What changed in this filing

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Item 1. Financial Statements

2024-08-13 compared with 2024-05-14 · 231 added, 161 removed, 442 unchanged (47% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

ASSETS March 31, 2024 (unaudited) December 31, 2023

ASSETS June 30, 2024 (unaudited) December 31, 2023

Cash and cash equivalents $ 9,196 $ 7,731

Restricted cash 938 938

Accounts receivable, net of allowance of $1,200 a nd $1,278

Accounts receivable, net of allowance of $1,364 and $1,278 99 91

Income tax receivable 416 465

4 unchanged sentences

Property and equipment, net 3,303 4,147

Long-term restricted cash 693 718

Operating lease right-of-use assets 2,807 3,315

Other assets 3,511 3,751

Deferred tax assets, net 1,690 1,611

Long-term restricted cash 676 718

Total assets $ 39,915 $ 41,206

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current portion of finance leases $ 265 $ 269

Accounts payable 4,882 4,010

Accrued expenses 5,899 6,779

Commissions and incentives payable $ 8,011 $ 8,175

Accrued expenses 5,965 6,779

Deferred revenue 4,152 4,786

Accounts payable 3,454 4,010

Taxes payable 1,743 1,521

Current notes payable 369 240

Deferred revenue 4,235 4,786

Current portion of finance lease liabilities 267 269

Total current liabilities 23,961 25,780

Finance leases, excluding current portion 888 956

Long-term notes payable 3,600 —

Operating lease liabilities, excluding current portion 1,975 2,582

Other long-term liabilities 1,360 1,404

Finance lease liabilities, excluding current portion 820 956

Total liabilities 31,716 30,722

2 unchanged sentences

Preferred stock, $0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding — —

Common stock, $0.0001 par value, 99,000,000 shares authorized, 2,742,857 shares issu ed and 1,884,814 s hares outstanding as of March 31, 2024 and 2,742,857 shares issued and 1,860,154 shares outstanding as of December 31, 2023

Common stock, $0.0001 par value, 99,000,000 shares authorized, 2,742,857 shares issu ed and 1,884,814 s hares outstanding as of June 30, 2024 and 2,742,857 shares issued and 1,860,154 shares outstanding as of December 31, 2023

Additional paid-in capital 32,982 33,309

1 unchanged sentence

Accumulated other comprehensive loss ( 4,102 ) ( 1,015 )

Treasury stock, at average cost, 858,043 s hares as of March 31, 2024 and 882,703 shares as of December 31, 2023

Treasury stock, at average cost, 858,043 s hares as of June 30, 2024 and 882,703 shares as of December 31, 2023

( 19,936 ) ( 20,509 )

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Net sales $ 27,740 $ 32,594 $ 57,133 $ 66,708

4 unchanged sentences

Selling and administrative expenses 10,860 13,079 21,452 25,510

Depreciation and amortization expense 416 387

Total operating expenses 22,520 26,544 44,797 52,532

Income from operations 820 713

Interest income, net 18 24

Loss from operations ( 1,143 ) ( 954 ) ( 322 ) ( 241 )

Interest (expense) income, net ( 105 ) ( 10 ) ( 87 ) 14

Other income, net 1,120 150 1,990 483

Income before income taxes 1,709 1,070

Income tax provision ( 529 ) ( 466 )

Net income $ 1,180 $ 604

Income per common share:

(Loss) income before income taxes ( 128 ) ( 814 ) 1,581 256

Income tax expense ( 496 ) ( 291 ) ( 1,025 ) ( 757 )

Net (loss) income $ ( 624 ) $ ( 1,105 ) $ 556 $ ( 501 )

(Loss) income per common share:

Basic $ ( 0.33 ) $ ( 0.59 ) $ 0.30 $ ( 0.27 )

7 unchanged sentences

Three Months Ended

Net income $ 1,180 $ 604

June 30, Six Months Ended

2024 2023 2024 2023

Net (loss) income $ ( 624 ) $ ( 1,105 ) $ 556 $ ( 501 )

Foreign currency translations ( 1,656 ) ( 651 ) ( 3,087 ) ( 1,450 )

16 unchanged sentences

Balance at March 31, 2024 1,884,814 $ — $ 32,948 $ ( 121 ) $ ( 2,446 ) $ ( 19,936 ) $ 10,445

Net loss — — — ( 624 ) — — ( 624 )

Charge related to stock-based compensation — — 34 — — — 34

Foreign currency translations — — — — ( 1,656 ) — ( 1,656 )

Balance at June 30, 2024 1,884,814 $ — $ 32,982 $ ( 745 ) $ ( 4,102 ) $ ( 19,936 ) $ 8,199

