MANNATECH INC 10-Q

Item 1. Financial Statements MANNATECH, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS – (UNAUDITED) (in thousands, except share and per share amounts) ASSETS September 30, 2024 (unaudited) December 31, 2023 Cash and cash equivalents $ 12,150 $ 7,731 Restricted cash 939 938 Accounts receivable, net of allowance of $932 and $1,278 22 91 Income tax receivable 414 465 Inventories, net 11,660 14,535 Prepaid expenses and other current assets 2,291 1,774 Deferred commissions 1,224 2,130 Total current assets 28,700 27,664 Property and equipment, net 3,118 4,147 Operating lease right-of-use assets 2,532 3,315 Other assets 3,674 3,751 Deferred tax assets, net 1,913 1,611 Long-term restricted cash 635 718 Total assets $ 40,572 $ 41,206 LIABILITIES AND SHAREHOLDERS’ EQUITY Commissions and incentives payable $ 8,203 $ 8,175 Accrued expenses 4,803 5,118 Deferred revenue 3,018 4,786 Accounts payable 3,580 4,010 Current portion of operating lease liabilities 1,508 1,661 Taxes payable 1,361 1,521 Current notes payable 208 240 Current portion of finance lease liabilities 271 269 Total current liabilities 22,952 25,780 Long-term notes payable 3,600 — Operating lease liabilities, excluding current portion 1,787 2,582 Other long-term liabilities 1,483 1,404 Finance lease liabilities, excluding current portion 751 956 Total liabilities 30,573 30,722 Commitments and contingencies Shareholders’ equity: 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 September 30, 2024 and 2,742,857 shares issued and 1,860,154 shares outstanding as of December 31, 2023 — — Additional paid-in capital 33,005 33,309 Accumulated deficit ( 1,073 ) ( 1,301 ) Accumulated other comprehensive loss ( 1,997 ) ( 1,015 ) Treasury stock, at average cost, 858,043 s hares as of September 30, 2024 and 882,703 shares as of December 31, 2023 ( 19,936 ) ( 20,509 ) Total shareholders’ equity 9,999 10,484 Total liabilities and shareholders’ equity $ 40,572 $ 41,206 2 MANNATECH, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – (UNAUDITED) (in thousands, except per share information) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net sales $ 31,725 $ 32,553 $ 88,858 $ 99,261 Cost of sales 8,105 6,625 20,763 21,042 Gross profit 23,620 25,928 68,095 78,219 Operating expenses: Commissions and incentives 12,893 13,178 36,237 40,200 Selling and administrative expenses 9,840 12,578 31,293 38,088 Total operating expenses 22,733 25,756 67,530 78,288 Income (loss) from operations 887 172 565 ( 69 ) Interest expense, net ( 109 ) ( 17 ) ( 196 ) ( 3 ) Other (expense) income, net ( 1,495 ) 320 495 803 (Loss) income before income taxes ( 717 ) 475 864 731 Income tax benefit (expense) 389 ( 457 ) ( 636 ) ( 1,214 ) Net (loss) income $ ( 328 ) $ 18 $ 228 $ ( 483 ) (Loss) income per common share: Basic $ ( 0.17 ) $ 0.01 $ 0.12 $ ( 0.26 ) Diluted $ ( 0.17 ) $ 0.01 $ 0.12 $ ( 0.26 ) Weighted-average common shares outstanding: Basic 1,885 1,863 1,885 1,868 Diluted 1,885 1,863 1,885 1,868 MANNATECH, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS – (UNAUDITED) (in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net (loss) income $ ( 328 ) $ 18 $ 228 $ ( 483 ) Foreign currency translations 2,105 ( 889 ) ( 982 ) ( 2,339 ) Comprehensive income (loss) $ 1,777 $ ( 871 ) $ ( 754 ) $ ( 2,822 ) See accompanying notes to unaudited condensed consolidated financial statements. 3 MANNATECH, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY – (UNAUDITED) (amounts in thousands, except share data) Common Stock, $0.0001 par value Number of Shares Amount Additional paid-in capital Accumulated deficit Accumulated other comprehensive loss Treasury stock Total shareholders’ equity Balance at January 1, 2024 1,860,154 $ — $ 33,309 $ ( 1,301 ) $ ( 1,015 ) $ ( 20,509 ) $ 10,484 Net income — — — 1,180 — — 1,180 Charge related to stock-based compensation — — 12 — — — 12 Issuance of unrestricted shares 24,660 — ( 373 ) — — 573 200 Foreign currency translations — — — — ( 1,431 ) — ( 1,431 ) 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 Net loss — — — ( 328 ) — — ( 328 ) Charge related to stock-based compensation — — 23 — — — 23 Foreign currency translations — — — — 2,105 — 2,105 Balance at September 30, 2024 1,884,814 $ — $ 33,005 $ ( 1,073 ) $ ( 1,997 ) $ ( 19,936 ) $ 9,999 4 Common Stock, $0.0001 par value Number of Shares Amount Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock Total shareholders’ equity Balance at January 1, 2023 1,858,800 $ — $ 33,377 $ 1,686 $ ( 208 ) $ ( 20,679 ) $ 14,176 Net income — — — 604 — — 604 Payment of cash dividends — — — ( 375 ) — — ( 375 ) Charge related to stock-based compensation — — 11 — — — 11 Issuance of unrestricted shares 12,808 — ( 76 ) — — 299 223 Stock option exercises 2,000 — ( 35 ) — — 47 12 Foreign currency translations — — — — ( 799 ) — ( 799 ) 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 Net income — — — 18 — — 18 Charge related to stock-based compensation — — 7 — — — 7 Repurchase of common stock ( 6,058 ) — — — — ( 78 ) ( 78 ) Foreign currency translations — — — — ( 889 ) — ( 889 ) Balance at September 30, 2023 1,860,154 $ — $ 33,301 $ 455 $ ( 2,547 ) $ ( 20,509 ) $ 10,700 See accompanying notes to unaudited condensed consolidated financial statements. 