What changed in this filing

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Item 9A. Controls and Procedures

2024-03-28 compared with 2023-03-17 · 280 added, 282 removed, 980 unchanged (36% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial officer), have concluded, based on their evaluation as of December 31, 2022, that our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d – 15(e) under the Exchange Act) are effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer (principal executive officer) and our Chief Operating Officer and Interim Chief Financial Officer (principal financial officer), have concluded, based on their evaluation as of December 31, 2023, that our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d – 15(e) under the Exchange Act) are effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the year ended December 31, 2022, there were no changes in our internal control over our financial reporting that we believe materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

During the quarter ended December 31, 2023, there were no changes in our internal control over our financial reporting that we believe materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

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Other Information

During the quarter ended December 31, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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Report of Independent Registered Public Accounting Firm:

BDO USA, LLP;

BDO USA, P.C.;

Dallas, Texas;

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Consolidated Statements of Operations for the years ended December 31, 2023 and 2022 F- 5

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022 and 2021 F- 5

Consolidated Statements of Comprehensive Loss for the years ended December 31, 2023 and 2022 F- 5

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2023 and 2022 F- 6

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10-K 00-24657 10.61 March 14, 2017

14.1 Code of Ethics.

14.1* Code of Ethic s for Officer s

10-K 00-24657 14.1 March 28, 2024

19.1* Insider Trading Disclosures

10-K 00-24657 19.1 March 28, 2024

21* List of Subsidiaries.

23.1* Consent of BDO USA, LLP.

24* Power of Attorney, which is included on the signature page of this annual report on Form 10-K.

23.1* Consent of BDO USA, P.C.

Incorporated by Reference

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Exhibit (s) Filing Date

24* Power of Attorney, which is included on the signature page of this annual report on Form 10-K.

31.1* Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer of Mannatech.

31.2* Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, of the Chief Financial Officer of Mannatech.

31.2* Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, of the Chief Operating Officer and Interim Chief Financial Officer of Mannatech.

32.1* Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer of Mannatech.

32.2* Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Financial Officer of Mannatech.

32.2* Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Operating Officer and Interim Chief Financial Officer of Mannatech.

97.1* Mandatory Recoupment Policy

99.1* Financial Statement Schedule Regarding Valuation and Qualifying Accounts.

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March 28, 2024 By:

Chief Financial Officer

/s/ Landen Fredrick

Landen Fredrick

Chief Operating Officer and Interim Chief Financial Officer

(principal financial officer)

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The undersigned directors and officers of Mannatech, Incorporated hereby constitute and appoint Larry A.

Jobe and David A.

Johnson, and each of them, with the power to act without the other and with full power of substitution and resubstitution, our true and lawful attorneys-in fact and agents with full power to execute in our name and behalf in the capacities indicated below any and all amendments to this report and to file the same, with all exhibits and other documents relating thereto and hereby ratify and confirm all that such attorneys-in-fact, or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.

Jobe with the power to act without the other and with full power of substitution and resubstitution, our true and lawful attorneys-in fact and agents with full power to execute in our name and behalf in the capacities indicated below any and all amendments to this report and to file the same, with all exhibits and other documents relating thereto and hereby ratify and confirm all that such attorneys-in-fact, or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.

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

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(principal executive officer) March 28, 2024

Johnson Chief Financial Officer

/s/ Landen Fredrick President and Chief Operating Officer and Interim Chief Financial Officer

(principal financial officer) March 28, 2024

Landen Fredrick

Stanley Fredrick Chairman of the Board March 28, 2024

Stanley Fredrick

/s/ Robert A.

Toth Director March 17, 2023

/s/ Kevin Andrew Robbins Director March 28, 2024

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Tyler Rameson

/s/ John Seifrick Director March 17, 2023

John Seifrick

Seifrick Director March 28, 2024

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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Consolidated Statements of Operations for the years ended December 31, 2023 and 2022 F- 5

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022 and 2021 F- 5

Consolidated Statements of Comprehensive Loss for the years ended December 31, 2023 and 2022 F- 5

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2023 and 2022 F- 6

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Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Mannatech, Incorporated (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive (loss) income, shareholders’ equity, and cash flows for the years then ended, and the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended , in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Mannatech, Incorporated (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows for each of the years then ended and the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Transfer Pricing

As indicated in Note 15 to the consolidated financial statements, the Company sells products in twenty-five countries around the world, and a substantial majority of the Company’s consolidated net sales in 2022, were generated outside of the United States.

As indicated in Note 7 to the consolidated financial statements, the Company's loss before income taxes of $0.5 million for the year ended December 31, 2022 comprised of a loss before income taxes of $7.8 million in the United States and income before income taxes of $7.3 million outside of the United States.

This is primarily a function of the Company’s transfer pricing policies, which govern the allocation of taxable income among the Company’s various tax jurisdictions.

We identified the Company’s determination of appropriate transfer pricing policies as a critical audit matter.

As the tax regulations that exist over transfer pricing are subjective and vary by jurisdiction, auditing management’s transfer pricing studies and transfer pricing policies was especially challenging and required significant auditor judgement, including the involvement of tax professionals with specialized knowledge and skill.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of the Company’s Determination of Transfer Pricing Policies

As described in Note 1 to the consolidated financial statements, the Company is subject to transfer pricing tax regulations designed to ensure the appropriate allocation of income between the U.S.

and foreign entities and that the Company is taxed accordingly.

As disclosed in Note 7 to the consolidated financial statements, the Company’s loss before income taxes of $1.1 million for the year ended December 31, 2023 comprised of a loss before income taxes of $5.4 million in the United States and income before income taxes of $4.3 million outside of the United States.

This is a function of the Company’s transfer pricing policies, which govern the allocation of taxable income among the Company’s various tax jurisdictions.

We identified the Company’s determination of transfer pricing policies as a critical audit matter.

The principal consideration for our determination was that the tax regulations that exist over transfer pricing are subjective and vary by jurisdiction.

Auditing management’s transfer pricing studies and transfer pricing policies was especially challenging and required significant auditor judgement, including the involvement of tax professionals with specialized knowledge and skill.

The primary procedures we performed to address this critical audit matter included:

• Utilizing personnel with specialized knowledge and skill in transfer pricing regulations to assist in evaluating (i) the reasonableness of the Company’s transfer pricing policies, based on comparisons to comparable companies and precedents set by the various taxing authorities that govern the jurisdictions in which the Company operates, and (ii) jurisdictional profit margins to ensure that the Company’s intercompany transactions and other income allocation methodologies are appropriate and comply with the Company’s transfer pricing policies.

/s/ BDO USA, LLP

• Utilizing personnel with specialized knowledge and skill in transfer pricing regulations to assist in evaluating (i) the Company’s transfer pricing policies, which is based on comparisons to comparable companies and precedents set by the various taxing authorities that govern the jurisdictions in which the Company operates, and (ii) jurisdictional profit margins to ensure that the Company’s intercompany transactions and other income allocation methodologies are appropriate and comply with the Company’s transfer pricing policies.

/s/ BDO USA, P.C.

We have served as the Company's auditor since 2007.

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Additional paid-in capital 33,309 33,377

Retained earnings 1,686 7,708

Accumulated other comprehensive (loss) income ( 208 ) 2,342

Retained earnings (accumulated deficit) ( 1,301 ) 1,686

Accumulated other comprehensive (loss) ( 1,015 ) ( 208 )

Treasury stock, at average cost, 882,703 shares as of December 31, 2023 and 884,057 shares as of December 31, 2022 ( 20,509 ) ( 20,679 )

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Depreciation and amortization 1,628 1,627

Other operating costs 19,973 21,634

Total operating expenses 103,829 104,553

(Loss) income from operations ( 405 ) 9,049

Loss from operations ( 964 ) ( 405 )

Interest income 4 88

Other expense, net ( 170 ) ( 162 )

(Loss) income before income taxes ( 479 ) 8,892

Income tax (provision) benefit ( 4,011 ) 950

Net (loss) income $ ( 4,490 ) $ 9,842

(Loss) income per common share:

Loss before income taxes ( 1,130 ) ( 479 )

Income tax provision ( 1,109 ) ( 4,011 )

Net loss $ ( 2,239 ) $ ( 4,490 )

(Loss) per common share:

Basic $ ( 1.20 ) $ ( 2.35 )

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Diluted 1,866 1,913

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

For the years ended December 31,

(in thousands)

Net (loss) income $ ( 4,490 ) $ 9,842

Net loss $ ( 2,239 ) $ ( 4,490 )

Other comprehensive loss, net of tax:

