Greetings and welcome to the Natural Health Trends Corporation Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kim Orlando of ADDO Investor Relations. Thank you. You may begin.

Thank you and welcome to Natural Health Trends third quarter 2017 earnings conference call. During today's call, there may be statements made relating to the future results of the company that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Actual results, performance, or achievements could materially differ from those anticipated in such forward-looking statements due to result of certain factors, including those set forth in the company's filings with the Securities and Exchange Commission. It should also be noted that today's call will be webcast live and can be found on the Investors section of the company's corporate website at www.naturalhealthtrendscorp.com. Additionally, in today's financial results press release which was issued at approximately 9:00 AM Eastern Time, instructions can be found for accessing the archived version of the conference call via the Internet. At this time, I would like to turn the call over to Chris Sharng, President of Natural Health Trends.

Thank you, Kim, and thanks to everyone for joining us. With me today is Scott Davidson, our Senior Vice President and Chief Financial Officer. Total revenue for the third quarter of $40.1 million declined by 43% from the third quarter of 2016 and by 22% from the second quarter of 2017, while we had made progress to revitalize sales growth, certain short-term factors exerted significant adverse effects and masked a quarter that was otherwise indicative of positive developments. The difficult market conditions we have been experiencing since the third quarter of 2016 were further compounded by the 20 anniversary of Hong Kong's handover in July, as well as China's Communist Party's 19 National Congress in October, which tempered economic activities. These events impacted the operations of our logistics partners and detracted from our leaders' ability to organize meetings, which hinder our progress in comparison to the prior quarter. However we view both occurrences as short-term issues. Despite the challenging environment on-site and follow-up orders for the Kuala Lumpur event in August were substantially greater than those of the Macau event in March. A number of our emerging markets still achieved impressive sales growth during the quarter including Peru, Northern Europe, Southeast Asia, and Japan. We also had a positive response to our most recent product introduction, notably OcuFocus, NaturalGlo, and CogniMax. Further we were able to maintain a strong gross profit margin of nearly 80% and generate an operating income margin of over 21%. Our ability to preserve healthy margins is due to the strong allegiance of consumers to our products and our continued proactive expense management to better align our cost structure with the more limited upside opportunities we have been seeing in the field. To help counter the slowdown and drive momentum in Asia, we recently enhanced our…

Thank you, Chris. As discussed total revenue for the third quarter was $40.1 million reflecting a decrease of 43% compared to $70.7 million in the third quarter of 2016. Sales in Hong Kong which accounted for 87% of our third quarter revenue decreased 47% year-over-year to $35 million. Outside of Hong Kong revenue increased 6% year-over-year to $5.1 million. Our active member base declined to approximately 99,700 at September 30 from 107,300 at June 30 and from 122,900 at September 30 last year. In regards to our cost and operating expenses, our gross profit margin for the third quarter was 79.6% compared to 80.7% in the third quarter last year. The slight reduction was due to lower revenue this year offset by reduced shipping cost. Commissions expense as a percent of total revenue decreased to 39.4% from 43.3% in the third quarter last year primarily due to less cost incurred for our third quarter [indiscernible] expected. Excluding this benefit, commissions expense as a percent of net sales for the third quarter of 2017 would have been consistent with the prior quarter. Selling, general and administrative expenses for the quarter decreased 33% to $7.5 million versus $11.2 million a year ago. The decrease in SG&A versus the prior year period reflects the proactive cost reduction measures we have been implementing since the fourth quarter last year. Operating income for the quarter totaled $8.5 million, a decrease of 44% compared to $15.2 million in the third quarter last year. As a percent of total revenue, our operating income margin was 21.2% compared to 21.5% in the third quarter last year. We continue to recognize a income tax provision for the expected partial repatriation of overseas profits. The effective tax rate of 14% for the third quarter compared to 18% in the prior year period was due to a true-up of foreign tax credits generated for prior tax years. Net income totaled $7.3 million or $0.65 per diluted share as compared to net income of $12.6 million or $1.12 per diluted share in the third quarter last year. Cash and cash equivalents as of September 30, 2017, were $127 million which was down from $136.3 million at June 30. During the quarter, we paid out $4.1 million in dividends as well as $5 million related to federal income taxes. On October 30, our board of directors declared a quarterly cash dividend of $0.12 per share as well as a special cash dividend of $0.15 per share both of which will be payable on November 24 to stockholders record as of November 14. That completes our prepared remarks. I will now turn the call back over to the operator to begin the question-and-answer session. Operator?

Thank you. We will now be conducting the question-and-answer session. [Operator Instructions]. Thank you. Our first question comes from the line of Jeff Lund, a Private Investor. Please proceed with your question.

Hi Chris, this is Jeff. I had a question about your dividend plan for the quarter; the current tax filed [ph] in Congress calls for some changes to corporate taxes why not to wait to see what happens with that plan?

Thank you, Jeff for calling in. The board is committed to returning capital to our shareholders and the review of capital allocation and capital return is ongoing and we don't prepared to know anymore than the market what is going on in DC with respect to this tax bill. We do keep an eye on it and so that it's incorporated in our thinking. The board is absolutely confident in the business prospects for our business in the near-term and also in the long-term and is very comfortable with the liquidity situation that we have now. So, I would strongly emphasize that the dividend and also potentially stock repurchase continues to be available for us to return capital. Thank you for your question.

Our next question comes from the line of Gordon [indiscernible] Private Investor. Please proceed with your question.

Hi Chris. A couple of months ago the Chinese Government was reported to announce a new policy of cracking down on payment schemes. Now you talked about the effects of the Hong Kong handover and the National Congress. So I was wondering that this in anyway affect the third quarter?

Thank you for calling in Gordon. Indeed the Chinese government about two months ago announce a policy or campaign to crack down an anti-Pyramid scheme and even in our field we have observed that the pyramid schemes had become increasingly ramping and aggressive and in certain cities they have impacted us negatively. We think that this is a good policy; and we think that we will like to see that this policy will be effectively and thoroughly implemented and maintained for the long-term, and it will be good for our business. Thank you for calling.

Thank you. We have reached the end of the question-and-answer session. And with that the conclusion of today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.