5 MANNATECH, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – (UNAUDITED) (in thousands) Nine Months Ended September 30, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 228 $ ( 483 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 1,174 1,224 Non-cash operating lease expense 1,228 1,232 Provision for inventory losses 661 279 Provision for (reversal of) allowance for credit losses ( 319 ) 345 Loss on retirement of property and equipment 253 7 Gain on disposal of subsidiary entity ( 226 ) — Unrealized gain from foreign exchange ( 146 ) — Charge related to stock-based compensation 269 259 Deferred income taxes ( 302 ) 303 Changes in operating assets and liabilities: Accounts receivable 388 ( 276 ) Income tax receivable 51 5 Inventories 2,214 ( 885 ) Prepaid expenses and other current assets 1,769 946 Deferred commissions 906 697 Other assets ( 9 ) 213 Accounts payable ( 430 ) ( 482 ) Accrued expenses ( 827 ) ( 247 ) Other long-term liabilities ( 2,503 ) ( 854 ) Taxes payable ( 159 ) ( 1,970 ) Commissions and incentives payable 28 ( 205 ) Deferred revenue ( 1,768 ) ( 1,157 ) Net cash provided by (used in) operating activities 2,480 ( 1,049 ) CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment ( 403 ) ( 540 ) Cash used in investing activities ( 403 ) ( 539 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from stock options exercised — 12 Repurchase of common stock — ( 176 ) Payment of cash dividends — ( 748 ) Proceeds from notes payable 3,600 — Repayment of finance lease obligations and other long-term liabilities ( 734 ) ( 717 ) Net cash provided by (used in) financing activities 2,866 ( 1,629 ) Effect of currency exchange rate changes on cash and cash equivalents ( 606 ) ( 2,293 ) Net increase (decrease) in cash, cash equivalents, and restricted cash 4,337 ( 5,510 ) Cash, cash equivalents, and restricted cash at the beginning of the period 9,387 15,197 Cash, cash equivalents, and restricted cash at the end of the period $ 13,724 $ 9,687 See accompanying notes to unaudited condensed consolidated financial statements. 6 Nine Months Ended September 30, 2024 2023 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Income taxes paid $ 812 $ 2,511 Interest paid on finance leases and other financing arrangements $ 323 $ 72 NON-CASH INVESTING AND FINANCING ACTIVITIES Assets acquired through other financing arrangements $ 446 $ 597 Operating lease right-of-use assets acquired in exchange for new operating lease liabilities $ 359 $ 284 Finance lease right-of-use assets acquired in exchange for new finance lease liabilities $ — $ 1,305 See accompanying notes to unaudited condensed consolidated financial statements. 7 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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: (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); and (iii) Asia/Pacific (Australia, Japan, New Zealand, the Republic of Korea, Singapore, Thailand, Hong Kong, Taiwan and China). During the second quarter of 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. The Company cannot distinguish products sold for personal use from other sales, when sold to associates, because it is not involved with the products after delivery, other than usual and customary product warranties and returns. Only associates are eligible to earn commissions and incentives. We also ship our products to customers in the following countries: Belgium, France, Greece, Italy, Luxembourg, and Poland. The Company operates a non-direct selling business in mainland China. Our subsidiary in China, Meitai Daily Necessity & Health Products Co., Ltd. (“Meitai”), is operating as a traditional retailer under a cross-border e-commerce model in China. Meitai cannot legally conduct a direct selling business in China unless it acquires a direct selling license in China. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with instructions for Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, the Company’s condensed consolidated financial statements and footnotes contained herein do not include all of the information and footnotes required by GAAP to be considered “complete financial statements”. However, in the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements and footnotes contain all adjustments, including normal recurring adjustments, considered necessary for a fair presentation of the Company’s consolidated financial information as of, and for, the periods presented. The Company cautions that its consolidated results of operations for an interim period are not necessarily indicative of its consolidated results of operations to be expected for its fiscal year. The December 31, 2023 consolidated balance sheet was included in the audited consolidated financial statements in the Company’s annual report on Form 10-K for the year ended December 31, 2023 and filed with the United States Securities and Exchange Commission (the “SEC”) on March 28, 2024 (the “2023 Annual Report”), which includes all disclosures required by GAAP. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company included in the 2023 Annual Report. Principles of Consolidation The condensed consolidated financial statements and footnotes include the accounts of Mannatech and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of the Company’s condensed consolidated financial statements in accordance with GAAP requires the use of estimates that affect the reported value of assets, liabilities, revenues and expenses. These estimates are based on historical experience and various other factors. The Company continually evaluates the information used to make these estimates as the business and economic environment changes. Historically, actual results have not varied materially from the Company’s estimates and the Company does not currently anticipate a significant change in its assumptions related to these estimates. However, actual results may differ from these estimates under different assumptions or conditions. The use of estimates is pervasive throughout the condensed consolidated financial statements, but the accounting policies and estimates considered the most significant are described in this note to the condensed consolidated financial statements, Organization and Summary of Significant Accounting Policies . Significant Accounting Policies 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, second and third quarter of 2024. 8 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Basis of 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. 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 $ 12.2 million at September 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 September 30, 2024 and December 31, 2023, credit card receivables were $ 2.0 million and $ 1.4 million, respectively, and cash and cash equivalents held in bank accounts in foreign countries totaled $ 4.8 million and $ 3.5 million at September 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 $ 3.3 million and $ 2.3 million at September 30, 2024 and December 31, 2023, respectively. In addition, for the three and nine months ended September 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. Restricted Cash The Company is required to restrict cash for: (i) direct selling insurance premiums and credit card sales in the Republic of Korea; (ii) reserves related to credit card sales in the United States and Canada; and (iii) the Australia building lease collateral. At September 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) : September 30, 2024 December 31, 2023 September 30, 2023 December 31, 2022 Cash and cash equivalents $ 12,150 $ 7,731 $ 7,928 $ 13,777 Current restricted cash 939 938 938 944 Long-term restricted cash 635 718 821 476 Cash, cash equivalents, and restricted cash $ 13,724 $ 9,387 $ 9,687 $ 15,197 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 September 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) : September 30, 2024 December 31, 2023 December 31, 2022 Accounts receivable, net $ 22 $ 91 $ 218 In accordance with 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. 9 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS At September 30, 2024 and September 30, 2023, the Company held an allowance for credit losses of $ 0.9 million and $ 1.3 million, respectively. September 30, 2024 September 30, 2023 Allowance for credit losses at beginning of period $ 1,278 $ 973 Provision in current period ( 319 ) 344 Accounts charged off against the allowance ( 27 ) ( 2 ) Allowance for credit losses at end of period $ 932 $ 1,315 Inventories 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. The Company periodically reviews inventories for obsolescence and any inventories identified as obsolete are reserved or written off. Other Assets Other Assets consisted of the following (in thousands): September 30, 2024 December 31, 2023 Investment in Korea Mutual Aid Cooperative & Consumer $ 2,177 $ 2,204 Deposits for building leases 1,260 1,310 Manapol Trademark 237 237 $ 3,674 $ 3,751 The Company accounts for its investment in Korea Mutual Aid Cooperative & Consumer at its initial investment amount, in accordance with ASC 321, Investments - Equity Securities (“ASC 321”). This guidance offers an alternative to the requirement of carrying equity interests at fair value as per ASC 820, Fair Value Measurement. The measurement alternative is applicable to certain equity interests without readily determinable fair values that fall within the scope of ASC 321 and are otherwise required to be measured at fair value. The application of this measurement alternative is optional and is applied upon the acquisition of an equity interest. See Note 9, Fair Value , for more information. Accrued Expenses Accrued expenses consisted of the following (in thousands): September 30, 2024 December 31, 2023 Accrued compensation $ 2,100 $ 1,707 Accrued legal and accounting fees 931 865 Customer deposits and sales returns 410 515 Other accrued operating expenses 460 506 Accrued shipping and handling costs 346 291 Accrued sales and other taxes 188 201 Accrued travel expenses related to corporate events 197 131 Accrued inventory purchases 136 861 Accrued royalties 35 38 Accrued rent expense — 3 $ 4,803 $ 5,118 10 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Other Long-Term Liabilities Other long-term liabilities consisted of the following (in thousands) . S ee Note 9, Employee Benefit Plans , of the Company’s 2023 Annual Report for more information. September 30, 2024 December 31, 2023 Government required severance $ 926 $ 822 Accrued lease restoration costs 365 369 Defined benefit plan obligation 192 213 $ 1,483 $ 1,404 Revenue Recognition The Company’s revenue is derived from sales of individual products and associate fees or, in certain geographic markets, starter packs. Substantially all of the Company’s product sales are made at published wholesale prices to associates and preferred customers. The Company records revenue net of any sales taxes and records a reserve for expected sales returns based on its historical experience. During the quarter ended September 30, 2024 the Company changed its shipping terms with customers such that ownership transfers upon delivery to the freight carrier, satisfying the Company's performance obligation. Previously, the Company's shipping terms were FOB destination, so the Company recognized revenue upon delivery of the product to the customer. As a result of the change in shipping terms, no revenue was required to be deferred for product sales that were in transit at September 30, 2024. The Company's deferred revenue balances related to product orders in transit were $0 at September 30, 2024 and $ 1.4 million at December 31, 2023, respectively. The Company's remaining performance obligations related to associate fees were $ 0.1 million at both September 30, 2024 and December 31, 2023. These amounts are included in Deferred revenue on the accompanying Condensed Consolidated Balance Sheets, respectively. Orders placed by associates or preferred customers constitute our contracts with customers. Product sales placed in the form of an automatic order contain two performance obligations: (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. The transaction price is allocated between the product sale and the loyalty program on a relative standalone selling price basis. Sales placed through a one-time order contain only the first performance obligation noted above — the delivery of the product. Payments are made immediately through credit card upon purchase of the products. The Company provides associates with access to a complimentary three-month package for the Success Tracker™ and Mannatech+ online business tools with the first payment of an associate fee. The first payment of an associate fee contains three performance obligations: (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 and revenue is recognized over the period that access to the tools is active. Associates do not have complimentary access to online business tools after the first contractual period. 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 Revenue The Company defers certain components of its revenue. Deferred revenue consisted of: (i) sales of products shipped but not received by customers by the end of the respective period (up to the change in shipping terms with customers); (ii) revenue from the loyalty program; (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. The table below presents the changes to deferred revenue balances (in thousands) . Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Total deferred revenue at beginning of the period $ 4,152 $ 4,330 $ 4,786 $ 5,106 Amount recognized as revenue during the period $ ( 1,836 ) ( 1,338 ) ( 4,747 ) ( 5,055 ) New deferrals at the end of the period $ 702 957 2,979 3,898 Total deferred revenue at end of the period $ 3,018 $ 3,949 $ 3,018 $ 3,949 11 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. 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. 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 September 30, 2024 and September 30, 2023 was $ 2.9 million. Three Months Ended September 30, Nine Months Ended September 30, Loyalty program (in thousands) 2024 2023 2024 2023 Loyalty deferred revenue at beginning of the period $ 2,861 $ 2,597 $ 3,242 $ 4,167 Loyalty points forfeited or expired ( 757 ) ( 440 ) ( 2,167 ) ( 3,176 ) Loyalty points used ( 2,227 ) ( 2,174 ) ( 6,745 ) ( 6,846 ) Loyalty points vested 1,624 2,042 7,171 7,880 Loyalty points unvested 1,399 867 1,399 867 Loyalty deferred revenue at end of period $ 2,900 $ 2,892 $ 2,900 $ 2,892 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 (up to the change in shipping terms with the customers) 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 September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Deferred commissions at beginning of the period $ 1,910 $ 1,852 $ 2,130 $ 2,476 Amount recognized as commissions expense ( 734 ) ( 535 ) ( 1,899 ) ( 2,022 ) New commission deferrals at the end of the period 48 462 993 1,325 Total deferred commissions at end of the period $ 1,224 $ 1,779 $ 1,224 $ 1,779 Sales Refunds and Allowances The Company utilizes the expected value method, as set forth by Accounting Standard Codification ("ASC") Topic 606 Revenue from Contracts with Customers ("ASC 606"), to estimate the sales returns and allowance liability by taking the weighted average of the sales return rates over a rolling six-month period. The Company allocates the total amount recorded within the sales return and allowance liability as a reduction of the overall transaction price for the Company’s product sales. The Company deems the sales refund and allowance liability to be a variable consideration. Historically, sales returns