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Other comprehensive Loss $ ( 807 ) $ ( 2,527 )

Comprehensive (loss) income $ ( 7,017 ) $ 7,034

Comprehensive loss $ ( 3,046 ) $ ( 7,017 )

See accompanying notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

stock Additional

(amounts in thousands, except share data)

Common Stock, $0.0001 par value

Number of Shares Amount Additional

capital Retained earnings (accumulated deficit) Accumulated

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Balance at December 31, 2021 1,940,687 $ — $ 33,277 $ 7,708 $ 2,342 $ ( 18,915 ) $ 24,412

Net Income — — 9,842 — — 9,842

Net loss — — — ( 4,490 ) — — ( 4,490 )

Payment of cash dividends — — — ( 1,532 ) — — ( 1,532 )

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Issuance of unrestricted shares 6,072 — 97 — — 143 240

Stock option exercises — ( 419 ) — — 964 545

Stock option exercises (cashless) 11,334 — ( 75 ) — — 75 —

Repurchase of common stock ( 99,293 ) — — — — ( 1,982 ) ( 1,982 )

Disposition of foreign entity — — — — ( 23 ) — ( 23 )

Foreign currency translation — — — — ( 2,546 ) — ( 2,546 )

Pension obligations, net of tax of $13 — — — 24 — 24

Pension obligations, net of $10 tax — — — — 19 — 19

Balance at December 31, 2022 1,858,800 $ — $ 33,377 $ 1,686 $ ( 208 ) $ ( 20,679 ) $ 14,176

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Issuance of unrestricted shares 12,808 — ( 76 ) — — 299 223

Stock option exercises (cashless) — ( 75 ) — — 75 —

Stock option exercises 2,000 — ( 35 ) — — 47 12

Repurchase of common stock ( 13,454 ) — — — — ( 176 ) ( 176 )

Liquidation of subsidiary — — — ( 23 ) ( 23 )

Foreign currency translation — — — — ( 819 ) — ( 819 )

Pension obligations, net of tax o f $10

— — — 19 — 19

Pension obligations, net of $6 tax — — — — 12 — 12

Balance at December 31, 2023 1,860,154 $ — $ 33,309 $ ( 1,301 ) $ ( 1,015 ) $ ( 20,509 ) $ 10,484

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CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income $ ( 4,490 ) $ 9,842

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities :

Net loss $ ( 2,239 ) $ ( 4,490 )

Adjustments to reconcile net loss to net cash used in operating activities :

Depreciation and amortization 1,628 1,627

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Deferred revenue ( 320 ) 239

Net cash (used in) provided by operating activities ( 2,599 ) 10,774

Net cash used in operating activities ( 2,370 ) ( 2,599 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of property and equipment ( 748 ) ( 1,063 )

Net cash used in investing activities ( 1,063 ) ( 650 )

Proceeds from sale of assets 1 —

Cash used in investing activities ( 747 ) ( 1,063 )

CASH FLOWS FROM FINANCING ACTIVITIES:

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Repayment of finance lease obligations and other financing obligations ( 991 ) ( 817 )

Net cash used in financing activities ( 4,331 ) ( 9,289 )

Cash used in financing activities ( 1,903 ) ( 4,331 )

Effect of currency exchange rate changes on cash and cash equivalents and restricted cash ( 790 ) ( 2,442 )

Net decrease in cash and cash equivalents and restricted cash ( 10,435 ) ( 1,865 )

Decrease in cash and cash equivalents and restricted cash ( 5,810 ) ( 10,435 )

Cash and cash equivalents and restricted cash at the beginning of the year 15,197 25,632

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Meitai cannot legally conduct a direct selling business in China unless it acquires a direct selling license in China.

As a response to COVID-19, we closed some offices and worked remotely.

The Company depends on an independent sales force of distributors to market and sell its products to consumers.

Developments such as social distancing and shelter-in-place directives impacted, and may continue to impact, their ability to engage with potential and existing customers.

The adverse economic effects of COVID-19 have had an impact on demand for the Company’s products due to government restrictions and changes in consumer behavior.

Moreover, the Company has rescheduled corporate sponsored events, and in some cases, our associates have cancelled sales meetings.

For some products the Company experienced shortages of raw materials, packaging supplies and ingredients and we successfully worked through challenges in getting these materials and ingredients to our contract manufacturers and finished products to our distribution centers.

Despite the impact on the global supply chain, the Company has overcome obstacles in shipping to our customers.

While the conditions described above are expected to be temporary, prolonged workforce disruptions, continued disruption in our supply chain and potential changes in consumer demands could negatively impact our sales as well as the Company’s overall liquidity.

We are managing with a focus on our financial condition, liquidity, operations, suppliers, industry, and workforce.

Principles of Consolidation

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The use of estimates is pervasive throughout the consolidated financial statements, but the accounting policies and estimates considered the most significant are described in this note to the consolidated financial statements, Organization and Summary of Significant Accounting Policies .

Basis of Presentation

Certain prior year amounts have been reclassified on the Consolidated Statements of Operations to conform to the current year presentation.

These reclassifications had no effect on the previously reported results of operations.

Foreign Currency Translation

The United States dollar is the functional currency for the majority of the Company’s foreign subsidiaries.

As a result, nonmonetary assets and liabilities are translated at their approximate historical rates, monetary assets and liabilities are translated at exchange rates in effect at the end of the year, and revenues and expenses are translated at weighted-average exchange rates for the year.

As a result, non-monetary assets and liabilities are translated at their approximate historical rates, monetary assets and liabilities are translated at exchange rates in effect at the end of the year, and revenues and expenses are translated at weighted-average exchange rates for the year.

The local currency is the functional currency of our subsidiaries in Japan, Republic of Korea, Taiwan, Norway, Denmark, Sweden, Mexico and China.

1 unchanged sentence

The foreign currency translation adjustment is recorded as a component of shareholders’ equity and is included in accumulated other comprehensive income.

Foreign currency transactio n losses t otaled approximately $ 0.7 million and $ 0.2 million for the years ended December 31, 2022 and 2021, respectively, and are included in other (expense) income, net in the Company’s consolidated statements of operations.

Foreign currency transactio n losses t otaled approximately $ 0.2 million for each of the years ended December 31, 2023 and 2022, respectively, and are included in other expense, net in the Company’s consolidated statements of operations.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

Cash and cash equivalents was $ 7.7 million at December 31, 2023, as compared to $ 13.8 million as of December 31, 2022.

The Company includes in its cash and cash equivalents credit card receivables due from its credit card processor, as the cash proceeds from credit card receivables are received within 24 to 72 hours.

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and (iii) Australia building lease collateral.

At each of December 31, 2022 and 2021, our total restricted cash was $ 1.4 million.

At December 31, 2023 and 2022, our total restricted cash was $ 1.7 million and $ 1.4 million, respectively.

The Company classifies the restricted cash held in Korea and Australia as long-term since it relates to assets and services contracted for longer than one year.

The following table provides a reconciliation of cash and cash equivalents, and restricted cash reported within the Company's consolidated balance sheets to the total amount presented in the consolidated statement of cash flows ( in thousands ):

December 31, 2023 December 31, 2022

Cash and cash equivalents at beginning of period $ 24,185 $ 22,207

Current restricted cash at beginning of period 944 944

Long-term restricted cash at beginning of period 503 4,346

Cash and cash equivalents and restricted cash at beginning of period $ 25,632 $ 27,497

Cash and cash equivalents at end of period $ 13,777 $ 24,185

Current restricted cash at end of period 944 944

Long-term restricted cash at end of period 476 503

Cash and cash equivalents and restricted cash at end of period $ 15,197 $ 25,632

Cash and cash equivalents at beginning of year $ 13,777 $ 24,185

Current restricted cash at beginning of year 944 944

Long-term restricted cash at beginning of year 476 503

Cash and cash equivalents and restricted cash at beginning of year $ 15,197 $ 25,632

Cash and cash equivalents at end of year $ 7,731 $ 13,777

Current restricted cash at end of year 938 944

Long-term restricted cash at end of year 718 476

Cash and cash equivalents and restricted cash at end of year $ 9,387 $ 15,197

Accounts Receivable

Accounts receivable are carried at their estimated collectible amounts.

As of December 31, 2022 and 2021, receivables consisted primarily of amounts due from preferred customers and associates.

The Company periodically evaluates its receivables for collectability based on historical experience, recent account activities, and the length of time receivables are past due and writes-off receivables when they become uncollectible.

At each of December 31, 2022 and 2021, the Company held an allowance for doubtful accounts of $ 1.0 million.

