          management to make estimates and assumptions  that affect the reported
          amounts  of  assets  and  liabilities  at the  date  of the  financial
          statements  and the reported  amounts of revenues and expenses  during
          the reported period. Actual results could differ from those estimates.

          H.  Income   Taxes-Pursuant  to  Statement  of  Financial   Accounting
          Standards No. 109 ("SFAS 109")  "Accounting  for Income  Taxes",  NHTC
          accounts  for  income  taxes  under the  liability  method.  Under the
          liability  method,  a deferred tax asset or  liability  is  determined
          based upon the tax effect of the  differences  between  the  financial
          statement and tax basis of assets and  liabilities  as measured by the
          enacted rates which will be in effect when these differences reverse.


                                       F-8
<PAGE>

          I. Fair Value of Financial  Instruments-The  carrying amounts reported
          in the balance sheet for cash, receivables,  accounts payable, accrued
          expenses,  and  notes  payable  approximate  fair  value  based on the
          short-term maturity of these instruments.

          J. Stock Based  Compensation-NHTC  accounts for stock  transactions in
          accordance  with APB Opinion No. 25,  "Accounting  For Stock Issued To
          Employees."  In  accordance  with  Statement of  Financial  Accounting
          Standards  No.  123  ("SFAS   123"),   "Accounting   For   Stock-Based
          Compensation,"  NHTC adopted the pro forma disclosure  requirements of
          SFAS 123.

          K. Impairment of Long-Lived  Assets-NHTC  reviews  long-lived  assets,
          certain  identifiable assets and goodwill related to those assets on a
          quarterly basis for impairment  whenever  circumstances and situations
          change such that there is an indication that the carrying  amounts may
          not be recovered. At December 31, 2000, NHTC recorded a charge against
          patents, customer lists and goodwill upon such review.

          L. Basis of  Presentation - NHTC had a working  capital  deficiency of
          approximately  $3,522,000  and  $5,864,000 as of December 31, 2001 and
          2000,  respectively,  and had  recorded  net  losses of  approximately
          $10,669,000   for  the  year  ended  December  31,  2000,  that  raise
          substantial doubt about NHTC's ability to continue as a going concern.
          NHTC's  continued  existence  is  dependent  on its  ability to obtain
          additional  debt or equity  financing  and to  generate  profits  from
          operations.

          M.  Royalty  Expense-Royalties  that are  incurred  on a per unit sold
          basis  are  included  in Cost of  Sales.  Additional  royalty  amounts
          incurred to meet contractual minimum levels are classified as Selling,
          General and Administrative Expenses.

          N.  Reclassifications-NHTC  has  reclassified  certain expenses in its
          consolidated statements of operations for the years ended December 31,
          2001 and 2000 as a result of the  closure of Kaire  Europe and related
          facilities.  These  changes had no  significant  impact on  previously
          reported results of operations or stockholders' equity.

          O.   Foreign   Currency   Translations-Assets   and   liabilities   of
          subsidiaries  are  translated at the rate of exchange in effect on the
          balance sheet date; income and expenses of subsidiaries are translated
          at the average rates of exchange  prevailing during the year or period
          then ended.  The related  translation  adjustments  are reflected as a
          cumulative  translation   adjustment  in  consolidated   stockholders'
          equity.  Foreign currency gains and losses resulting from transactions
          are  included  in  results  of  operations  in the period in which the
          transaction occurred.

          P.  Revenue  Recognition  - The  subsidiaries  of NHTC  sell  products
          directly to  independent  distributors.  Sales are  recorded  when the
          products are shipped.

          Q.  Concentration of Risk-NHTC  maintains its cash accounts in several
          bank  accounts.  Accounts  in the  United  States  are  insured by the
          Federal Deposit Insurance Corporation ("FDIC") up to $100,000.  NHTC's
          cash  balance  in some of its  bank  accounts  generally  exceeds  the
          insured limits.

          Lexxus and eKaire sell products through network  marketers  throughout
          the United States,  Canada, New Zealand,  Australia,  and Trinidad and
          Tobago.  Credit is extended  for returned  checks  and/or until credit
          card purchases have cleared the bank.

          Credit  losses,  if  any,  have  been  provided  for in the  financial
          statements and are based on management's expectations. NHTC's accounts
          receivable  are subject to  potential  concentrations  of credit risk.
          NHTC does not believe that it is subject to any unusual or significant
          risk, in the normal course of business.





