NATURAL HEALTH TRENDS CORP, POS AM, 1996-06-11

NATURAL HEALTH TRENDS CORP
POS AM, 1996-06-11
EDUCATIONAL SERVICES

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As filed with the Securities and Exchange Commission on June 11, 1996
Registration No. 33-91184

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

-----------

POST-EFFECTIVE AMENDMENT NO. 1
TO

FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933

-----------

NATURAL HEALTH TRENDS CORP.
(Name of small business issuer in its charter)

Florida 8200 59-2705336
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)

NATURAL HEALTH TRENDS CORP.
2001 West Sample Road
Pompano Beach, Florida 33064
(305) 969-9771
(Name, address and telephone number of principal executive offices
and principal place of business)

NEAL R. HELLER
Natural Health Trends Corp.
2001 West Sample Road
Pompano Beach, Florida 33064
(305) 969-9771
(Name, address and telephone number of agent for service)

-------------------

Copies to:
MARTIN C. LICHT, ESQ.
JOHN J. DRISCOLL, ESQ.
845 Third Avenue
New York, New York 10022-6601

---------------

Approximate Date of Commencement of Proposed Sale to the Public:
As soon as practicable after this Registration Statement becomes effective.
--------------

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|

<PAGE>

CALCULATION OF REGISTRATION FEE

================================================================================================================
Offering Aggregate Amount of
Title of Each Class of Amount to be Price Per Offering Registration
Securities to be Registered Registered Security Price Fee
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Common Stock underlying Class A
Redeemable Common Stock Purchase Warrants
("Class A Warrants")(1)........................... 2,661,672 $3.00 $7,985,016 $2,753.45
Shares of Common Stock underlying Class B
Redeemable Common Stock Purchase Warrants
("Class B Warrants")(1)........................... 2,661,672 $3.625 $9,648,561 $3,327.09
Underwriters' Units............................... 100,000 $4.875 $487,500 $168.10
Shares of Common Stock underlying
Underwriters' Unit Purchase Option(1)............. 200,000 $2.25 $450,000 $155.17
Class A Warrants contained in Underwriters' Unit
Purchase Option................................... 100,000 -- -- --
Class B Warrants contained in Underwriters' Unit
Purchase Option................................... 100,000 -- -- --
Shares of Common Stock underlying Class A
Warrants contained in Underwriters' Unit
Purchase Option(1)................................ 200,000 $3.00 $600,000 $206.90
Shares of Common Stock underlying Class B
Warrants contained in Underwriters' Unit
Purchase Option(1)................................ 200,000 $3.625 $725,000 $250.00
Total Registration Fee(2)......................... $6,692.61
================================================================================================================
</TABLE>

(1) Pursuant to Rule 416, there are also being registered such additional
shares as may become issuable pursuant to the anti-dilution provisions
of the Warrants and the Underwriters' Unit Purchase Option.

(2) A fee of $9,724.84 was paid upon the initial filing of this Registration
Statement.

The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

<PAGE>

CROSS REFERENCE SHEET

Item No. Caption in Form SB-2 Location in Prospectus
- ------------- ---------------------------------------------------------- -----------------------------------------
<S> <C> <C>
1. Front of the Registration Statement and Outside
Front Cover Page of Prospectus....................... Outside Front Cover.
2. Inside Front and Outside Back Cover Pages
of Prospectus ....................................... Inside Front and Outside Back Covers.
3. Summary Information and Risk Factors.................... Prospectus Summary; Risk Factors.
4. Use of Proceeds......................................... Use of Proceeds.
5. Determination of Offering Price......................... Front Page of Prospectus, Risk Factors;
Plan of Distribution.
6. Dilution................................................ Not Applicable.
7. Plan of Distribution.................................... Plan of Distribution.
8. Legal Proceedings....................................... Business - Litigation.
9. Directors, Executive Officers, Promoters and
Control Persons...................................... Management.
10. Security Ownership of Certain Beneficial Owners and
Management........................................... Principal Shareholders.
11. Description of Securities .............................. Description of Securities.
12. Interests of named Experts and Counsel.................. Legal Matters; Experts.
13. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities....................... Management.
14. Organization Within Last Five Years..................... Not Applicable
15. Description of Business................................. Prospectus Summary; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; and Financial Statements.
16. Management's Discussion and Analysis or Management's Discussion and Analysis of
Plan of Operation.................................... Financial Condition and Results of
Operations.
17. Description of Property................................. Business - Leased Property.
18. Certain Relationships and Related Transactions.......... Certain Transactions.
19. Market for Common Equity and
Related Stockholder Matters.......................... Outside Front Cover; Market for Common Equity
and Related Stockholder Matters.

20. Executive Compensation.................................. Management - Executive Compensation
and Employment Agreements.
21. Financial Statements.................................... Financial Statements.

</TABLE>

<PAGE>

(Subject to Completion)
Dated June 11, 1996

NATURAL HEALTH TRENDS CORP.
5,923,344 Shares of Common Stock, including 100,000 Underwriter Units
Each Underwriter Unit consisting of two shares of Common Stock
and one Class A Redeemable Common Stock Purchase Warrant
and one Class B Redeemable Common Stock Purchase Warrant

This prospectus relates to an offering (the "Offering") by Natural Health
Trends Corp., a Florida corporation (the "Company"), of (i) 2,661,672 shares of
common stock, $.001 par value (the "Common Stock") issuable upon the exercise of
the Company's Class A redeemable common stock purchase warrants (the "Class A
Warrants"), (ii) 2,661,672 shares of Common Stock issuable upon the exercise of
the Company's Class B common stock purchase warrants (the "Class B Warrants"),
and (iii) 100,000 units (the "Underwriter Units") issuable upon the exercise of
the Underwriters' Unit purchase option, each unit consisting of two shares
of Common Stock, together with one Class A Warrant and one Class B Warrant.
The Class A Warrants and Class B Warrants are sometimes collectively
referred to herein as the "Warrants."

There are presently outstanding: (a) 1,330,836 Class A Warrants and (b)
1,330,836 Class B Warrants. Each of the Warrants expires June 21, 2000 and
entitles the holder, commencing June 21, 1996, or earlier with the prior written
consent of Maidstone Financial, Inc. ("Maidstone"), to purchase two shares of
Common Stock, for $3.00 per share with respect to the Class A Warrants, and
$3.625 per share with respect to the Class B Warrants, in each case subject to
adjustment in certain events. The Warrants were offered by the Company in the
Company's initial public offering in June 1995 (the "Initial Public Offering").
See "PLAN OF DISTRIBUTION."

The Warrants are redeemable by the Company at a price of $.05 per Warrant
commencing June 21, 1996 (earlier with the prior written consent of Maidstone),
provided that (i) 30 days prior written notice is given to the holders of the
Warrants (the "Warrantholders") and (ii) the closing bid price per share of the
Common Stock as reported on The NASDAQ Stock Market ("NASDAQ") (or the last sale
price, if quoted on a national securities exchange) for 20 consecutive trading
days, ending on the third day prior to the date of the notice of redemption, has
been at least $4.50 with respect to the Class A Warrants and $5.00 with respect
to the Class B Warrants, subject to adjustment in certain events. The
Warrantholders shall have exercise rights until the close of the business day
immediately preceding the date fixed for redemption. See "DESCRIPTION OF
SECURITIES - Warrants."

The Underwriters' Unit Purchase Option was sold for $10 to Maidstone and
The Harriman Group, Inc. (collectively, the "Underwriters") as part of their
compensation in connection with their underwriting of the Initial Public
Offering. Each of the Underwriter Units are issuable upon exercise at $4.875 per
Underwriter Unit under the Underwriters' Unit Purchase Option commencing June
21, 1996 until the close of business on June 21, 2000, and consists of two
shares of Common Stock, one Class A Warrant and one Class B Warrant. The Class A
Warrants and Class B Warrants contained in the Underwriters' Unit Purchase
Option are identical to the Class A Warrants and Class B Warrants offered in the
Initial Public Offering.

The public offering prices of the Common Stock offered hereby are equal to
the exercise price of the Class A Warrants, Class B Warrants and the
Underwriters' Unit Purchase Option.

The Common Stock, the Class A Warrants and the Class B Warrants are traded
on NASDAQ under the symbols "NHTC," "NHTCW" and "NHTCZ," respectively. The
exercise prices of the Warrants were determined by negotiation between the
Company and the Underwriters. The Company will not receive any proceeds from the
sale of Common Stock and Warrants underlying the Underwriters' Units.

THIS OFFERING INVOLVES SUBSTANTIAL INVESTMENT RISKS, AND SECURITIES SHOULD
BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO SUSTAIN THE LOSS OF THEIR ENTIRE
INVESTMENT. SEE "RISK FACTORS" ON PAGE 9.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

<PAGE>

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

<PAGE>

===================================================================================================================================
Proceeds Total
Price to Underwriter Discounts to Company Proceeds to
the Public and Commissions(1) Per Share Company(2)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share of Common Stock underlying Class A Warrants..... $3.00 $0.00 $3.00 $7,985,016
- -----------------------------------------------------------------------------------------------------------------------------------
Per Share of Common Stock underlying Class B Warrants..... $3.625 $0.00 $3.625 9,648,561
- -----------------------------------------------------------------------------------------------------------------------------------
Per Underwriter Unit, consisting of two shares of Common Stock,
one Class A Warrant and one Class B Warrant............... $4.875 $0.00 $4.875 487,500
- -----------------------------------------------------------------------------------------------------------------------------------
Per Share of Common Stock underlying Class A Warrants contained
in the Underwriters' Unit Purchase Option................. $3.00 $0.00 $3.00 600,000
- -----------------------------------------------------------------------------------------------------------------------------------
Per Share of Common Stock underlying the Class B Warrants
Contained in the Underwriters' Unit Purchase Option....... $3.625 $0.00 $3.625 $725,000
- -----------------------------------------------------------------------------------------------------------------------------------
Total Proceeds to the Company............................. N/A $0.00 N/A $18,721,077
===================================================================================================================================
(Footnotes on following page.)
</TABLE>

<PAGE>

(1) Does not include additional compensation which may be paid to Maidstone by
the Company arising from the Company's agreement that it pay to Maidstone a
solicitation fee of seven percent of the aggregate exercise price of the
Warrants exercised through the efforts and with the assistance of
Maidstone. See "PLAN OF DISTRIBUTION."

(2) Does not include the payment of other expenses of the Offering (estimated
at $150,000), payable by the Company.

The date of this Prospectus is , 1996

- 2 -

<PAGE>

AVAILABLE INFORMATION

A Registration Statement on Form SB-2 (the "Registration Statement"), under
the Securities Act, relating to the securities offered hereby has been filed by
the Company with the Securities and Exchange Commission (the "Commission"),
Washington, D.C. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto. For
further information with respect to the Company and the securities offered
hereby, reference is made to such Registration Statement, exhibits and
schedules. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as exhibits to the Registration Statement, each such statement being qualified
in all respects by such reference. A copy of the Registration Statement may be
inspected without charge at the Commission's principal offices in Washington,
D.C., and copies of all or any part thereof may be obtained from the Commission
upon the payment of certain fees prescribed by the Commission.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
periodic reports, proxy statements and other information with the Commission.
Such reports, proxy statements and other information concerning the Company may
be inspected or copied at the public reference facilities at the Commission
located at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the
Commission's Regional Offices in New York, 7 World Trade Center, 13th Floor, New
York, New York 10048, and in Chicago, Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
documents can be obtained at the public reference section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.

The Company intends to furnish its shareholders with annual reports
containing audited financial statements certified by the Company's independent
public accounting firm and such other reports as the Company deems appropriate.

- 3 -

<PAGE>

PROSPECTUS SUMMARY

The following is a summary of certain information contained in this
Prospectus and is qualified in its entirety by reference to the more detailed
information, including the Financial Statements and the Notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated, the information in
this Prospectus gives effect to a 1.56 to 1 stock split, a 1-2/3 to 1 stock
split, and a 2 to 1 stock split effected in the form of stock dividends, in
October 1994, March 1995, and October 1995, respectively. Unless the context
otherwise indicates, the term the "Company" includes Natural Health Trends
Corp., F.I.M.T.E. Supply, Inc., The Corporate Body, Inc. and Health Wellness
Nationwide Corp. its wholly-owned subsidiaries. Each prospective investor is
urged to read this Prospectus in its entirety. See "GLOSSARY OF TERMS" for
definitions of certain technical terms used herein.

THE COMPANY

Natural Health Trends Corp. (the "Company") is a corporation which
develops and operates businesses to promote human wellness. Doing business as
the Florida Institute, the Company owns and operates three vocational schools in
Oviedo, Lauderhill and Miami, Florida (individually, the "Oviedo School," the
"Lauderhill School" and the "Miami School" and collectively the "Schools") that
offer training and preparation for licensing in therapeutic massage. Through its
wholly owned subsidiary, Health Wellness Nationwide Corp., the Company owns a
natural health care center in Boca Raton, Florida (the "Natural
Health Care Center"), which provides multi-disciplinary complementary
health care in the areas of alternative and nutritional medicine.

The Company acquired the Oviedo School from Reese Institute, Inc. in
November 1995. The Lauderhill School and the Miami School also offer training
and preparation for registration in holistic skin care. The Company seeks to
fulfill the educational needs of adults seeking augmented career skills or whose
educational needs have not been met in traditional educational environments.
These individuals are primarily high school graduates and underemployed adults
seeking specific career skills and training. As of May 31, 1996, approximately
560 students were enrolled in the Schools. The Miami School and Lauderhill
School are licensed under Florida law and approved by the United States
Department of Education (the "USDOE") to provide financial aid to qualified
applicants. For the year ended December 31, 1995, the Schools derived
approximately 66% of its revenues from financial aid provided under Federal or
state assistance programs.

The Company plans to expand its business operations by seeking to
increase the enrollment of the Schools and developing programs to offer massage
therapy and other holistic health care services to the public. In September,
1995 the Company commenced the operation of an on-site service that offers
massages at corporate offices (the "Corporate Massage Service").

Health Wellness Nationwide Corp. ("HWNC") a wholly owned subsidiary of
the company was incorporated in 1995. HWNC's business is to own and operate
multi-disciplinary complementary health care centers known as Natural Health
Care Centers. The Natural Health Care Centers will specialize in alternative and
nontraditional medical therapies to promote human wellness, including
homeopathy, environmental and internal medicine, allergy and Candida treatment,
clinical nutrition, pain management, massage therapy and stress reduction. In
January 1996 the Company purchased its first Natural Health Care Center by
buying the assets of an existing company operating a multi-disciplinary,
complementary health care clinic located in Boca Raton, Florida. The Company has
signed an agreement to purchase

- 4 -

<PAGE>

another Natural Health Care Center. The Company plans to open additional
Natural Health Care Centers. However, there can be no assurance that it will do
so. See "Business - Expansion Strategy."

The Company was incorporated under the name Florida Institute of
Massage Therapy, Inc. in Florida in December 1988 and changed its name to
Natural Health Trends Corp. in June 1993. The Company's principal offices are
located at 2001 West Sample Road, Pompano Beach, Florida 33064 and its telephone
number is (305) 969-9771.

- 5 -

<PAGE>

THE OFFERING

<TABLE>

<S> <C>
Securities Offered ........ (a) 2,661,672 shares of Common Stock underlying the
Class A Warrants exercisable at $3.00 per share. See
"DESCRIPTION OF SECURITIES."

(b) 2,661,672 shares of Common Stock underlying the
Class B Warrants exercisable at $3.625 per share. See
"DESCRIPTION OF SECURITIES."

(c) 100,000 Underwriter Units underlying the
Underwriters' Unit Purchase Option, each Underwriter
Unit consisting of two shares of Common Stock, one
Class A Warrant and one Class B Warrant exercisable
at $4.875 per Unit. See "DESCRIPTION OF
SECURITIES."

(d) 200,000 shares of Common Stock underlying each of
the Class A Warrants and Class B Warrants contained
in the Underwriters' Unit Purchase Option exercisable
at $3.00 and $3.625 per share, respectively. See
"DESCRIPTION OF SECURITIES."

Common Stock
Outstanding Prior to the
Offering................ 11,085,108 shares(1)

Outstanding After the
Offering................ 17,008,452 shares(1)(2)

Warrants
Outstanding Prior to the
Offering................. 1,330,836 Class A Warrants and 1,330,836 Class B Warrants

Outstanding After the
Offering................ 0 Class A Warrants and 0 Class B Warrants(2)

Exercise Terms............. The Class A Warrants and Class B Warrants each entitle the
holder to purchase two shares of Common Stock at an exercise
price of $3.00 per share and $3.625 per share, respectively,
subject to adjustment in certain events, for a four year period
commencing June 21, 1996 (or earlier with the consent of
Maidstone). See "DESCRIPTION OF SECURITIES --
Warrants."

</TABLE>

- 6 -

<TABLE>

<S> <C>
Redemption................. The Warrants are redeemable by the Company, commencing
June 21, 1996 (or earlier with the consent of Maidstone) at a
price of $.05 for each Warrant, provided that 30 days prior
written notice is given to the Warrantholders and the closing
bid price per share of the Common Stock as reported on
NASDAQ (or the last sale price, if quoted on a national
securities exchange) is at least $4.50 with respect to the Class
A Warrants and $5.00 with respect to the Class B Warrants,
for 20 consecutive trading days ending on the third day prior
to the date of the notice of redemption. See "DESCRIPTION
OF SECURITIES - Warrants."

Use of Proceeds............ The net proceeds of this Offering will be used for working
capital and general corporate purposes. See "USE OF
PROCEEDS."

Risk Factors............... The purchase of the securities offered hereby involves a high
degree of risk. See "RISK FACTORS."

NASDAQ Trading Symbols..... Common Stock: NHTC; Class A Warrants: NHTCW;
Class B Warrants: NHTCZ.

</TABLE>

- --------------------------------

(1) Does not include 656,666 shares of Common Stock issuable pursuant to
the Company's 1994 Stock Option Plan. See "MANAGEMENT."

(2) Assumes exercise of all of the Class A Warrants and Class B Warrants,
the exercise of the Underwriters' Unit Purchase Option and the Class A
Warrants and Class B Warrants included in the Underwriters' Unit
Purchase Option.

SUMMARY FINANCIAL INFORMATION

The following summary financial information is derived from, and should
be read in conjunction with, the financial statements and the related notes
included elsewhere in this Prospectus. The interim financial statements for the
three month periods ended March 31, 1996 and 1995 are unaudited, but include all
adjustments which, in the opinion of management, are necessary for a fair
presentation of the Company's financial position and results of operations for
such periods. All such adjustments are of a normal and recurring nature. The
results of operations for any interim period are not necessarily indicative of
the results of operations that may be expected for the year ending December 31,
1996. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" and "FINANCIAL STATEMENTS."

- 7 -

<PAGE>

Statement of Operations Data

Three Months Ended Year Ended
March 31, December 31,
------------------------------- ------------------------------

1996 1995 1995 1994
--------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Revenues.......................................... $1,537,632 $776,879 $3,138,203 $2,254,299

Cost of Sales..................................... 910,556 370,129 1,895,236 1,142,607
--------------- ------------- --------------- -------------

Gross Profit...................................... 627,076 406,750 1,242,967 1,111,692

Selling, General and Administrative Expenses...... 719,945 333,603 2,030,495 1,031,070

Non-Cash Imputed Compensation Expense - - 731,000 -
--------------- ------------- --------------- -------------

Operating Income (Loss)........................... (92,869) 73,147 (1,518,528) 80,622

Other Income (Expense)............................ (47,955) (49,414) (447,635) (58,576)
--------------- ------------- --------------- -------------

Income (Loss) Before Income Taxes................. (140,824) 23,733 (1,966,163) 22,046

Provision for Income Taxes........................ - 5,000 (27,294) 4,000
--------------- ------------- --------------- -------------

Net Income (Loss)................................. $ (140,824) $ 18,733 $ (1,938,869) $ 18,046
=============== ============= =============== =============

Net Income Per Common Share....................... $(0.01) $.00 ($0.21) $0.00
=============== ============= =============== =============

Weighted Average Shares of Common Stock
Used In Calculation............................ 10,965,775 7,952,802 9,204,816 7,790,658

</TABLE>

Balance Sheet Data

<TABLE>
<CAPTION>
March 31,
-------------
1996
-------------
<S> <C>
Current Assets....................... $1,965,725

Working Capital (Deficit)............ $843,198

Total Assets......................... $6,614,207

Current Liabilities.................. $1,122,527

Long Term Debt....................... $1,936,987

Total Liabilities.................... $3,070,817

Shareholders' Equity................. $3,163,390

</TABLE>

- 8 -

<PAGE>

RISK FACTORS

THIS OFFERING INVOLVES SUBSTANTIAL INVESTMENT RISKS AND SECURITIES
SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO SUSTAIN THE LOSS OF THEIR
ENTIRE INVESTMENT. IN EVALUATING AN INVESTMENT IN THE COMPANY AND ITS BUSINESS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AS
WELL AS THE INFORMATION SET FORTH ELSEWHERE IN THIS PROSPECTUS.

Historical Losses

The Company had a net loss of $1,938,869 (on revenues of $3,138,203)
for the year ended December 31, 1995. For the year ended December 31, 1994, the
Company had net income of approximately $18,000 (on revenues of $2,254,299). For
the three months ended March 31, 1996 and 1995, the Company had a net loss of
$140,824 and net income of $18,733, respectively. There is no assurance that the
Company can generate net income, increase revenues or successfully expand its
operations in the future. The Company is subject to all of the problems,
expenses, delays and other risks inherent in a business with a relatively short
history of operations and in a business seeking to expand its operations,
including the Company's lack of experience in connection with operating a
business offering services to the public and the establishment of new businesses
in undeveloped and evolving industries. Therefore, the Company cannot predict
with certainty the success or failure of its future operations. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," "BUSINESS" AND "FINANCIAL STATEMENTS."

Dependence Upon Proposed Expansion Program

The Company has applied for a license to operate the Schools as a
degree-granting junior college. The Company believes that completion of the
application process will be completed in 1996. However, there can be no
assurance as to if or when such application will be approved. The success of the
Company's plans to operate the Schools as a degree-granting junior college will
be dependent upon, among other things, the approval of the Company's application
by the State of Florida, the ability of the Schools to enroll students, the
development of additional programs of study and the transferability of credits
from the Schools to four year colleges and universities.

The transferability of credits from one educational institution to
another, absent an articulation agreement between the two schools, is
generally at the discretion of the receiving institution. The factors that
receiving institutions typically consider include, but are not limited to, the
similarity of accrediting commissions, the licensing status of the two
institutions and the similarity of program content, curriculum and textbooks. In
addition, many institutions enter into articulation agreements which establish
specific guidelines for the transfer of credits from one institution to another.
However, these agreements are not required by law, and the content may vary
dramatically depending on whether the institution is a public, private, academic
or vocational/technical school. Absent articulation agreements between the two
schools, consideration for the acceptance of transfer of credits is more
subjective than the transfer of credits between otherwise similar public or
private institutions. There can be no assurance that credits from the Schools'
courses will be transferable. If the ability of the Schools' students to
transfer credits to four year colleges and universities is limited, then the
Schools' ability to recruit new students may be impaired.

- 9 -

<PAGE>

In addition, the Company plans to open additional Natural Health Care
Centers. The success of Natural Health Care Centers will be dependent upon,
among other things, the Company's ability to attract patients, hire qualified
personnel and maintain the necessary licenses. The success of the Company's
Corporate Massage Service will be dependent upon, among other things, the
Company's ability to establish a client base and hire qualified personnel.
Many of the factors required for the various new operations to succeed will be
beyond the Company's control. These include, but are not limited to, the
effectiveness of the Company's marketing efforts in attracting students for the
Schools, clients for the clinics and the Corporate Massage Service and the
acceptance of the Schools' credits by other degree-granting institutions.