Accounts receivables are created upon shipment of an order if the credit card payment is rejected or does not match the order total.

As of December 31, 2023 and 2022, accounts receivables consisted primarily of amounts due from preferred customers and associates.

At December 31, 2023, 2022 and 2021, the Company's accounts receivable balances (net of allowance) were $ 0.1 million, $ 0.2 million and $ 0.1 million, respectively.

Upon adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), the Company assesses collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when the Company identifies specific customers with known disputes or collectability issues.

Expected loss estimates are determined utilizing an aging schedule.

In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status and makes judgments about the creditworthiness of customers based on ongoing credit evaluations.

The Company also considers customer-specific information, current market conditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss data.

At December 31, 2023 and 2022, the Company held an allowance of $ 1.3 million and $ 1.0 million, respectively.

Balance at Beginning of Year Charged to Expenses Deductions Balance at End of Year

Year Ended December 31, 2022

Allowance for doubtful accounts (000s) $ 987 $ ( 26 ) $ 12 $ 973

Year Ended December 31, 2023

Allowance for credit losses (000s) $ 973 $ 519 $ ( 214 ) $ 1,278

Inventories consist of raw materials, finished goods, and promotional materials that are stated at the lower of cost (using standard costs that approximate average costs) or net realizable value.

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Prepaid expenses and other current assets were $ 1.8 million and $ 2.4 million at December 31, 2023 and 2022, respectively.

Included in the December 31, 2022 and 2021 balances were $ 1.2 million and $1.1 million in other prepaid assets.

Also included in the balances at December 31, 2022 and 2021 were $ 0.9 million and $ 0.5 million for prepaid deposits, respectively.

Also included in the balances at December 31, 2022 and 2021 were $ 0.3 million and $ 1.3 million in prepaid inventory, respectively.

Included in the December 31, 2023 and 2022 balances were $ 1.1 million and $ 1.2 million in prepaid expenses, $ 0.3 million and $ 0.9 million for prepaid deposits, and $ 0.4 million and $ 0.3 million in prepaid inventory purchases, respectively.

Property and Equipment

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Expenditures for maintenance and repairs are charged to expense as incurred.

The cost of property and equipment sold or otherwise retired and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in other operating costs in the accompanying consolidated statements of operations.

The cost of property and equipment sold or otherwise retired and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is reported in the accompanying consolidated statements of operations.

The estimated useful lives of fixed assets are as follows:

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See Note 5, Leases for more information.

Included in the December 31, 2022 and 2021 balances were deposits for building leases in various locations of $ 1.3 million and $ 1.9 million, respectively.

Included in each of the December 31, 2023 and 2022 balances were deposits for building leases in various locations of $ 1.3 million.

Also included in the December 31, 2023 and 2022 balances were $ 2.2 million and $ 2.3 million, respectively, representing a deposit with Mutual Aid Cooperative and Consumer in the Republic of Korea, an organization established by the Republic of Korea’s Fair Trade Commission’s approval to compensate and protect consumers who participate in network marketing activities from damages.

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Payments are made monthly according to the terms of the agreements which have a weighted average effective interest rate of 10.8 % and are collateralized by leasehold improvements and computer hardware and software.

At December 31, 2022 and December 31, 2021, the current portion was $ 0.3 million and $ 0.2 million, respectively.

At December 31, 2023 and 2022, the current portion was $ 0.2 million and $ 0.3 million, respectively.

Other Long-Term Liabilities

Other long-term liabilities were $ 5.0 million at each of December 31, 2022 and 2021.

Other long-term liabilities were $ 4.0 million and $ 5.0 million at December 31, 2023 and 2022, respectively.

At December 31, 2023 and 2022, we recorded long-term lease liabilities related to operating leases of $ 2.6 million and $ 4.2 million, respectively.

See Note 5, Leases for more information.

As of December 31, 2022 and 2021, government mandated severance accruals in certain international offices amounted to $ 0.6 million and $ 0.5 million, respectively.

Certain operating leases for the Company’s regional office facilities contain a restoration clause that requires the Company to restore the premises to its original condition.

At December 31, 2023, accrued restoration costs related to these leases amounted to $ 0.4 million.

A s of December 31, 2023 and 2022, government mandated severance accruals in certain international offices amounted to $ 0.8 million and $ 0.6 million, respectively.

The Company also recorded a long-term liability for an estimated defined benefit obligation related to a non-U.S.

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The Company recognizes revenue from shipped products when delivered to the customer, thus the performance obligation is satisfied.

Corporate-sponsored event revenue is recognized when the event is held.

At December 31, 2023 and 2022, remaining performance obligations related to shipments were $1.4 million and $0.8 million, respectively.

The Company's remaining performance obligations related to associate fees were $0.1 million at both December 31, 2023 and 2022.

These amounts are included in Deferred Revenue as of December 31, 2023 and 2022.

Orders placed by associates or preferred customers constitute our contracts.

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(a) the sale of the product and (b) the loyalty program.

The Company's customer loyalty program conveys a material right to the customer to redeem loyalty points for the purchase of products.

For these contracts, the Company accounts for each of these obligations separately as they are each distinct.

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(a) the associate fee, whereby the Company provides an associate with the right to earn commissions, bonuses and incentives for a year, (b) three months of complimentary access to utilize the Success Tracker™ online tool and (c) three months of complimentary access to utilize the Mannatech+ online business tool.

The transaction price is allocated between the three performance obligations on a relative standalone selling price basis.

The transaction price is allocated between the three performance obligations on a relative standalone selling price basis and revenue is recognized over the period that access to the tool is active.

Associates do not have complimentary access to online business tools after the first contractual period.

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2023 Percentage 2022 Percentage

Consolidated product sales $ 130.2 94.9 % $ 151.0 94.4 %

Consolidated pack sales and associate fees 6.2 4.5 % 8.0 5.1 %

Consolidated other 0.8 0.6 % 0.8 0.5 %

Product sales $ 125.3 95.0 % $ 130.2 94.9 %

Pack sales and associate fees 5.6 4.2 % 6.2 4.5 %

Other 1.1 0.8 % 0.8 0.6 %

Total consolidated net sales $ 132.0 100.0 % $ 137.2 100.0 %

Revenues by reporting segment are presented in Note 15, Segment Information of our consolidated financial statements.

We believe that the disaggregation of our revenues as reflected above, coupled with further discussion below, and the reporting segment in Note 15, Segment Information depicts how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by economic factors.

Deferred Commissions

The Company defers commissions on (i) the sales of products shipped but not received by customers by the end of the respective period and (ii) the loyalty program.

Deferred commissions are incremental costs and are amortized to expense consistent with how the related revenue is recognized.

Deferred commissions are incremental costs and are charged to expense when the related revenue is recognized.

Deferred commissions were $ 2.1 million and $ 2.5 million at December 31, 2023 and 2022, respectively.

The full $ 2.4 million balance at December 31, 2021 was amortized to commissions expense for the twelve months ended December 31, 2022.

Products are generally received by customers three to five days after shipment.

Deferred Revenue

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(ii) revenue from the loyalty program;

(iii) prepaid

registration fees from customers planning to attend a future corporate-sponsored event;

(iii) prepaid registration fees from customers planning to attend a future corporate-sponsored event;

and (iv) prepaid annual associate fees.

To defer product sales that have not been received by customers, the Company estimates order delivery dates using weighted averages of historical delivery data collected from its freight carriers.

At December 31, 2023 and 2022, the Company’s deferred revenue was $ 4.8 million and $ 5.1 million, respectively.

The full $ 4.9 million balance at December 31, 2021 was recognized as revenue for the twelve months ended December 31, 2022.

The Company's customer loyalty program conveys a material right to the customer as it provides the promise to redeem loyalty points for the purchase of products, which is based on earning points through placing consecutive qualified automatic orders.

The deferred revenue amount of $ 4.8 million as of December 31, 2023 will be recognized as revenue for the year ending December 31, 2024.

The deferred revenue amount of $ 5.1 million as of December 31, 2022 was recognized as revenue for the year ended December 31, 2023.

The deferred revenue amount of $4.9 million as of December 31, 2021 was recognized as revenue for the year ended December 31, 2022.

The Company's customer loyalty program conveys a material right to the customer as it p rovides the promise to redeem loyalty points for the purchase of products, which is based on earning points through placing consecutive qualified automatic orders.

The Company factors in breakage rates, which is the percentage of the loyalty points that are expected to be forfeited or expire, for purposes of revenue recognition.