Common Stock, $0.0001 par value

12 unchanged sentences

Balance at March 31, 2023 1,873,608 $ — $ 33,277 $ 1,915 $ ( 1,007 ) $ ( 20,333 ) $ 13,852

Net loss — — — ( 1,105 ) — — ( 1,105 )

Payment of cash dividends — — — ( 373 ) — — ( 373 )

Charge related to stock-based compensation — — 17 — — — 17

Repurchase of common stock ( 7,396 ) — — — — ( 98 ) ( 98 )

Foreign currency translations — — — — ( 651 ) — ( 651 )

Balance at June 30, 2023 1,866,212 $ — $ 33,294 $ 437 $ ( 1,658 ) $ ( 20,431 ) $ 11,642

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 1,180 $ 604

Adjustments to reconcile net income to net cash provided by operating activities:

Net income (loss) $ 556 $ ( 501 )

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

Depreciation and amortization 803 774

1 unchanged sentence

Provision for inventory losses 370 275

Provision for (reversal of) allowance for credit losses ( 75 ) 112

Provision for allowance for credit losses 106 130

Loss on retirement of fixed assets 126 —

(Gain) on disposal of subsidiary entity ( 226 ) —

Unrealized loss (gain) from foreign exchange ( 1,895 ) —

Charge related to stock-based compensation 246 251

13 unchanged sentences

Deferred revenue ( 592 ) ( 776 )

Net cash provided by operating activities 1,874 1,351

Net cash provided by (used in) operating activities ( 792 ) ( 1,336 )

CASH FLOWS FROM INVESTING ACTIVITIES:

3 unchanged sentences

Proceeds from stock options exercised — 12

Repurchase of common stock — ( 98 )

Payment of cash dividends — ( 748 )

Proceeds from notes payable 3,600 —

Repayment of finance lease obligations and other long-term liabilities ( 491 ) ( 446 )

Net cash used in financing activities ( 250 ) ( 558 )

Net cash provided by (used in) financing activities 3,109 ( 1,280 )

Effect of currency exchange rate changes on cash and cash equivalents ( 751 ) ( 1,455 )

3 unchanged sentences

See accompanying notes to unaudited condensed consolidated financial statements.

Three Months Ended

Six Months Ended

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

9 unchanged sentences

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company develops, markets, and sells high-quality, proprietary nutritional supplements, topical and skin care and anti-aging products, and weight-management products.

Mannatech, Incorporated (together with its subsidiaries, the “Company”), located in Flower Mound, Texas, was incorporated in the state of Texas on November 4, 1993 and is listed on the Nasdaq Global Select Market under the symbol “MTEX.” The Company develops, markets, and sells high-quality, proprietary nutritional supplements, skin care and anti-aging products, and weight-management products.

We currently sell our products into three regions:

1 unchanged sentence

(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);

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

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

During the quarter ended June 30, 2024 the Company liquidated its entity in Sweden, Mannatech Sverige AB.

The Company sells its products principally through network marketing distribution channels via its active associates (“independent associate” or “associates” or “distributors”) and its “preferred customers,” Active business building associates and preferred customers purchase the Company’s products at published wholesale prices.

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Our significant accounting policies are described in the notes to our consolidated financial statements for the year ended December 31, 2023 included in our 2023 Annual Report.

There have been no significant changes in our accounting policies or the application thereof during the first quarter of 2024

There have been no significant changes in our accounting policies or the application thereof during the first or second quarter of 2024.

MANNATECH, INCORPORATED AND SUBSIDIARIES

1 unchanged sentence

Basis of Presentation

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

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

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

1 unchanged sentence

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

Cash and cash equivalents was $ 7.9 million at March 31, 2024 and $ 7.7 million at December 31, 2023.

Cash and cash equivalents was $ 9.2 million at June 30, 2024 and $ 7.7 million at December 31, 2023.

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.

At March 31, 2024 and December 31, 2023, credit card receivables were $ 1.9 million and $ 1.4 million, respectively, and cash and cash equivalents held in bank accounts in foreign countries totaled $ 4.0 million and $ 3.5 million at March 31, 2024 and December 31, 2023, respectively.

At June 30, 2024 and December 31, 2023, credit card receivables were $ 2.2 million and $ 1.4 million, respectively, and cash and cash equivalents held in bank accounts in foreign countries totaled $ 3.9 million and $ 3.5 million at June 30, 2024 and December 31, 2023, respectively.

The Company invests cash in liquid instruments, such as money market funds and interest-bearing deposits.

The Company holds cash in high quality financial institutions and does not believe it has an excessive exposure to credit concentration risk.

A significant portion of our cash and cash equivalent balances were concentrated within the Republic of Korea, with cash and cash equivalents totaling $ 3.5 million and $ 2.3 million at March 31, 2024 and December 31, 2023, respectively.