The Company's growth depends to a significant degree on its ability to
carry out its proposed expansion program. There can be no assurance that the
Company will be able to hire, train and integrate employees, and adapt its
management, information and other operating systems, to the extent necessary to
grow in a profitable manner. In addition, the costs associated with the
Company's planned expansion may be significantly greater than anticipated and
may have a materially adverse impact upon the Company's results and prospects.
In the event that the Company's plans for expansion are not successful, there
could be a materially adverse effect on the Company's business. See "USE OF
PROCEEDS" and "BUSINESS - Expansion Strategy."

Uncertainty of Market Acceptance

The Company's expansion plans are based on the practice of massage
therapy and holistic forms of health care. The Company does not believe that the
market for products and services related to massage therapy and holistic forms
of health care, subject to certain limited exceptions, is either well-developed
or has an established history. Management believes that, as is typical in an
undeveloped industry, demand and market acceptance for the services and products
that the Company intends to introduce will be subject to a high level of
uncertainty. The Company does not intend to conduct any formal marketing or
other concept feasibility studies to predict the commercial viability of its
concepts. The Company has limited financial, personnel and other resources to
undertake marketing activities. The Company's success will be dependent on,
among other things, its ability: to achieve and maintain the necessary licenses
and accreditation to operate as a degree-granting junior college; to achieve a
sufficient level of enrollment in the Schools; to qualify for, receive and
maintain any licenses necessary to operate, and to obtain a sufficient level of
acceptance of the services of the Natural Health Care Centers; and to achieve a
sufficient client base for the Corporate Massage Service. In light of the
relatively undeveloped markets for the Company's services and products and the
lack of significant funds for marketing, there can be no assurance that
substantial markets will develop and, if so, whether the Company can exploit
them profitably. See "USE OF PROCEEDS" and "BUSINESS - Expansion Strategy."

Dependence Upon Proceeds of the Offering and Possible Need for Additional
Financing

The Company intends to use the proceeds of the Offering for working
capital and general corporate purposes. The Company believes that the
anticipated net proceeds of the Offering, together with anticipated cash flow,
will be sufficient to meet the Company's projected cash requirements for its
present plans for expansion for at least the next 12 months. However, there
can be no assurance that this will be the case. If the Company's revenues do
not continue to be sufficient to fund the current level of operations of the
Company, or to enable the Company to implement its present plans for
expansion, then the Company will have to seek additional financing. In
addition, the Company intends to seek to open additional Natural Health Care
Centers, of which there can be no assurance. As it is likely that revenues
from the

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<PAGE>

Company's operations at such time will not be sufficient, the Company will be
required to raise additional capital to make such acquisitions and finance the
operations of such new businesses. Such additional financing may be in the form
of indebtedness from institutional lenders or other third parties or as equity
financing. There can be no assurance that such financing will be available and,
if so, on acceptable terms. Any such financing may result in significant
dilution to investors in the Offering or cause the Company to become overly
leveraged. See "USE OF PROCEEDS" and "FINANCIAL STATEMENTS."

Dependence on Accreditation and Student Financial Aid Programs

The Company and its Schools must comply with a variety of Federal and
state regulations in order for eligible students to qualify for government
financial aid for tuition and related expenses. These include requirements that
the Schools offer a mandated minimum tuition refund to students who leave the
Schools before completing their programs of study and that the percentage of
students enrolled without a high school or general equivalency diploma be below
specified levels. In addition, under USDOE regulations, educational institutions
with annual student loan default rates in excess of 25% (30% prior to 1994) for
three consecutive years may lose their eligibility for student loans. The
Schools' student loan default rates for 1992 and 1993 were determined to be 17%
and 10%, respectively. The default rates for 1994 and 1995 will not be available
from the USDOE until the third quarters of 1996 and 1997, respectively.
Moreover, under Federal regulations, a student drop-out rate in excess of 33%
may impair an institution's ability to administer financial aid programs and is
one factor in determining whether to deny an institution's certification to
participate in Federal student aid programs. A student drop-out rate exceeding
33%, however, is not alone sufficient to disqualify an institution from such
participation, but must be viewed in conjunction with other factors such as loss
of state licensing, loss of accreditation, poor periodic reviews or high student
loan default rates. The Schools' dropout rate in 1995 was approximately 10%. The
Schools may also be deemed ineligible to participate in financial aid programs
if the USDOE determines that 85% or more of the Schools' operating revenue is
derived from Title IV financial aid programs (the "85-15 Rule"). According to
the Company's preliminary calculations, the Schools derived approximately 66% of
their revenues for 1995 from Title IV Federal financial aid programs. The
official determination of the Company's compliance for the year ended December
31, 1994 with the 85-15 Rule will likely be made by the end of 1996. There can
be no assurance that the Schools will be able to meet the standards set by USDOE
regulations or otherwise remain eligible to participate in Federal financial aid
programs.

Federal regulations require the accreditation of a school by a private
commission recognized by the USDOE. The accreditation commission, in turn, sets
additional standards relating to curricula, teacher qualifications and other
matters. When a school wishes to participate in student aid programs, the school
applies for accreditation from an accrediting body and a designation from the
USDOE that it is an approved educational institution where eligible students may
participate in government-sponsored student financial aid programs. The Miami
and Lauderhill Schools are accredited by the Accrediting Commission of the
Career Schools and Colleges of Technology and the Schools' Therapeutic Massage
Training Program is accredited by the Commission on Massage Training
Approval/Accreditation of the American Massage Therapy Association. Moreover,
the Company has applied for accreditation of the Oviedo School, as a branch
campus of the Lauderhill School and there can be no assurance as to when or if
such application will be approved. There can be no assurance that the Company's
Schools will be able to maintain their accreditation.

The loss of accreditation would result in the loss of the Company's
ability to offer Federal financial aid under Title IV of the Higher Education
Act of 1965, as amended ("Title IV") (Federal Pell

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<PAGE>

Grants and/or Federal Family Educational Loan Programs), and would severely
restrict the Company's ability to attract substantial numbers of students.
During the year ended December 31, 1995 the Company depended on government
funding under Federal student financial aid programs and state assistance
programs for approximately 66% and 5% of its revenues, respectively. Numerous
Federal projects, including Title IV financial aid programs, that provide funds
for student loans and grants, are currently under scrutiny by the U.S. Congress.
There can be no assurance that these Federal programs, or other state programs,
will not be reduced or eliminated. The loss of accreditation or a reduction of
Federal student financial aid programs would have a material adverse effect on
the Company. See "BUSINESS - Regulation."

Possible Loss of Student Financial Aid, License and Accreditation in the Event
of a Change of Control of the Company

Under current USDOE regulations, a change in control of the Schools
could result in a temporary or a permanent loss of Federal financial aid funds
to the Schools' students. In addition, under the regulations of the State Board
of Independent Postsecondary, Vocational, Technical, Trade and Business Schools
of the Florida Department of Education (the "Florida State Board") a change of
ownership resulting in a change of control may result in the termination of the
Schools' licenses. The Schools will also require the approval of the Schools'
accrediting commission upon a change of control. Pursuant to the USDOE
regulations, a determination of a change of control would involve a review of
which persons or entities have the power to direct or cause the direction of
management and policies of the Schools. Under the Florida State Board's
regulations, a change of control constitutes a change in the authority to
establish or modify school policies, standards and procedures or the authority
to make the effective decisions regarding the implementation or enforcement of
school policies, standards and procedures. In such event, the prior approval of
the Florida State Board is required. Under the rules of the Schools' accrediting
commission, a change of control occurs when a person or a corporation obtains
authority to control the actions of the institution, including a change of
control which occurs as a result of a transfer in voting interest. The Company
believes, although there can be no assurance, that as a result of the Company's
completion of the Initial Public Offering and additional issuances of shares of
Common Stock, including the issuance of shares of Common Stock upon the exercise
of the Warrants that there has not been or would be a change of control that
would result in a loss of its eligibility for Federal financial aid funds, a
review of its licenses, or the requirement of prior approval by its accrediting
commission. Should the percentage ownership of the Company's Common Stock by the
Company's present shareholders, officers and directors decrease further through
the issuance of additional shares of Common Stock, the issue of whether there
was a change of control, if raised by the USDOE, the Florida State Board or the
accrediting commission, would be determined pursuant to the standards set forth
above, on the basis of the facts then existing, including the percentage
ownership of the present shareholders, officers and directors, as compared with
the holdings of others and other factors relating to the actual control of the
Company. Should there be a determination that a change of control had occurred
by the USDOE, the Florida State Board or the Schools' accrediting commission and
there was disruption or termination of the availability of Federal financial aid
to the Schools' students or a termination or interruption of the licenses or
accreditation of the Schools, there would be a material adverse effect on the
Company, its business and its prospects. See "BUSINESS - Regulation."

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<PAGE>

Dependence on State Licensing

The Company is dependent on state licensing from the Florida State
Board to operate its Schools and to recruit students. Extensive and complex
regulations govern these matters. Moreover, many other states require
post-secondary educational institutions operated with private investment capital
to post surety bonds as a precondition to licensing. Although the Company is not
required to post surety bonds with state regulatory authorities at this time,
there is no assurance that the Company will not be required to do so in the
future. Moreover, if certain financial tests recently adopted by the California
legislature and similar regulations adopted or proposed by other state
regulators are adopted in Florida, or if the Company expands into jurisdictions
in which such regulations are in effect, the Company may be unable to satisfy
the applicable requirements. The Company might be unable to operate its Schools
or otherwise be materially and adversely affected if it is unable to comply with
current or future rules and regulations.

The present state licenses for the Miami School, the Lauderhill School
and the Oviedo School expire on September 30, 1996, March 31, 1998 and November
30, 1996, respectively, and are subject to renewal at such times. The license
for the Miami School must be renewed on an annual basis, while the licenses
for the Lauderhill School and the Oviedo School, because they have been licensed
and in good standing for more than five years, must be renewed on a biennial
basis. There can be no assurance that the Florida State Board will renew the
licenses of each of the Schools. The failure of the Florida State Board to
renew each of the Schools' licenses would have a material adverse effect on the
Company. See "BUSINESS - Regulation."

The physicians who work in the National Health Care Center are also
licensed by state licensing boards. Any revocation of a license or institution
of disciplinary procedures against a physician could have a material adverse
effect on the Company's business

Regulation of Corporate Massage Service and the Natural Health Care Centers

The massage therapists employed in connection with the Corporate
Massage Service are required to satisfy professional licensing requirements by
the Division of Professions, Board of Massage, of the Department of Business and
Professional Regulation, under the Florida Massage Practice Act. Moreover, the
massage therapists and other specialists whose services are offered at the
Natural Health Care Center and other proposed Natural Health Care Centers, such
as acupuncturists, chiropractors, physicians, nutritionists, skin care
professionals and estheticians, are subject to ongoing professional licensing
requirements. The failure of such persons to practice in accordance with
professional licensing requirements could have a material adverse effect on the
Company. See "BUSINESS - Regulation."

Potential Liability; Insurance

The operation of the Natural Health Care Center, the Corporate Massage
Service and other Natural Health Care Centers exposes the Company to the
possibility of personal injury or other liability claims. The Company maintains
a general liability insurance policy which is subject to a $1,000,000 per
occurrence limit with a $2,000,000 aggregate limit. The Company also maintains a
professional liability insurance policy which is subject to a $1,000,000 per
occurrence limit with a $3,000,000 aggregate limit. The Company carries
$1,000,000 of malpractice insurance with respect to the Natural Health Care
Center. The Company anticipates procuring additional insurance in connection
with the Company's proposed expansion plans. There can be no assurance, however,
that the Company's insurance will be

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<PAGE>

sufficient to cover potential claims or that an adequate level of coverage will
be available in the future at reasonable cost, if at all. A successful claim
against the Company which exceeds, or is not covered by, its insurance policies
could have a material adverse effect on the Company. In addition, the Company
may be required to expend significant resources and energy in defending against
any claims. See "BUSINESS - Insurance."

Competition

The Company will face extensive competition in connection with its
proposed expansion program in areas in which the Company lacks experience. The
Natural Health Care Center and other Natural Health Care Centers compete and
will compete with doctors, hospitals and medical clinics offering traditional
forms of health care and other practicing therapists offering traditional
forms of health care, as well as with other providers of holistic forms of
health care and health maintenance. The Corporate Massage Service competes
against individual massage therapists, health clubs and other massage
providers. Many of these competitors will have established practices and
greater financial resources than the Company. In addition, the services
offered by the Company's competitors may be covered by medical insurance
or other third party reimbursement.

Lack of Insurance Coverage

The Company anticipates that medical insurance coverage and other third
party reimbursement will not be available for most of the services offered by
the Natural Health Care Centers and to the extent that such services are
covered, coverage may be limited. The lack of medical insurance coverage or
other third party reimbursement for all of the services performed at the Natural
Health Care Centers may affect the ability to attract and retain patients. See
"BUSINESS - Competition."

Dependence on Key Personnel

The Company believes that its success depends to a significant extent
on the efforts and abilities of Neal R. Heller, President and a director of the
Company, and on Elizabeth S. Heller, Secretary, Treasurer and a director of the
Company. Mr. and Mrs. Heller have each entered into employment agreements with
the Company that expire in December 1997. The success of the Company's first
Natural Health Care Center depends upon Samantha Haimes and Dr. Leonard Haimes.
Samantha Haimes and Leonard Haimes have entered into three-year contracts
expiring in 1999. The Company maintains key-employee insurance on the lives of
all of such employees. The loss or curtailment of the services of any of such
employees would have a materially adverse effect on the Company. The ability of
the Company to realize its business strategy might be jeopardized if any of such
individuals becomes incapable of fulfilling his or her obligations to the
Company and a qualified successor is not found promptly. The Company's success
also depends upon its ability to attract and retain qualified massage

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<PAGE>

therapists, physicians and other qualified personnel, including both instructors
and practitioners of other holistic health care services. While the Company
believes there are numerous qualified massage therapists and other holistic
health care practitioners currently available, competition for such personnel
may increase. If HWNC acquires existing alternative medicine clinics to be
operated as Natural Health Care Centers, the Company will be dependent on the
key employees of such clinics. See "BUSINESS Employees" and "MANAGEMENT."

Benefits to Insiders

Neal R. Heller and Elizabeth S. Heller, executive officers and
directors of the Company, have personally guaranteed certain obligations of the
Company, including the mortgage loans relating to the Pompano Property and
certain property adjacent to the Pompano Property (the "Adjacent Parcel"). The
likelihood that Mr. and Mrs. Heller will have to perform their obligations
pursuant to any of their guarantees will be reduced upon the Company's receipt
of the net proceeds of the Offering. Mr. and Mrs. Heller own all of the
outstanding capital stock of Justin Real Estate Corp. ("Justin Corp."), which
owns the Adjacent Parcel. The Company has agreed with Justin Corp. to make all
of the principal and interest payments on a second mortgage loan in the original
principal amount of $525,000 and a mortgage loan in the original principal
amount of $450,000 (the "Adjacent Parcel Mortgage Loan"), which loans encumber
the Adjacent Parcel as well as the Pompano Property. Therefore, Mr. and Mrs.
Heller will benefit from the payment of such loans by the Company. See
"BUSINESS - Property" and "CERTAIN TRANSACTIONS."

Risk of Foreclosure of Mortgages on Pompano Property

The Pompano Property is encumbered by mortgages securing repayment of
loans made to acquire the Adjacent Parcel which is owned by Justin Corp., which
is wholly-owned by Mr. and Mrs. Heller. The Company is obligated to make the
payments on two mortgages in the aggregate principal amount of $1,875,000, and
the Company is making payments on a mortgage loan on the Adjacent Parcel
Mortgage Loan in the amount of $450,000 for the benefit of Justin Corp. In the
event that either the Company or Justin Corp. defaults on its obligations under
such mortgage loans, the mortgagee could foreclose on the mortgages encumbering
the Pompano Property. Although Mr. and Mrs. Heller have personally guaranteed
the repayment of the mortgage loans relating to the Pompano Property and the
Adjacent Parcel, there is a risk of foreclosure of the mortgage loans on the
Adjacent Parcel and the Pompano Property. A foreclosure of the mortgage loans on
the Pompano Property would have a material adverse effect on the Company. See
"BUSINESS - Pompano Property" and "CERTAIN TRANSACTIONS."

Indemnification of Officers and Directors

The Articles of Incorporation of the Company provide that the Company
shall indemnify to the fullest extent permitted by Florida law any person whom
it may indemnify thereunder, including directors, officers, employees and agents
of the Company. Such indemnification (other than as ordered by a court) shall be
made by the Company only upon a determination that indemnification is proper in
the circumstances because the individual met the applicable standard of conduct.
Advances for such indemnification may be made pending such determination. In
addition, the Articles of Incorporation provide for the elimination, to the
extent permitted by Florida law, of personal liability of directors to the
Company and its shareholders for monetary damages for breach of fiduciary duty
as directors. The

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<PAGE>

foregoing may reduce the likelihood of derivative litigation against directors
and officers of the Company and may discourage or deter shareholders or
management from suing directors or officers for breaches of their duty of care,
even though such an action, if successful, might otherwise benefit the Company
and its shareholders. See "MANAGEMENT - Indemnification of Officers and
Directors."

Control by Current Shareholders, Officers and Directors

The current officers and directors of the Company beneficially own an
aggregate of approximately 57.5% of the Company's Common Stock and assuming
exercise of all of the Warrants will own 30.9% and will be in a position to
influence the election of the Company's directors and otherwise essentially
control the outcome of all matters requiring shareholder approval including
election of the Company's directors. See "MANAGEMENT" and "PRINCIPAL
SHAREHOLDERS."

No Dividends

The Company has not paid any cash dividends on its 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. See "DIVIDEND POLICY."

Relationship of Underwriters and Trading

Maidstone may act in a brokerage capacity with respect to the purchase
or sale of Common Stock or Warrants in the over-the-counter market where each
will trade. Maidstone also has the right to act as the Company's exclusive agent
in connection with the solicitation of Warrantholders to exercise their
Warrants. Unless granted an exemption by the Commission from Rule 10b-6
promulgated under the Exchange Act, Maidstone and any soliciting broker-dealers
will be prohibited from engaging in any market-making activities or solicited
brokerage activities with regard to the Company's securities during a period
beginning nine business days prior to the commencement of any such solicitation
and ending on the later of the termination of such solicitation activity or the
termination (by waiver or otherwise) of any right that Maidstone and soliciting
broker-dealers may have to receive a fee for soliciting the exercise of the
Warrants. As a result, Maidstone and soliciting broker-dealers may be unable to
continue to make a market for the Company's securities during certain periods
while the Warrants are exercisable. Such a limitation, while in effect, could
impair the liquidity and market price of the Company's securities.
See "PLAN OF DISTRIBUTION."

Underwriters' Unit Purchase Option and Registration Rights

In connection with the Initial Public Offering the Company sold to the
Underwriters, for $10, the Underwriters' Unit Purchase Option which entitles the
Underwriter to purchase 100,000 Underwriter Units. The Underwriter Units
issuable upon the exercise of the Underwriters' Units Purchase Option are
identical to the Units offered in the Initial Public Offering. The Underwriters'
Unit Purchase Option is exercisable at $4.875 per Underwriter Unit until June
21, 2000. The exercise of the Underwriters' Unit Purchase Option and the
exercise of the Warrants contained in the Underwriter's Unit may dilute the
value of the shares of Common Stock to be acquired by holders of the
Warrants, may adversely affect the

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<PAGE>

Company's ability to obtain equity capital, and, if the shares of Common Stock
issuable upon the exercise of the Underwriters' Unit Purchase Option and the
Underwriters' Warrants are sold in the public market, such sales may affect the
market price of the Common Stock. The Underwriters have been granted certain
"piggyback" and demand registration rights for periods of seven years and four
years, respectively, commencing June 21, 1996 with respect to the registration
under the Securities Act of the securities directly and indirectly issuable upon
exercise of the Underwriters' Unit Purchase Option. The exercise of such rights
could result in substantial expense to the Company. The securities contained in
the Underwriters' Unit Purchase Option are being registered hereby.

Shares Eligible for Future Sale

Of the 11,085,108 shares of Common Stock currently outstanding,
6,036,802 are "restricted securities" as that term is defined in Rule 144 under
the Securities Act and may only be sold pursuant to a registration statement
filed under the Securities Act or in compliance with Rule 144 or another
exemption from the registration requirements of the Securities Act. In general,
under Rule 144, subject to the satisfaction of certain other conditions, a
person, including an affiliate of the Company, who has beneficially owned
restricted shares of Common Stock for at least two years is entitled to sell,
within any three-month period, a number of shares that does not exceed the
greater of 1% of the total number of outstanding shares of the same class, or if
the Common Stock is quoted on NASDAQ or a stock exchange, the average weekly
trading volume during the four calendar weeks immediately preceding the sale. A
person who presently is not and who has not been an affiliate of the Company for
at least three months immediately preceding the sale and who has beneficially
owned the shares of Common Stock for at least three years is entitled to sell
such shares under Rule 144 without regard to any of the volume limitations
described above. Of the shares of Common Stock outstanding, the holders of
5,656,802 shares of Common Stock have agreed not to sell any of their shares
until June 21, 1997 without the consent of Maidstone. See "PRINCIPAL
SHAREHOLDERS."

In addition, 656,666 shares of Common Stock are reserved for issuance
upon the exercise of options which may be granted under the Company's 1994 Stock
Option Plan. To the extent that options are exercised, dilution to the interests
of the Company's shareholders may occur. Moreover, the terms upon which the
Company will be able to obtain additional equity capital may be adversely
affected, since the holders of the outstanding options or warrants can be
expected to exercise them, to the extent they are able to, at a time when the
Company would, in all likelihood, be able to obtain any needed capital on terms
more favorable to the Company than those provided in the options or warrants.
See "MANAGEMENT" and "DESCRIPTION OF SECURITIES."

Anti-Takeover Effect of Issuance of Preferred Stock

The Company's Articles of Incorporation authorizes the issuance of
1,500,000 shares of "blank check" preferred stock with such designations, rights
and preferences as may be determined from time to time by the Board of
Directors. Accordingly, the Board of Directors is empowered, without shareholder
approval, to issue preferred stock with dividends, liquidation, conversion,
voting or other rights which could decrease the amount of earnings and assets
available for distribution to holders of Common Stock and adversely affect the
relative voting power or other rights of the holders of the Company's Common
Stock. In the event of issuance, the preferred stock could be used, under
certain circumstances, as a method of discouraging, delaying or preventing a
change in control of the Company. Although the Company has no present intention
to issue any shares of its preferred stock and has agreed

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<PAGE>

not to issue any shares of preferred stock until June 21, 1997 without the
consent of Maidstone, there can be no assurance that the Company will not do so
in the future. See "DESCRIPTION OF SECURITIES."

Potential Adverse Effect of Redemption of Warrants

The Warrants are redeemable by the Company at a price of $.05 per
Warrant, commencing June 21, 1996 (or earlier with the consent of Maidstone) and
prior to their expiration, provided that (i) 30 days prior written notice is
given to the Warrantholders, and (ii) the closing bid price per share of the
Common Stock as reported on NASDAQ (or the last sale price, if quoted on a
national securities exchange) on each of the 20 consecutive trading days ending
on the third day prior to the date of the notice of redemption has been at least
$4.50 with respect to the Class A Warrants and $5.00 with respect to the Class B
Warrants. The Class A Warrants and Class B Warrants may be subject to redemption
at separate times, depending on the price of the Common Stock. The holders of
the Warrants have exercise rights until the close of the business day preceding
the date fixed for redemption. Notice of redemption of the Warrants could force
the holders to exercise the Warrants and pay the respective exercise prices at a
time when it may be disadvantageous for them to do so, to sell the Warrants at
the market price when they might otherwise wish to hold the Warrants, or to
accept the redemption price which is likely to be substantially less than the
market value of the Warrants at the time of redemption. See "DESCRIPTION OF
SECURITIES - Warrants."