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Loyalty deferred revenue as of December 31, $ 3,242 $ 4,167

Loyalty deferred revenue as of January 1, 2022 $ 4,292

Loyalty points forfeited or expired ( 3,387 )

Loyalty points used ( 10,543 )

Loyalty points vested 12,773

Loyalty points unvested 1,032

Loyalty deferred revenue as of December 31, 2022 $ 4,167

Sales Refund and Allowances

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Sales returns have historically averaged 1.5 % or less of our gross sales.

At December 31, 2022 and December 31, 2021, our sales return reserve, which is a component of Accrued expenses, consisted of the following (in thousands) :

Sales reserve as of January 1, 2021 $ 71

Provision related to sales made in current period 778

Adjustment related to sales made in prior periods ( 11 )

Actual returns or credits related to current period ( 728 )

Actual returns or credits related to prior periods ( 55 )

Sales reserve as of December 31, 2021 $ 55

Sales reserve as of January 1, 2022 $ 55

At December 31, 2023 and 2022, our sales return reserve, which is a component of Accrued expenses, consisted of the following (in thousands) :

Sales returns reserve as of January 1, $ 59 $ 55

Provision related to sales made in current period 739 783

2 unchanged sentences

Actual returns or credits related to prior periods ( 66 ) ( 45 )

Sales reserve as of December 31, 2022 $ 59

Sales returns reserve as of December 31, $ 41 $ 59

Shipping and Handling Costs

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The Company accrues commissions and incentives when earned by associates and pays commissions on product and pack sales on a monthly basis.

Advertising Expenses

Advertising Expense

The Company expenses advertising and promotions in selling and administrative expenses when incurred.

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Research and development expenses related to new product development, enhancement of existing products, clinical studies and trials, Food and Drug Administration compliance studies, general supplies, internal salaries, third-party contractors, and consulting fees were approximately $ 0.8 million and $ 1.0 million for the years ended December 31, 2023 and 2022, respectively.

Salaries and contract labor are included in selling and administrative expenses and all other research and development costs are included in other operating costs.

Salaries and contract labor are included in selling and administrative expenses and all other research and development costs are included in selling and administrative expenses in the consolidated statements of operations.

Stock-Based Compensation

The Company currently has one active stock-based compensation plan, the Mannatech, Incorporated 2017 Stock Incentive Plan, which was adopted by the Company’s Board of Directors (the "Board") on April 17, 2017 and was approved by its shareholders on June 8, 2017.

The Company recognizes stock-based compensation expense over the vesting period of the options granted.

See Note 10, Stock Based Compensation.

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The Company amortizes such costs over the estimated useful life of the software, which is three to five years once the software is placed in service.

Other Operating Costs

Other operating costs include travel, accounting/legal/consulting fees, credit card processing fees, banking fees, off-site storage fees, utilities, and other miscellaneous operating expenses.

The Company determines the provision for income taxes using the asset and liability method.

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The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained.

Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being recognized.

Recognized income tax positions are measured at the largest amount that is greater than 50% likelihood of being recognized.

Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

The Company recognizes both interest and penalties related to uncertain tax positions as part of the income tax provision.

Net income/loss, before income tax, for U.S.

and foreign entities is a function of the Company's transfer pricing policies, which govern the allocation of taxable income among the Company's various tax jurisdictions.

The Company is also subject to transfer pricing tax regulations designed to ensure the appropriate allocation of income between our U.S.

and foreign entities and that the Company

is taxed accordingly.

The Company is subject to audit by federal, state and foreign tax authorities and inquiries from those tax authorities regarding the amount of taxes due.

Comprehensive Income and Accumulated Other Comprehensive Income

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The Company’s comprehensive income consists of the Company’s net income, foreign currency translation adjustments from its Japan, Republic of Korea, Taiwan, Denmark, Norway, Sweden, Colombia, Mexico and China operations, remeasurement of intercompany balances of a long-term-investment nature from its Taiwan, Mexico and Cyprus operations, and changes in the pension obligation for its Japanese employees.

In the event that a subsidiary is disposed of, the Company recognizes cumulative translation adjustments of foreign exchange directly through retained earnings.

See Footnote 13, Shareholders Equity.

Recently Adopted Accounting Pronouncements

The Company adopted ASU 2016-13 as of January 1, 2023.

This new standard adds to U.S.

GAAP an impairment model (known as the current expected credit loss ("CECL") model) that is based on expected losses rather than incurred losses.

Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which is intended to result in the more timely recognition of losses.

Under the CECL model, entities estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications) from the date of initial recognition of the financial instrument.

Measurement of expected credit losses are based on relevant forecasts that affect collectability.

The scope of financial assets within the CECL methodology is broad and includes trade receivables from certain revenue transactions and certain off-balance sheet credit exposures.

ASU 2016-13 only applies to our receivables from revenue transactions.

Under ASC 606, revenue is recognized when, among other criteria, it is probable that the entity will collect the consideration to which it is entitled for goods or services transferred to a customer.

At the point that trade receivables are recorded, they become subject to the CECL model and estimates of expected credit losses on trade receivables over their contractual life are required to be recorded at inception based on historical information, current conditions, and reasonable and supportable forecasts.

The Company adopted the accounting standard using the modified retrospective approach, as of January 1, 2023.

The cumulative effect upon adoption did not have a material impact on our consolidated financial statements.

Concentration Risk

A significant portion of our revenue is derived from our Ambrotose Life ® , TruHealth ™ , Advanced Ambrotose ® , Manapol® Powder and Optimal Support Packets.

A significant portion of our revenue is derived from our Ambrotose, Ambrotose Life ® , TruHealth ™ , Manapol®, and Optimal Support Packets products.

A decline in sales value of such products could have a material adverse effect on our earnings, cash flows, and financial position

Revenue from these products were as follows for the years ended December 31, 2022 and 2021 ( in thousands, except percentages ):

product % of total

net sales Sales by

product % of total

Ambrotose Life ®

$ 28,734 20.9 % $ 28,776 18.0 %

15,730 11.5 % 18,010 11.3 %

Advanced Ambrotose ®

9,624 7.0 % 11,158 7.0 %

Manapol ® Powder

7,909 5.8 % 13,141 8.2 %

Optimal Support Packets 6,916 5.0 % 7,593 4.7 %

Total $ 68,913 50.2 % $ 78,678 49.2 %

Our business is not currently exposed to customer concentration risk given that no independent associate has ever accounted for more than 10% of our consolidated net sales.

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Failure to satisfy minimum purchase requirements could result in the loss of exclusivity.

During the year ended December 31, 2022, the Company purchased finished goods from four suppliers that accounted for 60.1% of the year's cost of sales.

During the year ended December 31, 2023, the Company purchased finished goods from three suppliers that accounted for 52.5 % of the year's cost of sales.

During the year ended December 31, 2022, the Company purchased finished goods from four suppliers that accounted for 60.1 % of the year's cost of sales.

The Company maintains other supply and manufacturing agreements to minimize exposure to supplier risk.

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents, investments, receivables, and restricted cash.

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents, receivables, and restricted cash.

The Company utilizes financial institutions that the Company considers to be of high credit quality and periodically evaluates the credit rating of such institutions and the allocation of their investments to minimize exposure to credit concentration risk.

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified for consistency with the current year presentation.

These reclassifications had no effect on the reported balances or results of operations.

An adjustment has been made to the Consolidated Balance Sheet for fiscal year ended December 31, 2021, to reclassify Construction in Progress to Property and Equipment, net.

Fair Value of Financial Instruments

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Accounting Pronouncements Issued But Not Yet Effective

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) .

This standard adds to U.S.

GAAP an impairment model known as the current expected credit loss (“CECL model”) that is based on expected losses rather than incurred losses.

Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which is intended to result in the more timely recognition of losses.

Under the CECL model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications) from the date of initial recognition of the financial instrument.

Measurement of expected credit losses are to be based on relevant forecasts that affect collectability.

The scope of financial assets within the CECL methodology is broad and includes trade receivables from certain revenue transactions and certain off-balance sheet credit exposures.

Different components of the guidance require modified retrospective or prospective adoption.

ASU 2019-10 deferred the effective date of ASU 2016-13 for smaller reporting companies.

This standard will be effective for us as of January 1, 2023.

While our review is ongoing, we believe ASU 2016-13 will only have applicability to our receivables from revenue transactions.

Under ASC Topic 606, revenue is recognized when, among other criteria, it is probable that the entity will collect the consideration to which it is entitled for goods or services transferred to a customer.

At the point that trade receivables are recorded, they become subject to the CECL model and estimates of expected credit losses on trade receivables over their contractual life will be required to be recorded at inception based on historical information, current conditions, and reasonable and supportable forecasts.