                                       F-9
<PAGE>


          R. Restricted Cash - NHTC is required to maintain three (3) restricted
          cash accounts (i) two with credit card processing  companies,  one for
          each subsidiary. The primary purpose of these accounts is to provide a
          reserve for potential  uncollectible amounts and chargebacks by Lexxus
          and eKaire credit card customers. The credit card processing companies
          may periodically  increase the restricted cash account.  The amount on
          deposit  is  calculated  at 2% of net sales  over a rolling  six month
          average and (ii) a third account is maintained with a Canadian bank as
          security  for a  bank  drafting  process  utilized  by  eKaire  in the
          ordinary  course  of  business.

          S. Recently Issued  Accounting  Standards-In  July 2001, the Financial
          Accounting  Standards  Board  ("FASB")  issued  Statement on Financial
          Accounting  Standards No. 141 ("SFAS 141"),  "Business  Combinations."
          SFAS No. 141 requires the purchase  method of accounting  for business
          combinations   initiated  after  June  30,  2001  and  eliminates  the
          pooling-of-interest  method.  NHTC  believes that the adoption of SFAS
          No.  141  will  not  have  a  significant   impact  on  the  financial
          statements.

          In July 2001, FASB issued Statement of Financial  Accounting standards
          Board No. 142,  "Goodwill  and Other  Intangible  Assets",  ("SFAS No.
          142"),  which is effective for fiscal years  beginning  after December
          15, 2001. SFAS 142 requires, among other things, the discontinuance of
          goodwill  amortization.  In addition, the standard includes provisions
          upon adoption for the  reclassification of certain existing recognized
          intangibles as goodwill,  reassessment of the useful lives of existing
          recognized intangibles, reclassification of certain intangibles out of
          previously  reported  goodwill and the testing for the  impairment  of
          existing goodwill and other intangibles.  NHTC is currently  assessing
          but has not yet determined the impact of SFAS No. 142 on the financial
          position and results of operations.

          In August 2001,  the FASB issued  Statement  of  Financial  Accounting
          standards   Board  No.   143,   "Accounting   for   Asset   Retirement
          Obligations", (SFAS No. 143"), which is effective for all fiscal years
          beginning after June 15, 2002; however,  early adoption is encouraged.
          In August 2001,  the FASB issued  Statement  of  Financial  Accounting
          Standards Board No. 144, "Accounting for the Impairment or Disposal of
          Long-Lived  Assets",  ("SFAS  144").  This  statement is effective for
          fiscal years beginning after December 15, 2001 and supercedes SFAS 121
          while retaining many of its requirements.

          In October  2001,  the FASB issued  Statement of Financial  Accounting
          Standards  No. 144 ("SFAS  144"),  "Accounting  for the  Impairment or
          Disposal  of  Long-Lived   Assets,"  which  supercedes   Statement  of
          Financial Accounting  Standards No. 121 ("SFAS 121"),  "Accounting for
          the Impairment of Long-Lived  Assets and for  Long-Lived  Assets to be
          Disposed Of" and certain  provisions of APB Opinion No. 30, "Reporting
          Results of Operations - Reporting the Effects of Disposal of a Segment
          of a Business and  Extraordinary,  Unusual and Infrequently  Occurring
          Events and Transactions."  SFAS 144 requires that long-lived assets to
          be disposed of by sale, including discontinued operations, be measured
          at the  lower of  carrying  amount or fair  value,  less cost to sell,
          whether   reported  in  continuing   operations  or  in   discontinued
          operations.  SFAS 144 also  broadens  the  reporting  requirements  of
          discontinued  operations  to include all  components of an entity that
          have  operations  and cash flows  that can be  clearly  distinguished,
          operationally and for financial reporting  purposes,  from the rest of
          the entity.  The provisions of SFAS 144 are effective for fiscal years
          beginning  after  December  15,  2001.  Management  believes  that the
          implementation  of this standard will have no impact on NHTC's results
          of operations and financial position.