In addition, for the three months ended March 31, 2024 and 2023, a concentrated portion of our operating cash flows were earned from operations within the Republic of Korea.

A significant portion of our cash and cash equivalent balances were concentrated within the Republic of Korea, with cash and cash equivalents totaling $ 3.2 million and $ 2.3 million at June 30, 2024 and December 31, 2023, respectively.

In addition, for the three and six months ended June 30, 2024 and 2023, a concentrated portion of our operating cash flows were earned from operations within the Republic of Korea.

An adverse change in economic conditions within the Republic of Korea could negatively affect the Company’s results of operations.

4 unchanged sentences

and (iii) the Australia building lease collateral.

At March 31, 2024 and December 31, 2023, our total restricted cash was $ 1.6 million and $ 1.7 million, respectively.

At June 30, 2024 and December 31, 2023, our total restricted cash was $ 1.6 million and $ 1.7 million, respectively.

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

March 31, 2024 December 31, 2023 March 31, 2023 December 31, 2022

June 30, 2024 December 31, 2023 June 30, 2023 December 31, 2022

Cash and cash equivalents $ 9,196 $ 7,731 $ 9,374 $ 13,777

2 unchanged sentences

Cash, cash equivalents, and restricted cash $ 10,810 $ 9,387 $ 10,772 $ 15,197

Accounts Receivable

Accounts Receivable, net

Accounts receivable are carried at their estimated collectible amounts.

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

As of March 31, 2024 and December 31, 2023, receivables consisted primarily of amounts due from preferred customers and associates.

As of June 30, 2024 and December 31, 2023, receivables consisted primarily of amounts due from preferred customers and associates.

The Company's accounts receivable balances, net, are presented below (in thousands) :

March 31, 2024 December 31, 2023 December 31, 2022

Accounts receivable

June 30, 2024 December 31, 2023 December 31, 2022

Accounts receivable, net

$ 99 $ 91 $ 218

6 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At March 31, 2024 and March 31, 2023, the Company held an allowance for credit losses of $ 1.2 million and $ 1.1 million, respectively.

March 31, 2024 March 31, 2023

At June 30, 2024 and June 30, 2023, the Company held an allowance for credit losses of $ 1.4 million and $ 1.1 million, respectively.

June 30, 2024 June 30, 2023

Allowance for credit losses at beginning of period $ 1,278 $ 973

5 unchanged sentences

Other Assets consisted of the following (in thousands):

See Note 8, Leases, for more information on these assets.

March 31, 2024 December 31, 2023

Right of use Assets- Operating leases $ 3,104 $ 3,315

Deposit with Mutual Aid Cooperative & Consumer (Korea) 2,121 2,204

June 30, 2024 December 31, 2023

Investment in Korea Mutual Aid Cooperative & Consumer 2,064 2,204

Deposits for building leases 1,210 1,310

3 unchanged sentences

Accrued expenses consisted of the following (in thousands):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Accrued compensation $ 1,756 $ 1,707

Accrued inventory purchases 112 861

Accrued royalties 39 38

Accrued sales and other taxes 181 201

Other accrued operating expenses 361 506

Operating Lease Liabilities - Current Portion 1,679 1,661

Accrued legal and accounting fees 837 865

Customer deposits and sales returns 474 515

Accrued travel expenses related to corporate events 123 131

Other accrued operating expenses 442 506

Accrued shipping and handling costs 281 291

Accrued sales and other taxes 191 201

Accrued travel expenses related to corporate events 178 131

Accrued inventory purchases 90 861

Accrued royalties 34 38

Accrued rent expense 3 3

Accrued legal and accounting fees 735 865

Right of use Liabilities-Operating leases 1,688 1,661

$ 5,965 $ 6,779

Notes Payable

Notes payable were $ 0.5 million and $ 0.2 million as of March 31, 2024 and December 31, 2023, respectively, as a result of funding from a capital financing agreement related to our computer hardware and software and other financing arrangements.

Payments are made monthly according to the terms of the agreements which have a weighted average effective interest rate o f 10.5 % an d are collateralized by computer hardware and software.

At each of March 31, 2024 and December 31, 2023, there was no long-term portion of the liability.

MANNATECH, INCORPORATED AND SUBSIDIARIES

2 unchanged sentences

Other long-term liabilities consisted of the following (in thousands) .

See Note 8, Leases, for more information.

S ee Note 9, Employee Benefit Plans , of the Company’s 2023 Annual Report for more information.

March 31, 2024 December 31, 2023

Right of use liabilities- Operating leases $ 2,242 $ 2,582

Accrued lease restoration costs 351 369

June 30, 2024 December 31, 2023

Government required severance 846 822

Accrued lease restoration costs 339 369

Defined benefit plan obligation 175 213

6 unchanged sentences

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

At March 31, 2024 and December 31, 2023, remaining performance obligations related to shipments were $ 1.1 million and $ 1.4 million, respectively.