The Company has reviewed the pronouncement and not found any indication nor do we expect to find that the new guidance will have an impact on our consolidated financial statements or existing internal controls.

Other recently issued accounting pronouncements did not or are not believed by management to have a material impact on the Company's present or future financial statements.

Segment Reporting (ASU 2023-07) — Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASC 2023-07”).

In November 2023, the FASB issued accounting guidance that requires incremental disclosures related to reportable segments which includes significant segment expense categories and amounts for each reportable segment.

The guidance is effective January 1, 2024, and will be adopted retrospectively.

The adoption will result in incremental disclosures related to reportable segments in the 2024 year-end financial statements and interim periods beginning in 2025.

The Company is currently evaluating the disclosure impacts of ASU 2023-07 on its consolidated financial statements as well as the impacts to its financial reporting process and related internal controls.

Income Tax Reporting (ASU 2023-09) — Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASC 2023-09”).

In December 2023, the FASB issued accounting guidance to expand the annual disclosure requirements for income taxes, primarily related to the rate reconciliation and income taxes paid.

This guidance is effective January 1, 2025, with early adoption permitted.

This guidance can be applied prospectively or retrospectively.

The Company is currently evaluating the disclosure impacts of ASU 2023-09 on its consolidated financial statements as well as the impacts to its financial reporting process and related internal controls.

The Company utilizes fair value measurements to record fair value adjustments to certain financial assets and to determine fair value disclosures.

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The primary objective of the Company’s investment activities is to preserve principal while maximizing yields without significantly increasing risk.

The investment instruments held by the Company are interest bearing deposits for which quoted market prices are readily available.

The investment instruments held by the Company are money market funds and interest bearing deposits for which quoted market prices are readily available.

The Company considers these highly liquid investments to be cash equivalents.

These investments are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets.

The tables below present the recorded amount of financial assets measured at fair value, which approximately equates to the carrying value due to the relatively short maturities of these respective assets, (in thousands) on a recurring basis as of December 31, 2022 and 2021.

The Company did not have any material financial liabilities that were required to be measured at fair value on a recurring basis at December 31, 2022 and 2021.

The tables below present the recorded amount of financial assets measured at fair value (money market fund) on a recurring basis as of December 31, 2023.

The Company's interest-bearing deposits are measured at amortized cost, which approximates fair value to the carrying value due to the relatively short maturity of the asset, (in thousands).

The Company did not have any financial assets measured at fair value on a recurring basis at December 31, 2022.

T he Company did not have any material financial liabilities that were required to be measured at fair value on a recurring basis at December 31, 2023 and 2022.

2023 Level 1 Level 2 Level 3 Total

Money Market Funds – JP Morgan, US $ 2,310 $ — $ — $ 2,310

Interest bearing deposits – various banks $ 1,084 $ — $ — $ 1,084

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The Company provides an allowance for any slow-moving or obsolete inventories.

The allowance for slow-moving and inventory obsolescence was $ 0.4 million at each of December 31, 2023 and 2022.

Inventories as of December 31, 2023 and 2022, consisted of the following (in thousands) :

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Finished goods 9,431 11,424

Inventory reserves for obsolescence ( 417 ) ( 447 )

Total $ 14,726 $ 12,020

Total inventory, net $ 14,535 $ 14,726

PROPERTY AND EQUIPMENT

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Leasehold improvements 3,867 4,079

ROU Assets- finance leases 182 177

Right of use Assets- finance leases 1,236 182

56,584 55,860

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Total $ 4,147 $ 3,759

For each of the years ended December 31, 2023 and 2022, depreciation and amortization expense remained constant at $ 1.6 million.

The Company leases office space and equipment from third-party lessors and accounts for leases in accordance with ASC Topic 842.

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Generally, the Company’s operating leases relate to office space used in Mannatech’s operations, including its headquarters in Flower Mound, Texas and office space in international locations in which the Company does business.

As of December 31, 2022, all of the Company’s finance leases pertain to certain equipment used in the business.

As of December 31, 2023 and 2022, all of the Company’s finance leases pertain to certain equipment used in the business.

On March 10, 2023, the Company entered into a five-year agreement to sublease 10,000 rentable square feet of the Company's leased office space in Flower Mound, Texas to a subtenant.

There was no modification or impairment by entering into the sublease agreement because the Company was not released from its obligations under the head lease.

The Company earned $0.1 million and $0 sublease revenue for the year ended December 31, 2023 and 2022, respectively, which is presented as a component of net sales on the Company's Consolidated Statements of Operations.

The Company has made a policy election in accordance with ASC 842-10-15-39A to exclude from consideration taxes that are assessed on and collected from the sublessee from consideration.

As of December 31, 2023 and 2022, our leased assets and liabilities consisted of the following (in thousands):

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Operating leases

Operating lease costs Other operating costs $ 2,137 $ 2,201

Short term lease costs Other operating costs 279 339

Operating lease costs Selling and administrative expenses $ 1,910 $ 2,137

Short term lease costs Selling and administrative expenses 232 279

Finance leases

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Total lease cost $ 2,459 $ 2,514

For the twelve months ended December 31, 2022 and 2021, cash paid for amounts included in the measurement of lease liabilities included (in thousands):

For the years ended December 31, 2023 and 2022, cash paid for amounts included in the measurement of lease liabilities included (in thousands):

Operating cash flows from operating leases $ 1,948 $ 2,017

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December 31, 2023

Maturity of lease liabilities Operating Leases Finance Leases

Maturity of lease liabilities Operating Leases Finance Leases Sublease Income

2024 $ 1,819 $ 337 $ ( 132 )

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2026 723 327 ( 132 )

2027 650 315 ( 132 )

2028 268 90 ( 55 )

Thereafter — — —

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Accrued shipping and handling costs 291 528

Rent expense 3 —

Accrued legal and accounting fees 865 1,300

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$ 6,779 $ 7,510

The components of the Company’s (loss) income before income taxes are attributable to the following jurisdictions for the years ended December 31 (in thousands) :

The components of the Company’s (loss) before income taxes are attributable to the following jurisdictions for the years ended December 31 (in thousands) :

United States $ ( 5,378 ) $ ( 7,822 )

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Federal ( 2 ) 1,200

State 81 ( 131 )

Foreign 113 ( 55 )

$ 1,109 $ 4,011

$ 4,011 $ ( 950 )

For the years ended December 31, 2023 and 2022, the Company’s effective tax rate was ( 98.1 )% and ( 837.4 )%, respectively.

The Company's effective tax rate for the year ended December 31, 2023 differed from the statutory rate due to a mix of earnings across jurisdictions and the associated valuation allowance recorded on losses in certain jurisdictions.

The Company's effective tax rate for the year ended December 31, 2022 differed from the statutory rate due to additional taxes assessed as a result of the settlement of the income tax audit in Korea, the Company recording a valuation allowance on U.S.

deferred tax assets largely driven by changes in expected earnings mix between jurisdictions, and the relative impact of these items on decreased earnings.

The Company's effective tax rate for the year ended December 31, 2021 differed from the statutory rate due to the release of valuation allowance on U.S.

deferred tax assets due to the expectation of current and future utilization.

A reconciliation of the Company’s effective income tax rate and the United States federal statutory income tax rate is summarized as follows, for the years ended December 31:

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Effect of changes in valuation allowance ( 46.4 ) ( 383.7 )

Foreign Derived Intangible Income (FDII) deduction — ( 8.1 )

Global Intangible Low Taxed Income (GILTI) (1)

Credits generated 7.9 15.2

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Return to provision adjustments 1.4 ( 43.4 )

Meals and entertainment ( 12.8 ) —

Withholding taxes ( 16.0 ) ( 50.3 )

Changes to uncertain tax positions — ( 1.8 )

Expiration of tax attribute ( 38.5 ) ( 135.5 )

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Capitalized research & development 1,058 218

Unrealized foreign exchange gains and losses 410 225

Other 1,090 743

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Deferred commissions 446 418

Internally-developed software — 104

Lease assets 978 624

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Jurisdiction Gross NOL Tax Effected NOL Expiration Years

Australia $ 120 $ 36 Indefinite

Bermuda 73 — N/A

Cyprus 1,453 182 2024-2027

Denmark 1 — Indefinite

Gibraltar 253 32 Indefinite

Mexico 6,066 1,816 2024-2028

Netherlands 5 1 Indefinite

Norway 267 59 Indefinite

8 2 Indefinite

Singapore 148 25 Indefinite

South Africa 631 170 Indefinite

Sweden 424 87 Indefinite

Switzerland 4,566 420 2024-2029

Taiwan 2,274 455 2024-2032

7 1 Indefinite

United Kingdom 275 69 Indefinite

United States - Federal 1,828 384 Indefinite

United States - State 14,941 849 2024-Indefinite

Other - Foreign 2,408 528 Indefinite

foreign tax credit carryforwards of $ 3.3 million as of December 31, 2023, which will begin to expire in 2024.