Current Prospectus and State Blue Sky Registration Required to Exercise Warrants

Warrantholders will have the right to exercise the Warrants and
purchase shares of Common Stock only if a current prospectus relating to such
shares is then in effect and only if the shares are qualified for sale under the
securities laws of the applicable state or states, or there is an exemption from
the applicable qualification requirements. The Company has undertaken and
intends to file and keep effective and current a prospectus which will permit
the purchase and sale of the Common Stock underlying the Warrants, but there can
be no assurance that the Company will be able to do so. Although the Company
intends to qualify for sale the shares of Common Stock underlying the Warrants
in those states in which the securities are to be offered, no assurance can be
given that such qualification will occur. The Warrants may be deprived of any
value if a prospectus covering the shares issuable upon the exercise thereof is
not kept effective and current or if such underlying shares are not, or cannot
be, registered in the applicable states. Although the Company does not presently
intend to do so, the Company reserves the right to call the Warrants for
redemption whether or not a current prospectus is in effect or such underlying
shares are not, or cannot be, registered in the applicable states. See
"DESCRIPTION OF SECURITIES - Warrants."

USE OF PROCEEDS

The net proceeds to the Company from the Offering, net of expenses of
the Offering are estimated to be approximately $18,061,768 assuming that all of
the Warrants and the Underwriters' Unit Purchase Option and the Warrants
contained therein are exercised. There can be no assurance as to the number, if
any, of Warrants, including the Underwriter's Purchase Option, which will be
exercised. Management anticipates that the proceeds, if any, will be allocated
to working capital and for general corporate purposes.

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<PAGE>

The proceeds allocated to working capital will be applied, to the
extent necessary, to the Company's current operations. However, as it is an
inherent part of the Company's strategic plan to achieve long-term growth
through, in part, acquisitions, a portion of the proceeds allocated to working
capital may be used in connection with one or more acquisitions.

Pending use of the net proceeds of the Offering, if any, the funds will
be invested temporarily in certificates of deposit, short-term government
securities or similar investments. Any income form these short-term investments
will be used for working capital.

DIVIDEND POLICY

The Company has never paid cash dividends on its capital stock and does
not anticipate paying cash dividends in the foreseeable future, but instead
intends to retain future earnings, if any, for reinvestment in its business. The
Company is not presently a party to any agreement which limits its ability to
pay cash dividends on its capital stock. However, the Company may in the future
enter into agreements which limit its ability to pay cash dividends on its
capital stock. Any future determination to pay cash dividends will be at the
discretion of the Board of Directors and will be dependent upon the Company's
financial condition, results of operations, capital requirements and such other
factors as the Board of Directors deems relevant.

CAPITALIZATION

The following table sets forth the actual capitalization of the Company
at March 31, 1996. This table should be read in conjunction with the Company's
financial statements and the notes thereto included elsewhere in
this registration statement.

<TABLE>
<CAPTION>
Actual
----------
<S> <C>
STOCKHOLDERS' EQUITY:

Preferred stock, $.001 par value, 1,500,000 shares authorized; no
shares issued and outstanding $ -

Common stock, $.001 par value; 20,000 shares authorized;
11,085,108 shares issued and outstanding at March 31, 1996 11,085

Additional paid-in capital 5,347,034

Retained earnings (accumulated deficit) (1,814,729)

Common stock subject to put (380,000)
-------------

TOTAL STOCKHOLDERS' EQUITY $3,163,390
=============

</TABLE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Three Months Ended March 31, 1996 and 1995

Total revenues were $1,537,632 for the three months ended March 31,
1996 compared to $776,879 for the three months ended March 31, 1995. This
represents an increase of $760,753 or 98%. The increase is primarily
attributable to approximately $432,000 in fee revenue provided by the Natural

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<PAGE>

Health Care Center which was acquired by the Company in January 1996,
approximately $77,000 in rental income which did not commence until the Pompano
Property was acquired in May 1995 and approximately $165,000 from the Oviedo
School which was acquired in November 1995. Additionally, tuition revenues from
the Miami School and Lauderhill School increased by approximately $60,000, due
primarily to increased enrollment.

Cost of sales for the three months ended March 31, 1996 were $910,556
compared to $370,129 for the comparable period of the prior year. Gross profit
as a percentage of revenues was 41% for the three months ended March 31, 1996,
compared to 52% for the three months ended March 31, 1995. Management believes
that the decrease in gross profit as a percentage of revenues in 1996 was
primarily attributable the new services offered by the Company. Specifically,
the Natural Health Care Center incurred higher costs for medical salaries and
medical products and costs and the Corporate Massage Service incurred
significant expenses, but is still in a start-up stage and has provided minimal
revenues to date.

Selling, general and administrative expenses were $719,945 for the
three months ended March 31, 1996. This represents an increase of $386,342 from
the three months ended March 31, 1995. Management believes that the increase is
primarily attributable to the higher level of operations. These costs as a
percentage of revenues were 47% in the 1996 period as compared to 43% in the
1995 period. Management believes that the increase as a percentage of revenues
is primarily attributable to general and administrative expenses connected with
the Corporate Massage Service which provided minimal revenues, increased
salaries and increased levels of advertising. Interest for the three months
ended March 31, 1996 was $47,955 compared to $49,414 for the three months ended
March 31, 1995.

For the three months ended March 31, 1996, the net loss was $140,824
compared to a net income of $18,733 for the three months ended March 31, 1995.
Management believes that the increase in net loss is attributable to the impact
of the individual elements discussed above.

Years Ended December 31, 1994 and 1995

Tuition revenues constituted approximately 88% of the Company's
revenues in fiscal 1995 and approximately 97% of the Company's revenues in
fiscal 1994. The bookstores accounted for approximately 6% of the Company's
revenues in fiscal 1995 and approximately 3% in fiscal 1994. The Corporate
Massage Service which commenced operations in September 1995 accounted for
approximately .3% of the Company's revenues in fiscal 1995, while rental income
which commenced in May 1995 accounted for approximately 6% of the Company's
revenues in fiscal 1995. The Company's revenues in fiscal 1995 were $3,138,203,
a 39.2% increase over revenues of $2,254,299 in fiscal 1994. Management believes
that the increase resulted from an approximately $110,000 increase in bookstore
revenues, an aggregate of approximately $190,000 of new sources of revenue from
rental income and the Corporate Massage Service and a $580,000 increase in
tuition revenues. Management believes that the increase in tuition revenues is
due to a general increase in the level of enrollment, particularly at the Miami
School, which was fully operational for the entire twelve months in 1995, but
operated at a limited level prior to April 1994, together with an increase in
tuition rates of approximately 8%.

Cost of sales was $1,895,236 in fiscal 1995, a 66% increase compared to
cost of sales of $1,142,607 in fiscal 1994. Gross profit as a percentage of
revenues was 40% in fiscal 1995, compared to 49% in fiscal 1994. Management
believes that the decrease in gross profit as a percentage of revenues

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is primarily attributable to the inclusion of costs associated with the
Corporate Massage Service, which provided minimal revenues, together with higher
salary levels and rent expense.

Selling, general and administrative expenses were $2,030,495 in fiscal
1995 compared to $1,031,070 in fiscal 1994, a 96.9% increase. Management
believes that the increase in such expenses resulted primarily from an increased
level of support services required to maintain the higher level of operations,
increased activity related to exploring and developing new lines of business and
increased consulting fees and expenses of being a public company aggregating
approximately $180,000.

The Company's net income in fiscal 1995 reflects non-cash expenses of
approximately $1,061,000. Such expenses were incurred as a result of expensing
the remaining $330,000 of finance costs attributable to the loans in the
aggregate principal amount of $350,000 (the "Bridge Loans") borrowed during the
first half of 1995 and other loans in the aggregate original principal amount of
$130,000. Such expenses also include an expense of $731,000, which was the
assumed fair market value of 472,000 shares of Common Stock issued to the
Company's officers and a director of the Company in the first half of 1995.

Interest expense was approximately $118,000 in 1995, compared to
$59,000 in 1994, reflecting increased interest which is attributable to the
mortgages on the Pompano Property.

The Company had net income of $18,046 in fiscal 1994 compared to a net
loss of $1,938,869 in fiscal 1995. Management believes that the net loss in
fiscal 1995 is primarily attributable to a combination of all of the factors
discussed above.

Liquidity and Capital Resources

The Company has funded its working capital and capital expenditures
requirements from cash provided through borrowings from individuals and
institutions and from the sale of the Company's securities in private placements
and the initial public offering of its securities. The Company's primary source
of cash receipts is from payments for tuition, fees and books and revenues from
the operation of the Natural Health Care Center. The payments related to fees,
tuition and books were funded primarily from student and parent educational
loans and financial aid under various Federal and state assistance programs and,
to a significantly lesser extent, from student and parent resources.

During the first half of 1995, the Company issued an aggregate of
361,672 shares of Common Stock, 361,672 Class A Warrants and 361,672 Class B
Warrants in connection with the Bridge Loans in the original principal amount
$350,000 which were repaid from the net proceeds of the Initial Public Offering.
In April 1995, the Company sold an aggregate of 720,000 shares of Common Stock
for an aggregate of $126,000.

On June 29, 1995 the Company consummated the Initial Public Offering of
1,150,000 units at a price of $3.25 per Unit. Each Unit consisted of two shares
of Common Stock, one Class A Warrant and one Class B Warrant. See "DESCRIPTION
OF SECURITIES - Warrants."

At December 31, 1995, the Company had working capital of $1,087,726 as
compared to working capital of $168,996 at December 31, 1994, an increase of
$918,730. The increase was primarily attributable to the completion of the
Initial Public Offering.

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During fiscal 1995, net cash used in operations was $873,112 as
compared to net cash used in operations of $208,454 during fiscal 1994. The
primary use of cash during 1995 was the net loss of $1,938,869, offset by
charges not requiring the use of cash totalling $1,157,040 and net changes in
operating assets and liabilities aggregating approximately $88,000. Cash
provided by financing activities during 1995 was $4,609,302. Approximately
$3,000,000 was provided by the Initial Public Offering and $2,160,000 from debt
borrowings, primarily from mortgages on the Pompano Property. Approximately
$528,000 was used to repay long-term debt. Cash used in operations in the period
ended March 31, 1996 was approximately $147,000, attributable primarily to the
net loss of $141,000. See "BUSINESS - Pompano Property".

At March 31, 1996 the ratio of current assets to current liabilities
was 1.75 to 1.0 and working capital was approximately $843,000.

Capital expenditures of approximately $280,000 in the first three
months of 1996 related primarily to construction for preparing the Pompano
Property for the Company's use. The Company invested $250,000 in an investment
credit line account which secures a revolving credit account in the amount of
$300,000, of which approximately $170,000 was outstanding during the first three
months of 1996. The Company's capital expenditures totalled $2,714,402 in 1995
and $25,032 in 1994. Net cash paid for the acquisition of the Oviedo School was
$108,933. The Company anticipates that its most significant capital expenditures
during the next twelve months will relate to renovating the Pompano Property to
accommodate the Lauderhill School, equipping the Natural Health Centers.

The Company anticipates that the net proceeds received in the Offering,
together with anticipated cash flow will be sufficient to finance the Company's
operations for at least the next twelve months.

BUSINESS

Schools

The Company owns and operates three vocational schools in Oviedo,
Lauderhill and Miami, Florida that offer training and preparation for licensing
in therapeutic massage. The Company acquired the Oviedo School from Reese
Institute, Inc. in November 1995. The Lauderhill School and the Miami School
also offer training and preparation for registration in holistic skin care. The
Company seeks to fulfill the educational needs of adults seeking augmented
career skills or whose educational needs have not been met in traditional
educational environments. These individuals are primarily high school graduates
and underemployed adults seeking specific career skills and training. As of May
31, 1996, approximately 560 students were enrolled in the Schools. The Miami
School and Lauderhill School are licensed under Florida law and approved by the
USDOE to provide financial aid to qualified applicants. The Oviedo School is
licensed under Florida's law and has applied to the USDOE for approval to
provide financial aid to qualified applicants. For the year ended December 31,
1995, the Schools derived approximately 66% of their revenues from financial aid
provided under Federal or state assistance programs.

Currently, 19 states, including Florida and New York, require
individuals who practice massage therapy to be licensed. The Schools prepare
students to take the examination offered by the NCBTMB for certification as a
massage therapist. The NCBTMB's certification of massage therapists satisfies
the requirements for licensing in 11 of the states requiring licenses, including
Florida. The Company is currently seeking approval of the Schools' massage
therapy training program from the State of New York, which would qualify the
Schools' students to take the New York licensing examination.

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The State of Florida requires registration of skin care professionals.
Upon completing the Miami and Lauderhill Schools' holistic skin care program and
passing an examination administered by the Schools, the Schools' students
satisfy the requirements for registration as skin care professionals in the
State of Florida.

Through its wholly-owned subsidiary, F.I.M.T.E., the Company owns and
operates bookstores at each of the Schools. The bookstores sell massage therapy
equipment, skin care products and related educational materials, primarily to
students, as well as to practicing therapists, skin care professionals and the
public.

Natural Health Care Centers

The Company's Natural Health Care Center is a multi-disciplinary
complementary clinic specializing in alternative and traditional medicine
therapies to promote human wellness, including homeopathy, environmental and
internal medicine, allergy and Candida treatment, clinical nutrition, pain
management, massage therapy, stress reduction, colon hydrotherapy and chelation
therapy. The Natural Health Care Center promotes wellness as opposed to treating
health crises. As such the Natural Health Care Center concentrates on treating
illnesses which do not strike as a sudden crisis but develop gradually and
refuse to go away. Such illnesses includes most of the diseases related to aging
and lifestyle arthritis, osteoporosis, lower back pain, high blood pressure,
coronary artery disease and ulcers. Many patients are individuals who have not
done well under traditional medical treatment programs.

The Natural Health Care Center, founded as the Medicine and Lifestyle
Clinic, was established in light of a growing national interest in alternative
medicine fueled by a dissatisfaction with traditional medicine. A 1994 survey
indicated that thirty percent of people questioned had tried some form of
unconventional therapy. The alternative medicine industry has been estimated to
be a $27 billion a year industry and is expected to grow as the "baby boomer"
population ages.

Market Overview

Massage Therapy -- an Overview

Massage therapy is an ancient art dating back to ancient Greek and
Roman cultures. The term massage, as used today, includes various therapeutic
techniques including wellness massage, medical massage, rehabilitative massage,
beautification massage, pain relief, relaxation massage, sports massage and
neuromuscular massage. Massage therapy, as practiced by a professional, is a
scientific technique. It can facilitate relaxation and the reduction of mental
and physical tension, relieve muscle spasms, and improve body circulation. Other
benefits include reduction of strain on the heart and of fluids in the legs and
arms accomplished with lymphatic drainage.

In general, massages are offered at hospitals, spas, and health clubs.
In addition, chiropractors and physical therapists may use massage as part of
their treatment. Massages are administered to athletes as an aid to prevent
injuries, to help in the recovery of injured muscles, and to help athletes
perform at a higher level of competition. Massages are also used in the medical
field to ease pain and spasms and to alleviate the sore necks and backs of
accident victims. Most notably, massage is used for stress relief and
relaxation. In the past five years, several Fortune 500 corporations have made
massages available to certain employees as a stress reduction technique. Massage
therapy is often combined with

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chiropractic treatment, and some doctors who work with massage therapists
believe that patients who have therapeutic massages heal more quickly.

Alternative Medicine - an Overview

Alternative medicine utilizes a number of techniques to promote
wellness. As practiced at the Natural Health Center, treatment routinely
includes vitamins, minerals, enzymes, homeopathic preparations and related
medications, diet counseling, behavior modification, psychological stress
reduction and exercise programs. Treatment programs are customized for
individual patients. A number of patients served by the Natural Health Care
Center are patients who have not done well with traditional medical therapies.
The Natural Health Center utilizes the following therapies:

Chelation Therapy. Chelation Therapy is an intravenous treatment using
a solution containing minerals, vitamins and a special amino acid. This solution
through a complex biochemical action has the effect of removing toxic heavy
metals such as lead, mercury and arsenic. It also causes the mobilization of
abnormal calcium;

Homeopathy. Homeopathy, which was developed in early 1800s, is based on
the belief that physical symptoms signal an immune and defense system response
to stress or infection. Homeopathic remedies are natural substances that -- if
given to a healthy person in a large enough dose -- would cause symptoms similar
to what the sick person experiences. Homeopathic remedies come in liquid or pill
form and, according to practitioners, produce no side effects because they are
extremely small, specifically-prepared doses. The natural substances are
repeatedly diluted with distilled water and vigorously shaken -- sometimes
thousands of times -- to increase the potency of their effects by changing the
electron's structure. Homeopathy is widely used for chronic conditions, such as
allergies, chronic fatigue syndrome, heart disease, back pain, sports injuries,
arthritis, anxiety, addiction, PMS and menopause. It is also used for more acute
health problems, such as sore throats, flu and childhood afflictions, including
colic, teething and earaches. For instance, homeopathic doses of coffee (highly
diluted) are commonly given to people suffering from insomnia or headaches
because coffee is known to cause these symptoms in healthy people;

Colon Hydrotherapy. Colon Hydrotherapy is a colon cleansing system that
involves the safe, gentle infusion of purified warm water into the colon, using
no chemicals or drugs. Colon Hydrotherapy simply bathes the colon, removing
impaction from colon walls, stimulating peristaltic action and enhancing the
absorptive ability of the colon. This modality cleanses the colon from rectum to
cecum. In some cases more than one treatment is necessary for total cleaning. A
healthy colon is essential to a healthy body. Conventional diets of today,
comprised of refined, processed foods, high in saturated fats and low in natural
fiber, contribute to the magnitude of problems associated with the large
intestine. The elimination of undigested food and other waste products is as
important as the proper digestion and assimilation of food-stuffs. Research has
shown that regular use of refined carbohydrates and lack of natural fiber in the
diet increase the transit time of bowel wastes and stimulates putrefaction in
the colon. Both of these factors have been linked to constipation and
diverticulosis, as well as bowel diseases such as colitis and colon cancer,
which is the second leading killer cancer in the United States. Cholesterol and
triglycerides may be reduced in many cases after treatments;

Hormone Replacement. Hormone Replacement Therapy was developed to help
slow the aging process. Researchers are exploring the rejuvenating effects of
several hormones that are known to undergo rather striking declines with age. A
major focus of the new research is growth hormone, a product of the pituitary
gland that gradually declines with age and until recently was not thought

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important to older people. The Natural Health Care Center is administering
carefully supervised, customized programs of administering growth hormones to
patients. Some researchers believe that growth hormone helps older people gain
muscle, lose fat and develop thicker skins, and may contribute to reversal of
degenerative changes in bones, muscles, nerves and cartilage; and

Nutritional Counseling and Dietary Advice. It is well known that a
balanced diet promotes overall health. The Natural Health Care Center
provides dietary counseling including planning diets for patients with
certain health problems as well as prescribing various vitamins for patients,
such as vitamin A, which is regarded as helping to prevent numerous
degenerative diseases, vitamin B for preventing fatigue, vitamins B1, B2, B3,
B5 and B6 for the nervous system, muscle tone, circulation, stress and
utilization of proteins, respectively, vitamin C as an anti-oxidant, vitamin D
for skin and bone health.

Expansion Strategy

General

The Company plans to expand its business operations by seeking to
increase the enrollment of the Schools and developing programs to offer massage
therapy and other alternative health care services to the public. In order to
increase its ability to recruit students, the Company has applied for licensing
by the State of Florida to operate as a degree-granting junior college. In
addition, in May 1995 the Company acquired the Pompano Property, to which it
intends to relocate the Lauderhill School. In September, 1995 the Company
commenced the operation of the on-site Corporate Massage Service that offers
massages at corporate offices. In January 1996, the Company purchased
substantially all of the assets of Sam Lilly, Inc. which owns and operates the
Natural Health Care Center in Boca Raton, Florida. The Natural Health Care
Center specializes in alternative and traditional medical therapies to promote
human wellness, including homeopathy, environmental and internal medicine,
allergy and Candida treatment, clinical nutrition, pain management, massage
therapy and stress reduction. The Company plans to open additional Natural
Health Care Centers and has entered into an agreement to acquire a Natural
Health Care Center in Pompano, Florida. However, there can be no assurance that
it will do so.

Degree-Granting Junior College

The Company has filed an application with the State of Florida to
obtain approval to operate as a degree-granting junior college. The Company
believes, although there can be no assurance, that the application process will
be completed during 1996. The Company anticipates that graduates of its programs
would then receive an associates degree in holistic studies while majoring in
the areas of massage therapy, paramedical esthetics, acupuncture, nutrition or
homeopathy. The Company believes that the approval of its application to operate
as a degree-granting junior college will enhance the Schools' ability to recruit
students, although the Company has not obtained any studies to confirm such
belief. There can be no assurance as to if or when the Company's application to
operate as a degree-granting junior college will be granted, that the Company
will be able to maintain or increase the Schools' enrollment or that the
Company's marketing and expansion of the Schools will be successful or
profitable.

Corporate Massage Service

In September, 1995 the Company commenced the operation of the Corporate
Massage Service to offer on-site massages to businesses. The Company's initial
marketing efforts have concentrated on Florida and, if successful, of which
there can be no assurance, will be expanded elsewhere. The

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Corporate Massage Service has had minimal revenues while incurring significant
expenses. The Company directs its marketing at both employees and employers. The
Company attempts to encourage employers to pay for the massages for its
employees as a method of increasing employee morale and productivity. In
addition, the Company advertises in local newspapers, business and trade
publications. The Company's massage therapists are independent contractors. The
massage therapists set up portable massage chairs at corporate offices and offer
massages to employees for 10-15 minute sessions. The massages do not require the
recipient to disrobe. The Company charges approximately $60 per hour per
therapist. The Company has two full-time employees to oversee the marketing and
operating activities of the Corporate Massage Service. Massage therapists are
used on a part-time, as needed basis.

Natural Health Care Centers

In January 1996, the Company through its wholly-owned subsidiary,
Health Wellness Nationwide Corp. purchased the assets of Sam Lily, Inc. which
owned and operated the Natural Health Care Center in Boca Raton, Florida. The
purchase price for the assets was 380,000 shares of Common Stock. In addition,
the Company, in connection with the acquisition of the assets of Sam Lily, Inc.,
entered into employment agreements with Samantha Haimes and Leonard Haimes, M.D.
Each of the employment agreements were effective as of January 22, 1995 and
provide for a three-year term. Mrs. Haimes and Dr. Haimes are to receive
salaries of $357,500 and $192,500, respectively, for 1996. Thereafter, the
salaries of Mrs. Haimes and Dr. Haimes are based upon a percentage of the gross
revenues of Health Wellness Nationwide Corp. The Natural Health Care Center
specializes in alternative and traditional medical therapies to promote human
wellness, including homeopathy, environmental and internal medicine, allergy and
Candida treatment, clinical nutrition, pain management, massage therapy and
stress reduction.