The Company's remaining performance obligations related to associate fees were $ 0.1 million at both March 31, 2024 and December 31, 2023.

At June 30, 2024 and December 31, 2023, remaining performance obligations related to shipments were $ 1.2 million and $ 1.4 million, respectively.

The Company's remaining performance obligations related to associate fees were $ 0.1 million at both June 30, 2024 and December 31, 2023.

These amounts are included in Deferred Revenue on the accompanying Condensed Consolidated Balance Sheets, respectively.

13 unchanged sentences

With regard to both of the aforementioned contracts, the Company determines the standalone selling prices by using observable inputs which includes the Company’s standard published price lists.

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 charged to expense when the related revenue is recognized.

As of each of the periods shown below, our deferred commissions consisted of the following (in thousands) .

March 31, 2024 March 31, 2023

Total deferred commissions at beginning of the year $ 2,130 $ 2,476

Amount recognized as commissions expense ( 1,411 ) ( 1,779 )

New commission deferrals at the end of the quarter 1,117 1,828

Total deferred commissions at end of the quarter $ 1,836 $ 2,525

MANNATECH, INCORPORATED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Deferred Revenue

6 unchanged sentences

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.

As of each of the periods shown below, our deferred revenue consisted of the following (in thousands) .

March 31, 2024 March 31, 2023

Total deferred revenue at beginning of the year $ 4,786 $ 5,106

Amount recognized as revenue during the quarter ( 3,733 ) ( 3,566 )

New deferrals at the end of the quarter 3,182 3,964

Total deferred revenue at end of the quarter $ 4,235 $ 5,504

The table below presents the changes to deferred revenue balances (in thousands) .

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Total deferred revenue at beginning of the period $ 4,235 $ 5,504 $ 4,786 $ 5,106

Amount recognized as revenue during the period $ ( 2,090 ) ( 3,453 ) ( 5,823 ) ( 7,019 )

New deferrals at the end of the period $ 2,007 2,279 5,189 6,243

Total deferred revenue at end of the period $ 4,152 $ 4,330 $ 4,152 $ 4,330

MANNATECH, INCORPORATED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 orders.

1 unchanged sentence

Breakage rates are estimated based on historical data and can be reasonably and objectively determined.

The deferred revenue associated with the loyalty program at each of March 31, 2024 and March 31, 2023 was $ 3.1 million and $ 3.7 million, respectively.

The deferred revenue associated with the loyalty program at each of June 30, 2024 and June 30, 2023 was $ 2.9 million and $ 2.6 million, respectively.

Three Months Ended

June 30, Six Months Ended

Loyalty program (in thousands)

March 31, 2024 March 31, 2023

2024 2023 2024 2023

Loyalty deferred revenue at beginning of the period $ 3,056 $ 3,748 $ 3,242 $ 4,167

4 unchanged sentences

Loyalty deferred revenue at end of period $ 2,861 $ 2,597 $ 2,861 $ 2,597

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 charged to expense when the related revenue is recognized.

The table below illustrates the changes to deferred commission balances (in thousands) .

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Deferred commissions at beginning of the period $ 1,836 $ 2,525 $ 2,130 $ 2,476

Amount recognized as commissions expense ( 883 ) ( 1,464 ) ( 2,294 ) ( 3,243 )

New commission deferrals at the end of the period 957 791 2,074 2,619

Total deferred commissions at end of the period $ 1,910 $ 1,852 $ 1,910 $ 1,852

Sales Refunds and Allowances

5 unchanged sentences

As of each of the periods shown below , our sales return reserve consisted of the following (in thousands) :

March 31, 2024 March 31, 2023

June 30, 2024 June 30, 2023

Sales reserve at beginning of period $ 41 $ 59

26 unchanged sentences

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

The allowance for slow-moving inventory obsolescence was $ 0.4 million at each of March 31, 2024 and December 31, 2023.

Inventories as of March 31, 2024 and December 31, 2023, consisted of the following (in thousands) :

March 31, 2024 December 31, 2023

The allowance for slow-moving inventory obsolescence was $ 0.4 million at each of June 30, 2024 and December 31, 2023.

Inventories as of June 30, 2024 and December 31, 2023, consisted of the following (in thousands) :

June 30, 2024 December 31, 2023

Raw materials $ 5,062 $ 5,104

1 unchanged sentence

Total $ 13,155 $ 14,535

For the three months ended March 31, 2024 and 2023, the Company’s effective tax rate was 36.0 % and 43.6 %, respectively.

For the three months ended March 31, 2024 and 2023, the Company's effective tax rate was determined based on the estimated annual effective income tax rate.