1 unchanged sentence

At December 31, 2023 and 2022, the Company’s valuation allowance was $ 10.3 million and $ 9.8 million, respectively.

The net change in the valuation allowance for the years ended December 31, 2023 and 2022 was an increase of $ 0.5 million and $ 1.9 million, respectively.

The provisions of ASC Topic 740 require a company to record a valuation allowance when the “more likely than not” criterion for realizing a deferred tax asset cannot be met.

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China $ — $ 0.4

Colombia — 0.5

Cyprus 0.2 0.2

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Jurisdiction Open Years

Australia 2018-2021

China 2019-2022

Japan 2018-2022

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TRANSACTIONS WITH RELATED PARTIES AND AFFILIATES

The Company made cash donations of $ 0.6 million to the M5M Foundation for each of the years ended December 31, 2022 and December 31, 2021.

The Company made cash donations of $ 0.5 million and $ 0.6 million to the M5M Foundation for each of the years ended December 31, 2023 and December 31, 2022, respectively.

The M5M Foundation is a 501(c)(3) charitable organization that works to combat the epidemic of childhood malnutrition on a global scale.

Several of the Company’s directors and officers and their family members serve on the board of the M5M Foundation, including:

• Al Bala, the Company’s CEO and President;

• Chris Simons, the Company’s Regional Vice President EMEA;

• Landen Fredrick, the Company's Chief Sales and Marketing Officer and President, North America and son of J.

• Al Bala, the Company’s CEO;

• Lorrie Jobe, daughter of Larry Jobe, a Director and Chair of the Audit Committee of the Board of Directors;

• Landen Fredrick, the Company's President and Chief Operating Officer and Interim Chief Financial Officer and son of J.

Stanley Fredrick, the Company’s Chairman of the Board and a major shareholder.

We paid employment compensation of approximately $ 477,000 and $ 375,000 in 2022 and 2021, respectively, for salary, bonus, auto allowance, and other compensation to Landen Fredrick.

In addition, Landen Fredrick participated in the employee health care benefit plans available to all employees of the Company.

Effective November 12, 2019, Landen Fredrick was promoted from Chief Global Sales Officer and President, North America to Chief Sales & Marketing Officer.

Fredrick had served as Chief Global Sales Officer and President, North America since January 1, 2018.

Prior to that, Mr.

Fredrick had served as Senior Vice President, Global Operations since August of 2016, as Senior Vice President, Supply Chain and IT since August of 2015, Vice President, Global Operations since May of 2013, Vice President, North American Sales and Operations since January of 2011, Vice President, North American Sales since February of 2010 and as Senior Director of Tools and Training since his hire in May of 2006.

Effective June 7, 2023, Landen Fredrick was named President and Chief Operating Officer.

We paid employment compensation of approximately $ 330,000 and $ 477,000 for the years ended December 31, 2023 and 2022, respectively, for salary, bonus, auto allowance, and other compensation to Landen Fredrick.

Fredrick also participated in the employee health care benefit plans available to all employees of the Company.

Landen Fredrick also serves as Chairman of the Board of the M5M Foundation.

Kevin Robbins is a member of the Company's Board of Directors, serving on the Science and Marketing Committee, and is also an independent associate, holding a position in the Company's associate global downline network marketing system.

He has also consulted on the associate commission plan in the past, but did not do so during the years ended December 31, 2022 and 2021.

Kevin Robbins is a member of the Company's Board of Directors, serving as the Chair of the Science and Marketing Committee, and is also an independent associate, holding a position in the Company's associate global downline network marketing system.

He also received compensation for consulting on the associate commission plan in the past, but did not receive any compensation for consulting on the plan during the years ended December 31, 2023 and 2022.

In addition, several of Mr.

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Robbins was approximately $ 0.2 million in each of 2023 and 2022.

The aggregate amount of commission and incentives paid in 2022 and 2021 to Mr.

The aggregate amount of commission and incentives expense in 2023 and 2022 to Mr.

Robbins' father, Ray Robbins, who holds positions in the Company's associate global downline network marketing system was approximately $ 1.8 million and $ 1.5 million, respectively.

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Robbins and his family members are in accordance with the Company’s global associate career and compensation plan.

Johanna Bala, the wife of Al Bala, the Company’s Chief Executive Officer and President, is an independent associate who earns commissions and incentives.

Johanna Bala, the wife of Al Bala, the Company’s Chief Executive Officer, is an independent associate who earns commissions and incentives.

The aggregate amount of commission and incentives paid to Johanna Bala was approximately $ 0.1 million in each of 2023 and 2022.

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The Company’s matching contributions for its United States and Canada employees vest ratably over a five -year period.

During each of the years ended December 31, 2022 and 2021, the Company contributed approximately $ 0.3 million to the 401(k) Plan for matching contributions.

During the years ended December 31, 2023 and 2022, the Company contributed approximately $ 0.2 million and $ 0.3 million to the 401(k) Plan for matching contributions, respectively.

The Company also sponsors a non-U.S.

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Components of Expense

Service Cost for the Benefit Plan is included within selling and administrative expenses and all other items noted in the table below (Interest Cost, Amortization of Transition Obligation, Loss and Prior Service Cost) are included within other

(expense), net.

Service Cost for the Benefit Plan is included within selling and administrative expenses in the statement of operations and all other items noted in the table below (Interest Cost, Amortization of Transition Obligation, Loss and Prior Service Cost) are included within other (expense), net.

Pension costs, which are included within Consolidated Statement of Operations are detailed below for the years ended December 31 (in thousands) :

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Prior service cost ( 34 ) ( 36 )

Total pension expense $ 3 $ 7

Total pension expense (benefit) $ ( 3 ) $ 3

Estimated Benefits and Contributions

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STOCK BASED COMPENSATION

Summary of Stock Plan

Summary of Stock Option Plan

The Company currently has one active stock-based compensation plan, the 2017 Plan, which was adopted by the Company’s Board of Directors on April 17, 2017 and was approved by its shareholders on June 8, 2017, and subsequently amended by the Board in February 2019, which was approved by the Company's shareholders on June 11, 2019.

The 2017 Plan supersedes the Mannatech, Incorporated 2008 Stock Incentive Plan, as amended, which was set to expire on February 20, 2018.

The Board has reserved a maximum of 370,000 shares of our common stock that may be issued under the 2017 Plan (subject to adjustments for stock splits, stock dividends or other changes in corporate capitalization).

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Exercised ( 2 ) 5.72

Expired ( 12 ) 10.01

Outstanding at end of year 235 $ 17.73 3.47 $ —

Options exercisable at year end 228 $ 17.77 3.30 $ —

During 2022, the Company issued 11,334 treasury shares upon the exercise of options and granted 11,807 new options to management and members of the Board.

Options exercised during the years ending December 31, 2022 and 2021 had a total intrinsic value, calculated as the difference between the exercise date stock price and the exercise price of $ 0.1 million and $ 1.2 million, respectively.

Non-vested shares at December 31, 2022 and 2021 were approximately 10,003 and 8,336 , respectively.

Valuation and Expense Information Under FASB ASC Topic 718 Compensation – Stock Compensation

The Company is required to measure and recognize compensation expense related to any outstanding and unvested stock options previously granted, and thereafter recognize, in its consolidated financial statements, compensation expense related to any new stock options granted after implementation using fair-value based on an option-pricing model.

The Company uses the Black-Scholes option-pricing model to calculate the fair value of all of its stock options and its assumptions are based on historical information.

During 2023 and 2022, the Company issued 2,000 and 11,334 treasury shares upon the exercise of options and granted 5,000 and 11,807 new options to management and members of the Board, respectively.

Options exercised during the years ending December 31, 2023 and 2022 had a total intrinsic value, calculated as the difference between the exercise date stock price and the exercise price, of less than $ 0.1 million and $ 0.1 million, respectively.

Non-vested options at December 31, 2023 and 2022 were approximately 6,668 and 10,003 , respectively.

We grant stock options to our employees, board members, and consultants.

At the date of grant, we determine the fair value of a stock option award and recognize compensation expense over the requisite service period, or the vesting period of such stock option award, which is two or three years.

The fair value of the stock option award is calculated using the Black-Scholes option-pricing model.

