Natrol Reports First Quarter Earnings.

CHATSWORTH, Calif. -- Natrol, Inc. (NASDAQ:NTOL) today announced financial results for the quarter ended March 31, 2005.

The Company recorded a net loss of $592,000 or $0.04 per share for the quarter ended March 31, 2005 as compared to net income of $450,000 or $0.03 per share in the quarter ended March 31, 2004.

Net sales decreased 13.5%, or $2.7 million, to $17.7 million for the three months ended March 31, 2005 from $20.4 million for the three months ended March 31, 2004.

Elliott Balbert, Natrol's President and Chairman, advised that "Sales of one product in our weight loss category fell approximately $2 million," and additionally noted that "our Prolab brand also suffered a $1.1 million drop in business when compared to 2004. Consumers moving away from low-carb diets affected our weight loss category and increases in the cost of whey forced a price increase which affected the Prolab business. The bottom line was affected heavily by legal expenses that were approximately $554,000 more in the first quarter of 2005 than in the first quarter of 2004. This was due to the timing of litigation and the final settlement of litigation surrounding Andro-based products sold by Prolab prior to August 2002. We believe the current quarter is not a predictor of how the year will finish. Our balance sheet remains strong, and the Company is optimistic that product introductions such as the new line of innovative Brainspeed(TM) products, which has been announced but has not yet shipped, will perform well."

The statements made in this press release which are not historical facts including statements regarding expectations for future growth of revenue and profits and trends concerning net sales, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. As a result of a number of factors, the Company's actual results could differ materially from those set forth in the forward-looking statements. Certain factors that might cause Natrol's actual results to differ materially from those set forth in the forward-looking statements include adverse trends in the dietary supplements industry, intense competition, adverse effects of unfavorable publicity regarding particular products or the Company's industry generally, the Company's dependence on the introduction of successful new products, the Company's ability to gain market share and shelf space in each of its distribution channels, the Company experiencing high rates of product returns, and adverse government regulation, as well as those factors set forth under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2004 and in the Company's other filings with Securities and Exchange Commission.

Natrol, Inc. and Subsidiaries
                      Consolidated Balance Sheets
            (In thousands, except share and per share data)

                                                            March 31,
                                                              2005
                                                           -----------
                                                           (Unaudited)
Assets
Current assets:
  Cash                                                        $ 6,947

  Accounts receivable, net of allowances of $404 and $421
   at March 31, 2005 and December 31, 2004, respectively        7,705
  Inventory                                                     9,009
  Income taxes receivable                                         862
  Deferred income taxes                                           814
  Prepaid expenses and other current assets                       761
                                                           -----------
Total current assets                                           26,098
                                                           -----------
Property and equipment:
  Land, building and improvements                              15,891
  Machinery and equipment                                       5,460
  Furniture and office equipment                                3,114
                                                           -----------
                                                               24,465
Accumulated depreciation                                       (8,342)
                                                           -----------
Property and equipment, net                                    16,123
                                                           -----------

Restricted cash                                                 5,000
Deferred income taxes                                           3,628
Goodwill, net of accumulated amortization and impairment
 charge of $37,381                                              2,026
Other assets                                                      192
                                                           -----------
Total assets                                                  $53,067
                                                           ===========

Liabilities and stockholders' equity
Current liabilities:
  Accounts payable                                            $ 3,708
  Accrued expenses                                              2,917
  Accrued payroll and related liabilities                       1,140
  Current portion of long-term debt                               510
                                                           -----------
Total current liabilities                                       8,275
                                                           -----------
Long-term debt, less current portion                            7,566
Commitments and contingencies
Stockholders' equity:
  Preferred stock, par value of $0.01 per share:
   Authorized shares--2,000,000; Issued and
    outstanding shares-none
  Common stock, par value of $0.01 per share:
   Authorized shares--50,000,000
  Issued and outstanding shares-14,310,715 and 14,281,928
   at March 31, 2005 and December 31, 2004, respectively          143
  Additional paid-in capital                                   62,766
  Accumulated deficit                                         (22,802)
                                                           -----------
                                                               40,107
  Shares held in treasury, at cost-921,900 shares at
   March 31, 2005 and December 31, 2004                        (2,881)
                                                           -----------
Total stockholders' equity                                     37,226
                                                           -----------
Total liabilities and stockholders' equity                    $53,067
                                                           ===========


                     Natrol, Inc. and Subsidiaries
                 Consolidated Statements of Operations
            (In thousands, except share and per share data)

                                                Three Months Ended
                                                     March 31,
                                              -----------------------
                                                  2005        2004
                                              ----------- -----------
                                                    (Unaudited)

Net sales                                        $17,669     $20,425
Cost of goods sold                                11,404      12,595
                                              ----------- -----------
Gross profit                                       6,265       7,830
                                              ----------- -----------
Selling and marketing expenses                     4,185       4,619
General and administrative expenses                2,917       2,325
                                              ----------- -----------
Total operating expenses                           7,102       6,944
                                              ----------- -----------
Operating income (loss)                             (837)        886
Interest income                                       42          22
Interest expense                                    (160)       (158)
                                              ----------- -----------
Income (loss) before income taxes                   (955)        750
Income tax (benefit) provision                      (363)        300
                                              ----------- -----------
Net Income (loss)                                $  (592)    $   450
                                              =========== ===========
Basic and Diluted income (loss) per share:
                                              ----------- -----------
  Income (loss) per share                        $ (0.04)    $  0.03
                                              =========== ===========

Weighted-average shares outstanding:
  Basic                                       13,384,419  13,162,459
  Diluted                                     13,384,419  14,175,061