In May 1996 the Company signed an agreement and plan of reorganization
to acquire substantially all of the assets of Medical Sciences Consultants,
Inc., Diagnostic Services, Inc., Managenet Inc. and KBM Consultants which
companies operate an alternative medical clinic in Pompano Beach, Florida. The
purchase price is $550,000 payable in Common Stock of the Company, valued at the
average of the high and low trading price on May 1, 1996, May 15, 1996 and May
31, 1996. The Agreement and Plan of Reorganization provides that the Company
will enter into an employment agreement with Kaye Lenzi, who directs the Pompano
facility.

The Company anticipates that a Natural Health Care Center will be
opened at the site of the Lauderhill School upon the relocation of the
Lauderhill School to the Pompano Property. The Company plans to open additional
Natural Health Care Centers. However, there can be no assurance that the Company
will open additional Natural Health Care Centers. The Company believes that
holistic health care has been marketed to only a small segment of the
population. The Company anticipates that it will direct its advertising and
educational materials toward individuals who have not previously considered
homeopathic health care remedies or maintenance techniques. The Company may need
to seek additional financing to open additional Natural Health Care Centers.

Operation of the Schools

Curricula

The primary focus of the Company's Schools has been on massage therapy,
which the Company believes has achieved increased public awareness and
acceptance. Currently, 19 states, including Florida and New York, require
individuals who practice massage therapy to be licensed. The Schools prepare

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students to take the examination offered by the NCBTMB for certification as a
massage therapist. The NCBTMB's certification of massage therapists satisfies
the requirements for licensing in 11 of the states requiring licenses, including
Florida. The Miami School and Lauderhill School also offer training in holistic
skin care. The State of Florida requires registration of skin care
professionals. Upon completing the holistic skin care program and passing an
exam administered by the School, the School's students satisfy the requirements
for registration as a skin care professional by the State of Florida.

The Company has applied to the New York State Board of Regents for
approval to allow students attending the Schools to take the New York State
examination for licensing as massage therapists. There can be no assurance as to
if or when the application will be granted. If the application is granted, the
Company believes that its Schools will be the only schools in south Florida to
have obtained such approval. The Company believes that if approval is obtained,
the Schools will be able to attract New York students because the Company
believes that tuition costs at the Schools are substantially lower than the
tuition costs of the only three licensed massage therapy schools in New York
known to the Company. However, the Company has not obtained any studies to
confirm such belief.

The basic massage therapy program curriculum presently includes 624
hours of required classroom study (which exceeds the 500 hours required for
licensing in the State of Florida), including 252 hours in anatomy and
physiology, 236 hours in therapeutic massage, 20 hours in the theory and
practice of hydrotherapy, 100 hours in allied modalities, 12 hours in Florida
state law and business principles and development, and four hours in AIDS/HIV
education. The Company also offers a 300 hour program in advanced sports
massage. The curriculum includes clinical instruction, and students are required
to perform periodic evaluations of patients and take a final clinical
examination similar to the NCBTMB examination. The Schools also offer a two-day
review course for students preparing to take NCBTMB's certification examination.
The grading scale used at the Schools is the same as that used on the
certification examination offered by NCBTMB. In addition, the Schools offer
continuing education courses and provide seminars for graduates and other
massage therapists. Some seminars offered by the Schools include neuromuscular
therapy (St. John method), aromatherapy, shiatsu, sports massage, infant
massage, craniosacral technique and trager.

The holistic skin care program offered by the Lauderhill School and
Miami School was introduced in 1992. The holistic skin care program curriculum
includes European facials, acne treatments, exfoliating peels, face and body
waxing, make-up artistry, face and scalp massage, cellulite treatments,
aromatherapy, sea weed therapy, pre-operative and post-operative care for facial
surgery, body wraps, paraffin treatments, spa therapies, business management and
career development. The program consists of a total of 300 classroom hours of
study, approximately half of which are devoted to lectures and approximately
half of which are devoted to clinical training. The program, conducted over a
fifteen week period, presently includes hair removal (15 hours), applied
clinical training (150 hours), understanding the skin and its functions/anatomy
and physiology (88 hours), make-up artistry (10 hours), electricity,
sterilization, sanitation, bacteriology, mask therapy, ethical business practice
and marketing.

The Lauderhill School and Miami School also offer a combined massage
therapy and holistic skin care program, requiring approximately 900 hours of
study. The Company requires that the massage therapy portion of the curriculum
be completed first, followed by 300 hours of holistic skin care.

The curriculum is taught in a modular system and there is rollover
enrollment. Each portion of the curriculum is taught independently, so that a
student can begin classes upon introduction to the next system of the body.
Individual orientation takes place during the student's first week of classes,
further acclimating the student to the School's system of education. The
rollover enrollment system allows a

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student to start classes within 30 days of enrollment, thereby allowing the
student to begin classes at the student's convenience. The Company believes that
the rollover enrollment system has proven effective because it allows new
students to learn from both the structured class as well as from more
experienced students.

The Company has a 900 hour advanced level curriculum that includes
externship programs in which students participate with the Touch Research
Institute of the University of Miami School of Medicine (the "Touch Research
Institute"), Renfrew, which is an eating disorder institute, Center One, an
AIDS/HIV clinic, the University of Miami Athletic Department or other
organizations. The advanced level program also includes a course relating to
medical documentation and medical terminology. In the clinical program at the
Touch Research Institute, students participate in medical studies, including
studies on the effect of massage therapy on premature infants, "crack babies,"
AIDS/HIV positive patients and individuals suffering from general job stress.

The Company may, in the future, seek to expand its course offerings to
include programs of study in paramedical esthetics, acupuncture, nutrition and
homeopathy. There is no assurance that such additional programs will ever be
offered or that, if offered that they will result in an increase in enrollment
or revenues.

Student Recruitment

The Company believes that enrollment at the Company's Schools is
influenced by a number of factors, including (i) a growing need for individuals
to have technical and occupational training in order to obtain employment, (ii)
the number of high school graduates and other demographic trends, and (iii) the
availability of competing alternatives, including other educational
opportunities, other vocational training alternatives, employment and service in
the U.S. military. The Company believes that successful student recruitment
depends upon a number of factors, including a school's educational reputation
and accreditation, job placement record, frequency and schedule of classes and
location, as well as the availability of Federal student financial aid. In order
to attract potential students and increase recognition of its name and programs
of study, the Company utilizes a variety of marketing methods including radio,
newspapers, mailings, surveys, presentations, telemarketing and public
relations.

The Company employs an admissions director, who is directly responsible
for all areas concerning the marketing and advertising for the Schools,
recruitment of prospective students and training admissions personnel. The
Company currently markets the Schools primarily in the south Florida area, and
plans to expand its marketing to students in South and Central America, as well
as the Caribbean area. The Schools have been approved by the United States
Immigration and Naturalization Service to provide student visas to students from
countries in these regions. As part of its international marketing efforts, the
Company has obtained an 800 number in the Bahamian yellow pages and plans to
advertise in Jamaica, the U.S. Virgin Islands and in selected South American
and Central American cities and countries. The Schools have attracted students
from the Bahamas, St. Thomas, Jamaica, Canada, Great Britain and Norway.

School Faculty and Administration

As of May 31, 1996 the Company had 24 full-time employees in the
administration of the Schools and three part-time administrators, as well as 14
part-time faculty members and 15 full-time faculty members. Generally, the
Company tries to provide one teacher for every 15 students in the clinical
classroom and one teacher for every 35 students in the lecture classroom.
Faculty members are required

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to meet certain state licensing requirements. The Company prefers teachers who
have had some practical experience in the fields in which they are instructing
students. The Company has experienced no difficulty in obtaining qualified
faculty members and believes that qualified teachers can be readily employed.
Each of the Schools is managed by a school director who has responsibility for
all aspects of the School. The school director is assisted by an executive
staff, which monitors teacher performance, and by administrative coordinators.

Graduate Job Placement

The Company believes that the placement of its graduates is essential
to its ability to attract students. The Company's Office of Graduate Job
Placement works with students and graduates by advising them about employment
opportunities and offering other placement assistance. It provides career
counseling, holds practice job interviews, helps students write resumes and
maintains regular contact with and communicates with prospective employers. The
Schools have registered chiropractors, orthopedic doctors, rehabilitation and
sports medicine clinics, spas, hotels, resorts, salons, plastic surgeons and
dermatologists as prospective employers. Based on the placement calculation
mandated by the Accrediting Commission of the Career Schools and Colleges of
Technology, approximately 85% of the Miami School's and Lauderhill School's 1995
graduates have found positions, including those who are self-employed and have
entered private practice.

F.I.M.T.E. Supply, Inc.

F.I.M.T.E., the Company's wholly-owned subsidiary, operates a bookstore
at each of the Schools' campuses and publishes a catalog that is available to
the public. Inventory consists of such items as massage tables, headrests, other
equipment related to the practice of and utilized to provide massage therapy
services, educational materials, skin care products, and clothing, including
uniforms and shirts. Customers include students, instructors, graduates of the
Schools, practicing therapists and the public. F.I.M.T.E. intends to continue to
offer these products and expand its inventory to include updated and related
products.

Acquisition of Oviedo School

On November 17, 1995 the Company, pursuant to an asset purchase
agreement with Reese Institute, Inc. ("Reese"), acquired all of Reese's
corporate assets, which included the Oviedo School, for a purchase price of
$250,000. Of the $250,000 purchase price, $125,000 was paid at the closing
and the balance is payable over four years pursuant to a secured promissory
note. In addition, the Company entered into a five-year lease agreement with
Jean Reese, the sole stockholder of Reese, to lease the 7,590 square foot
property which is occupied by the Oviedo School. The Oviedo School has applied
for accreditation with the Accrediting Commission of Career Schools and
Technology as a branch campus of the Lauderhill School. There can be no
assurance as to when or if such application will be approved. As of May 31,
1996, the Oviedo School had 79 students. See "- Leased Properties."

Regulation

General

Participation in Federal student financial aid programs subjects the
Company to extensive regulation and to audit and compliance review by the USDOE
and other administering agencies. Failure

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to comply with these regulations may have serious consequences and may result in
suspension, limitation, or termination hearings to determine if an institution's
participation in these programs should be reduced or terminated. No such
suspension, limitation or termination proceeding has been instituted against the
Company. The Company would be materially affected adversely if one of these
proceedings were instituted against the Company and it resulted in a curtailment
of the Company's participation in government student financial aid programs. The
Oviedo School has applied for approval to provide financial aid to qualified
applicants. However, there can be no assurance, as to if or when, the
application will be granted.

The Schools must hold a state license or be registered with the
appropriate state authorities to operate as a school. The Schools are licensed
by the State Board of Independent Postsecondary, Vocational, Technical, Trade
and Business Schools of the Florida Department of Education (the "Florida State
Board"). In addition, the Schools must generally comply with standards
established by Florida state laws governing proprietary schools. Typically,
these laws and the related regulations concern such matters as standards and
methods of instruction, qualifications of teachers and management personnel,
adequacy of school facilities and equipment, advertising, form and content of
contracts between schools and their students and tuition collection methods. The
Company holds all required Florida licenses and registrations, and believes that
it is in substantial compliance with such laws and related regulations. As a
result of these laws and regulations, the Company must obtain the approval of
the appropriate state education departments before offering new programs or
courses and before implementing any changes in existing programs or courses.

The Company and its Schools must comply with a variety of Federal and
state regulations to qualify as institutions where eligible students can obtain
government financial aid for tuition and related expenses. These regulations
include rules which set minimum tuition refund levels for students who leave
school before completing their programs of study. In addition, the Federal
regulations require the accreditation of the school by private commissions
recognized by the USDOE. The accreditation commissions establish additional
standards with respect to such matters as curriculum and teacher qualifications.

Under current USDOE regulations, a change in control of the Schools
could result in a temporary or a permanent loss of Federal financial aid funds
to the Schools' students. In addition, under the regulations of the Florida
State Board a change of ownership resulting in a change of control may result in
the termination of the Schools' licenses. The Schools will also require the
approval of the Schools' accrediting commission upon a change of control.
Pursuant to the USDOE regulations, a determination of a change of control would
involve a review of which persons or entities have the power to direct or cause
the direction of management and policies of the Schools. Under the Florida State
Board's regulations, a change of control constitutes a change in the authority
to establish or modify school policies, standards and procedures or the
authority to make the effective decisions regarding the implementation or
enforcement of school policies, standards and procedures. In such event, the
prior approval of the Florida State Board is required. Under the rules of the
Schools' accrediting commission, a change of control occurs when a person or a
corporation obtains authority to control the actions of the institution,
including a change of control which occurs as a result of a transfer in voting
interest. The Company believes, although there can be no assurance, that as a
result of the Company's completion of the Initial Public Offering and additional
issuances of shares of Common Stock, including the issuance of shares of Common
Stock upon the exercise of the Warrants, that there has not been or would be a
change of control that would result in a loss of its eligibility for Federal
financial aid funds, a review of its licenses, or the requirement of prior
approval by its accrediting commission. Should the percentage ownership of the
Company's Common Stock by the Company's present shareholders, officers and

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directors decrease further through the issuance of additional shares of Common
Stock, the issue of whether there was a change of control, if raised by the
USDOE, the Florida State Board or the accrediting commission, would be
determined pursuant to the standards set forth above, on the basis of the facts
then existing, including the percentage ownership of the present shareholders,
officers and directors, as compared with the holdings of others and other
factors relating to the actual control of the Company. Should there be a
determination that a change of control had occurred by the USDOE, the Florida
State Board or the Schools' accrediting commission and there was a disruption or
termination of the availability of Federal financial aid to the Schools'
students or a termination or interruption of the licenses or accreditation of
the Schools, there would be a material adverse effect on the Company, its
business and its prospects. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION."

Accreditation and Licensing

Accreditation is a means of recognizing that learning institutions have
met uniform standards of educational performance, primarily through impartial,
non-governmental peer evaluations by national or regional professional
associations. A school becomes accredited by formal action of the accrediting
body, which bases its decision on information submitted by the school and the
reports of a specially appointed inspection team which has visited the school
and evaluated the programs and operations according to established standards.
Accreditation by at least one accrediting body recognized by the USDOE is
required to permit a school's students to participate in Federal student
financial aid programs. Accreditation is also an important factor in
establishing an institution's reputation with potential students and employers
of its graduates.

Accredited schools are subject to periodic review by accrediting bodies
to ensure that the schools maintain the level of performance, integrity and
quality required by the accrediting body. There can be no assurance that the
existing accreditation of the Miami School and Lauderhill School will be
renewed. Moreover, the Company has applied for accreditation of the Oviedo
School, as a branch campus of the Lauderhill School and there can be no
assurance as to when or if such application will be approved. In addition, a
change in ownership of the Company would require notification of, and possible
re-evaluation of, the Company's accreditation by the accrediting agencies in
order for the Schools to retain their accreditation.

Although accreditation is a private, voluntary process designed to
promote educational quality, the Company believes that accreditation is an
important asset. Accreditation of a school provides significant competitive
advantages over non-accredited, for-profit educational institutions. College and
university administrators look to accreditation in deciding whether to accept
transfers of credit. Employers rely on an institution's accredited status when
evaluating a job applicant's credentials. Moreover, accreditation is required
for participation in government financial aid programs.

Each School is licensed by the Florida State Board as an institution
that provides instruction or training that leads to an occupational objective.
Such institutions are subject to annual or, if they have been licensed and in
good standing for five years or more, biennial licensing renewal. The present
license for the Miami School is subject to annual review, while the licenses for
the Oviedo School and the Lauderhill School are subject to biennial review, and
expire on September 30, 1996, November 30, 1996 and March 31, 1998,
respectively. Each institution must meet certain minimum standards established
by the Florida State Board with respect to administrative organization,
educational program and curricula, finances, financial stability, faculty
requirements, library facilities, student personnel services, physical plant and
facilities, and publications. In addition, the institution is required to
disclose

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<PAGE>

to the Florida State Board and its students the status of the institution with
respect to professional certification and licensure. Failure to maintain
compliance with the Florida State Board's minimum standards could result in
revocation or suspension of a School's license, or other penalties imposed by
the Florida State Board. The rules of the Florida State Board require prior
approval of written contracts between the student and the institution, changes
of location in certain events and significant changes to programs and methods of
operation. Each institution is required to be incorporated and have adequate
administrative staff and faculty to provide instruction in its licensed
programs. In addition, each program to be offered by an institution must be
described in detail in the institution's catalog, including a listing of
required equipment and instructional materials. Moreover, institutions must
submit financial statements at the time of application for renewal. If the
institution has a ratio of current assets to current liabilities of less than 1
to 1, the Florida State Board is authorized to deny the renewal of the license
or to require a demonstration to provide further justification for the renewal
of the license. The Florida State Board may also require the institution to post
a bond to assure the Florida State Board that the institution will be able to
fulfill its obligations to its students. The institution must maintain a
placement rate of its graduates of at least 60%, otherwise the institution will
be required to submit reports implementing placement improvement measures. In
addition, each institution must maintain a retention rate of 50% of its
students. Presently, the Florida State Board rules require a minimum of 500
hours of training for massage practice, with a maximum of 625 hours of
instruction. Agents employed by the institution to solicit students outside the
institution are required to be licensed and are subject to annual licensure and
payment of fees. The rules of the Florida State Board provide that the
advertising of the institution must be in compliance with its requirements,
which include limits on the use of superlatives or non-factual statements or
illustrations. Any statement which is intended to mislead the public could
result in revocation of licensure or other sanctions imposed by the Florida
State Board.

The Miami School and Lauderhill School are accredited by the
Accrediting Commission of Career Schools and Colleges of Technology. The
Schools' Therapeutic Massage Training Program is accredited by the Commission on
Massage Training Approval/Accreditation of the American Massage Therapy
Association. The Oviedo School has applied for accreditation to the Accrediting
Commission of Career Schools and Colleges of Technology. However, there can be
no assurance as to if or when such accreditation will be granted.

The Company is also a member of the Career College Association, the
Florida Association of Post Secondary Schools and Colleges and the Florida
Association of Estheticians. The Miami School and Lauderhill School are approved
by the Florida State Board of Massage as a provider of continuing education
units and by the Immigration and Naturalization Service to provide student
visas. The Lauderhill School and Miami School, are also approved by the
Veteran's Administration to accept veteran's benefits.

Application to Become Degree-Granting Junior College

The Schools are not presently degree-granting institutions.
Degree-granting institutions can issue either bachelors, associates or graduate
degrees. The Company has filed an application with the State of Florida to
become a degree-granting institution. If the Company's application is approved,
of which there can be no assurance, the Schools will be permitted to grant
associate degrees. Initially, upon preliminary approval of the Company's
application, the Schools will be provisionally approved as a junior college.
However, final approval by the State of Florida is required to become a
degree-granting institution. The Company anticipates that the application
process will be completed in 1996. However, there can be no assurance as to if
or when the Company's application will be approved. The Company was required to
set forth its plans to establish a general education curriculum and minimum
faculty

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<PAGE>

qualification requirements in its application. The Company anticipates that it
will be able to meet these criteria by entering into agreements with nearby
existing institutions to make available general education courses to the
Schools' students or by employing faculty on a part-time basis. There is no
assurance that such arrangements will be available to the Company or that they
will be acceptable to the State of Florida.

If the Schools obtain licensing to operate as a degree-granting junior
college, the success of the Schools may be dependent, in part, upon the
transferability of credits from the Schools to four year institutions. The
transferability of credits from one educational institution to another, absent
an articulation agreement between the two schools, is generally at the
discretion of the receiving institution. The factors that receiving institutions
typically consider include, but are not limited to, the similarity of
accrediting commissions, the licensing status of the two institutions and the
similarity of program content, curriculum and textbooks. In addition, many
institutions enter into articulation agreements which establish specific
guidelines for the transfer of credits from one institution to another. However,
these agreements are not required by law, and the content may vary dramatically
depending on whether the institution is a public, private, academic or
vocational/technical school. In general, if the institutions are accredited by
the same or a similar accreditation commission, then the transfer of credits
between such institutions is more likely. The accreditation commission
requirements may be identical or similar in terms of faculty to student ratios,
equipment requirements, library facilities, curriculum development and other
factors. Students may also attempt to transfer credits from one institution to
another without regard to whether the institutions are licensed by the Florida
State Board of Independent Colleges and Universities or the Florida Board of
Regents (the head of the state university system). Absent articulation
agreements between the two schools, consideration for the acceptance of transfer
of credits is more subjective than the transfer of credits between otherwise
similar public or private institutions. There can be no assurance that credits
from the Schools' courses will be transferable.

Student Financial Aid

Students at the Schools finance their education through a variety of
sources, including individual resources, earnings from part-time employment,
family contributions and tuition payment from their employers. However, the
principal source of tuition financing at the Miami School and Lauderhill School
is government-sponsored financial aid programs. Students at the Miami School and
Lauderhill School receive financial aid under the following primary programs:
(i) Federal Pell Grant Program (formerly known as Basic Educational Opportunity
Grants); (ii) Federal Family Educational Loan Programs, which includes the
Stafford Loan Program (previously known as the Guaranteed Student Loan Program),
the Parent Loans for Undergraduate Students ("PLUS") program, and the
Supplemental Loans for Students ("SLS") program; (iii) Supplemental Educational
Opportunity Grants; and (iv) the College Work Study program.

Federal Pell Grants are available to needy students studying at least
16 hours per week at an approved post-secondary educational institution. A
Federal Pell Grant may be received during each July 1 through June 30 period, an
"award year," and need not be repaid by the student. In 1992, Congress adopted
legislation which provided for incremental increases until the 1997-98 academic
year when Federal Pell Grants will reach $4,500. The Federal Pell Grant Program,
however, is not an entitlement, and, therefore, the maximum grant recommended in
the legislation is not currently funded. There can be no assurance that Congress
will continue to fund the Federal Pell Grant Program in the future. The size of
the Federal Pell Grant received by a particular student depends upon a complex
formula which takes into account a series of factors, including family income,
assets and size, whether the student is

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<PAGE>

financially dependent upon or independent of his or her family, and the number
of post-secondary students in the family, as well as the length of the program
and the cost of education.

Stafford Loans are available to students studying at least 16 hours per
week at an approved educational institution. A student pays no interest on a
Stafford Loan while in school and for a six-month "grace period" thereafter,
after which time the student is required to pay monthly installments of at least
$50, which includes interest at a rate prescribed by Federal law (8% per year
for Stafford Loans made at the present time for the first four years and 10%
thereafter). Stafford Loans may be obtained in amounts up to $2,625 per award
year. If family income exceeds $30,000, the student must provide evidence of
financial need. Stafford Loans are made by banks and other participating lending
institutions, which receive interest subsidies during the life of the loan.
During the student's grace period, the Federal government also pays all interest
due on the Stafford Loan. In the event of default, Stafford Loans are fully
guaranteed as to principal and interest by state guarantee agencies, which, in
turn, are reimbursed by the Federal government.

Commencing in April 1995, the Miami School and Lauderhill School became
participants in the National Direct Student Loan Program ("NDSL"). NDSL Loans
are available to students studying at least 16 hours per week at an approved
educational institution. NDSL Loans may be obtained in amounts up to $2,625 per
year. If a student's income or family income is below a specified level, a
student pays no interest on an NDSL Loan while in school and for a six-month
"grace period" thereafter, after which time the student is required to pay
monthly installments of at least $50, which includes interest at a rate
prescribed by Federal law. If the student's income or family income is above a
specified level, then interest accrues on the loan at a rate prescribed by
Federal law. The interest rate on NDSL Loans ranges from 8.25% to 8.98% per
annum. NDSL Loans are direct loans from the Federal government.