MANNATECH, INCORPORATED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

EARNINGS PER SHARE

The Company calculates basic Earnings per Share ("EPS") by dividing net income by the weighted-average number of common shares outstanding for the period.

Diluted EPS also reflects the potential dilution that could occur if common stock were issued for awards outstanding under the Mannatech, Incorporated 2017 Stock Incentive Plan (described below).

In determining the potential dilutive effect of outstanding stock options for the three months ended March 31, 2024, the Company used the quarterly average common stock close price of $ 8.84 .

For the three months ended March 31, 2024, there were 1.88 million weighted-average common shares outstanding used for the basic EPS calculation.

For the three months ended March 31, 2024, 8,187 shares granted (see Note 5 — Stock Based Compensation, for more information.) were excluded from the calculation of diluted EPS because the related market condition was not achieved.

In addition, 199,824 shares underlying stock options were excluded from the diluted EPS calculation, as their effect would have been antidilutive.

In determining the potential dilutive effect of outstanding stock options for the three months ended March 31, 2023, the Company used the quarterly average common stock close price of $ 17.02 per share.

For the three months ended March 31, 2023, there were 1.87 million weighted-average common shares outstanding used for the basic EPS calculation.

For the three months ended March 31, 2023, 18,221 shares subject to options were included in the calculation resulting in 1.89 million dilutive shares used to calculate diluted EPS.

For the three months ended March 31, 2023, 86,276 shares were excluded from the diluted EPS calculation, as the effect would have been antidilutive.

Calculation of net EPS— basic and diluted ( in thousands, except EPS ):

Three Months Ended

Net earnings attributable to common stockholders $ 1,180 $ 604

Weighted average common shares outstanding (for basic calculation) 1,884 1,872

Dilutive effect of outstanding common stock options and RSU’s — 18

Weighted average common and common equivalent shares outstanding 1,884 1.891

EPS - Basic $ 0.63 $ 0.32

EPS - Diluted $ 0.63 $ 0.32

For the three and six months ended June 30, 2024, the Company’s effective tax rate was ( 277.4 )% and 74.8 %, respectively.

For the three and six months ended June 30, 2023, the Company’s effective tax rate was ( 20.8 )% and ( 228.0 )%, respectively.

For the three and six months ended June 30, 2024 and 2023, the Company's effective tax rate was determined based on the estimated annual effective income tax rate.

MANNATECH, INCORPORATED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES PAYABLE

Notes payable were $ 4.0 million and $ 0.2 million as of June 30, 2024 and December 31, 2023, respectively.

The current portion was $ 0.4 million and $ 0.2 million at June 30, 2024 and December 31, 2023, respectively, as a result of insurance financing arrangements.

The notes are fully amortizing and payments are made monthly, according to the terms of the agreements which have a weighted average effective interest rate of 10.5 %.

The long-term portion of notes payable relates to three unsecured notes, described below.

The long-term portion of notes payable was $ 3.6 million and $ 0.0 million as of June 30, 2024 and December 31, 2023, respectively.

On April 23, 2024, the Company issued an unsecured note payable to Jade Capital in the amount of $ 2.5 million.

The note bears interest at 16% per annum and requires quarterly interest payments beginning June 30, 2024.

The note is due in full on September 30, 2026.

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

Tyler Rameson is an independent member of Mannatech's Board of Directors, and is the managing member of Jade Capital.

As of June 30, 2024, there was no current portion and the long term portion of the balance was $2.5 million.

On April 23, 2024, the Company issued an unsecured note payable to J.

Stanley Fredrick in the amount of $ 1.0 million.

The note bears interest at 16% per annum and requires quarterly interest payments beginning June 30, 2024.

The note is due in full on September 30, 2026.

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

Fredrick is the Chairman of Mannatech's Board of Directors.

As of June 30, 2024, there was no current portion and the long term portion of the balance was $1.0 million.

On April 23, 2024, the Company issued an unsecured note payable to Kevin Robbins in the amount of $ 0.1 million.

The note bears interest at 16% per annum and requires quarterly interest payments beginning June 30, 2024.

The note is due in full on September 30, 2026.

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

Robbins is a member of Mannatech's Board of Directors.

As of June 30, 2024, there was no current portion and the long term portion of the balance was $0.1 million.

As of June 30, 2024, the Company's future principal payments on notes payable were as follows (in thousands):

Principal Payments Remaining 2024 2025 2026 Thereafter Total

Insurance Financing Notes $ 285 $ 84 $ — $ — $ 369

Jade Capital Note — — 2,500 — 2,500

Fredrick Note — — 1,000 — 1,000

Robbins Note — — 100 — 100

Total $ 285 $ 84 $ 3,600 $ — $ 3,969

STOCK-BASED COMPENSATION

2 unchanged sentences

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).