                                      F-10


<PAGE>

3. PROPERTY AND EQUIPMENT

         Property and Equipment consisted of the following:

                                        Estimated Useful
     Type of Property or Equipment           Lives                  Amount
  -------------------------------      ------------------      -----------------
Equipment, furniture and
fixtures                                      5 to 7        $       113,514
Computers and peripherals                       3                   105,694
Software                                     3 to 5                   4,307
Leasehold improvements                       3 to 5                   3,489
                                                                ----------------
Property and Equipment                                      $       227,004
Less: Accumulated depreciation                                      (79,085)
                                                                ----------------
Property and Equipment, net                                 $       147,919
                                                                ================



4. NOTES PAYABLE

         Notes Payable consisted of the following at December 31, 2001:
<TABLE>
<CAPTION>

         Note Payable Amount

<S>                           <C>                    <C>                                <C>
      (i)  Augusta Street LLC $100,000 note payable, 10% interest                       $ 100,000
     (ii)  Augusta Street LLC $138,000 note payable, 4.75% interest                     $ 138,000
    (iii)  Naline Thompson $50,000 note payable, 12% interest                             $50,000
           Merrill  Corporation  $145,496  note payable,  8% interest,  due upon        $ 145,496
           demand
           Aloe Commodities International, Inc.,
           non-interest bearing, due upon demand                                         $ 52,500
     (iv)  Lightfoot                                                                     $ 40,967
           Life Dynamics, Inc. note payable, interest-free                                $31,125
                                                                                        ---------
                                      Notes Payable                                     $ 558,088
                                                                                        =========
</TABLE>


(i)Payee of the note is  entitled,  at its option,  to convert at any time,  the
principal amount of this note at a conversion price equal to 75% of the five-day
average  closing  bid  price  of the  Common  Stock  for the five  trading  days
immediately  preceding the applicable conversion date. The beneficial conversion
feature of $ 33,333 was recorded in the financial  statements.  This note is due
upon demand.




                                      F-11


<PAGE>

(ii)Payee of the note is entitled,  at its option,  to convert at any time,  the
principal amount of this note at a conversion price equal to 75% of the five-day
average  closing  bid  price  of the  Common  Stock  for the five  trading  days
immediately  preceding the applicable conversion date. The beneficial conversion
feature of $ 46,000 was recorded in the financial  statements.  This note is due
December 31, 2002.

(iii) The  investor  received  200,000  shares of NHTC Common Stock as well as a
warrant to purchase  200,000  shares of the Common  Stock of NHTC at an exercise
price of $0.05 per share for three years.

(iv) Note due to  Michael  and Linda  Lightfoot,  bears  interest  at prime plus
1.75%, monthly payments are being made.

5. LONG-TERM DEBT

         Long-term debt consisted of the following at December 31, 2001:


         Debt Instrument                                            Amount
         -------------------------------------                  -------------
(i)      Samantha Haimes, $325,000, 10% interest                  $ 296,892
(ii)     State of Texas, $114,278, 7% interest                      $96,738
(iii)    Robert L. Richards, interest-free                          $69,753
                                                                -------------
              Total Debt                                          $ 463,383
              Less: current portion of Long-term Debt             $ 171,070
                                                                -------------
              Long-term Debt                                      $ 292,313
                                                                =============

(i) NHTC is making monthly  payments of $12,000 through July 2002 and thereafter
$15,000  per  month  until  repaid in full  with  interest.  (ii) NHTC is making
monthly  payments of $2,200  until repaid in full with  interest.  (iii) NHTC is
making monthly payments of $1,333 until repaid in full with interest.


                Date                       Amount
               -----                   -------------
                2002                     $ 171,070
                2003                     $ 199,517
                2004                       $39,134
                2005                       $40,807
                2006 and thereafter        $12,855



As of December 31, 2001, NHTC owed approximately  $70,000 to Robert L. Richards,
a former  president and a director,  in connection with  liabilities  assumed in
connection with the KII acquisition.

                                      F-12


<PAGE>

6.  PAYROLL TAX LIABILITIES

    During  2000 and 1999,  Kaire  Nutraceuticals,  Inc.  did not make  payroll
tax deposits  with the Internal  Revenue  Service  ("IRS") and the various state
taxing  authorities on a timely basis. Kaire  Nutraceuticals,  Inc. did file all
required payroll tax returns. This liability of approximately  $630,000 is fully
reserved for in the financial statements.

7. STOCKHOLDERS' EQUITY

     A. Common Stock - NHTC is authorized to issue 500,000,000  shares of Common
     Stock, $.001 par value.

     B.  Preferred  Stock - NHTC is  authorized  to issue a maximum of 1,500,000
     shares of $1,000  par value  preferred  stock,  in one or more  series  and
     containing  such  rights,  privileges  and  limitations,  including  voting
     rights, dividend rates, conversion privileges, redemption rights and terms,
     redemption prices and liquidation preferences, as NHTC's board of directors
     may, from time to time, determine.

     Series E Preferred Stock.