have not materially changed through the years, as the majority of our customers who return their merchandise do so within the first 90 days after the original sale. Sales returns have historically averaged 0.5% or less of our gross sales. As of each of the periods shown below , our sales return reserve consisted of the following (in thousands) : September 30, 2024 September 30, 2023 Sales reserve at beginning of period $ 41 $ 59 Provision in current period 627 620 Returns charged off against the reserve ( 606 ) ( 630 ) Sales reserve at end of period $ 62 $ 49 12 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Shipping and Handling Costs The Company records inbound freight as a component of inventory and cost of sales. The Company records freight and shipping fees collected from its customers as fulfillment costs. Freight and shipping fees are accounted for as activities to fulfill the promise to transfer the products to the customer, not as a separate performance obligation. Commissions and Incentives Associates earn commissions and incentives based on their direct and indirect commissionable net sales over each month of the fiscal year. The Company accrues commissions and incentives when earned by associates and pays commissions on product and pack sales on a monthly basis. Comprehensive Income (Loss) and Accumulated Other Comprehensive Income Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources and includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. The Company’s comprehensive income (loss) consists of the Company’s net income (loss), foreign currency translation adjustments from its Japan, Republic of Korea, Denmark, Norway, Sweden, Mexico, Taiwan and China operations, remeasurement of intercompany balances of a long-term-investment nature from its Mexico, Taiwan, and Cyprus operations, and changes in the pension obligation for its Japanese employees. Accounting Pronouncements Issued but Not Yet Effective In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for annual reporting periods beginning after December 15, 2023 and interim reporting periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of implementing this guidance but does not expect adoption to have a material impact on its consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. 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. NOTE 2: INVENTORIES Inventories consist of raw materials, finished goods, and promotional materials. The Company provides an allowance for any slow-moving or obsolete inventories. The allowance for slow-moving inventory obsolescence was $ 0.6 million at each of September 30, 2024 and December 31, 2023. Inventories as of September 30, 2024 and December 31, 2023, consisted of the following (in thousands) : September 30, 2024 December 31, 2023 Raw materials $ 5,110 $ 5,104 Finished goods 6,550 9,431 Total $ 11,660 $ 14,535 NOTE 3: INCOME TAXES For the three and nine months ended September 30, 2024, the Company’s effective tax rate was 83.9 % and 71.1 %, respectively. For the three and nine months ended September 30, 2023, the Company’s effective tax rate was 43.0 % and 166.1 %, respectively. For the three and nine months ended September 30, 2024 and 2023, the Company's effective tax rate was determined based on the estimated annual effective income tax rate. The effective tax rate for the three and nine months ended September 30, 2024 and September 30, 2023, was different from the federal statutory rate due to the mix of earnings across jurisdictions and the associated valuation allowances recorded on losses in certain jurisdictions. 13 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 4: NOTES PAYABLE Notes payable were $ 3.8 million and $ 0.2 million as of September 30, 2024 and December 31, 2023, respectively. The current portion was $ 0.2 million at each of September 30, 2024 and December 31, 2023, 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 as of September 30, 2024. There were no unsecured notes at December 31, 2023. 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 September 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. Mr. Fredrick is the Chairman of Mannatech's Board of Directors. As of September 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. Mr. Robbins is a member of Mannatech's Board of Directors. As of September 30, 2024, there was no current portion and the long-term portion of the balance was $0.1 million. As of September 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 $ 124 $ 84 $ — $ — $ 208 Jade Capital Note — — 2,500 — 2,500 J.S. Fredrick Note — — 1,000 — 1,000 K. Robbins Note — — 100 — 100 Total $ 124 $ 84 $ 3,600 $ — $ 3,808 NOTE 5: STOCK-BASED COMPENSATION Stock Option Plan 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, and subsequently amended by the Board in February 2019, which amendment was approved by the Company's shareholders on June 11, 2019 (as amended, the "2017 Plan"). 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 September 30, 2024, the Company had a total of 121,971 shares available for grant under the 2017 Plan, which expires on April 16, 2027. 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. However, only employees of the Company and its corporate subsidiaries are eligible to receive incentive stock options. The exercise price per share for all stock options will be no less than the market value of a share of common stock on the date of grant. Any incentive stock option granted to an employee owning more than 10 % of our common stock will have an exercise price of no less than 110 % of our common stock’s market value on the grant date. The majority of stock options vest over two or three years, and generally are granted with a term of ten years, or five years in the case of an incentive option granted to an employee who owns more than 10 % of our common stock. The Company is required to measure and recognize compensation expense related to any outstanding and unvested stock options in its consolidated financial statements using a fair-value based option-pricing model. The Company records stock-based compensation expense related to granting stock options in selling and administrative expenses. The fair value of the stock option award is calculated using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model 14 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS requires us to apply judgment and use subjective assumptions about expected dividend yields, risk-free interest rates, price volatility related to the underlying shares, and the expected stock option life, including forfeitures. The following assumptions were used to calculate the fair value of stock options granted: June 2024 Grant July 2024 Grant Estimated fair value per share of options granted: $ 4.67 $ 4.00 Assumptions: Annualized dividend yield — % — % Risk-free rate of return 4.4 % 4.5 % Common stock price volatility 69.6 % 70.2 % Expected average life of stock options (in years) 4.5 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 nine months ended September 30, 2024 and 2023, the Company granted 14,500 and 5,000 stock options, respectively. The weighted average fair value of stock options granted during the nine months ended September 30, 2024 and 2023 was approximately $ 4.47 and $ 4.32 per share, respectively. Stock Grants 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. If the contingency is not met within the 18-month period, the grant will lapse and will not be awarded. The Company is required to measure and recognize compensation expense related to the grant in its consolidated financial statements using a fair-value based model. 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 $10 thousand and $23 thousand for the three and nine months ended September 30, 2024, respectively. The Company recognized compensation expense as follows for the three and nine months ended September 30 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Total gross compensation expense $ 23 $ 8 $ 69 $ 36 Total tax benefit associated with compensation expense 3 2 11 8 Total net compensation expense $ 20 $ 6 $ 58 $ 28 As of September 30, 2024, the Company expects to record compensation expense in the future as follows (in thousands) : Three months ending December 31, 2024 Years ending December 31, 2025 2026 Total gross unrecognized compensation expense $ 17 $ 51 $ — Equity-Based Compensation to Directors At the discretion of the Board, each director may receive a portion of their fees payable in stock grants in lieu of cash compensation. For the nine months ending September 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 for each of the nine months ending September 30, 2024 and 2023. 15 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 6: SHAREHOLDERS’ EQUITY Treasury Stock There were no shares repurchased during the three and nine months ended September 30, 2024. During the three and nine months ended September 30, 2023, the Company repurchased 6,058 and 13,454 shares of its outstanding common stock, respectively. As of September 30, 2024 and December 31, 2023 , the Company had 858,043 and 882,703 treasury s hares, respectively. Accumulated Other Comprehensive Loss Accumulated other comprehensive loss displayed in the Condensed Consolidated Statement of Shareholders’ Equity represents the results of certain shareholders’ equity changes not reflected in the Condensed Consolidated Statements of Operations, such as foreign currency translation and certain pension and post-retirement benefit obligations. The after-tax components of accumulated other comprehensive loss are as follows (in thousands) : Foreign Currency Translation Pension Postretirement Benefit Obligation Accumulated Other Comprehensive Loss, Net Balance as of December 31, 2023 $ ( 1,427 ) $ 412 $ ( 1,015 ) Current-period change (1) ( 982 ) — ( 982 ) Balance as of September 30, 2024 $ ( 2,409 ) $ 412 $ ( 1,997 ) (1) No material amounts were reclassified from accumulated other comprehensive loss. Dividends 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 and nine months ended September 30, 2024, the Company did not pay any dividends. During the nine months ended September 30, 2023, the Company paid dividends of $ 0.20 per share to holders of our Common Stock in the amount of $ 0.7 million. NOTE 7: LITIGATION Litigation in General As of September 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. The Company believes such claims can be resolved without any material adverse effect on its consolidated financial position, results of operations, or cash flows. The Company maintains certain liability insurance; however, certain costs of defending lawsuits are not covered by or only partially covered by its insurance policies, including claims that are below insurance deductibles. Additionally, insurance carriers could refuse to cover certain claims, in whole or in part. The Company accrues costs to defend itself from litigation as they are incurred. 16 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 8: LEASES The Company has entered into contractual lease arrangements to rent office space and equipment from third-party lessors and accounts for leases in accordance with ASC Topic 842. See Note 5 to the consolidated financial statements in our 2023 Annual Report. Right of use assets represent the Company’s right to use an underlying asset over the lease term and lease liabilities represent the Company’s obligation to make future lease payments arising from the lease. 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 September 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. 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. Sublease income is presented as a component of net sales on the Company's Condensed 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. For the three and nine months ended September 30, 2024, the Company had earned less than $ 0.1 million and $ 0.1 million income from the sublease, respectively. For the three and nine months ended September 30, 2023, the Company had earned less than $ 0.1 million and $ 0.1 million income from the sublease, respectively. As of September 30, 2024, the Company had net operating lease right-of-use assets of $ 2.5 million and net finance lease right-of-use assets of $ 1.0 million. At September 30, 2024, our operating lease liabilities were $ 3.3 million and our finance lease liabilities were $ 1.0 million. The weighted-average remaining lease term and discount rate related to the Company’s operating lease liabilities as of September 30, 2024 were 2.82 years and 5.3 %, respectively. The weighted-average remaining lease term and discount rate related to the Company’s finance lease liabilities as of September 30, 2024 were 3.54 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 September 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 September 30, 2024 December 31, 2023 Right-of-use assets Operating leases Operating lease right-of-use assets $ 2,532 $ 3,315 Finance leases Property and equipment, net 1,016 1,236 Total right-of-use assets $ 3,548 $ 4,551 Current portion of lease liabilities Operating leases Current portion of operating leases $ 1,508 $ 1,661 Finance leases Current portion of finance leases 271 269 Long-term portion of lease liabilities Operating leases Operating lease liabilities 1,787 2,582 Finance leases Finance leases, excluding current portion 751 956 Total lease liabilities $ 4,317 $ 5,468 17 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As of September 30, 2024, the Company's future sublease income and minimum future lease payments on operating and finance leases were as follows (in thousands) : Future Maturities of Leases Operating Leases Finance Leases Sublease Income Remaining 2024 $ 517 $ 82 $ ( 33 ) 2025 1,334 327 ( 132 ) 2026 771 327 ( 132 ) 2027 650 315 ( 132 ) 2028 268 90 ( 55 ) Total minimum lease payments 3,540 1,141 ( 484 ) Imputed interest ( 245 ) ( 119 ) — Present value of minimum lease payments $ 3,295 $ 1,022 $ ( 484 ) 18 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 9: FAIR VALUE The Company utilizes fair value measurements to record fair value adjustments to certain financial assets and to determine fair value disclosures. Fair Value Measurements and Disclosure (Topic 820) of the Financial Accounting Standards Board (“FASB”) establishes a fair value hierarchy that requires the use of observable market data, when available, and prioritizes the inputs to valuation techniques used to measure fair value in the following categories: • Level 1 – Quoted unadjusted prices for identical instruments in active markets. • Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all observable inputs and significant value drivers are observable in active markets. • Level 3 – Model-derived valuations in which one or more significant inputs or significant value drivers are unobservable, including assumptions developed by the Company. 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 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 Company does not have any material financial liabilities that were required to be measured at fair value on a recurring basis at September 30, 2024. As of September 30, 2024, the Company valued its investment in Korea Mutual Aid Cooperative & Consumer based on the initial investment amount in accordance with ASC 321. The Company determined that the investment was not impaired as of that date. Since these securities are not actively traded, the Company will apply valuation adjustments if and when relevant indicators become available. Consequently, these securities are carried at cost and are classified as Level 3 within the fair value hierarchy. The tables below present the recorded amount of financial assets and liabilities