As of March 31, 2024, the Company had a total of 75,621 shares available for grant under the 2017 Plan, which expires on April 16, 2027.

As of June 30, 2024, the Company had a total of 94,621 shares available for grant under the 2017 Plan, which expires on April 16, 2027.

MANNATECH, INCORPORATED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The 2017 Plan provides for grants of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock and performance stock units to our employees, board members, and consultants.

5 unchanged sentences

The Company records stock-based compensation expense related to granting stock options in selling and administrative expenses.

During the three months ended March 31, 2024 and 2023, the Company granted no stock options.

During the three months ended March 31, 2024, the Company issued a grant of 8,187 shares of our common stock to our Chief Executive Officer.

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:

June 2024 Grant

Estimated fair value per share of options granted:

Annualized dividend yield — %

Risk-free rate of return 4.4 %

Common stock price volatility 69.6 %

Expected average life of stock options (in years) 4.5

The computation of the expected volatility assumption used in the Black-Scholes calculations for new grants is based on historical volatility of the Company’s stock.

The expected life assumptions are based on the Company’s historical employee exercise and forfeiture behavior.

During the six months ended June 30, 2024 and 2023, the Company granted 10,000 and 5,000 stock options, respectively.

The fair value of stock options granted during the six months ended June 30, 2024 and 2023 was approximately $ 4.67 and $ 4.32 per share, respectively.

On March 11, 2024, the Company issued a grant of 8,187 restricted stock units of our common stock to our Chief Executive Officer.

Under the terms of the stock grant, the grant is available for 18 months and will not vest until Mannatech's stock price averages $15.00 per share (i.e., the volume weighted price) for 60 consecutive days.

2 unchanged sentences

The Company has determined the fair value of the grant is $ 0.1 million.

Accordingly, the company has recognized compensation expense related to the grant of $3,232 for the three months ended March 31, 2024.

The Company recognized compensation expense as follows for the three months ended March 31 (in thousands) :

Accordingly, the company has recognized compensation expense related to the grant of $10 thousand and $13 thousand for the three and six months ended June 30, 2024, respectively.

The Company recognized compensation expense as follows for the three and six months ended June 30 (in thousands) :

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Total gross compensation expense $ 34 $ 17 $ 46 $ 28

1 unchanged sentence

Total net compensation expense $ 28 $ 13 $ 38 $ 21

As of March 31, 2024, the Company expects to record compensation expense in the future as follows (in thousands) :

As of June 30, 2024, the Company expects to record compensation expense in the future as follows (in thousands) :

MANNATECH, INCORPORATED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2024 Years ending December 31,

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At the discretion of the Board, each director may receive a portion of their fees payable in stock grants in lieu of cash compensation.

At March 31, 2024 and 2023, the Company issued a total of 24,660 and 12,808 treasury stock to the members of the Board as a part of their compensation, respectively.

The stock grants to the Board were vested upon grant and the Company recognized $0.2 million compensation expense at each of March 31, 2024 and 2023.

At June 30, 2024 and 2023, the Company issued a total of 24,660 and 12,808 treasury stock to the members of the Board as a part of their compensation, respectively.

The stock grants to the Board were vested upon grant and the Company recognized $0.2 million compensation expense at each of June 30, 2024 and 2023.

MANNATECH, INCORPORATED AND SUBSIDIARIES

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Treasury Stock

There were no shares repurchased during the three months ended March 31, 2024 and 2023.

As of March 31, 2024 and December 31, 2023 , the Company had 858,043 and 882,703 treasury s hares, respectively.

There were no shares repurchased during the three and six months ended June 30, 2024.

During the three and six months ended June 30, 2023, the Company repurchased 7,396 shares of its outstanding common stock.

As of June 30, 2024 and December 31, 2023 , the Company had 858,043 and 882,703 treasury s hares, respectively.

Accumulated Other Comprehensive Loss

8 unchanged sentences

( 3,087 ) — ( 3,087 )

Balance as of March 31, 2024 $ ( 2,858 ) $ 412 $ ( 2,446 )

Balance as of June 30, 2024 $ ( 4,514 ) $ 412 $ ( 4,102 )

(1) No material amounts were reclassified from accumulated other comprehensive loss.

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 three months ended March 31, 2024, the Company did not pay any dividends.

For the three months ended March 31, 2023, the Company paid dividends of $ 0.20 per share to holders of our Common Stock in the amount of $ 0.4 million.

For the three and six months ended June 30, 2024, the Company did not pay any dividends.

For the three and six months ended June 30, 2023, the Company paid dividends of $ 0.20 per share to holders of our Common Stock in the amount of $ 0.4 million and $ 0.8 million, respectively.

Litigation in General

As of March 31, 2024, the Company had no open or pending litigation and no legal reserve was deemed necessary.

As of June 30, 2024, the Company had no open or pending litigation and no legal reserve was deemed necessary.

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

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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 March 31, 2024 and December 31, 2023, all of the Company’s finance leases pertain to certain equipment used in the business.

As of June 30, 2024 and December 31, 2023, 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.

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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.

For the three months ended March 31, 2024, the Company had earned less than $ 0.1 million income from the sublease.

For the year ended December 31, 2023, the Company earned $ 0.1 million income from the sublease.

As of March 31, 2024, the Company had net operating lease right-of-use assets of $ 3.1 million and net finance lease right-of-use assets of $ 1.2 million.

At March 31, 2024, our operating lease liabilities were $ 3.9 million and our finance lease liabilities were $ 1.2 million.

The weighted-average remaining lease term and discount rate related to the Company’s operating lease liabilities as of March 31, 2024 were 3.16 years and 4.5 %, respectively.

The weighted-average remaining lease term and discount rate related to the Company’s finance lease liabilities as of March 31, 2024 were 3.95 years and 6.4 %, respectively.

For the three and six months ended June 30, 2024, the Company had earned less than $ 0.1 million and $ 0.1 million income from the sublease, respectively.

For the three and six months ended June 30, 2023, the Company had earned less than $ 0.1 million and $ 0.1 million income from the sublease, respectively.

As of June 30, 2024, the Company had net operating lease right-of-use assets of $ 2.8 million and net finance lease right-of-use assets of $ 1.1 million.

At June 30, 2024, our operating lease liabilities were $ 3.7 million and our finance lease liabilities were $ 1.1 million.

The weighted-average remaining lease term and discount rate related to the Company’s operating lease liabilities as of June 30, 2024 were 2.99 years and 5.2 %, respectively.

The weighted-average remaining lease term and discount rate related to the Company’s finance lease liabilities as of June 30, 2024 were 3.79 years and 6.5 %, respectively.

The Company uses the discount rates implicit in each lease, or an estimate of the Company's incremental borrowing rate if the rate implicit in a lease cannot be readily determined.

As of March 31, 2024 and December 31, 2023 our right-of-use assets and lease liabilities consisted of the following (in thousands) :

Leases Classification March 31, 2024 December 31, 2023

As of June 30, 2024 and December 31, 2023 our right-of-use assets and lease liabilities balances, net of accumulated amortization, were as follows (in thousands) :

Leases Classification June 30, 2024 December 31, 2023

Right-of-use assets

Operating leases Other assets $ 3,104 $ 3,315

Operating leases Operating lease right-of-use assets $ 2,807 $ 3,315

Finance leases Property and equipment, net 1,079 1,236

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Long-term portion of lease liabilities

Operating leases Other long-term liabilities 2,242 2,582

Operating leases Operating lease liabilities 1,975 2,582

Finance leases Finance leases, excluding current portion 820 956

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2024, the Company's future sublease income and minimum future lease payments on operating and finance leases were as follows (in thousands) :

March 31, 2024

As of June 30, 2024, the Company's future sublease income and minimum future lease payments on operating and finance leases were as follows (in thousands) :

June 30, 2024

Future Maturities of Leases Operating Leases Finance Leases Sublease Income

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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 Company does not have any material financial liabilities that were required to be measured at fair value on a recurring basis at March 31, 2024.

The tables below present the recorded amount of financial assets measured at fair value (money market fund) (in thousands) on a recurring basis as of March 31, 2024 and December 31, 2023.

The Company does not have any material financial liabilities that were required to be measured at fair value on a recurring basis at June 30, 2024.

The tables below present the recorded amount of financial assets measured at fair value (money market fund) (in thousands) on a recurring basis as of June 30, 2024 and 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 March 31, 2024 and December 31, 2023.

The Company did not have any material financial liabilities that were required to be measured at fair value on a recurring basis at March 31, 2024 and December 31, 2023.

March 31, 2024

The Company did not have any financial assets measured at fair value on a recurring basis at June 30, 2024 and December 31, 2023.

The Company did not have any material financial liabilities that were required to be measured at fair value on a recurring basis at June 30, 2024 and December 31, 2023.

June 30, 2024

Level 1 Level 2 Level 3 Total

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

Consolidated net sales shipped to customers in these regions, along with pack or associate fee and product information for the three months ended March 31, were as follows (in millions, except percentages) :

Consolidated net sales shipped to customers in these regions, along with pack or associate fee and product information for the three and six months ended June 30, were as follows (in millions, except percentages) :

Three Months Ended

June 30, Six Months Ended

Region 2024 2023 2024 2023

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Product sales $ 26.3 $ 31.0 $ 54.2 $ 62.9

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Total sales $ 27.7 $ 32.6 $ 57.1 $ 66.7

Long-lived assets, which include property and equipment and construction in process for the Company and its subsidiaries, as of March 31, 2024 and December 31, 2023, reside in the following regions, as follows (in millions) :

Region March 31, 2024 December 31, 2023

Long-lived assets, which include property and equipment and construction in process for the Company and its subsidiaries, as of June 30, 2024 and December 31, 2023, reside in the following regions, as follows (in millions) :

Region June 30, 2024 December 31, 2023

Americas $ 2.9 $ 3.6

2 unchanged sentences

Inventory balances, which consist of raw materials, finished goods, and promotional materials, as offset by the allowance for slow moving or obsolete inventories, reside in the following regions (in millions) :

Region March 31, 2024 December 31, 2023

Region June 30, 2024 December 31, 2023

Americas $ 7.6 $ 8.3

3 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

EARNINGS PER SHARE

The Company calculates basic Earnings per Share ("EPS") by dividing net income by the weighted-average number of common shares outstanding for the period.

Diluted EPS also reflects the potential dilution that could occur if common stock were issued for awards outstanding under the Mannatech, Incorporated 2017 Stock Incentive Plan (described above).

In determining the potential dilutive effect of outstanding stock options for the three and six months ended June 30, 2024, the Company used the quarterly and six-month average common stock close price of $ 7.92 and $ 8.37 per share, respectively.

For three months ended June 30, 2024, the Company's common stock subject to options were excluded from the diluted EPS calculation as their effect would have been antidilutive.

The company reported a net loss for the three months ended June 30, 2024.

For the six months ended June 30, 2024, there were 1.89 million weighted-average common shares outstanding used for the basic EPS calculation.

For the six months ended June 30, 2024, 8,187 shares granted (see Note 5 — Stock Based Compensation, for more information).

These shares were excluded from the calculation of diluted EPS because the related market condition was not achieved.

In addition, 375,824 shares underlying stock options were excluded from the diluted EPS calculation, as their effect would have been antidilutive.

For the three and six months ended June 30, 2023, the Company's common stock subject to options were excluded from the diluted EPS calculation as their effect would have been antidilutive.

The company reported a net loss for the three and six months ended June 30, 2023.

Calculation of net EPS— basic and diluted ( in thousands, except EPS ):

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Net earnings attributable to common stockholders $ ( 624 ) $ ( 1,105 ) $ 556 $ ( 501 )

Weighted average common shares outstanding (for basic calculation) 1,885 1,870 1,885 1,871

Dilutive effect of outstanding common stock options and RSU’s — — — —

Weighted average common and common equivalent shares outstanding 1,885 1,870 1,885 1,871

EPS - Basic $ ( 0.33 ) $ ( 0.59 ) $ 0.30 $ ( 0.27 )

EPS - Diluted $ ( 0.33 ) $ ( 0.59 ) $ 0.30 $ ( 0.27 )

SUBSEQUENT EVENTS

Unsecured Promissory Note

On April 23, 2024 Mannatech Incorporated (the “Company”) entered into three separate unsecured Loan Agreement and Promissory Notes (“Promissory Notes”) with three related parties, who are all current members of the Company’s Board of Directors and stockholders of the Company, in an aggregate principal amount of $3.6 million.

The lenders are J.

Stanley Fredrick, Chairman of the Board and our largest shareholder, Tyler Rameson, our second largest shareholder, and Kevin Robbins.

Tyler Rameson is lending money through his firm, Jade Capital, LLC, where he is the managing member.

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 Promissory Notes, each note is due in full on September 30, 2026, requires quarterly interest payments beginning June 30, 2024, has an annual interest rate of 16%, and certain other terms customarily included in similar debt financing arrangements.

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

The Company signed the three Promissory Notes on April 23, 2024, in the respective amounts of $1,000,000;

and $100,000.

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 agreement he is entitled to severance of $0.5 million, payable over two years.

CFO Executive Employment Agreement

On July 1, 2024, the Board of Directors appointed James Clavijo as Chief Financial Officer ("CFO"), principal financial officer and principal accounting officer of the Company.

Per the terms of the Employment Agreement with Mr.

Clavijo, he is entitled to an annual base salary of $275,000 and is eligible to participate in the Company's annual executive bonus program established by the Board of Directors' Compensation Committee.

The Company granted an option to Mr.

Clavijo to purchase 4,500 shares of the Company's common stock, pursuant to the Company's 2017 Plan.

The Company extended a one-time $15,000 relocation allowance to Mr.

Clavijo and he will be eligible to participate in the Company's employee benefits, including its 401k, health insurance, and paid time off benefits.

Under the terms of the Employment Agreement, Mr.

Clavijo is entitled to severance if the Company either exercises its right to early termination or provides notice of its intent to not renew the agreement.

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-Q

Item 1. Financial Statements