          In August 1998,  NHTC issued 1,650 shares of Series E Preferred  Stock
     with a  stated  value  of  $1,000  per  share  realizing  net  proceeds  of
     $1,439,500.  The  preferred  stock and the  accrued  dividends  thereon are
     convertible  into shares of NHTC's Common Stock at a conversion price equal
     to the lower of 75% of the average  closing  bid price of the Common  Stock
     for the five trading days immediately preceding the conversion date or 100%
     of the  closing  bid price on the day of  funding.  This series of stock is
     convertible  commencing  60  days  after  issuance.  Due to the  beneficial
     conversion  features in the issuance of this series of preferred  stock, an
     imputed dividend of $550,000 has been recorded.

          Pursuant  to the terms of the Series E Preferred  Stock,  if NHTC does
     not have an effective  registration statement within 120 days subsequent to
     the issuance of Series E Preferred  Stock,  a 2% penalty on the face amount
     of $1,650,000  accrues for every 30 days without an effective  registration
     statement.  As of the year ended  December  31,  2000,  NHTC had recorded a
     charge of $635,471 due to non-compliance with this clause.

          In the year ended December 31, 2000, $103,715 in accrued dividends was
     recorded for the period such stock was outstanding.

          During the year ended December 31, 2000,  NHTC had converted 93 shares
     of the Series E Preferred Stock into 2,984,122 shares of Common Stock.

          In the year ended December 31, 2001,  $33,780 in accrued dividends was
     recorded for the period such stock was outstanding.

          During the year ended December 31, 2001, NHTC had converted 947 shares
     of the Series E Preferred Stock into 35,523,045 shares of Common Stock.

     Series F Preferred Stock.

          In February 1999, NHTC issued 2,800 shares of Series F Preferred Stock
     with  a  stated  value  of  $1,000  per  share  realizing  a net  value  of
     $2,800,000.  This  issuance  is  in  accordance  with  the  asset  purchase
     agreement of KII. The  preferred  stock pays a dividend at 6% per annum and
     is payable upon conversion into either cash or common stock.  The preferred
     stock and the accrued  dividends thereon are convertible into shares of the
     Company's  Common Stock at a  conversion  price equal to 95% of the average
     closing  bid  price  of  the  Common  stock  for  the  three  trading  days
     immediately  preceding the date on which NHTC receives notice of conversion
     from a holder. NHTC is permitted at any time, on five days prior to written
     notice,  to redeem the outstanding  preferred  stock at a redemption  price
     equal to the stated value and the accrued dividends thereon.

                                      F-13
<PAGE>


          In the year ended  December 31, 2000,  NHTC had  converted 3 shares of
     the Series F Preferred Stock into 138,318 shares of Common Stock.

          In the year ended December 31, 2001,  $32,732 in accrued dividends was
     recorded for the period such stock was outstanding.

          During the year ended  December 31,  2001,  NHTC had  converted  1,416
     shares of the Series F  Preferred  Stock into  51,559,177  shares of Common
     Stock.

     Series G Preferred Stock.

          In February 1999,  NHTC issued 350 shares of Series G Preferred  Stock
     with a stated value of $1,000 per share  realizing a net value of $350,000.
     The  preferred  stock  pays a  dividend  at the rate of 6% per  annum.  The
     preferred  stock and the accrued  dividends  thereon are  convertible  into
     shares of NHTC's  Common  Stock at a  conversion  price equal to 95% of the
     average  closing bid price of the common  stock for the three  trading days
     immediately  preceding  the date on which the  Company  receives  notice of
     conversion.  NHTC is  permitted  at any time,  on five days  prior  written
     notice,  to redeem the outstanding  preferred  stock at a redemption  price
     equal to the stated value and the accrued dividends thereon.

          During the year ended  December 31, 2000,  NHTC had converted 6 shares
     of the Series G  Preferred  Stock and  accrued  dividends  of $20,942  into
     279,852 shares of Common Stock.

          In the year ended December 31, 2001,  $7,198 in accrued  dividends was
     recorded for the period such stock was outstanding.

          During the year ended December 31, 2001, NHTC had converted 344 shares
     of the Series G Preferred Stock into 15,732,164 shares of Common Stock.

     Series H Preferred Stock.

          In March and April  1999,  the Company  sold 1,400  shares of Series H
     Preferred  Stock  with a stated  value of $1,000  per share  realizing  net
     proceeds of $1,201,015.  In October 2000, the Company sold an additional 50
     shares of Series H Preferred  Stock with a stated value of $1,000 per share
     realizing net proceeds of  $43,500.The  preferred  stock pays a dividend at
     the rate of 8% per annum.  The  preferred  stock and the accrued  dividends
     thereon are  convertible  into shares of the  Company's  common  stock at a
     conversion price equal to the lower of the closing bid price on the date of
     issuance  or 75% of the average  closing bid price of the common  stock for
     the three trading days immediately  preceding the date on which the Company
     receives notice of conversion from a holder.

          In April 2001,  NHTC issued 50 shares of Series H Preferred  Stock for
     $50,000  realizing  net proceeds of $43,500.  The Series H Preferred  Stock
     pays  dividends of 10% per annum and is  convertible  into shares of Common
     Stock at the lower of the closing bid price on the  conversion  date or 75%
     of the market value of the Common Stock on the conversion date.

          In May 2001,  NHTC  issued 50 shares of Series H  Preferred  Stock for
     $50,000  realizing  net proceeds of $43,500.  The Series H Preferred  Stock
     pays  dividends of 10% per annum and is  convertible  into shares of Common
     Stock at the lower of the closing bid price on the  conversion  date or 75%
     of the market value of the Common Stock on the conversion date

          Pursuant  to the terms of the Series H Preferred  Stock,  if NHTC does
     not have an effective  registration statement within 120 days subsequent to
     the issuance of Series H Preferred  Stock,  a 2% penalty on the face amount
     of $1,400,000  accrues for every 30 days without an effective  registration
     statement.  As of the year ended  December  31,  2001,  NHTC had recorded a
     charge of $12,000 due to non-compliance with this clause.


                                      F-14
<PAGE>


          In the year ended December 31, 2000, NHTC recorded an imputed dividend
     of  $16,667  due to the  beneficial  conversion  features  in the  Series H
     Preferred  Stock. An additional  $49,686 in accrued  dividends was recorded
     for the period such stock was outstanding.

          During the year ended December 31, 2000, NHTC had converted 359 shares
     of the Series H Preferred Stock into 434,660 shares of Common Stock.

          In the year ended  December  31,  2001,  NHTC  recorded an  additional
     $19,611 in accrued  dividends  was  recorded  for the period such stock was
     outstanding.

          During the year ended December 31, 2001, NHTC had converted 615 shares
     of the Series H Preferred Stock into 27,699,368 shares of Common Stock.

     Series J Preferred Stock.

          In March 2000, NHTC sold 1,000 shares of Series J Preferred Stock with
     a stated value of $1,000 per share realizing net proceeds of $936,000.  The
     preferred  stock pays a dividend  at the rate of 10% per annum,  payable in
     cash or stock  at  NHTC's  option.  The  preferred  stock  and the  accrued
     dividends thereon are convertible into shares of the Company's common stock
     at a  conversion  price  equal to the lower of the closing bid price on the
     date of  issuance  or 70% of the  average  closing  bid price of the common
     stock for the  lowest  three  trading  days  during  the  twenty day period
     immediately  preceding the date on which NHTC receives notice of conversion
     from a holder.

          Pursuant  to the terms of the Series J Preferred  Stock,  if NHTC does
     not have an effective  registration statement within 120 days subsequent to
     the issuance of Series J Preferred  Stock,  a 2% penalty on the face amount
     of $1,000,000  accrues for every 30 days without an effective  registration
     statement.  As of the year ended  December  31,  2001,  NHTC had recorded a
     charge of $411,890 due to non-compliance with this clause.

          In the year ended  December  31,  2001,  NHTC  recorded an  additional
     $17,051 in accrued  dividends  was  recorded  for the period such stock was
     outstanding.

          During the year ended December 31, 2001, NHTC had converted 206 shares
     of the Series J Preferred Stock into 12,260,376 shares of Common Stock.


     C.  Convertible  Debentures - During  2001,  NHTC  converted  approximately
     $385,409 of its  promissory  notes,  plus accrued  interest of $37,604 into
     22,887,006 shares of Common Stock.

          NHTC  issued  500,000  shares of Common  Stock to  certain  management
     employees in April 2001 and recorded $30,500 of compensation expense.

          NHTC issued  200,000  shares of Common Stock in a verbal  agreement to
     Capital  Development  S.A., a  consulting  firm in August 2001 and recorded
     $11,800 of consulting expense.