Under the provisions of the Reauthorization of Higher Education Act of
1965, as amended (the "Reauthorization Act"), educational institutions with
annual student loan default rates in excess of 25% (30% prior to 1994) for three
consecutive years may lose their eligibility for student loans. The Company's
schools' student loan default rates for 1992 and 1993 were determined to be 17%
and 10%, respectively. The default rates for 1994 and 1995 will not be available
from the USDOE until the third quarters of 1996 and 1997, respectively, since a
student is not deemed to be in default until eight months after a six-month
grace period from the time that the student leaves school. Commencing in April
1995, the Company became a participant in the National Direct Student Loan
Program. Management knows of no written regulations with respect to the
requirements for determining and maintaining student loan default rates below
specified levels for the National Direct Student Loan Program. In addition, the
Certification Office of the USDOE monitors student drop-out rates. Under Federal
regulations, a student drop-out rate in excess of 33% may impair an
institution's ability to administer financial aid programs and is one factor in
determining whether to deny an institution's certification to participate in
Federal student aid programs. A student drop-out rate exceeding 33%, however, is
not alone sufficient to disqualify an institution from such participation, but
must be viewed in conjunction with other factors such as loss of state
licensing, loss of accreditation, poor periodic reviews, or high student loan
default rates. The Schools' dropout rate in 1995 was approximately 10%. There
can be no assurance that the Company will be successful in continuing to
maintain an acceptable student loan default rate, or dropout rate or otherwise
remain eligible for Federal funding.

The Reauthorization Act prohibits an institution from enrolling more
than 50% of its students on the basis of "Ability to Benefit." "Ability to
Benefit" students are those without a high school or general equivalency degree.
As of December 31, 1993, 1994 and 1995, approximately 12%, 15% and 12%,

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<PAGE>

respectively, of the Company's students at the Lauderhill School and Miami
School were classified as "Ability to Benefit" students.

Under USDOE regulations, the Schools are proprietary schools (a
"for-profit" educational institution that provides job or career-related
training). A proprietary school may be deemed ineligible to participate in
financial aid programs if the USDOE determines that 85% or more of the
institution's operating revenue is derived from Title IV financial aid programs.
The application of the 85-15 Rule depends largely on the USDOE's interpretation
of what constitutes "revenue" for such institutions. According to the Company's
preliminary calculations, the Miami School and Lauderhill School derived
approximately 66% of their revenues for the calendar year ending December 31,
1995 from the Title IV financial aid programs. The official determination of the
Company's compliance for the year ended December 31, 1995 with the 85-15 Rule
will likely be made by the end of 1997. Accordingly, if it is determined that
the Company did or does not comply with these regulations, some or all of the
student financial aid received by the students at the Schools could be curtailed
or eliminated. The reduction or termination of Federal student financial aid
would have a material adverse effect on the Company.

The USDOE has considered, and the U.S. Congress is presently
considering, changes in the administration of certain student financial aid
programs. There is no assurance that government funding of the financial aid
programs in which the Company's students participate will be maintained at
current levels. A reduction in funding levels could result in lower enrollments.
Extensive and complex regulations govern all of the government grant and loan
programs in which the Company participates. As such, the Company is subject to
periodic reviews and audits by the USDOE and Federal and State Guaranty Agencies
to determine compliance with applicable regulations. Because financial
assistance programs are required to be administered in accordance with the
standard of care and diligence of a fiduciary, any regulatory violation could be
the basis for the initiation of a suspension, limitation or termination
proceeding against the Company. If such a proceeding were initiated against the
Company and resulted in a substantial reduction or termination of the Company's
participation in government grant or loan programs the Company would be
materially and adversely affected.

The Company's Schools also offer a payment plan which enables students
to pay for their tuition in monthly installments. The Company charges students
participating in this payment program a finance charge of $25 and interest at
the annual rate of 12%. Students participating in this program are required to
pay the remaining balance of their tuition accounts prior to graduation.

Natural Health Care Center and Corporate Massage Service

The massage therapists employed in connection with the Corporate
Massage Service are required to satisfy professional licensing requirements. In
Florida, the Company's massage therapists and the Natural Health Care Center,
and other Natural Health Care Centers which the Company may open as
establishments offering massage therapy, are subject to regulation by the
Division of Professions, Board of Massage of the Department of Business and
Professional Regulation under the Florida Massage Practice Act. Moreover, the
massage therapists and other specialists whose services are offered at the
Natural Health Care Center are also subject to ongoing professional licensing
requirements. All physicians employed at Natural Health Care Centers must be
licensed and are also subject to ongoing professional licensing requirements.
The failure of such persons to practice in accordance with professional
licensing requirements could have a material adverse effect on the Company.

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Competition

The Schools

The Schools compete with (i) regional vocational schools and national
vocational schools which offer occupational training programs in massage
therapy, holistic skin care and in related and unrelated fields, (ii) two and
four year universities and colleges, and (iii) on-the-job training offered by
private and government employers. The Company believes that there are
approximately five schools in the Schools geographic area that offer programs of
study in massage therapy and approximately five schools that offer programs of
study in holistic skin care. The Company believes that the massage therapy and
holistic skin care programs of study offered by its Schools offer a broader
range of courses than other schools in its geographic area. In addition, the
ability of two of the Schools' students to receive financial aid under Federal
programs provides a competitive advantage over those schools which do not have
such ability. Many competitors have greater financial, recruiting and job
placement resources than the Company, have longer operating histories and are
more established than the Company, and have more extensive facilities and more
personnel than the Company has now or will have in the foreseeable future.

Natural Health Care Centers and Corporate Massage Service

The Company's Natural Health Care Center competes with doctors,
hospitals and medical clinics offering traditional forms of health care and
other practicing therapists offering traditional forms of health care, as well
as with other providers of alternative forms of health care and health
maintenance. The Corporate Massage Service competes against individual massage
therapists, health clubs and other massage providers. Many of these competitors
have established practices and greater financial resources than the Company. In
addition, the services offered by the Company's competitors may be covered by
medical insurance or other third party reimbursement. Medical insurance coverage
and other third party reimbursement is not available for most of the services
offered by the Natural Health Care Center and to the extent that such services
are covered, coverage is limited. The lack of medical insurance coverage or
other third party reimbursement for all of the services performed at the Natural
Health Care Center or other Natural Health Care Centers may affect their ability
to attract and retain patients.

Employees

As of May 31, 1996 the Company had 60 full time employees and 17 part
time employees including 24 full time administration employees and three
part-time administration employees. The Schools have 15 full time and 14 part
time faculty members. The Corporate Massage Service has two full time employees,
and the Natural Health Care Center has 12 full time employees.

Insurance

The Company presently maintains workers' compensation coverage and
liability insurance relating to hazards on the Company's premises. The Company
carries a general liability policy which provides for coverage of $1,000,000 per
occurrence and $2,000,000 in the aggregate. The Company's professional liability
policy provides for coverage of $1,000,000 per occurrence and $3,000,000 in the
aggregate. The Company is and will be engaged in a business which could expose
it to personal injury and other liability claims. The Company carries $1,000,000
of malpractice insurance in connection with the Natural Health Care Center.
There can be no assurance, however, that the Company's insurance will be
sufficient to

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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 the Company.

Leased Properties

The Company leases approximately 11,500 square feet for the Lauderhill
School at 5453 North University Drive, Lauderhill, Florida. The current annual
rent is approximately $116,000 and the lease expires on July 31, 1997 as to
9,940 feet. The balance of the space is leased on a monthly basis. The Company
intends to relocate the Lauderhill School to the Pompano Property and intends to
open a Natural Health Care Center at such site. However, there can be no
assurance that it will do so. In the event that the Company does not utilize
such space, the Company believes that its maximum liability would be
approximately $135,000. The Company leases approximately 12,000 square feet for
the Miami School at 7925 Northwest 12th Street, Miami, Florida. The current
annual rent is $155,520 and the lease expires on October 31, 1998. The Company
leases approximately 7,590 square feet in Oviedo, Florida which is occupied by
the Oviedo School. The lease expires in November, 2000 and the annual rent
payable under the lease is $79,087. The Company also has the option to purchase
the leased property for $550,000. The Company also leases approximately 5,000
square feet for the National Health Care Center. The lease expires in January
2001 and the annual rent ranges from $72,000 in the first year of the lease
to $87,600 in the fifth year.

Pompano Property

In May 1995, the Company purchased the Pompano Property from Merrick Venture
Capital, Inc. (the "Seller") for $2,350,000 and Justin Corp. concurrently
acquired the Adjacent Parcel from the Seller for $450,000. All of the
outstanding capital stock of Justin Corp. is owned by Neal R. Heller and
Elizabeth S. Heller. The Pompano Property is located on approximately three
acres at 2001 West Sample Road, Pompano Beach, Broward County, Florida, which
contains a four story building consisting of 50,438 square feet which is known
as the Tricom Office Center. Neal R. Heller, President of the Company, made an
advance to the Company in the amount of $570,000 to cover the down payment and
certain closing costs. The advance was repaid to Mr. Heller from the proceeds of
the Initial Public Offering. The Company financed the purchase of the Pompano
Property with two mortgage loans, secured by both the Pompano Property and the
Adjacent Parcel, in the aggregate principal amount of $1,875,000. The Company
obtained a first mortgage loan from TransFlorida Bank in the original principal
amount of $1,350,000 (the "First Mortgage Loan"), which bears interest at two
percent above the prime rate of Sun Banks, Inc. (initially 11%), and provides
for repayment of principal based on a 25 year amortization schedule. The First
Mortgage Loan matures in May 2002 and is guaranteed by Neal R. Heller and
Elizabeth S. Heller. The Company obtained a second mortgage loan in the original
principal amount of $525,000 from the Seller (the "Second Mortgage Loan"). The
Second Mortgage Loan matures in May 2000, bears interest at the same rate as the
First Mortgage Loan, and provides for repayment of principal based on a 25 year
amortization schedule. The Second Mortgage Loan is also guaranteed by Neal R.
Heller and Elizabeth S. Heller. The Pompano Property and the Adjacent Parcel are
also encumbered by a $450,000 mortgage loan from TransFlorida Bank to Justin
Corp. (the "Adjacent Parcel Mortgage Loan"). The Company has agreed to make the
payments on the Adjacent Parcel Mortgage Loan. The mortgages on the Pompano
Property and the Adjacent Parcel are summarized below:

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<PAGE>

Entity
Property Making
Amount Encumbered Mortgage Mortgagor Payments
-------------- ------------------- --------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
First Mortgage $1,350,000 Pompano Property TransFlorida Company Company
Loan Bank

Second $525,000 Pompano Property Seller Company Company
Mortgage Loan and Adjacent and Justin
Parcel Corp.

Adjacent Parcel $450,000 Pompano Property TransFlorida Company Company
Mortgage Loan and Adjacent Bank and Justin
Parcel Corp.
</TABLE>

Approximately 41% of the building will be occupied by the Company's
corporate offices, and the Lauderhill School and the balance will be occupied by
non-affiliated tenants. Approximately 30,000 square feet of the Pompano Property
is presently leased to 10 tenants at an aggregate rental of approximately
$300,000 per annum. The current leases expire at various times between 1996
through 1998 and require annual rentals that range from $5,000 to $63,000 per
annum. The three largest tenants account for approximately 50% of the Pompano
Property's rental income, and none of the other tenants accounts for more than
12% thereof. Three of the largest tenant leases expire in May 1998, October 1998
and September 1998 and such leases provide for current annual rentals of
approximately $50,500, $63,000 and $40,000, respectively. In the event that
leases representing a significant percentage of rental income expire and the
space is not promptly rented on advantageous terms, there may be a material
adverse effect on the Company's earnings.

The Company has engaged Justin Corp. to act as the managing agent for
the Pompano Property. Justin Corp. will receive a management fee equal to 5% of
the gross rents collected from the Pompano Property, including an amount equal
to the fair rental value of the portion of the Pompano Property occupied by the
Company.

Justin Corp. has granted to the Company a perpetual non-exclusive
right-of-way for ingress and egress on the Adjacent Parcel. In addition, Justin
Corp. has granted to the Company the perpetual right to use a portion of the
Adjacent Parcel to park up to 25 vehicles. If the Adjacent Parcel is
subsequently developed, Justin Corp. has agreed to provide a comparable
alternative for the Company's parking rights. The Company believes that there is
sufficient parking to meet the anticipated short-term needs of operating the
Pompano Property. However, the Company believes that the additional parking
rights afforded by the Adjacent Parcel will be useful in the event of increased
use as a result of the Company's anticipated expansion. Moreover, although there
is separate access to the Pompano Property, the Company believes that the
additional access rights provided by the right-of-way over the Adjacent Parcel
will be beneficial to the use of the Pompano Property by the Company and third
parties.

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Adjacent Parcel

The Adjacent Parcel consists of approximately four acres of undeveloped
land that is adjacent to the Pompano Property. The Adjacent Parcel, as well as
the Pompano Property, are encumbered by the Adjacent Parcel Mortgage Loan, which
is on the same terms as the First Mortgage Loan, including the guarantees by Mr.
and Mrs. Heller. The Company is jointly and severally liable with Justin Corp.
on the Adjacent Parcel Mortgage Loan and the Company has agreed to make all of
the payments thereon.

Although Justin Corp. is jointly and severally liable with the Company
on the Second Mortgage Loan and the Adjacent Parcel is encumbered by the Second
Mortgage Loan, the Company has also agreed to make all of the payments thereon
in consideration for Justin Corp's grant of ingress, egress and parking rights
to the Company and Justin Corp's payment for excavating a portion of the
Adjacent Parcel which contained elevated volatile organic compounds in the soil.
Although the volatile soil may or may not be deemed contaminated under current
environmental regulations, TransFlorida Bank required its removal as a condition
to making the First Mortgage Loan and the Adjacent Parcel Mortgage Loan.
Nonetheless, the Company does not believe that such elevated volatile organic
compounds are contained in the soil at the Pompano Property.

In the event of the sale of the Adjacent Parcel, the Seller has agreed
to release the Adjacent Parcel from the Second Mortgage Loan upon the payment of
$200,000 and the accrued interest thereon. The Company is responsible for such
payment, which will be a reduction of the principal balance of the Second
Mortgage Loan, as part of the Company's obligation to make all of the payments
on the Second Mortgage Loan. If Justin Corp. makes such payment, then the
Company will repay such amount to Justin Corp., based upon the terms of the
Second Mortgage Loan. See "CERTAIN TRANSACTIONS."

Legal Proceedings

The Company is not a party to any material litigation.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

From inception the Units, Common Stock, Class A Warrants and Class B
Warrants have been quoted on the NASDAQ SmallCap Market under the symbols
"NHTCU," "NHTC," "NHTCW," and "NHTCZ," respectively. The Units are no longer
quoted. The following table sets forth the range of high and low bid quotations
as reported by the National Quotation Bureau, Inc. for the Common Stock, Class A
Warrants and Class B Warrants for the quarters indicated. The quotations are the
actual quotations for the periods. The quotations after October 31, 1995 reflect
the Company's two for one stock split which occurred on October 31, 1995.

- 39 -

<PAGE>

<TABLE>
<CAPTION>
Common Stock
High Low
<S> <C> <C>
1995
Third Quarter............................................... 8 1/8 6 1/8
Fourth Quarter
10/2/95 through 10/31/95................................ 8 1/8 7 1/4
11/1/95 through 12/29/95................................ 6 1/2 4
1996
First Quarter .............................................. 6 4 1/4
Second Quarter (through 6/6/96)............................. 5 3/4 5
</TABLE>

Class A Warrants Class B Warrant
High Low High Low
<S> <C> <C> <C> <C>
1995
Second Quarter.............................................. 2 7/8 1 1/2
Third Quarter............................................... 4 1 7/8 2 3/4 9/16
1996
First Quarter............................................... 3 3/4 2 1/2 2 1/2 2
Second Quarter (through 6/6/96)............................. 4 3 2 1/2 2
</TABLE>

Holders

As of March 31, 1996, the Company had approximately 800 beneficial
holders of its Common Stock.

Dividends

The Company has not paid any dividends since its inception. The Company
has no intention of paying any cash dividends on its Common Stock in the
foreseeable future, as it intends to use any earnings to generate increased
growth. The payment by the Company of cash dividends, if any, in the future
rests within the discretion of its Board of Directors and, among other things,
will depend upon the Company's earnings, capital requirements and financial
condition, as well as other relevant factors.

MANAGEMENT

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

Directors and Executive Officers

Name Age Position
- -------------------------------------- --------------- ------------------------------------------------------------
<S> <C> <C>
Neal R. Heller 35 Chairman of the Board, President, Chief Executive Officer,
Chief Financial and Accounting Officer and Director

Elizabeth S. Heller 34 Secretary, Treasurer and Director

Martin C. Licht 54 Director

Arthur Keiser 41 Director
</TABLE>

- 40 -

<PAGE>

The following is a brief summary of the background of each executive
officer and director of the Company:

Neal R. Heller has been the Chairman of the Board, President, Chief
Executive and a director of the Company since its inception in 1988. Mr. Heller
is an attorney and has been admitted to practice in the State of Florida since
1985. Mr. Heller earned a Bachelor of Arts degree from the University of Miami
in 1982 and a Juris Doctor degree from Nova University in 1985. On December 18,
1990, Mr. Heller filed a voluntary petition under Chapter 7, Title 11 of the
United States Code, in the United States Bankruptcy Court for the Southern
District of Florida. The Bankruptcy Court entered an Order of Discharge of
Debtor on April 5, 1991. Mr. Heller currently serves as President of the Broward
Association of Career Schools and is the president-elect and a member of the
Board of Directors of the Florida Association of Post-Secondary Schools and
Colleges. Mr. Heller is the husband of Elizabeth S. Heller. Mr. and Mrs. Heller
are the sole shareholders of Justin Corp. See "CERTAIN TRANSACTIONS."

Elizabeth S. Heller has been Secretary, Treasurer, and a director of
the Company since its inception in 1988. Mrs. Heller earned a Bachelor of Arts
degree from the University of Miami in 1983. Mrs. Heller is the wife of Neal R.
Heller. Mr. and Mrs. Heller are the sole shareholders of Justin Corp. See
"CERTAIN TRANSACTIONS."

Arthur Keiser has been the President of Keiser College since 1977. Mr.
Keiser became a director of the Company in July 1995. Keiser College is a
regionally accredited independent privately-owned junior college which has
facilities in five Florida locations, namely, Ft. Lauderdale, Melbourne,
Sarasota, Daytona Beach and Tallahassee. Mr. Keiser is a member of the board of
directors of the Career College Association and is the President of the Florida
Association of Post-Secondary Schools and Colleges. Mr. Keiser received a B.A.
from Tulane University in 1975.

Martin C. Licht has been a practicing attorney since 1967 and has been
a partner of the law firm of Gallet Dreyer & Berkey, LLP since October 1993. Mr.
Licht became a director of the Company in July 1995. From April 1993 until that
time, he was a partner of Solomon, Weiss & Moskowitz, P.C. For one year prior
thereto, he was a partner of the law firm of Summit, Solomon & Feldesman. Prior
to such time, Mr. Licht was a member of the law firm of Herzfeld & Rubin, P.C.
for twelve years. All of such firms are located in New York City. Mr. Licht is
also a director of Gaylord Companies, Inc., which is traded on The NASDAQ
SmallCap Market and operates retail bookstores and retail stores selling
cookware and serving equipment.

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, 1995, and (ii) Forms 5 and amendments thereto
and/or written representations furnished to the Company by any director, officer
or ten percent security holder of the Company (collectively "Reporting Persons")
stating that he or she was not required to file a Form 5 during the Company's
fiscal year ended December 31, 1995, 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, except that it appears that a former
principal stockholder, Richard Schuman, has not filed Forms 4 or Forms 5 for the
fiscal year ended December 31, 1995 (to the

- 41 -

<PAGE>

Company's knowledge, Mr. Schuman is no longer a principal stockholder of the
Company) and Arthur Keiser, a director of the Company, has not filed a Form 5
for the fiscal year ended December 31, 1995.

Executive Compensation

Summary Compensation Table

The following table provides a summary of cash and non-cash
compensation for each of the last three fiscal years ended December 31, 1993,
1994 and 1995 with respect to the following officers of the Company:

Annual Compensation Long Term Compensation

Awards Payouts

Other Securities
Annual Restricted Underlying LTIP All Other
Name and Compensation Stock Award(s) Options Payouts Compensa-
Principal Position Year Salary($) Bonus($) ($)(1) $ SARs(#) ($) tion($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Neal R. Heller, 1995 150,000 - - 247,000 - - -
Chairman of the Board, 1994 144,400 - - - - - -
President, Chief Financial and 1993 131,900 - - - - - -
Accounting Officer and
Chief Executive Officer

Elizabeth S. Heller 1995 150,000 - - 247,000 - - -
Secretary and Treasurer 1994 137,000 - - - - - -
1993 131,900 - - - - - -

</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.

Employment Agreements

The Company has entered into employment agreements with Neal R. Heller
and Elizabeth S. Heller, which will expire in December 1997, under which they
are full-time employees and each receives annual salaries of $150,000. Each
agreement provides that the executive is eligible to receive short-term
incentive bonus compensation if the Company is profitable, the amount of which,
if any, will be determined by the Board of Directors based on the executive's
performance, contributions to the Company's success and on the Company's ability
to pay such incentive compensation. The employment agreements also provide for
termination based on death, disability, voluntary resignation or material
failure in performance and for severance payments upon termination under certain
circumstances. The agreements contain non-competition provisions that preclude
each executive from competing with the Company for a period of two years from
the date of termination of employment.

In addition, the Company, in connection with the acquisition of the
assets of Sam Lily, Inc., entered into employment agreements with Samantha
Haimes and Leonard Haimes, M.D. Each of the employment agreements were effective
as of January 22, 1995 and provide for a three-year term. Mrs. Haimes and Dr.
Haimes are to receive salaries of $357,500 and $192,500, respectively, for 1996.
In connection with the acquisition of a Pompano Natural Health Care Center, the
Company has agreed to pay Kaye Lenzi a salary of $100,000 per year subject to
adjustment based on revenues of the facility.

- 42 -

<PAGE>

Directors' Compensation

Directors of the Company do not receive any fixed compensation for
their services as directors. The Company grants each non-employee director
options to purchase 1,000 shares of Common Stock under the 1994 Stock Option
Plan, at an exercise price equal to the fair market value of the Common Stock on
the date of grant, and pays non-employee directors $500 for each meeting of the
Board of Directors they attend. Directors are reimbursed for their reasonable
out-of-pocket expenses incurred in connection with performance of their duties
to the Company. Except for 2,000 options granted to each of Mr. Licht and Mr.
Keiser, for the fiscal year ended December 31, 1995, the Company did not pay its
directors any cash or other form of compensation for acting in such capacity,
although directors who were also executive officers of the Company received cash
compensation for service as a director for acting in the capacity of executive
officers. See "- Executive Compensation." No director received any other form of
compensation for service as a director for the fiscal year ended December 31,
1995.

Indemnification of Officers and Directors

The Articles of Incorporation of the Company provide that the Company shall
indemnify to the fullest extent permitted by Florida law any person whom it may
indemnify thereunder, including directors, officers, employees and agents of the
Company. Such indemnification (other than as ordered by a court) shall be made
by the Company only upon a determination that indemnification is proper in the
circumstances because the individual met the applicable standard of conduct.
Advances for such indemnification may be made pending such determination. In
addition, the Articles of Incorporation provide for the elimination, to the
extent permitted by Florida law, of personal liability of directors to the
Company and its shareholders for monetary damages for breach of fiduciary duty
as directors.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director, officer
of controlling person of the Company in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Company, will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

Stock Options

The Company has adopted the 1994 Stock Option Plan (the "Plan") under
which up to 666,666 options to purchase shares of Common Stock may be granted to
key employees, officers, consultants and members of the Board of Directors of
the Company. As of the date hereof, 10,000 options to purchase shares of Common
Stock were granted under the Plan. Options granted under the Plan may be either
(i) options intended to qualify as "incentive stock options" under Section 422
of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"),
or (ii) non-qualified stock options. Incentive stock options may be granted
under the Plan to employees, including officers and directors who are employees.
Non-qualified options may be granted to employees, officers, directors and
consultants of the Company.