measured at fair value (in thousands) on a recurring basis as of September 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 September 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 September 30, 2024 and December 31, 2023. September 30, 2024 Level 1 Level 2 Level 3 Total Assets Money Market Funds – JPMorgan Chase, US $ 4,332 $ — $ — $ 4,332 Interest bearing deposits – various banks 1,082 — — 1,082 Total assets $ 5,414 $ — $ — $ 5,414 Amounts included in Assets: Cash and cash equivalents $ 4,332 $ — $ — $ 4,332 Restricted cash 675 — — 675 Long-term restricted cash 407 — — 407 Total $ 5,414 $ — $ — $ 5,414 Liabilities Unsecured notes payable $ 3,600 $ — $ — $ 3,600 Total Liabilities $ 3,600 $ — $ — $ 3,600 19 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023 Level 1 Level 2 Level 3 Total Assets Money Market Funds – JPMorgan Chase, US $ 2,310 $ — $ — $ 2,310 Interest bearing deposits – various banks 1,084 — — 1,084 Total assets $ 3,394 $ — $ — $ 3,394 Amounts included in Assets: Cash and cash equivalents $ 2,310 $ — $ — $ 2,310 Restricted cash 674 — — 674 Long-term restricted cash 410 — — 410 Total $ 3,394 $ — $ — $ 3,394 20 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 10: SEGMENT INFORMATION The Company operates as a direct seller in the nutritional supplement industry. The Company's sole reporting segment is one in which it sells proprietary nutritional supplements, skin care and anti-aging products, and weight-management and fitness products operating in twenty-five markets. The products are primarily sold through a network marketing distribution channel of approximately 136,000 active associates and preferred customer positions who we refer to as current associates and preferred customers. The Company's 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's 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. Management reviews and analyzes net sales by geographical location and by products and packs on a consolidated basis. The Company currently sells its products in three regions: (i) the Americas (the United States, Canada and Mexico); (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, Hong Kong, Taiwan and China). It also ships 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 or associate fee and product information for the three and nine months ended September 30, were as follows (in millions, except percentages) : Three Months Ended September 30, Nine Months Ended September 30, Region 2024 2023 2024 2023 Americas $ 10.6 33.4 % $ 10.7 32.8 % $ 30.4 34.2 % $ 31.8 32.0 % Asia/Pacific 18.6 58.7 % 19.6 60.1 % 51.6 58.0 % 60.0 60.4 % EMEA 2.5 7.9 % 2.3 7.1 % 6.9 7.8 % 7.5 7.6 % Total sales $ 31.7 100.0 % $ 32.6 100.0 % $ 88.9 100.0 % $ 99.3 100.0 % Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Product sales $ 30.1 $ 31.0 $ 84.3 $ 93.9 Pack sales 1.3 1.2 3.4 4.7 Other 0.3 0.4 1.2 0.7 Total sales $ 31.7 $ 32.6 $ 88.9 $ 99.3 Long-lived assets, which include property and equipment and construction in process for the Company and its subsidiaries, as of September 30, 2024 and December 31, 2023, reside in the following regions, as follows (in millions) : Region September 30, 2024 December 31, 2023 Americas $ 2.6 $ 3.6 Asia/Pacific 0.5 0.5 EMEA — — Total long-lived assets $ 3.1 $ 4.1 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 September 30, 2024 December 31, 2023 Americas $ 6.9 $ 8.3 Asia/Pacific 3.8 4.6 EMEA 1.0 1.6 Total inventory $ 11.7 $ 14.5 21 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 11: 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 nine months ended September 30, 2024, the Company used the quarterly and nine-month average common stock close price of $ 7.32 and $ 8.01 per share, respectively. For the three months ended September 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 September 30, 2024. For the nine months ended September 30, 2024, there were 1.89 million weighted-average common shares outstanding used for the basic EPS calculation. For the nine months ended September 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, 524,122 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 and nine months ended September 30, 2023, the Company used the quarterly and nine-month average common stock close price of $ 11.90 and $ 14.11 per share, respectively. For the three months ended September 30, 2023, there were 1.86 million weighted-average common shares outstanding used for the basic EPS calculation. For the three months ended September 30, 2023, approximately 0.2 million shares were excluded from the diluted EPS calculation as their effect would have been antidilutive. The company reported a net loss for the nine months ended September 30, 2023. Calculation of net EPS— basic and diluted ( in thousands, except EPS ): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net earnings attributable to common stockholders $ ( 328 ) $ 18 $ 228 $ ( 483 ) Weighted average common shares outstanding (for basic calculation) 1,885 1,863 1,885 1,868 Dilutive effect of outstanding common stock options and RSU’s — — — — Weighted average common and common equivalent shares outstanding 1,885 1,863 1,885 1,868 EPS - Basic $ ( 0.17 ) $ 0.01 $ 0.12 $ ( 0.26 ) EPS - Diluted $ ( 0.17 ) $ 0.01 $ 0.12 $ ( 0.26 ) 22