          In August  2001,  NHTC  issued  20,000,000  shares of Common  Stock to
     Summit Trading Ltd., a consulting  firm, as part of a long-term  consulting
     agreement.  This issuance was recorded as deferred compensation and will be
     amortized over the life of the agreement.

          In  January  2001,  NHTC  entered  into a joint  venture  with  Lexxus
     International   and  formed  a  new   majority-owned   subsidiary,   Lexxus
     International,  Inc.,  a Delaware  corporation.  The  original  founders of
     Lexxus  International  received an aggregate of 10,000,000 shares of NHTC's
     Common Stock, par value of $0.001.



                                      F-15
<PAGE>

8.   INCOME TAXES

     NHTC  accounts for income taxes under the  provisions of SFAS 109. SFAS No.
     109 requires the  recognition  of deferred tax assets and  liabilities  for
     both the expected impact of differences between the financial statement and
     tax  basis of assets  and  liabilities,  and for the  expected  future  tax
     benefit to be derived from tax loss and tax credit carryforwards.  SFAS 109
     additionally requires the establishment of a valuation allowance to reflect
     the likelihood of realization of deferred tax assets. At December 31, 2001,
     NHTC had net deferred  tax assets of  approximately  $4,400,000.  NHTC has
     established a valuation  allowance for the full amount of such deferred tax
     assets at December 31, 2001, as management of the Company has not been able
     to  determine  that it is more likely than not that the deferred tax assets
     will be realized.


     The following table reflects  NHTC's deferred tax assets and  (liabilities)
     at December 31, 2001:

                                                             December 31, 2001
                                                             -----------------
           Net operating loss deduction                   $       4,400,000
           Valuation allowance                                   (4,400,000)
                                                             -----------------
                                                          $           --
                                                             =================

     The provision for income taxes (benefits) differs from the amount computed
     by applying the statutory federal income tax rate to income loss before
     income taxes as follows:

<TABLE>
<CAPTION>
                                                                       For the year Ended
                                                                          December 31,
                                                       ---------------------------------------------------
                                                                2001                         2000
                                                       ------------------------       --------------------
<S>                                                 <C>                           <C>
      Income tax (benefit) computed at statutory    $               (1,500,000)   $            (3,500,000)
      rate
      Effect of permanent differences                                1,500,000                  3,500,000
                                                       ------------------------       --------------------
      Provision for income taxes (benefit)          $                     -       $                  -
                                                       ========================       ====================

</TABLE>

     The net operating loss  carryforward at December 31, 2001 was approximately
     $12,000,000 and expires in the years 2012 to 2020.


9. COMMITMENTS AND CONTINGENCIES

A.  Leases

          NHTC  utilizes  approximately  1,000  square  feet of office  space in
     Irving,  Texas on an as needed  basis,  through an  arrangement  with Regus
     Business Centre which provides business solutions for companies.  NHTC pays
     a minimum  annual  rental  fee of $2,100.  Lexxus  leases an  aggregate  of
     approximately  16,000 square feet of office and warehouse  space in Dallas,
     Texas. The lease term is 38 months, expiring on September 30, 2004, and the
     current rent is approximately $151,500 per year. Additional warehousing for
     Lexxus is located in Branson,  Missouri where Lexxus utilizes approximately
     35,000   square  feet  of  warehouse   space.   The  lease  term  is  on  a
     month-to-month basis at a rent of $18,000 per year. The Canadian office and
     warehouse  of Lexxus and eKaire  leases  office  space in Langley,  British
     Columbia,  totaling  approximately  3,600 square feet. The lease term is 36
     months,  expiring on December 1, 2004 and the current rent is approximately
     $25,000 per year.

                                      F-16
<PAGE>


          Kaire  Australia,  Kaire New Zealand,  Lexxus Australia and Lexxus New
     Zealand lease office space and warehouse  facilities of approximately 2,475
     square feet in Queensland, Australia. The lease term is 60 months, expiring
     on January 1, 2007, and the current rent is approximately $20,000 per year.

          In March 2002,  Lexxus Taiwan  entered into a two-year lease for 6,314
     square feet of office space at a current rent of approximately  $75,000 per
     year.

          Kaire Trinidad leases  approximately 1,100 square feet of office space
     in downtown Port-of-Spain,  Trinidad. The lease term is on a month-to-month
     basis.

          NHTC is currently in the process of finding  adequate office space for
     its subsidiaries in Hong Kong and Russia.

          NHTC believes that such  properties  are suitable and adequate for the
     current operating needs.