The Black-Scholes option-pricing model requires us to apply judgment and use subjective assumptions, including expected stock option life, expected volatility, expected average risk-free interest rates, and expected forfeiture rates.

The following assumptions were used to calculate the fair value of stock options granted each year:

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66.5 % 63.6 - 64.9 %

Average expected life of stock options:

Weighted average expected life of stock options:

4.5 years 4.5 years

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The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2023 and 2022 was $ 4.32 and $ 7.21 per share, respectively.

The total fair value of awards vested during the years ended December 31, 2022 and 2021 was less than $ 0.1 million and $ 0.1 million, respectively.

The total fair value of awards vested during each of the years ended December 31, 2023 and 2022 was $ 0.1 million.

Valuation and Expense Information Under FASB ASC Topic 718 Compensation – Stock Compensation

If we grant additional stock options in the future, we would be required to recognize additional compensation expense over the vesting period of such stock options in our consolidated statement of operations.

As of December 31, 2023, we had 108,468 shares available for grant in the future.

The Company recorded the following amounts related to the expense of the fair values of options during the years ended December 31, 2023 and 2022 (in thousands) :

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Effect on net income $ 33 $ 60

At each of the years ended December 31, 2022 and 2021, the Company had $0.2 million of compensation expense related to the issuance of unrestricted shares.

As of December 31, 2022, the Company had less than $ 0.1 million of total unrecognized compensation expense related to stock options currently outstanding, to be recognized in future years, ending December 31, as follows (in thousands):

As of December 31, 2023, the Company had less than $ 0.1 million of total unrecognized compensation expense related to stock options currently outstanding, to be recognized in future years over a weighted-average period of 0.95 years , ending December 31, as follows (in thousands):

Total gross unrecognized

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If the employment relationships with these executives were terminated, as of December 31, 2023, the Company would continue to be indebted to the executives for $ 0.6 million , payable through 2024.

Korean Customs Audit

We resolved the Busan Customs Office audit of the Korean customs values for $0.1 million, which was $0.4 million lower than that had been accrued in the prior year.

As we process commissions monthly, Mannatech Korea receives from Mannatech Inc.

payments for members’ commissions and these intercompany payments are settled by way of netting set-off with other transactions.

We are seeking an official ruling from the Ministry of Economy and Finance involving the netting of receivables / payables in foreign currency between a Korean resident and a non-resident and whether this should be reported to the Bank of Korea or a designated foreign exchange bank under compliance with the Foreign Exchange Transactions Act ("FETA") of Korea.

If it is confirmed in the ruling that the above transactions are subject to the advance reporting requirement under the FETA, there is a possibility of a penalty for the violation.

Litigation in General

As of December 31, 2023, the Company had no open or pending litigation and no legal reserve was deemed necessary at December 31, 2023.

The Company has incurred several claims in the normal course of business.

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The Company accrues costs to defend itself from litigation as they are incurred.

The outcome of litigation is uncertain, and despite management’s views of the merits of any litigation, or the reasonableness of the Company’s estimates and reserves, the Company’s financial statements could nonetheless be materially affected by an adverse judgment.

The Company reserves for contingencies arising from current legal matters where an outcome was deemed to be probable, and the loss amount could be reasonably estimated.

No legal reserve was deemed necessary at December 31, 2022.

SHAREHOLDERS’ EQUITY

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On June 30, 2004, the Company’s Board of Directors authorized the Company to repurchase, in the open market, the lesser of (i) 131,756 shares of its common stock and (ii) $ 1.3 million of its shares, (the “June 2004 Plan”).

On August 28, 2006, a second program permitting the Company to purchase, in the open market, up to $ 20 million of its outstanding shares was approved by our Board of Directors (the “August 2006 Plan”).

On July 14, 2011, the Company’s Board of Directors authorized the Company to reactivate the June 2004 Plan.

On August 31, 2016, the Company's Board of Directors reactivated the August 2006 Plan.

In August of 2016, and December of 2017, the Company's Board of Directors authorized the Company to repurchase up to $ 0.5 million, respectively, of the Company's outstanding common shares in open market transactions.

In August of 2018 and November of 2018, the Company's Board of Directors reactivated an additional $ 0.5 million (of the original $20.0 million authorization), respectively, in shares of the Company's common stock to be repurchased in the open market.

In December of 2019, the Company’s Board of Directors approved a share repurchase program to acquire up to $1.0 million (of the original $20.0 million authorization) of the Company’s common stock through March 1, 2020.

In August 2020, the Company’s Board of Directors approved a share repurchase program to acquire up to $1.0 million (of the original $20.0 million authorization) of the Company’s common stock through August 16, 2021.

In September 2021, the Company's Board approved a share repurchase program to acquire up to $1.0 million (of the original $20.0 million authorization) of our common stock through September 21, 2022.

In September 2022, our Board approved a share repurchase program to acquire up to $1.5 million (of the original $20.0 million authorization) of our common stock through September 18, 2023.

On August 28, 2006, the Company's Board of Directors authorized a second program permitting the Company to purchase, in the open market, up to $ 20 million of its outstanding shares (the “August 2006 Plan”).

Under the June 2004 Plan and the August 2006 Plan, shares of Common Stock may be repurchased from time to time through open market transactions in compliance with applicable securities laws.

The timing, manner, price and amount of any repurchases, as well as the capital resources to fund the repurchases, are determined by the Company, in its discretion, and depends on a variety of factors, including legal requirements, price and economic and market conditions.

During the year ended December 31, 2023, the Company repurchased 13,454 shares of its common stock, at an average price of $ 13.06 .

During the year ended December 31, 2022, the Company repurchased 99,293 shares of its common stock, at an average price of $ 21.87 .

As of December 31, 2023, there was $ 12.6 million remaining for repurchase under the August 2006 Plan, and the total value of shares repurchased in the open market under the August 2006 Plan was $ 1.5 million.

The Company does not have any stock repurchase plans or programs other than the June 2004 Plan and the August 2006 Plan.

During the year ended December 31, 2022, the Company repurchased 99,293 shares of its common stock, at an average price of $ 21.87 .

During the year ended December 31, 2021, the Company repurchased 200,115 shares of its common stock, which included 171,433 shares of its common stock repurchased pursuant to the 2021 tender offer, at an average price of $ 26.76 .

Voting rights

Holders of our Common Stock will vote as a single class and are entitled to one vote per share on all matters on which stockholders are entitled to vote generally, including the election or removal of directors.

The holders of our Common Stock do not have cumulative voting rights in the election of directors.

Preemptive or similar rights

Holders of shares of our Common Stock do not have preemptive, subscription, redemption or conversion rights.

There are no redemption or sinking fund provisions applicable to the Common Stock.

Holders of Common Stock are entitled to receive dividends at the same rate, when, as and if declared by our Board of Directors out of funds legally available therefor, subject to any statutory or contractual restrictions on the payment of dividends and to the rights of the holders of one or more outstanding series of our preferred stock.

For the years ended December 31, 2023 and 2022, the Company paid dividends of $.20 per share to holders of our Common Stock in the amount of $ 0.7 million and $ 1.5 million, respectively.

Equity-Based Compensation

During 2022, 11,334 treasury shares were issued for stock option exercises and a total of 6,072 treasury shares were issued to the members of the Board as compensation for their work on the Board.

For the years ended December 31, 2023 and 2022, the Company issued a total of 12,808 and 6,072 treasury shares to the members of the Board as a part of their compensation, respectively .

The share grants to the Board were vested upon grant and the Company recognized $ 0.2 million for each of the years 2023 and 2022 .

Accumulated Other Comprehensive Income

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Current-period change before reclassifications ( 2,546 ) — ( 2,546 )

Disposition of foreign entity ( 23 ) — ( 23 )

Amounts reclassified from accumulated other comprehensive income (loss) — 29 29

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Current-period change before reclassifications ( 819 ) — ( 819 )

Disposition of foreign entity ( 23 ) — ( 23 )

Amounts reclassified from accumulated other comprehensive income (loss) — 18 18

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Balance as of December 31, 2023 $ ( 1,427 ) $ 412 $ ( 1,015 )

During the year ended December 31, 2022, the Company declared and paid dividends amounting to an aggregate of $ 1.5 million.

During the year ended December 31, 2021, the Company declared and paid dividends amounting to an aggregate of $ 4.3 million.

Payment of future dividends is at the discretion of our Board of Directors.

EARNINGS PER SHARE

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The Company reported a net loss for the year ended December 31, 2023.

In determining the potential dilution effect of outstanding stock options during 2021, the Company used the average common stock close price of $ 27.36 per share.