The Plan is administered by the Board of Directors. Under the Plan, the
Board of Directors has the authority to determine the persons to whom options
will be granted, the number of shares to be covered by each option, whether the
options granted are intended to be incentive stock options, the manner of
exercise, and the time, manner and form of payment upon exercise of an option.

Incentive stock options granted under the Plan may not be granted at a
price less than the fair market value of the Common Stock on the date of grant
(or less than 110% of fair market value in the case of employees holding 10% or
more of the voting stock of the Company). Non-qualified stock options may be
granted at an exercise price established by the Stock Option Committee selected
by the Board of Directors, but may not be less than 85% of fair market value of
the shares on the date of grant. Incentive stock options granted under the Plan
must expire not more than ten years from the date of grant, and not more than
five years from the date of grant in the case of incentive stock options granted
to an employee holding 10% or more of the voting stock of the Company.

PRINCIPAL SHAREHOLDERS

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

- 43 -

<PAGE>

Name and Address of Number of Approximate Percentage of Common Stock
Beneficial Owner(1) Shares Before Offering After Offering(2)
<S> <C> <C> <C>
Neal R. Heller and Elizabeth S. Heller
2397 N.W. 64th Street
Boca Raton, Florida 33496 5,182,000(3) 47.2% 30.5%

Martin C. Licht
Selden Lane
Greenwich, Connecticut 06831 55,000(4) * *

Arthur Keiser
6324 NW 79th Way
Parkland, Florida 33067 25,000(4) * *

All Officers and Directors as a Group
(4 persons) 5,262,000 47.5%* 30.9%

</TABLE>

- --------------------

(1) 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.

(2) Assumes exercise of all of the Class A Warrants and Class B
Warrants, the exercise of the Underwriters' Unit Purchase Option
and the Class A Warrants and Class B Warrants included in the
Underwriters' Unit Purchase Option.

(3) Mr. Heller owns 2,522,000 shares of Common Stock, and Mrs. Heller
owns 2,660,000 shares of Common Stock. Each has sole voting and
dispositive power with respect to such shares. As they are husband
and wife, each may be deemed the beneficial owner of the shares
owned by the other.

(4) Includes options to purchase up to 5,000 shares of Common Stock
held by each of Mr. Licht and Mr. Keiser.

* Represents less than 1% of applicable shares of Common Stock
outstanding.

CERTAIN TRANSACTIONS

As of April 28, 1993, Mr. Heller and Mrs. Heller transferred to the
Company as an additional capital contribution all of the issued and outstanding
Common Stock of F.I.M.T.E. which had a value of approximately $25,000. As of
March 31, 1996, Neal R. Heller, the Company's President, owed the Company
$58,818, which is evidenced by an unsecured non-interest bearing promissory note
which is payable over 24 months commencing on July 1, 1995. In addition, as of
March 31, 1996 Mr. and Mrs. Heller owed the Company an additional $75,790, which
is also unsecured and non-interest bearing and is payable upon demand. In
addition, Mr. and Mrs. Heller are jointly and severally liable with the Company
and F.I.M.T.E. for a $56,000 line of credit extended to the Company by an
institutional lender, of which $11,303 was outstanding as of March 31, 1996.
All of such funds have been utilized by the Company. The line of credit is
secured by Mr. and Mrs. Heller's residence. In April 1995, the Company issued
190,000 shares of Common Stock to each of Mr. and Mrs. Heller as additional
compensation to which the Company attributed an aggregate value of $494,000. In
May 1995, Mr. Heller advanced $570,000 to the Company in connection with the
purchase of the Pompano Property which was repaid from the proceeds of the
Initial Public Offering. Mr. and Mrs. Heller have also guaranteed the financing
in the aggregate principal amount of $1,875,000 in connection with the Company's
acquisition of the Pompano Property. Mr. and Mrs. Heller may be deemed parents
of the Company as a result of

- 44 -

<PAGE>

their executive positions, service as directors and ownership of approximately
65% of the Common Stock of the Company prior to the Initial Public Offering.

In May 1995, Justin Corp. purchased the Adjacent Parcel for $450,000
from the Seller concurrently with the closing of the Pompano Property. All of
the common stock of Justin Corp. is owned by Neal R. Heller and Elizabeth S.
Heller. Upon the acquisition of the Adjacent Parcel, Justin Corp. delivered the
Adjacent Parcel First Mortgage Loan in the original principal amount of $450,000
to TransFlorida Bank, which has been guaranteed by Mr. and Mrs. Heller. The
Pompano Property is also encumbered by the Adjacent Parcel Mortgage Loan, on
which the Company has agreed to make the payments.

The $525,000 Second Mortgage Loan delivered to the Seller in connection
with the purchase of the Pompano Property also encumbers the Adjacent Parcel.
Although Justin Corp. is jointly and severally liable with the Company thereon,
the Company has agreed to make all of the payments on the Second Mortgage Loan,
which will provide a benefit to Mr. and Mrs. Heller, in consideration for Justin
Corp's grant of ingress, egress and parking rights to the Company and Justin
Corp.'s payment for excavating a portion of the Adjacent Parcel which contained
elevated volatile organic compounds in the soil. Although the volatile soil may
or may not be deemed contaminated under current environmental regulations,
TransFlorida Bank required its removal as a condition to making the First
Mortgage Loan and the Adjacent Parcel Mortgage Loan. Nonetheless, the Company
does not believe that such elevated volatile organic compounds are contained in
the soil at the Pompano Property. Justin Corp. has granted to the Company a
perpetual non-exclusive right-of-way for ingress and egress on the Adjacent
Parcel. In addition, Justin Corp. has granted to the Company the perpetual right
to use a portion of the Adjacent Parcel to park up to 25 vehicles. If the
Adjacent Parcel is subsequently developed, Justin Corp. has agreed to provide a
comparable alternative for the Company's parking rights. The Company believes
that the Pompano Property has sufficient parking to meet the anticipated
short-term needs of operating the Pompano Property. However, the Company
believes that the additional parking rights afforded by the Adjacent Parcel will
be useful in the event of increased use as a result of the Company's anticipated
expansion. Moreover, although there is separate access to the Pompano Property,
the Company believes that the additional access rights provided by the
right-of-way over the Adjacent Parcel will be beneficial to the use of the
Pompano Property by the Company and third parties.

In the event of the sale of the Adjacent Parcel, the Seller has agreed
to release the Adjacent Parcel from the Second Mortgage Loan upon the payment of
$200,000 and the accrued interest thereon. The Company is responsible for such
payment, which will be a reduction of the principal balance of the Second
Mortgage Loan, as part of the Company's obligation to make all of the payments
on the Second Mortgage Loan. If Justin Corp. makes such payment, then the
Company will repay such amount to Justin Corp. based upon the terms of the
Second Mortgage Loan. The Company does not have any options or any rights of
first refusal to purchase the Adjacent Parcel. The Company has also agreed to
make the payments on the $450,000 Adjacent Parcel Mortgage Loan.

In addition, the Company has engaged Justin Corp. to act as the
managing agent for the Pompano Property. Justin Corp. will receive a management
fee equal to 5% of the gross rents collected from the Pompano Property,
including an amount equal to the fair rental value of the portion of the Pompano
Property to be occupied by the Company. See "BUSINESS - Pompano Property."

Martin C. Licht was issued 50,000 shares of Common Stock in April 1995
in consideration of his agreement to serve as a director of the Company. The
Company paid Gallet Dreyer & Berkey, LLP legal fees of $268,812 in 1995 and owed
such firm $16,811 as of December 31, 1995. In addition, in

- 45 -

<PAGE>

December, 1995, Neal R. Heller, the Company's President transferred 20,000
shares of his Common Stock to Arthur Keiser, a director of the Company.

In January 1994, the Company issued 832,500 shares of Common Stock and
options to purchase 500,000 shares of Common Stock at an exercise price of
$1.625 per share for a term of 10 years to Richard Schuman for consulting
services relating to business development, potential new business development,
potential business acquisitions and site location. In addition, pursuant to an
agreement dated December 27, 1993 between the Company and Mr. Schuman, Mr.
Schuman was paid $122,000. In February 1996, the Company entered into an
agreement with Richard Schuman, pursuant to which Mr. Schuman exchanged options
to purchase up to 500,000 shares of Common Stock at an exercise price of $1.625
per share for 100,000 shares of Common Stock. In addition, Mr. Schuman entered
into a two-year consulting agreement with the Company pursuant to which Mr.
Schuman received consulting fees of $165,000.

All future transactions and/or loans to officers, directors or 5%
shareholders will be on terms no less favorable than could be obtained from
independent third parties and will be approved by a majority of the independent
disinterested directors of the Company.

DESCRIPTION OF SECURITIES

General

The total authorized capital stock of the Company is 20,000,000 shares
of Common Stock, $.001 par value per share, and 1,500,000 shares of Preferred
Stock, $.001 par value per share. As of May 31, 1996, the Company had 11,085,108
shares of Common Stock issued and outstanding, which were held by approximately
800 shareholders, and an aggregate of 5,943,344 shares of Common Stock issuable
upon exercise of outstanding options, warrants and conversion rights. After the
completion of the Offering, 17,088,452 shares of Common Stock will be issued and
outstanding, assuming the exercise of all of the Warrants, the Underwriter's
Unit Purchase Option and the Warrants contained therein, and an aggregate of
10,000 shares of Common Stock will be issuable upon exercise of outstanding
options, warrants and conversion rights. After completion of the Offering, no
shares of Preferred Stock will be issued and outstanding.

Common Stock

Each share of Common Stock entitles the holder thereof to one vote on
all matters submitted to a vote of the shareholders. Since the holders of Common
Stock do not have cumulative voting rights, holders of more than 50% of the
outstanding shares can elect all of the directors of the Company then being
elected and holders of the remaining shares by themselves cannot elect any
directors. The holders of Common Stock do not have preemptive rights or rights
to convert their Common Stock into other securities. Holders of Common Stock are
entitled to receive ratably such dividends as may be declared by the Board of
Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, holders of the Common
Stock have the right to a ratable portion of the assets remaining after payment
of liabilities subject to any superior claims of any shares of Preferred Stock
hereafter issued. See "-Preferred Stock." All shares of Common Stock
outstanding and to be outstanding upon completion of the Offering are and will
be fully paid and nonassessable.

- 46 -

<PAGE>

Warrants

Each Warrant is issued pursuant to a Warrant Agreement between the
Company and Continental Stock Transfer & Trust Company, as warrant agent. The
following description is subject to the detailed provisions of and are qualified
in their entirety by reference to the Warrant Agreement, which is included as an
exhibit to the Registration Statement of which this Prospectus is a part.

Commencing June 21, 1996 (or earlier with the consent of Maidstone),
and terminating June 21, 2000, each Class A Warrant and each Class B Warrant
will entitle the registered holder to purchase two shares of Common Stock for
$3.00 and $3.625, respectively. The exercise prices of the Warrants and the
number of shares issuable upon exercise of such Warrants will be subject to
adjustment to protect against dilution in the event of stock dividends, stock
splits, combinations, subdivisions, or reclassifications or the sale of any
shares of Common Stock below the market price thereof. Warrants may be exercised
by surrendering to the warrant agent the Warrants and the payment of the
exercise price in United States funds by cash or certified or bank check. No
fractional shares of Common Stock will be issued in connection with the exercise
of the Warrants. The Warrants may not be exercised unless a registration
statement pursuant to the Securities Act covering the underlying shares of
Common Stock is current and such shares have been qualified, or there is an
exemption from registration and qualification requirements, under the Securities
Act and securities laws of the state of residence of the holder of the Warrants.

Commencing June 21, 1996 (or earlier with consent of Maidstone), the
Company may redeem the Warrants at a price of $.05 per Warrant, provided that
(i) 30 days prior written notice is given to the Warrantholders and (ii) the
closing bid price per share of the Common Stock as reported on NASDAQ (or the
last sale price, if quoted on a national securities exchange) has been at least
$4.50 with respect to the Class A Warrants and $5.00 with respect to the Class B
Warrants, for the 20 consecutive trading days ending on the third day prior to
the date of the notice of redemption. In the event the Company notifies the
Warrantholders of its intention to redeem Warrants, the Warrantholders may
exercise same at any time prior to the close of business on the day immediately
preceding the date fixed for redemption.

Unless extended by the Company in its discretion, the Warrants will
expire at 3:00 p.m., New York time, on the June 21, 2000. In the event a holder
of Warrants fails to exercise the Warrants prior to their expiration, the
Warrants will expire and the holder thereof will have no further rights
thereunder.

Preferred Stock

The Company is authorized by its Articles of Incorporation to issue a
maximum of 1,500,000 shares of 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 the Board of Directors of the Company
may, from time to time, determine. No shares of Preferred Stock have ever been
issued. The Company has agreed not to issue any shares of Preferred Stock prior
to June 21, 1997 without the consent of the Underwriters.

The issuance of shares of Preferred Stock pursuant to the Board's
authority could decrease the amount of earnings and assets available for
distribution to holders of Common Stock, and otherwise adversely affect the
rights and powers, including voting rights, of such holders and may have the
effect of delaying, deferring or preventing a change in control of the Company.
The Company is not required by current Florida Law to seek shareholder approval
prior to any issuance of authorized but unissued

- 47 -

<PAGE>

stock and the Board of Directors does not currently intend to seek shareholder
approval prior to any issuance of authorized but unissued shares of Preferred
Stock or Common Stock, unless otherwise required by law.

SHARES ELIGIBLE FOR FUTURE SALE

The Company has 6,036,802 shares of the Company's Common Stock
currently outstanding which are "restricted securities" as that term is defined
in Rule 144 under the Securities Act. Such shares may be sold only pursuant to a
registration under the Securities Act or in compliance with Rule 144 or pursuant
to another exemption therefrom. In general, under Rule 144, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company, who has beneficially owned restricted shares of Common Stock for at
least two years is entitled to sell, within any three-month period, a number of
shares that does not exceed the greater of 1% of the total number of outstanding
shares of the same class, or if the Common Stock is quoted on NASDAQ or a stock
exchange, the average weekly trading volume during the four calendar weeks
immediately preceding the sale. A person who presently is not and who has not
been an affiliate of the Company for at least three months immediately preceding
the sale and who has beneficially owned the shares of Common Stock for at least
three years is entitled to sell such shares under Rule 144 without regard to any
of the volume limitations described above. Of the shares of Common Stock
outstanding, the holders of 5,656,802 shares of Common Stock have agreed not to
sell any of their securities until June 21, 1997 without the prior written
consent of Maidstone. Sales of the Company's Common Stock by existing
shareholders may have a depressive effect on the price of the Company's Common
Stock in any market which may develop.

PLAN OF DISTRIBUTION

This Offering is made by the Company in connection with the exercise of
outstanding Class A Warrants and Class B Warrants to purchase shares of the
Company's Common Stock which Warrants were previously sold to the public as part
of Units in the Initial Public Offering by the prospectus dated June 21, 1995.
There are currently issued and outstanding 1,330,836 Class A Warrants and
1,330,836 (plus an additional 100,000 Class A Warrants and 100,000 Class B
Warrants that are contained in the Underwriters' Unit Purchase Option which
Underwriters' Unit Purchase Option to date has not been exercised), all of which
may be exercised to purchase the Company's Common Stock pursuant to this
Offering. There is no minimum number of shares which must be purchased upon the
exercise of the Warrants except that one Warrant is required to purchase two
shares of Common Stock and no fractional shares will be issued. There are no
arrangements to escrow any of the funds to be paid in connection with the
exercise of the Warrants. All the payments made pursuant to the exercise of the
Warrants will be made directly to the Company and may be used by the Company
immediately upon receipt.

A registered holder may exercise his or her Warrants by surrendering
the certificate representing the Warrants together with a Warrant exercise form
on the Warrant certificate properly completed and signed with full payment of
the exercise price payable by cash or certified or bank check to the Company.
Warrants may be exercised in whole or in part. If Warrants are exercised in
part, a new Warrant certificate will be issued for the remaining number of
shares. No fractional shares will be issued upon the exercise of Warrants.
Rather, they will be settled for cash. All payments must be received by the
Company prior to the expiration date or the redemption date established by the
Company and Warrants not exercised prior to the expiration date or redemption
date shall expire.

- 48 -

<PAGE>

Upon the exercise of the Warrants at any time commencing June 21, 1996,
the Company will pay Maidstone a commission of 7% of the aggregate exercise
price if (i) the market price of the Company's shares of Common Stock on the
date the Warrant is exercised is greater than the then current exercise price of
the Warrants; (ii) the exercise of the Warrant was solicited by a member of the
National Association of Securities Dealers, Inc.; (iii) the Warrant is not held
in a discretionary account; (iv) disclosure of compensation arrangements was
made both at the time of the Offering and at the time of exercise of the
Warrant; (v) the holder of the Warrant has stated in writing that the exercise
was solicited and designated in writing the soliciting broker-dealer; and (vi)
the solicitation of exercise of the Warrant was not in violation of Rule 10b-6,
promulgated under the Exchange Act. No fee will be paid to Maidstone on Warrants
exercised prior to June 21, 1996 or on Warrants voluntarily exercised at any
time without solicitation by the Underwriters.

In connection with the solicitation of Warrant exercises, unless
granted an exemption by the Commission from Rule 10b-6, the Underwriters and any
other soliciting broker-dealer will be prohibited from engaging in any
market-making activities with respect to the Company's securities for the period
commencing either two or nine business days (depending on the market price of
the Company's shares of Common Stock) prior to any solicitation activity of the
exercise of Warrants until the later of (i) the termination of such solicitation
activity or (ii) the termination (by waiver or otherwise) of any right which the
Underwriters or any other soliciting broker-dealer may have to receive a fee for
the exercise of Warrants following such solicitation. As a result, the
Underwriters or other soliciting broker-dealer may be unable to provide a market
for the Company's securities, should it desire to do so, during certain periods
while the Warrants are exercisable. In accordance with the Underwriting
Agreement, Maidstone has been granted the right of designating one individual to
serve as an advisor to, or a member of, the Company's Board of Directors.
Maidstone has not advised the Company whether it will exercise such right or, if
it does so, whom it will designate. Maidstone's designee will receive the same
compensation, if any, for such service as other members of the Board.

The exercise prices of $3.00 per share for each Class A Warrant and
$3.625 for each Class B Warrant were arbitrarily determined by the Company in
negotiation with the Underwriters in the Initial Public Offering and the price
bears no relationship to the Company's assets, earnings, book value or to any
other established criteria of value. Thus, the exercise prices of the Warrants
should not be considered an indication of the actual value of the Company.
Therefore, holders of Warrants are subject to an increased risk that the prices
of the Company's securities have been arrived at arbitrarily.

LEGAL MATTERS

Certain legal matters with respect to the issuance of the securities
offered hereby will be passed upon for the Company by Martin C. Licht, Esq., 845
Third Avenue, New York. Mr. Licht owns 50,000 shares of Common Stock and is a
member of the Board of Directors of the Company.

EXPERTS

The financial statements of the Company at December 31, 1995 and for
the two years then ended appearing in this Prospectus and the Registration
Statement have been audited by Feldman Radin & Co., P.C., independent auditors,
as set forth in their report thereon appearing elsewhere herein and in the
Registration Statement. The financial statements referred to above are included
in reliance upon such reports given upon the authority of such firms as experts
in accounting and auditing.

- 49 -

<PAGE>

GLOSSARY OF TERMS

The "GLOSSARY OF TERMS" was derived from Taber's Cyclopedic Medical
Dictionary, 17th Edition (1993), F.A. Davis Company and Mylady's Theory and
Practice of Therapeutic Massage, Mark F. Beck, 2nd Edition (1994), Mylady
Publishing Company.

Acupuncture -- Technique for treating certain painful conditions and
for producing regional anaesthesia by passing long thin needles through the skin
to specific points.

Allied Modalities -- Methods of massage related to, but not confined to
Swedish Massage, namely lymphatic drainage, polarity therapy and neuromuscular
therapy.

Aromatherapy -- The use of essential oils to produce specific
physiological and psychological effects.

Bacteriology -- Study of bacteria and its effect on health and disease,
as well as the study of sanitation and sterilization.

Chiropractic -- System of health care based on the principle that the
normal transmission and expression of nerve energy are essential to the
restoration and maintenance of health. Incorporates manual spinal manipulation
to achieve this goal.

Craniosacral Technique -- A massage modality which focuses on balancing
the energy flow between the brain and the spinal column.

Esthetics -- The science and study of skin care.

Holistic -- The philosophy which holds that, in nature, entities such
as individuals, function as complete units that cannot be reduced to the sum of
their parts.

Holistic Healthcare Services -- Comprehensive care of a patient. The
overall needs of the patient, the "whole," are considered when formulating
treatment and/or intervention.

Holistic Skin Care -- A comprehensive approach to the care of the skin.
Incorporates physical, nutritional and spiritual principles in an effort to
treat the "whole" person, not simply symptoms or specific imbalances.

Homeopathic Counseling -- Counseling based on the theory that large
doses of drugs that produce symptoms of a disease in healthy people will cure
the same symptoms when given in small amounts.

Homeopathy -- School of medicine, founded in the late 18th century,
based on the theory that large doses of substances that produce symptoms of a
disease in healthy people will cure the same symptoms when administered in small
amounts.

Hydrotherapy -- The use of water in any of its three natural states
(namely, ice, heat and vapor) in the treatment and prevention of disease.

- 50 -

<PAGE>

Neuromuscular Massage -- A comprehensive program of soft tissue
manipulation techniques that attempts to balance the central nervous system with
the structure and form of the neuromuscular system.

Neuromuscular Therapy -- The identification of soft tissue
abnormalities and the manipulation of soft tissue to restore function and well
being.

Paramedical Esthetics -- The incorporation of medical paradigms into
the study and science of skin care.

Physician -- A person licensed to practice medicine, osteopathic
medicine or chiropractic.

Rehabilitative Massage -- The process of treatment and education that
seeks to assist the disabled individual to attain improved function, well-being
and independence.

Sea Weed Therapy -- A spa-oriented application of "natural" algae which
is used to cleanse and detoxify the skin.

Shiatsu - Japanese "finger pressure" massage -- The philosophy is based
on 12 energy meridians which must be free of obstruction to maintain optimum
health.

St. John Method -- A systematic approach to neuromuscular therapy.

Swedish Massage -- A foundation for all forms of massage therapy
incorporating five basic strokes and joint movement.

Therapeutic Massage -- The systematic and scientific manipulation of
superficial tissues of the human body.

Trager -- A therapeutic modality which incorporates gentle, rhythmical
rocking and shaking techniques as well as specific "mind" exercises referred to
as "Mentastics."

Wellness Massage -- Swedish massage applied with the intent to prevent
disease, promote stress management, and result in optimum physical, spiritual
and emotional well being.

- 51 -

<PAGE>

NATURAL HEALTH TRENDS CORP. AND SUBSIDIARY

d/b/a/ FLORIDA INSTITUTE OF MASSAGE THERAPY AND ESTHETICS

INDEX TO FINANCIAL STATEMENTS

PAGE NUMBER

Independent Auditors' Report F-2
Consolidated Balance Sheet F-3
Consolidated Statement of Operations F-4
Consolidated Statement of Stockholders' Equity F-5
Consolidated Statement of Cash Flows F-6
Notes to Consolidated Financial Statements F-8

UNAUDITED FINANCIAL STATEMENTS FOR THE
THREE MONTHS ENDED MARCH 31, 1996:

Consolidated Balance Sheet F-18
Consolidated Statement of Operations F-19
Consolidated Statement of Cash Flows F-20
Notes to Consolidated Financial Statements F-21

F-1

<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors
Natural Health Trends Corp. and Subsidiaries
Pompano Beach, Florida

We have audited the accompanying consolidated balance sheets of Natural
Health Trends Corp. and Subsidiaries as of December 31, 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended December 31, 1995 and 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. 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, 1995, and the results of its operations and its cash flows for the
years ended December 31, 1995 and 1994, in conformity with generally accepted
accounting principles.

Feldman Radin & Co., P.C.
Certified Public Accountants

New York, New York
March 8, 1996

F-2

<PAGE>

NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES

D/B/A FLORIDA INSTITUTE OF MASSAGE THERAPY AND ESTHETICS

CONSOLIDATED BALANCE SHEET

DECEMBER 31, 1995

<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash $ 914,618
Accounts receivable 705,974
Inventories 124,887
Due from officers 134,608
Due from affiliate 22,524
Prepaid expenses and other current assets 54,962
----------------
TOTAL CURRENT ASSETS 1,957,573

PROPERTY AND EQUIPMENT 2,779,831

OTHER ASSETS 259,075
----------------
$ 4,996,479
================

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable $ 219,225
Accrued expenses 60,978
Deposits 61,075
Current portion of long-term debt 43,325
Deferred revenue 485,244
----------------
TOTAL CURRENT LIABILITIES 869,847

----------------

LONG-TERM DEBT 1,948,115

DUE TO BANK 27,303

STOCKHOLDERS' EQUITY:

Preferred stock, $.001 par value, 1,500,000 shares authorized; no shares
issued and outstanding -
Common stock, $.001 par value; 20,000,000 shares authorized;
10,599,108 shares issued and outstanding 10,599
Additional paid-in capital 3,946,520
Accumulated deficit (1,805,905)
----------------
TOTAL STOCKHOLDERS' EQUITY 2,151,214
----------------
$ 4,996,479
================
</TABLE>

The accompanying notes are an integral part of the consolidated
financial statements.

F-3
<PAGE>

NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES

D/B/A FLORIDA INSTITUTE OF MASSAGE THERAPY AND ESTHETICS

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1995 1994
---------------- ----------------
<S> <C>
REVENUES $ 3,138,203 $ 2,254,299

COST OF SALES 1,895,236 1,142,607
---------------- ----------------

GROSS PROFIT 1,242,967 1,111,692

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,030,495 1,031,070

NON-CASH IMPUTED COMPENSATION EXPENSE 731,000 -
---------------- ----------------

OPERATING INCOME (LOSS) (1,518,528) 80,622

WRITE-OFF OF DEFERRED FINANCE COSTS (329,974) -
INTEREST EXPENSE, net (117,661) (58,576)
---------------- ----------------

INCOME (LOSS) BEFORE INCOME TAXES (1,966,163) 22,046

PROVISION FOR INCOME TAXES (27,294) 4,000
---------------- ----------------

NET INCOME (LOSS) $ (1,938,869) $ 18,046
================ ================

EARNINGS (LOSS) PER COMMON SHARE $ (0.21) $ 0.00
================ ================

WEIGHTED AVERAGE COMMON SHARES USED 9,204,816 7,790,658
================ ================
</TABLE>

The accompanying notes are an integral part of the consolidated
financial statements.

F-4

<PAGE>
NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES

D/B/A FLORIDA INSTITUTE OF MASSAGE THERAPY AND ESTHETICS

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

Common
Common Stock Additional Retained Stock
------------------ Paid-in Earnings Subject
Shares Amount Capital (Deficit) to Put Total
--------- ------- ---------- ----------- --------- -----------
<S> <C>
BALANCE - DECEMBER 31, 1993 4,940,000 $ 4,940 $ 15,398 $ 114,918 $ - $ 135,256

Net income - - - 18,046 - 18,046
Issuance of common stock 833,300 833 18,167 - - 19,000
Conversion of note to common stock 111,110 110 95,890 - - 96,000
Issuance of common stock 733,334 734 109,266 - - 110,000
Common stock subject to put - - - - (110,000) (110,000)
----------- ------- ---------- ----------- --------- -----------

BALANCE - DECEMBER 31, 1994 6,617,744 $ 6,617 $ 238,721 $ 132,964 $(110,000) $ 268,302

Net loss - - - (1,938,869) - (1,938,869)
Shares issued in bridge financing 361,672 362 62,931 - - 63,293
Shares issued to employees and director 472,000 472 598,528 - - 599,000
Shares issued in bridge financing 720,000 720 125,280 - - 126,000
Shares issued to various lenders 127,692 128 165,872 - - 166,000
Shares transferred by principal
shareholder for services - - 132,000 - - 132,000
Initial public offering 2,300,000 2,300 2,623,188 - - 2,625,488
Cancellation of put on common stock - - - - 110,000 110,000
----------- ------- ---------- ----------- --------- -----------

BALANCE - DECEMBER 31, 1995 10,599,108 $10,599 $3,946,520 $(1,805,905) $ - $ 2,151,214
=========== ======= ========== =========== ========= ===========
</TABLE>

The accompanying notes are an integral part of the consolidated
financial statements.

F-5
<PAGE>
NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES

D/B/A FLORIDA INSTITUTE OF MASSAGE THERAPY AND ESTHETICS

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1995 1994
---------------- ----------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,938,869) $ 18,046
---------------- ----------------
Adjustments to reconcile net income (loss) to net cash provided by (used
in) operating activities:

Depreciation and amortization 96,066 26,630
Non-cash imputed compensation expense 731,000 -
Write-off of deferred finance costs 329,974 -

Changes in assets and liabilities (net of effects of acquisition):

Decrease (increase) in accounts receivable 48,356 (51,317)
Decrease (Increase) in inventories (55,616) 15,659
Decrease (Increase) in prepaid expenses and other current assets (22,413) (27,493)
Decrease (increase) in deferred registration costs - (108,950)
Decrease (increase) in due from affiliate (22,524) -
Decrease (increase) in other assets 13,055 (13,100)
Payments for deferred finance costs (120,681) -
Increase (decrease) in accounts payable 44,502 (28,578)
Increase (decrease) in accrued expenses 58,087 (105,226)
Increase (decrease) in deposits 61,075 -
Increase (decrease) in deferred revenue (67,830) 61,875
Increase (decrease) in deferred taxes (27,294) 4,000
---------------- ----------------
TOTAL ADJUSTMENTS 1,065,757 (226,500)
---------------- ----------------

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (873,112) (208,454)
---------------- ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:

Cash paid for acquisition, net of cash acquired (108,933) -
Capital expenditures (2,714,402) (25,032)
---------------- ----------------

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (2,823,335) (25,032)
---------------- ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:

Increase in due from officer (6,800) (80,955)
Increase (decrease) in due to bank (24,715) 52,018
Proceeds from notes payable and long-term debt 2,158,077 164,000
Payments of notes payable and long-term debt (503,560) (15,000)
Proceeds from issuance of common stock, net of expenses 2,986,300 110,000
---------------- ----------------

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 4,609,302 230,063
---------------- ----------------

NET INCREASE (DECREASE) IN CASH 912,855 (3,423)

CASH, BEGINNING OF YEAR 1,763 5,186
---------------- ----------------

CASH, END OF YEAR $ 914,618 $ 1,763
================ ================
</TABLE>

The accompanying notes are an integral part of the consolidated
financial statements.

F-6
<PAGE>

NATURAL HEALTH TRENDS CORP. AND SUBSIDIARY

D/B/A FLORIDA INSTITUTE OF MASSAGE THERAPY AND ESTHETICS

CONSOLIDATED STATEMENT OF CASH FLOWS

(CONTINUED)

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1995 1994
---------------- ----------------
<S> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 130,552 $ 23,501
================ ================
Income taxes $ - $ -
================ ================
</TABLE>

DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES:

In January 1994, the Company issued 833,300 shares of common stock to
an individual for consulting services rendered of $19,000.

In October 1994, an individual converted $80,000 in debt plus accrued
interest into 111,110 shares of common stock.

In July 1995, an individual converted $10,000 in debt for 7,692 shares
of common stock.

In November 1995, the Company incurred a note payable in the amount of
$125,000 to the seller in a business acquisition.

<PAGE>

NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES

D/B/A FLORIDA INSTITUTE OF MASSAGE THERAPY AND ESTHETICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1995

1. ORGANIZATION

Natural Health Trends Corp. (formerly known as Florida Institute of Massage
Therapy, Inc.) (the "Company") was incorporated under the laws of the State of
Florida in December 1988.

The Company's primary business is the operation of schools which
develop, market and offer curricula in therapeutic massage training and holistic
skin care therapy. The Company presently has a total of three schools, located
in the Miami, Fort Lauderdale and Orlando areas. F.I.M.T.E. Supply, Inc. is a
wholly owned subsidiary which owns and operates on-site book stores servicing
the school's students, practicing therapists and the public. During 1995, the
Company formed Corporate Body Corp., a wholly-owned subsidiary which is engaged
in the business of providing on-site corporate massage primarily at business
establishments. Additionally, during 1995, the Company purchased a building in
Pompano Beach, Florida, part of which will be used to house the school presently
located in Fort Lauderdale, and the rest of which is rented out to unrelated
commercial tenants, providing incidental rental income to the Company.

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 intercompany transactions have been
eliminated in consolidation.

B. Accounts Receivable - Accounts receivable consists of tuition due
from students and federal and state governmental agencies. Management
has determined all accounts receivable to be collectible.

C. Inventories - Inventories consisting of books and supplies are stated
at the lower of cost or market. Cost is determined using the first-in,
first-out method.

F-8

<PAGE>

D. Property and Equipment - Property and equipment is carried at cost.
Depreciation is computed using the straight-line method and accelerated
methods over the useful lives of the various assets, which is generally
five to seven years for equipment, and furniture and fixtures, and
thirty-nine years for the building.

E. Deferred Revenue - Deferred revenue represents tuition revenues which
will be recognized into income as earned. Tuition revenue is recognized
as earned over the enrollment period.

F. Earnings (Loss) Per Common Share - Earnings (loss) per common share
are computed on the basis of weighted average number of common shares
and dilutive common share equivalents outstanding during the respective
periods. In accordance with Securities and Exchange Commission
accounting rules, shares issued within one year of the Company's initial
public offering are included in all reported periods for purposes of
this calculation.

3. DUE FROM OFFICERS

As of December 31, 1995, the Company is due $134,608 from
officers representing temporary non-interest bearing advances.

4. PROPERTY AND EQUIPMENT

Property and Equipment consisted of the following at December 31, 1995:

Equipment, furniture and fixtures $ 228,057
Building and improvements 2,254,600
=========
Land 470,000
---------
2,952,657

Less: Accumulated depreciation (172,826)
$2,779,831
=========

F-9

<PAGE>

5. OTHER ASSETS

Other assets consisted of the following at December 31, 1995:

Deposits $ 34,974
Covenant not to compete, net of
accumulated amortization of $1,042 48,958
Goodwill, net of accumulated
amortization of $797 175,143
--------
$ 259,075
========

The goodwill and the covenant not to compete arise in connection with
the December 1995, acquisition of the Reese Institute. The goodwill will
be amortized over its estimated use full life of 20 years, and the
covenant will be amortized over its contractual term of four years.

6. NOTES PAYABLE AND LONG-TERM DEBT

Notes payable consisted of the following at December 31, 1995:

Note payable for purchase of school, bearing interest at
8.75%, principal and interest payments due quarterly
commencing February 1996 through November 1999 $ 125,000

First Mortgage Note payable to a bank, bearing interest
at prime +2%. Monthly payments consisting of principal
and interest are approximately $13,232 and are payable
through May 1, 2002, at which time the balance of
principal is due in a balloon payment on May 1, 2002 1,343,837

Second Mortgage Note payable to a bank, bearing interest
at prime +2%. Monthly payments consisting of principal
and interest are approximately $5,145 through May 1,
2002, at which time the balance of principal is due in a
balloon payment on May 1, 2000 522,603
----------
1,991,440

Less: Current portion (43,325)
----------
$ 1,948,115
==========

F-10

<PAGE>

Long-term debt maturities for the next five years are as follows:

1996 $ 43,325
1997 47,646
1998 52,408
1999 57,650
2000 523,307

7. STOCKHOLDERS' EQUITY

A. The Company is authorized to issue 20,000,000 shares of common stock,
$.001 par value per share.

B. In January 1994, the Company issued 832,500 shares of its common
stock and 500,000 options to purchase common stock for $1.63 per share,
expiring in January 2004, to an individual for consulting services
rendered. Such stock and options have been valued at $19,000, or $.025
per share, representing the book value at the time of issuance. The
Company believes that such amount reflected the fair market value of the
common stock since the Miami school had not yet become fully
operational.

C. In October 1994, the Company declared a 1.56 to 1 stock split.
Accordingly, the effect of the stock split has been retroactively
applied to all periods presented.

D. In October and November 1994, the Company sold 733,334 shares of
common stock for $.15 per share in a private placement. Such shares are
subject to a put. Since such sales were made to unrelated third parties
at $.15 per share, such price represents the fair market value of the
Company's common stock at that time.

E. In October 1994, an individual converted an $80,000 note payable plus
$14,667 of accrued interest into 111,110 shares of the Company's common
stock.

F. In April 1995, the Company effected a 1 2/3 to one stock split which
has been retroactively applied to all common share data.

G. In January and February, 1995, the Company sold 361,672 shares of its
common stock and warrants to purchase up to 723,334 shares of common
stock as part of a private placement of 14 Units. Each Unit consisted of
(i) a $25,000 promissory note payable, bearing interest at 10% per
annum, due upon the earlier of December 31, 1995 or the receipt of
$3,000,000 from the sale of the Company's debt and/or equity securities
in a

F-11

<PAGE>

public or private financing, (ii) 25,834 shares of common stock, $.001
par value, (iii) a warrant to purchase up to 25,834 shares of common
stock at $3.00 per share (the "Class A Warrant"), and (iv) a warrant to
purchase up to 25,834 shares of common stock at $3.63 per share (the
"Class B Warrant"). The common stock issued in January and February 1995
was valued at $.175 per share which equaled the fair market value per
share as determined by the price per share paid by unrelated third
parties in the 1995 Equity Financing in April 1995. The aggregate value
of such shares was $63,293. Such amount was recorded as deferred finance
costs. An additional $120,681, which represents direct expenses
associated with the financing was also recorded as deferred finance
costs. The unamortized balance of the deferred finance costs was written
off upon the early repayment of the notes upon completion of the initial
public offering.

H. In April 1995, the Company sold 720,000 shares of common stock for
$.175 per share, realizing gross proceeds of $126,000. Since such sales
were made to unrelated third parties at $.175 per share such price
represents the fair market value of the Company's common stock at that
time. Also in April 1995, the Company issued a total 380,000 shares to
Company officers and 50,000 shares to an individual who agreed to serve
as a director, all such shares being issued as compensation. Such shares
of common stock were valued at the assumed fair market value of $1.30
(based on the initial public offering price of $1.63 per share less a
20% discount for restrictions on the resale of such shares). This
resulted in an aggregate charge upon the issuance of such shares of
common stock of $559,000.

I. In July 1995, the Company issued 32,000 shares to employees for past
services.

J. In October 1995, the Company issued 10,000 shares to an employee,
recording compensation expense aggregating $40,000 in connection with
this issuance.

K. In October 1995, the Company declared a 2 for 1 stock split. All
common shares data is retroactively stated to reflect this transaction.

8. INCOME TAXES

The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS No. 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 No. 109 additionally
requires the establishment of a valuation allowance to reflect the
likelihood of realization of deferred tax assets. At December 31, 1995,
the Company had deferred tax assets, related to net operating loss
carryfowards of approximately $399,000. The Company has established a
valuation

F-12

<PAGE>

allowance for the full amount of such deferred tax assets.

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:

December 31,
----------------------
1995 1994
---------- ---------
Income tax computed at statutory rate $ (614,000) $ 7,000
Effect of graduated rates - (3,000)
Effect of permanent differences 275,000 -
Tax benefit not recognized 311,706 -
---------- ---------
Provision for income taxes (benefit) $ (27,294) $ 4,000
========== =========

Net operating loss carryforward at December 31, 1995 was approximately
$988,000 and expires in the year 2010.

9. COMMITMENTS AND CONTINGENCIES

A. The Company leases its school facilities under non-cancellable
operating leases. The lease terms are five years and expire variously
from July 1997 through November 2000.

Rent expense for the years ended December 31, 1995 and 1994 was
$365,068 and $267,468, respectively. Minimum rental commitments over the
next five years are as follows:

1996 $ 394,487
1997 306,559
1998 161,883
1999 156,025
2000 72,496

F-13

<PAGE>

B. The Company has entered into employment agreements with its two
executive officers providing for annual salaries of $150,000 each. The
agreements expire in December 1997.

10. PURCHASE OF BUILDING

The Company purchased a building located in Pompano Beach,
Florida (the "Pompano Property") to which it intends to relocate the
Lauderhill school. The purchase price for the property was $2,350,000,
of which $1,875,000 was financed through a first and second mortgage.
The Pompano Property is encumbered by mortgages securing repayment of
loans made to acquire an adjacent parcel which is owned by Justin Real
Estate Corp. ("Justin Corp."). All of the common stock of Justin Corp.
is owned by principal shareholders of the Company. In the event that
Justin Corp. defaults on its obligations under such mortgage loans, the
mortgagee could foreclose on the mortgages encumbering the Pompano
Property.

11. INITIAL PUBLIC OFFERING

In June 1995, the Company completed an initial public offering,
selling a total of 2,300,000 units for $1.63 per unit. Each unit
consisted of one share of common stock, one Class A Warrant to acquire
one share of common stock at $3.00 and one Class B Warrant to acquire
one share at $3.63. Commencing one year from the effective date of the
Company's Registration Statement, the warrants will be exercisable for a
period of four years. The underwriters received an option to purchase
200,000 units at 150% of the offering price for a period of four years
commencing one year from the date of the offering. Additionally, the
Company entered into a consulting agreement with the underwriters for a
term of 24 months at $2,000 per month, which was paid in advance at the
closing of the offering.

12. REVENUES

The Company obtains a large proportion of its revenue from
Federal and State student financial aid programs. For the year ended
December 31, 1995, the Company derived approximately 66% of its revenue
from students with financial aid and approximately 34% from students
without financial aid. The Company's ability to obtain such funding is
dependent on a number of factors, including meeting various educational
accreditation and licensing standards and also certain financial
standards such as maintaining at least a 15% ratio of non-financial aid
students and not experiencing a student loan default rate of in excess
of 25% for three consecutive years. The Company's student loan default
rate for 1992 and 1993 was 17% and 10%, respectively. The

F-14

<PAGE>

definitive default rates for 1994 and 1995 will not be available until
the third quarters of 1996 and 1997, respectively. The Company believes
it has complied with all other factors necessary to obtain funding.

The duties of disbursing Federal aid funds is handled by an
independent service company through separate federal trust accounts. All
requests and payments for Federal funds are done by the outside service
company. Federal aid funds are wired into a separate U.S. Federal Pell
Trust Account and the money can only be transferred to the Company's
operating accounts with check registers issued by the outside service
company. The Company believes that it is in compliance with Federal
requirements with respect to the administration of Federal aid programs.

13. COMMON STOCK SUBJECT TO PUT

Under the subscription agreements in connection with the sale of
733,334 common shares to investors in October and November 1994, if the
Company was unable to complete an initial public offering of its
securities by September 1995, the Company had the right to require the
investors to sell and the investors had the right to require the Company
to buy such shares. In accordance with generally accepted accounting
principles, the Company's potential repurchase obligation was excluded
from stockholders' equity. Such amounts were reclassified to permanent
equity upon consummation of the initial public offering, which
terminated the repurchase obligation.

14. PREFERRED STOCK

The Company is authorized by its articles of incorporation to
issue a maximum of 1,500,000 shares of $.001 par 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 the Company's board of directors may, from time to time,
determine. No shares of preferred stock have been issued to date.

15. STOCK OPTION PLAN

Under the Company's 1994 Stock Option Plan, up to 666,666 shares
of common stock are reserved for issuance. The exercise price of the
options will be determined by the Stock Option Committee selected by the
board of directors, but the exercise price will not be less than 85% of
the fair market value on the date of grant.

F-15

<PAGE>

16. DUE TO BANK

The officers of the Company, together with the Company and a
subsidiary, established a $56,000 line of credit with a bank in March
1994. The line of credit bears interest at the annual rate of prime plus
2% on the outstanding principal balance. As of December 31, 1995 the
Company's borrowings against this line of credit were $27,303. Any
principal due under this line matures in March 1999. The line of credit
is secured by the officers' jointly owned personal residence.

17. ACQUISITION

In November 1995, the Company made a business acquisition
through the acquisition of substantially all the operating assets and
liabilities of the Reese Institute, located in Oviedo, Florida. The
following table summarizes this acquisition:

Purchase Price, including acquisition costs $ 267,550
Liabilities assumed 130,727
Assets purchased (222,337)
---------
Goodwill $ 175,940
=========

Goodwill is being amortized over a period of 20 years. The purchase
price was settled through the payment of $125,000 at closing and a note
payable to the seller of $125,000.

18. SUBSEQUENT EVENTS

A. In January 1996, Health Wellness Nationwide Corp., a newly-formed
wholly-owned subsidiary of the Company, acquired substantially all of
the assets of Sam Lilly Inc. ("SLI"), a clinic located in Boca Raton,
Florida specializing in alternative medical therapies, in exchange for
380,000 shares of Company common stock.

In connection with this acquisition, the Company entered into employment
agreements with two former principals of SLI providing for aggregate
annual salaries of no less than $550,000 for a term of three years.

B. In February 1996, an individual who owned 500,000 options to purchase
common stock at $1.63 per share, exchanged such options for 100,000
shares of the Company

F-16

<PAGE>

common stock. This individual also entered into a two year consulting
agreement with the Company providing for a total fee of $165,000, which
was paid in advance at the signing of the agreement.

F-17

<PAGE>

NATURAL HEALTH TRENDS CORP.

CONSOLIDATED BALANCE SHEET

MARCH 31, 1996

(UNAUDITED)

ASSETS

CURRENT ASSETS:

Cash $ 374,538
Marketable securities 250,000
Accounts receivable 849,492
Inventories 124,030
Due from officers 134,608
Due from affiliate 22,524
Prepaid expenses and other current assets 210,533
------------------
TOTAL CURRENT ASSETS 1,965,725

PROPERTY, PLANT AND EQUIPMENT 3,020,997
GOODWILL 1,536,236
DEPOSITS AND OTHER ASSETS 91,249
------------------

$ 6,614,207
==================

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable $ 247,899
Accrued expenses 70,479
Revolving credit line 170,000
Current portion of long term debt 44,005
Deferred revenue 529,069
Other current liabilities 61,075
-------------------
TOTAL CURRENT LIABILITIES 1,122,527

-------------------

LONG-TERM DEBT 1,936,987

DUE TO BANK 11,303

COMMON STOCK SUBJECT TO PUT 380,000

STOCKHOLDERS' EQUITY:

Preferred stock, $.001 par value, 1,500,000
shares authorized; no shares
issued and outstanding -
Common stock, $.001 par value; 20,000,000
shares authorized; 11,085,108 shares
issued and outstanding at March 31, 1996 11,085
Additional paid-in capital 5,347,034
Retained earnings (accumulated deficit) (1,814,729)
Common stock subject to put (380,000)
------------------
TOTAL STOCKHOLDERS' EQUITY 3,163,390

------------------

$ 6,614,207
==================

See notes to consolidated financial statements.

F-18
<PAGE>

NATURAL HEALTH TRENDS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

<TABLE>
<CAPTION>
Three months ended
March 31,

-----------------------------------
1996 1995
--------------- ----------------
<S> <C>
REVENUES $ 1,537,632 $ 776,879

COST OF SALES 910,556 370,129
--------------- ----------------

GROSS PROFIT 627,076 406,750

SELLING, GENERAL AND

ADMINISTRATIVE EXPENSES 719,945 333,603
--------------- ----------------

OPERATING INCOME (LOSS) (92,869) 73,147

OTHER INCOME (EXPENSE):

Interest (net) (47,955) (49,414)
--------------- ----------------
TOTAL OTHER INCOME (EXPENSE) (47,955) (49,414)
--------------- ----------------

INCOME (LOSS) BEFORE INCOME TAXES (140,824) 23,733

PROVISION FOR INCOME TAXES - 5,000
--------------- ----------------

NET INCOME (LOSS) $ (140,824) $ 18,733
=============== ================

EARNINGS (LOSS) PER COMMON SHARE $ (0.01) $ 0.00
=============== ================

WEIGHTED AVERAGE COMMON SHARES USED 10,965,775 7,952,802
=============== ================
</TABLE>

See notes to consolidated financial statements.

F-19
<PAGE>

NATURAL HEALTH TRENDS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------------------
1996 1995
---------------- ---------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (140,824) $ 18,733
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:

Depreciation and amortization 53,346 37,140

Changes in assets and liabilities:

(Increase) decrease in accounts receivable (143,518) (61,446)
(Increase) decrease in inventories 857 -
(Increase) decrease in prepaid expenses 9,429 (11,415)
(Increase) decrease in deferred registration costs - (80,779)
(Increase) decrease in deposits and other assets (8,114) (129,757)
Increase (decrease) in accounts payable 28,674 (16,729)
Increase (decrease) in accrued expenses 9,501 8,004
Increase (decrease) in deferred revenue 43,825 (18,236)
Increase (decrease) in deferred taxes - 5,000
Increase (decrease) in other current liabilities - -
---------------- ---------------
TOTAL ADJUSTMENTS (6,000) (268,218)
---------------- ---------------

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (146,824) (249,485)
---------------- ---------------

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures (266,808) (6,641)
Acquisition expenses (20,000) -
Purchase of marketable securities (250,000) -
---------------- ---------------

NET CASH USED IN INVESTING ACTIVITIES (536,808) (6,641)
---------------- ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:

Increase in due from officer - (6,800)
Increase (decrease) in due to bank (16,000) (31,269)
Proceeds from notes payable and long-term debt 170,000 350,000
Payments of notes payable and long-term debt (10,448) (32,000)
---------------- ---------------

NET CASH PROVIDED BY FINANCING ACTIVITIES 143,552 279,931
---------------- ---------------

NET INCREASE (DECREASE) IN CASH (540,080) 23,805

CASH, BEGINNING OF PERIOD 914,618 1,763
---------------- ---------------

CASH, END OF PERIOD $ 374,538 $ 25,568
================ ===============
</TABLE>

See notes to consolidated financial statements.

F-20

<PAGE>

NATURAL HEALTH TRENDS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 1996

(UNAUDITED)

1. BASIS OF PRESENTATION

The accompanying financial statements are unaudited, but reflect
all adjustments which, in the opinion of management, are necessary for a
fair presentation of financial position and the results of operations
for the interim periods presented. All such adjustments are of a normal
and recurring nature. The results of operations for any interim period
are not necessarily indicative of the results attainable for a full
fiscal year.

2. EARNINGS (LOSS) PER SHARE

Per share information is computed based on the weighted average
number of shares outstanding during the period.

3. REVOLVING CREDIT LINE

The Company entered into a revolving credit line with Merrill
Lynch as of October 4, 1995 in the amount of $300,000. This revolving
credit line was activated by the Company on February 29, 1996. The
revolving credit line expires on October 31, 1996, at which time the
Company is required to pay back any and all amounts borrowed under the
revolving credit line. Interest accrues at the rate of prime plus 1%. As
of March 31, 1996, the Company borrowed $170,000 under this revolving
credit line. A $250,000 investment that the Company has with Merrill
Lynch is restricted as security for any loans under this revolving
credit line.

4. ACQUISITION

On January 22, 1996, the Company acquired all of the assets of
Sam Lilly, Inc. in exchange for 380,000 shares of the Company's common
stock. The acquisition was accounted for as a purchase. The net assets
acquired totaled approximately $9,000. As a result of this acquisition,
the Company recorded goodwill of $1,380,000.

F-21

<PAGE>

The following table presents certain unaudited pro forma
financial information as if the acquisition occurred as of January 1,
1995:

Three months ended March 31,
---------------------------
1996 1995
---------- -----------
Revenues $ 1,667,235 $ 1,070,934
========== ===========
Net Loss $ (146,574) $ (1,483)
========== ===========
Net Loss Per Share $ (0.01) $ -
========== ===========

5. LETTER OF INTENT

In May 1996, the Company entered into a letter of intent to
acquire an alternative health care clinic. The proposed purchase price
is $550,000, payable in common stock of the Company.

F-22

<PAGE>

No dealer, salesperson or any other person is
authorized to give any information or to make any
representations in connection with this Prospectus and,
if given or made, such information or representations
must not be relied upon as having been authorized by
the Company or the Underwriter. This Prospectus does
not constitute an offer to sell or a solicitation of an offer
to buy any security other than the securities offered by
this Prospectus, or an offer to sell or a solicitation of an
offer to buy any securities by anyone in any jurisdiction
in which such offer or solicitation is not authorized or is
unlawful. The delivery of this Prospectus shall not,
under any circumstances, create any implication that the
information herein is correct as of any time subsequent
to the date of the Prospectus.

---------------------

TABLE OF CONTENTS

Page
Prospectus Summary.................................
Risk Factors.......................................
Use of Proceeds....................................
Dividend Policy....................................
Capitalization.....................................
Management's Discussion and Analysis of
Financial Condition and Results of Operations....
Business...........................................
Management.........................................
Certain Transactions...............................
Principal Shareholders.............................
Description of Securities..........................
Shares Eligible for Future Sale....................
Plan of Distribution...............................
Legal Matters......................................
Experts............................................
Glossary of Terms..................................
Index to Financial Statements...................F-1

5,923,344 SHARES OF COMMON
STOCK, INCLUDING 100,000
UNDERWRITER UNITS

NATURAL HEALTH TRENDS CORP.

Each Underwriter Unit Consists of Two
Shares of Common Stock, One Class A
Redeemable Common Stock Purchase
Warrant and One Class B Redeemable
Common Stock Purchase Warrant

PROSPECTUS

MAIDSTONE FINANCIAL INC.

, 1996

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

Section 607.0850 of the Florida Business Corporation Act (the "FBCA")
permits, in general, a Florida corporation to indemnify any person who was or is
a party to an action or proceeding by reason of the fact that he or she was a
director or officer of the corporation, or served another entity in any capacity
at the request of the corporation, against liability incurred in connection with
such proceeding including the estimated expenses of litigating the proceeding to
conclusion and the expenses, actually and reasonably incurred in connection with
the defense or settlement of such proceeding, including any appeal thereof, if
such person acted in good faith, for a purpose he or she reasonably believed to
be in, or not opposed to, the best interests of the corporation and, in criminal
actions or proceedings, in addition had no reasonable cause to believe that his
or her conduct was unlawful. Section 607.0850(6) of the FBCA permits the
corporation to pay in advance of a final disposition of such action or
proceeding the expenses incurred in defending such action or proceeding upon
receipt of an undertaking by or on behalf of the director or officer to repay
such amount as, and to the extent, required by statute. Section 607.0850 of the
FBCA provides that the indemnification and advancement of expense provisions
contained in the FBCA shall not be deemed exclusive of any rights to which a
director or officer seeking indemnification or advancement of expenses may be
entitled.

The Company's Certificate of Incorporation provides, in general, that
the Company shall indemnify, to the fullest extent permitted by Section 607.0850
of the FBCA, any and all persons whom it shall have power to indemnify under
said section from and against any and all of the expenses, liabilities or other
matters referred to in, or covered by, said section. The Certificate of
Incorporation also provides that the indemnification provided for therein shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any By-Law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to actions taken in his or her official capacity
and as to acts in another capacity while holding such office.

In accordance with that provision of the Certificate of Incorporation,
the Company shall indemnify any officer or director (including officers and
directors serving another corporation, partnership, joint venture, trust, or
other enterprise in any capacity at the Company's request) made, or threatened
to be made, a party to an action or proceeding (whether civil, criminal,
administrative or investigative) by reason of the fact that he or she was
serving in any of those capacities against judgments, fines, amounts paid in
settlement and reasonable expenses (including attorney's fees) incurred as a
result of such action or proceeding. Indemnification would not be available if a
judgment or other final adjudication adverse to such director or officer
establishes that (i) his or her acts were committed in bad faith or were the
result of active and deliberate dishonesty or (ii) he or she personally gained
in fact a financial profit or other advantage to which he or she was not legally
entitled.

The Underwriting Agreement contains, among other things, provisions
whereby the Underwriters agree to indemnify the Company, each officer and
director of the Company who has signed the Registration Statement, and each
person who controls the Company within the meaning of Section 15 of the
Securities Act, against any losses, liabilities, claims or damages arising out
of alleged untrue statements or alleged omissions of material facts with respect
to information furnished to the Company

II-1

<PAGE>

by the Underwriter for use in the Registration Statement or Prospectus. See
Item 28, "UNDERTAKINGS."

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the various expenses (other than selling,
commissions and other fees paid or payable to the Underwriters) which will be
paid by the Company in connection with the issuance and distribution of the
securities being registered. With the exception of the registration fee, all
amounts shown are estimates.

Registration fee .....................................................$ 9,725
Printing expenses.....................................................$ 10,275
Legal fees and expenses (other than Blue Sky).........................$ 80,000
Accounting fees and expenses..........................................$ 45,000
Transfer agent fees and expenses......................................$ 5,000
Miscellaneous expenses................................................$ 5,000
-------
Total ........................................................$ 150,000
</TABLE>

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

In the past three years, the Company has made the sales of unregistered
securities set forth below, all of which sales were intended to be exempt from
the registration requirements of the Securities Act pursuant to Section 4(2) of
the Securities Act or pursuant to Rules 506 of Regulation D promulgated
thereunder.

I. General.

The issuances of the following securities were intended to be exempt
from the registration requirements of the Securities Act pursuant to Section
4(2) thereof.

A. On January 12, 1994, the Company issued 833,300 shares of Common
Stock and options to purchase 500,000 shares of Common Stock to Richard Schuman
for services, pursuant to an agreement dated December 27, 1993.

B. On October 3, 1994, the Company issued 111,110 shares of Common Stock
to Daniel Stubbs upon the conversion of a note in the original principal amount
of $80,000. Mr. Stubbs is also the holder of a note dated March 23, 1994 in the
original principal amount of $100,000 and was issued 33,334 additional shares of
Common Stock upon the closing of the Initial Public Offering as additional
interest thereunder.

C. Pursuant to a note dated July 26, 1994 in the original principal
amount of $25,000 from the Company to Jonathan E. Felix, Mr. Felix was issued
15,384 shares of Common Stock as additional interest upon the closing of the
Initial Public Offering.

D. Pursuant to a note dated July 26, 1994 from the Company to Michael
Dennis in the original principal amount of $25,000, Mr. Dennis was issued 66,666
shares of Common Stock as additional interest upon the closing of the Initial
Public Offering.

II-2

<PAGE>

E. Pursuant to a note dated August 1, 1994 in the original principal
amount of $15,000 from the Company to Martin E. Blackman, Mr. Blackman converted
the outstanding balance of the note into shares of Common Stock at a conversion
price equal to 50% of the initial public offering price to purchase 12,308
shares of Common Stock.

F. On April 3, 1995, Neal R. Heller was issued 190,000 shares of
Common Stock as additional compensation for services rendered.

G. On April 3, 1995, Elizabeth S. Heller was issued 190,000 shares of
Common Stock as additional compensation for services rendered.

H. On April 3, 1995, Martin C. Licht was issued 50,000 shares of Common
Stock in consideration for his agreement to serve as a director of the Company.
See "MANAGEMENT."

I. On August 10, 1995, Company employees Melissa Ryan, Nadine Hankin and
Kristi Mollis were issued 12,000, 10,000 and 10,000 shares of Common Stock,
respectively, as additional compensation for services rendered.

J. On November 10, 1995, Russell Newman was issued 10,000 shares of
Common Stock as additional compensation for services rendered.

K. On January 27, 1996, the Company issued a total of 380,000 shares of
Common Stock to Sam Lilly Corp. in connection with the Agreement and Plan of
Reorganization whereby the Company acquired through its wholly owned subsidiary,
Health Wellness Nationwide Corp. ("HWNC"), all of the assets of Sam Lilly Corp.

L. On February 23, 1996, the following employees were issued an
aggregate of 6,000 shares of Common Stock as additional compensation for
services rendered:

Number of Shares
Employee of Common Stock

Cheri Barbell 100
Dennis Cohen 750
Davina Cook 100
Michael Cukierman 250
Nadine Forbes 150
Candy Francis 100
Claudio Gelerof 100
Marta Gonzales-Lopez 150
Diane Ippolito 400
Antoinette Mancuso 400
Barbara Marzulli 400
Marjory Meshew 400
Sonia Negron 400
Theresa Owens 100
Sherry Parker 200
Ilida Pena 150

II-3

<PAGE>

Cindy B. Richmond 500
Donna Rivera 100
Jill Romagnolo 100
Joy Sidebottom 200
Nancy Sims 100
Claudia Singkornrat 150
Megheen Sullivan 300
Ryan Varga 100
Christiana Villard 200
Jorge Villasante 100

II. 1994 Bridge Financing.

During the second half of 1994, the Company sold 733,334 shares of
Common Stock to the six investors named below at a purchase price of $.15 per
share in the 1994 Bridge Financing. These sales were intended to be exempt from
the registration requirements of the Securities Act pursuant to Rule 506
promulgated thereunder. Maidstone received a non-accountable expense allowance
and commissions aggregating $14,300 in connection with such sales. See
"DESCRIPTION OF SECURITIES."

Number of Shares
Date Name of Purchaser of Common Stock
- -------- ----------------- ---------------
12/01/94 Alan Adler 100,000
12/01/94 Bruce Adler c/f Kenneth Adler 100,000
12/01/94 Gary Brustein 133,334
12/01/94 Gary Hanna 150,000
12/01/94 Joel Paschow 116,666
12/01/94 Steven Schwartz 133,334

III. 1995 Bridge Financing.

During the first quarter of 1995, the Company consummated the 1995
Bridge Financing, to the 12 Bridge Lenders set forth below, of an aggregate of
$350,000 of its 10% Bridge Notes which were repaid from the net proceeds of the
Initial Public Offering. In connection with the sale of the Bridge Notes, the
Company issued an aggregate of 361,672 shares of Common Stock 180,836, Class A
Warrants and 180,836 Class B Warrants as set forth below. These sales were
intended to be exempt from the registration requirements of the Securities Act
pursuant to Rule 506 promulgated thereunder. Maidstone received a
non-accountable expense allowance and commissions aggregating $35,000 in
connection with such sales. See "DESCRIPTION OF SECURITIES."

Number of Number Number Principal
Shares of of Class A of Class B Amount of
Date Name of Purchaser Common Stock Warrants Warrants Note
------ ----------------- ------------ -------- -------- -----
<S> <C> <C> <C> <C> <C>
1/23/95 David Cymrot - IRA 25,834 12,917 12,917 $25,000
2/13/95 Artie Gabay 25,834 12,917 12,917 $25,000
2/02/95 Matthew Gissen 25,834 12,917 12,917 $25,000

II-4

<PAGE>

2/07/95 Allen S. Kaplan 25,834 12,917 12,917 $25,000
1/25/95 Phyllis Kramer 25,834 12,917 12,917 $25,000
2/07/95 Lawrence E. Putterman 25,834 12,917 12,917 $25,000
2/07/95 Anthony C. Recchia 25,834 12,917 12,917 $25,000
1/25/95 Martin Rosenman 25,834 12,917 12,917 $25,000
2/02/95 Robert L. Rosenthal 25,834 12,917 12,917 $25,000
1/25/95 Richard M. Schlanger 25,834 12,917 12,917 $25,000
2/16/95 Gilda Shapiro 51,666 25,833 25,833 $50,000
2/07/95 Ron Suster 51,666 25,833 25,833 $50,000
</TABLE>

IV. 1995 Equity Financing.

In April 1995, the Company consummated the 1995 Equity Financing to
seven investors, as set forth below, of an aggregate of 720,000 shares of Common
Stock at a purchase price of $.175 per share. These sales were intended to be
exempt from the registration requirements of the Securities Act pursuant to Rule
506 promulgated thereunder. Maidstone received a non-accountable expense
allowance and commissions aggregating $16,380 in connection with such sales. See
"DESCRIPTION OF SECURITIES - Prior Financings."

Number of Shares
Date Name of Purchaser of Common Stock
- ------ ----------------- ---------------
4/12/95 Lynne Hersch 60,000
4/12/95 Martin Roseman 120,000
4/12/95 Phyllis Kramer 120,000
4/12/95 Bruce Adler 100,000
4/12/95 Alan Adler 100,000
4/12/95 Gary Brustein 80,000
4/12/95 Richard D. Siegel 140,000

II-5

<PAGE>

ITEM 27. EXHIBITS.

<TABLE>
<CAPTION>
Number DESCRIPTION OF EXHIBIT
<S> <C>
1.1 Form of Underwriting Agreement between the Company and the Underwriters.*

3.1 Amended and Restated Certificate of Incorporation of the Company.*

3.2 Amended and Restated By-Laws of the Company.*

4.1 Specimen Certificate of the Company's Common Stock.*

4.2 Form of Class A Warrant.*

4.3 Form of Class B Warrant.*

4.4 Form of Warrant Agreement between the Company and Continental Stock Transfer & Trust
Company.*

4.5 Form of Underwriter's Warrants.*

4.6 Form of Class A Warrants issued in the 1995 Bridge Financing.*

4.7 Form of Class B Warrants issued in the 1995 Bridge Financing.*

4.8 Form of Bridge Notes issued in the 1995 Bridge Financing.*

4.9 1994 Stock Option Plan.*

5.1 Opinion of Gallet Dreyer & Berkey, LLP, counsel to the Company.*

10.1 Form of Employment Agreement between the Company and Neal R. Heller.*

10.2 Form of Employment Agreement between the Company and Elizabeth S. Heller.*

10.3 Letter Agreement, dated December 27, 1993, between the Company and Richard
Schuman.*

10.4 Lease, dated April 29, 1993, between Florida Institute of Massage Therapy, Inc., as tenant,
and MICC Venture, as landlord, as amended.*

10.5 Lease, dated April 10, 1991, between Florida Institute of
Massage Therapy, Inc., as tenant, and Superior Investment
& Development Corporation, as agent, for SIDCOR 50/50
Associates.*

10.6 Department of Education, Office of Postsecondary Education, Office of Student Financial
Assistance Program Participation Agreement, dated March 28, 1994, between the Company
and the USDOE.*

10.7 Purchase and Sale Agreement between Merrick Venture Capital, Inc., as seller, and the
Company, as buyer.*

10.8 First Mortgage Loan Documents between the Company and Trans Florida Bank in
connection with the purchase of the Pompano Property.*

10.9 Equity Credit Plan and Note, dated March , 1994, among the Company, F.I.M.T.E.,
Neal R. Heller, Elizabeth S. Heller and American Bank of Hollywood.*

II-6

<PAGE>

10.10 Form of Financial Consulting Agreement between the Company and Maidstone.*

10.12 Agreement dated June 7, 1995 between Natural Health Trends Corp. and Justin Real Estate
Corp.*

10.13 Property Management Agreement dated June 7, 1995 between Natural Health Trends Corp.
and Justin Real Estate Corp.*

10.14 Agreement and Plan of Reorganization by and among the Company, HWNC and Sam Lilly
Corp., dated as of January 22, 1996.**

10.15 Employment Agreement between HWNC and Samantha Haimes dated January 22, 1996.**

10.16 Employment Agreement between HWNC and Leonard Haimes, M.D. dated January 27,
1996.**

10.17 Agreement by and among the Company, HWNC, Medical Service Consultants, Inc.,
Diagnostic Services, Inc., Managenet, Inc. and KBM Consultants.**

16.1 Letter from Soule & Associates, P.A. on change in certifying accountant.*

21.1 List of Subsidiaries.+

23.1 Consent of Feldman Radin & Co., P.C.+

23.3 Consent of Gallet Dreyer & Berkey, LLP (contained in Exhibit 5.1).**

23.4 Consent of Akerman, Senterfitt & Eidson, P.A.*

23.5 Consent of Martin C. Licht to serve as a director.*

24.1 Power of Attorney (included on the signature page of this Registration Statement).
</TABLE>

+ FILED WITH THIS AMENDMENT
* PREVIOUSLY FILED
** TO BE FILED BY AMENDMENT

ITEM 28. UNDERTAKINGS.

1. The undersigned, Company, hereby undertakes:

(a) To file, during any period in which the Company offers or
sells securities, a post-effective amendment(s) to this
registration statement:

(1) To include any prospectus required by Section
10(a)(3) of the Securities Act;

(2) To reflect in the prospectus any facts or events
which, individually or together, represent a
fundamental change in the information in the
registration statement; and

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<PAGE>

(3) To include any additional or changed material
information with respect to the plan of
distribution not previously disclosed in the
registration statement or any material change to
such information in the registration statement;

(b) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering; and

(c) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and
the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

2. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission (the "Commission") such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

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SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing this Amendment to Form SB-2 and has authorized
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the County of Broward, State of Florida, on June ,
1996.

NATURAL HEALTH TRENDS CORP.

By: /s/ NEAL R. HELLER
Neal R. Heller, President
and Chief Executive Officer

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints NEAL R. HELLER and/or ELIZABETH S. HELLER his
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or either of them or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE TITLE DATE
<S> <C> <C>
/s/ NEAL R. HELLER Chairman of the Board, June 10, 1996
- --------------------------------- Chief Financial and Accounting
Neal R. Heller Officer, Chief Executive
Officer and Director

/s/ ELIZABETH S. HELLER Secretary, Treasurer June 10, 1996
- --------------------------------- and Director
Elizabeth S. Heller

/s/ ARTHUR KEISER Director June 10, 1996
- ---------------------------------
Arthur Keiser

/s/ MARTIN C. LICHT Director June 10, 1996
- ---------------------------------
Martin C. Licht

</TABLE>

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EXHIBIT 21.1

LIST OF SUBSIDIARIES

F.I.M.T.E. Supply, Inc. a Florida corporation

Health Wellness Nationwide Corp. a Florida corporation

The Corporate Body, Inc. a Florida corporation

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the use in this Registration Statement on Form SB-2 of our report
dated March 8, 1996, relating to the consolidated financial statements of
Natural Health Trends Corp. for the periods indicated therein, and to the
reference to our firm under the caption "EXPERTS" in this Registration
Statement.

Feldman Radin & Co., P.C.
Certified Public Accountants

June 7, 1996
New York, New York