B. Litigation

          On August 4, 1997,  Samantha Haimes brought an action in the Fifteenth
     Judicial Circuit of Palm Beach County,  Florida,  against NHTC and National
     Health Care Centers of America,  Inc., a  wholly-owned  subsidiary of NHTC.
     NHTC asserted counterclaims against Samantha Haimes and Leonard Haimes. The
     complaint  arises out of the  defendants'  alleged  breach of  contract  in
     connection  with NHTC's  natural  health care center,  which was located in
     Boca  Raton,  Florida.  NHTC  agreed to settle  such  actions for shares of
     Common  Stock  with a fair  market  value of  $325,000,  but not less  than
     125,000  shares of Common  Stock and agreed to  register  such  shares.  On
     October 10, 2000, due to noncompliance with the settlement,  a judgment was
     taken against NHTC in the amount of $325,000 plus interest.  On October 12,
     2001,  NHTC entered into a payment  arrangement to settle this  obligation.
     NHTC has  recorded a  liability  of $325,000  plus  interest at ten percent
     (10%) per annum, which is included in the financial statements for the year
     ended December 31, 2001.

          On July 10, 2000, the State of Texas obtained a judgment  against NHTC
     in the amount of $109,170 for unpaid sales taxes, penalties,  interest, and
     attorney fees.  NHTC has entered into a voluntary  payment  arrangement and
     has recorded a liability of $109,170  plus  interest at seven  percent (7%)
     per annum, which is included in the financial statements for the year ended
     December 31, 2001.

          On December 29, 2000, Merrill Corporation  obtained a judgment against
     NHTC in the amount of  $145,497,  plus  interest at eight  percent (8%) per
     annum,  which is included in the  financial  statements  for the year ended
     December 31, 2001.

          On October  30,  2001,  Omni Group LLC filed an action in the State of
     Vermont, Addison Superior Court, against NHTC alleging that NHTC tortuously
     interfered with existing contractual relationships and made representations
     about  Omni  Group  that are  untrue.  Omni  Group is seeking $5 million in
     compensatory damages and $5 million in punitive damages.  NHTC is defending
     this action. NHTC filed an answer on April 2, 2002 in which NHTC denied any
     wrongdoing.

          On  November  22,  2001,  Pfizer,  Inc.  filed an action in the United
     States  District  Court,  Southern  District  of New  York  against  Lexxus
     alleging that Lexxus'  distribution  and marketing of Viacreme TM infringes
     on Pfizer's federally registered trademark,  Viagra (R). Pfizer's complaint
     alleges federal false designation of origin and unfair competition, federal
     trademark  dilution,  federal  false  advertising  and unfair  competition,
     common law trademark  infringement,  trademark  dilution and deceptive acts
     and practices. NHTC is defending this action and is currently in settlement
     discussions with Pfizer.

          On March 21,  2002,  NFL  Properties,  Inc.  brought  an action in the
     Supreme  Court of the County of Onondaga  in the State of New York  against
     NHTC  and  Natural  Health  Laboratories  in the  amount  of  approximately
     $126,000 for alleged breach of contract.  NHTC's  management  believes that
     the action  naming NHTC as a defendant was a case of mistaken identity, and
     is currently trying to have NHTC removed as a defendant in the action.



                                      F-17
<PAGE>


C. Major Supplier

          NHTC currently buys all of its Pycnogenol(R),  an important  component
     of its products, from a single supplier, Natural Health Sciences, L.L.C.

          Although  there  are  a  limited  number  of   manufacturers  of  this
     component,  management  believes that other suppliers could provide similar
     components  on  comparable  terms.  NHTC does not maintain any  contractual
     commitments or similar arrangements with other suppliers.

          NHTC purchases its products from  manufacturers and suppliers on an as
     needed  basis.  Should these  relationships  terminate,  NHTC's  supply and
     ability to meet consumer demands would not be adversely affected.

10. STOCK OPTION PLANS AND WARRANTS

          The  following  table  summarizes  the changes in options and warrants
     outstanding,  and the related  exercise  price for shares of NHTC's  Common
     Stock:

<TABLE>
<CAPTION>

                                                    Weighted                                        Weighted
                                                     Average                                       Exercisable
                                                    Exercise                                        Average
                                                   Price Stock                                      Exercise
                                      Shares         Options        Exercisable      Shares          Price           Warrants
                                  -------------  --------------   -------------- ------------    -------------  --------------
Outstanding at
<S>      <C> <C>                        <C>     <C>                     <C>          <C>       <C>                  <C>
December 31, 1999                       339,100 $          6.01         339,100      2,813,257 $         7.00       2,813,257
  Granted                                     -               -               -        138,889           1.44         138,889
  Cancelled                           (295,000)            3.50       (295,000)              -              -               -
                                  -------------  --------------   -------------- ------------    -------------  --------------
Outstanding at
December 31, 2000                        44,100 $         15.68          44,100      2,952,146 $         6.74       2,952,146
  Granted                             6,200,000             .01       6,200,000              -              -               -
  Cancelled                                   -               -               -              -              -               -
                                  -------------  --------------   -------------- ------------    -------------  --------------
Outstanding at
December 31, 2001                    6,244,100  $           .12       6,244,100      2,952,146 $         6.74       2,952,146

</TABLE>

     The following table summarizes information about exercisable stock options
and warrants at December 31, 2001:

<TABLE>
<CAPTION>

                                                   Remaining       Average        Average
                   Range of          Number        Contractual     Exercise       Number       Exercise
                 Exercise Price      Outstanding   Life             Price        Exercisable    Price
               ----------------------------------------------------------------------------------------
<S>              <C>     <C>            <C>         <C>             <C>            <C>          <C>
     Options:    $ .01 - 101.20      6,244,100     1- 10             $ .12      6,244,100       $  .12
     Warrants:   $1.00 - 113.75      2,952,146     0 - 5             $6.74      2,952,146        $6.74

</TABLE>


                                      F-18

<PAGE>

          For  disclosure  purposes in  according  with  Statement  of Financial
     Accounting  Standards  123  ("SFAS  123"),  the fair  value of  options  is
     estimated on the date of grant using the Black-Scholes option pricing model
     with the  following  weighted  average  assumptions  used for stock options
     granted  during the years ended  December  31, 2001 and 2000  respectively:
     annual dividends of $0; expected volatility of 50%; risk free interest rate
     of 7% and expected  life of 10 years.  The  weighted  average fair value of
     stock options granted during the years ended December 31, 2001 and 2000 was
     $0.12 and $0,respectively. If NHTC had recognized compensation cost of
     stock options in accordance  with SFAS 123, NHTC's proforma income (loss)
     and net income (loss) per share would have been as follows:

                                                      Year Ended December 31,
                                                --------------------------------
                                                  2001                  2000
                                                -----------         ------------
Net income (loss) to Common Stockholders
  As reported                                  $  2,022,621        $(10,396,557)
  Pro forma                                    $  1,947,621        $(10,525,683)
Net income (loss) from continuing operations:
  As reported                                  $  1,202,123        $(12,140,043)
  Pro forma                                    $  1,127,123        $(12,269,169)
Net income (loss) per share to common
stockholders
  Basic
   As reported                                    $0.01             $(1.04)
   Pro forma                                      $0.01             $(1.10)
  Diluted
   As reported                                    $0.00             $(1.26)
   Pro forma                                      $0.00             $(1.72)
Net income (loss) per share to common
 stockholders continuing operations:
  Basic
   As reported                                    $0.01             $(1.26)
   Pro forma                                      $0.01             $(1.72)
  Diluted
   As reported                                    $0.00             $(1.26)
   Pro forma                                      $0.00             $(1.72)


11. FORGIVENESS OF DEBT

          During  the year  ended  December  31,  2001 NHTC  realized  a gain of
     approximately $820,000 due to the sale of Kaire Nutraceuticals, Inc.

          During  the year  ended  December  31,  2000 NHTC  realized  a gain of
     approximately  $2,148,000  due to the filing of Chapter 7 bankruptcy by GHA
     and its various wholly-owned subsidiaries.


12. FOREIGN SALES

          NHTC has substantially  increased its  international  presence both in
     sales and long-lived assets.  NHTC's sales and long-lived assets by country
     as of December 31, 2001 are as follows:


<TABLE>
<CAPTION>
                                      United         Australia and           Other
                                      States         New Zealand         Subsidiaries     Consolidated
<S>                                    <C>                <C>                      <C>            <C>
Sales to unaffiliated customers      $22,535,109        $2,258,927           $-0-         $24,794,036

Long-lived assets at   December 31,
   2001                                 $825,904           $55,026           $-0-            $880,930

</TABLE>

13. FOURTH QUARTER ADJUSTMENTS

        Fourth quarter adjustments include the following:

           Penalties on Preferred Stock     $ 1,586,000



                                      F-19