For the year ended December 31, 2021, there were 1.99 million weighted-average common shares outstanding used for the basic EPS calculation.

For the year ended December 31, 2021, approximately 0.10 million shares subject to options were included in the calculation resulting in 2.09 million dilutive shares used to calculate diluted EPS.

For the year ended December 31, 2021, approximately 0.1 million of the Company's common stock subject to options were excluded from the diluted EPS calculation as the effect would have been antidilutive.

For the year ended December 31, 2022, shares of the Company's common stock subject to options were excluded from the diluted EPS calculations as their effect would have been antidilutive.

The Company reported a net loss for the year ended December 31, 2022.

SEGMENT INFORMATION

The Company's sole reporting segment is one where we sell proprietary nutritional supplements, skin care and anti-aging products, and weight-management and fitness products through network marketing distribution channels operating in twenty-four countries.

Each of the business units receives associate fees or sells similar packs (in the case of Mexico and South Korea, where packs have not been replaced with associate fees, see Note 1, Organization and Summary of Significant Accounting Policies ) and products and possesses similar economic characteristics, such as selling prices and gross margins.

In each country, the Company markets its products and pays commissions and incentives in similar market environments.

The Company’s management reviews its financial information by country and focuses its internal reporting and analysis of revenues by pack sales and associate fees and product sales.

The Company sells its products through its independent associates who occupy positions in our network and distribute products through similar distribution channels in each country.

The Company also operates a non-direct selling business in mainland China.

Our subsidiary in China, Meitai, is operating as a traditional retailer under a cross-border e-commerce model.

We operate as a direct seller in the nutritional supplement industry.

The Company's sole reporting segment is one in which we sell proprietary nutritional supplements, skin care and anti-aging products, and weight-management and fitness products operating in twenty-five markets.

We primarily sell our products through a network marketing distribution channel of approximately 145,000 active associates and preferred customer positions who we refer to as current associates and preferred customers.

Our subsidiary in China, Meitai, is currently operating as a traditional retailer under a cross-border e-commerce model.

Meitai cannot legally conduct a direct selling business in China unless it acquires a direct selling license in China.

The Company operates facilities in eleven countries and sells product in twenty-five countries around the world.

These facilities are located in the United States, Canada, Australia, the United Kingdom, Japan, the Republic of Korea (South Korea), Taiwan, South Africa, Mexico, Hong Kong and China.

Each facility services different geographic areas.

Our subsidiary, NEMO, operates an affiliate business model under the brand name, “Trulu,” in the United States.

Each of our subsidiaries sells similar products and exhibits similar economic characteristics, such as selling prices, paying commissions and incentives, gross margins and operating characteristics.

We review and analyze net sales by geographical location and by products and packs on a consolidated basis.

We currently sell our products in three regions:

(i) the Americas (the United States, Canada and Mexico);

(ii) EMEA (Austria, the Czech Republic, Denmark, Estonia, Finland, Germany, the Republic of Ireland, Namibia, the Netherlands, Norway, South Africa, Spain, Sweden and the United Kingdom);

(ii) Europe/the Middle East/Africa (“EMEA”) (Austria, the Czech Republic, Denmark, Estonia, Finland, Germany, the Republic of Ireland, Namibia, the Netherlands, Norway, South Africa, Spain, Sweden and the United Kingdom);

and (iii) Asia/Pacific (Australia, Japan, New Zealand, the Republic of Korea, Singapore, Taiwan, Hong Kong, and China).

We also ship our products to customers in the following countries:

Belgium, France, Greece, Italy, Luxembourg, and Poland.

Consolidated net sales shipped to customers in these regions, along with pack and product information for the years ended December 31, are as follows (in millions, except percentages) :

Product sales from network marketing $ 125.3 $ 130.2

Pack sales 5.6 6.2

Other 1.1 0.8

Total 132.0 137.2

Region 2023 2022

Americas $ 41.6 30.3 % $ 46.8 29.3 %

The Americas $ 42.8 32.4 % $ 41.6 30.3 %

Asia/Pacific 79.4 60.2 % 83.8 61.1 %

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Total $ 132.0 100.0 % $ 137.2 100.0 %

Consolidated product sales $ 130.2 $ 151.0

Consolidated pack sales and associate fees 6.2 8.0

Consolidated other 0.8 0.8

Total $ 137.2 $ 159.8

Long-lived assets by region, which include property and equipment and construction in progress for the Company and its subsidiaries, as of December 31, reside in the following regions, as follows (in millions) :

Region 2023 2022

Americas $ 3.2 $ 3.8

North America $ 3.6 $ 3.2

Asia/Pacific 0.5 0.6

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Region 2023 2022

Americas $ 7.5 $ 5.7

North America $ 8.3 $ 7.5

Asia/Pacific 4.6 5.4

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SUBSEQUENT EVENTS

In February 2023, the Daegu Customs Office began an audit of our Korean subsidiary, Mannatech Korea, reviewing point of origin for compliance with free trade agreement terms.

Several products imported between July 2017 and December 2021 have been identified as subject of this audit.

Depending on the outcome of this audit, duty tariff rates could be modified which could result in additional customs, VAT and penalties.

As it is early in the audit, the Company is not able to estimate the financial impact from this audit on its results of operations, financial condition, or liquidity for fiscal year 2023.

Unsecured Promissory Note

On March 11, 2024, the Company’s Board of Directors authorized the Company to enter into unsecured Loan and Promissory Note agreements (“Prom Notes”) with certain related parties, three of which are members of the Company’s Board of Directors, and all of which are current stockholders of the Company, in an aggregate principal amount of approximately $3.6 million.

The purpose of the borrowing is to provide funds to the Company for general working capital needs, including payment to vendors, expansion of the Company’s non-US operations, technology investment primarily for improving the customer ordering process and software updates to improve visibility of sales associate activity.

Pursuant to the terms of the Prom Notes, the financing includes a 30-month unsecured note, and certain other terms customarily included in similar debt financing arrangements.

The Company has the right to prepay all or a portion of the Prom Notes at any time without premium or penalty.

A third party has been engaged to evaluate and provide a fairness opinion on the transaction and its related terms.

The Company intends to complete the financing immediately following the receipt of such fairness opinion.

CEO Severance Agreement

On March 13, 2024, the Company announced the retirement of Alfredo (Al) Bala as the Company’s Chief Executive Officer effective April 1, 2024 and the engagement of Mr.

Bala as an advisor to the Company effective April 1, 2024.

Per the terms of Mr.

Bala’s employment agreement he is entitled to one year severance of $0.4 million.

List of Subsidiaries

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33.New Economy Marketing Opportunities, LLC

34.Mannatech (Thailand) Co.,Ltd.

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Mannatech, Incorporated

Flower Mound, Texas

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos.

333-72767, 333-77227, 333-94519, 333-47752, 333-113975, 333-153199, 333-182676, 333-197400, 333-220539 and 333-233418) of Mannatech, Incorporated and Subsidiaries of our report dated March 17, 2023, relating to the consolidated financial statements and financial statement schedule, which appear in this Form 10-K.

/s/ BDO USA, LLP

333-72767, 333-77227, 333-94519, 333-47752, 333-113975, 333-153199, 333-182676, 333-197400, 333-220539 and 333-233418) of Mannatech, Incorporated of our report dated March 28, 2024, relating to the consolidated financial statements and financial statement schedule, which appears in this Annual Report on Form 10-K.

/s/ BDO USA, P.C.

Dallas, Texas

March 28, 2024

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SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Johnson, certify that:

I, Landen Fredrick, certify that:

I have reviewed this annual report on Form 10-K of Mannatech, Incorporated;

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March 28, 2024

Chief Financial Officer

/s/ Landen Fredrick

Landen Fredrick

Chief Operating Officer and Interim Chief Financial Officer

(principal financial officer)

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SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Mannatech, Incorporated (the “Company”) on Form 10-K for the period ending December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David A.

Johnson, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C.

In connection with the Annual Report of Mannatech, Incorporated (the “Company”) on Form 10-K for the period ending December 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Landen Fredrick, Chief Operating Officer of the Company, hereby certify, pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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March 28, 2024

Chief Financial Officer

/s/ Landen Fredrick

Landen Fredrick

Chief Operating Officer and Interim Chief Financial Officer

(principal financial officer)

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Deducted from asset accounts:

Allowance for doubtful accounts $ 987 ( 26 ) — 12 $ 973

Allowance for credit losses $ 973 519 — ( 214 ) $ 1,278

Allowance for obsolete inventories $ 417 463 — ( 460 ) $ 420

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures