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 March 31, 2025 December 31, 2024 Cash and cash equivalents $ 9,323 $ 11,396 Restricted cash 550 550 Accounts receivable, net of allowance of $876 and $935 102 19 Income tax receivable 697 737 Inventories, net 11,820 10,405 Prepaid expenses and other current assets 3,292 1,755 Deferred commissions 761 1,259 Total current assets 26,545 26,121 Property and equipment, net 3,089 2,858 Operating lease right-of-use assets 1,963 2,094 Other assets 2,676 2,644 Deferred tax assets, net 1,826 1,770 Long-term restricted cash 570 569 Total assets $ 36,669 $ 36,056 LIABILITIES AND SHAREHOLDERS’ EQUITY Commissions and incentives payable $ 8,765 $ 8,642 Accrued expenses 4,307 3,832 Deferred revenue 2,322 3,027 Accounts payable 4,373 2,070 Current portion of operating lease liabilities 981 1,178 Taxes payable 1,549 1,788 Current notes payable — 84 Current portion of finance lease liabilities 279 275 Total current liabilities 22,576 20,896 Long-term notes payable 2,900 2,900 Operating lease liabilities, excluding current portion 1,548 1,576 Other long-term liabilities 1,451 1,390 Finance lease liabilities, excluding current portion 609 680 Total liabilities 29,084 27,442 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 1,900,930 s hares outstanding as of March 31, 2025 and 2,742,857 shares issued and 1,884,814 shares outstanding as of December 31, 2024 — — Additional paid-in capital 32,916 33,027 (Accumulated deficit) retained earnings ( 341 ) 1,189 Accumulated other comprehensive loss ( 5,428 ) ( 5,666 ) Treasury stock, at average cost, 841,927 s hares as of March 31, 2025 and 858,043 shares as of December 31, 2024 ( 19,562 ) ( 19,936 ) Total shareholders’ equity 7,585 8,614 Total liabilities and shareholders’ equity $ 36,669 $ 36,056 2 MANNATECH, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – (UNAUDITED) (in thousands, except per share information) Three Months Ended March 31, 2025 2024 Net sales $ 26,563 $ 29,393 Cost of sales 6,827 6,296 Gross profit 19,736 23,097 Operating expenses: Commissions and incentives 10,553 11,685 Selling and administrative expenses 10,016 10,592 Total operating expenses 20,569 22,277 (Loss) income from operations ( 833 ) 820 Interest (expense) income, net ( 73 ) 18 Other (expense) income, net ( 418 ) 871 (Loss) income before income taxes ( 1,324 ) 1,709 Income tax expense ( 206 ) ( 529 ) Net (loss) income $ ( 1,530 ) $ 1,180 (Loss) income per common share: Basic $ ( 0.80 ) $ 0.63 Diluted $ ( 0.80 ) $ 0.63 Weighted-average common shares outstanding: Basic 1,901 1,884 Diluted 1,901 1,884 MANNATECH, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS – (UNAUDITED) (in thousands) Three Months Ended March 31, 2025 2024 Net (loss) income $ ( 1,530 ) $ 1,180 Foreign currency translations 238 ( 1,431 ) Comprehensive loss $ ( 1,292 ) $ ( 251 ) 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, 2025 1,884,814 $ — $ 33,027 $ 1,189 $ ( 5,666 ) $ ( 19,936 ) $ 8,614 Net loss — — — ( 1,530 ) — — ( 1,530 ) Charge related to stock-based compensation — — 23 — — — 23 Issuance of unrestricted shares 16,116 — ( 134 ) — — 374 240 Foreign currency translations — — — — 238 — 238 Balance at March 31, 2025 1,900,930 $ — $ 32,916 $ ( 341 ) $ ( 5,428 ) $ ( 19,562 ) $ 7,585 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 See accompanying notes to unaudited condensed consolidated financial statements. 4 MANNATECH, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – (UNAUDITED) (in thousands) Three Months Ended March 31, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $ ( 1,530 ) $ 1,180 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation and amortization 293 416 Non-cash operating lease expense 405 402 Provision for inventory losses ( 27 ) 32 Provision for (reversal of) allowance for credit losses ( 96 ) ( 75 ) Unrealized gain from foreign exchange 328 — Charge related to stock-based compensation 263 212 Deferred income taxes ( 56 ) 6 Changes in operating assets and liabilities: Accounts receivable 14 ( 154 ) Income tax receivable 38 15 Inventories ( 1,368 ) 824 Prepaid expenses and other current assets ( 1,554 ) ( 909 ) Deferred commissions 503 294 Other assets ( 47 ) 158 Accounts payable 2,297 872 Accrued expenses 6 ( 1,085 ) Other long-term liabilities 35 ( 408 ) Taxes payable ( 263 ) 401 Commissions and incentives payable 107 244 Deferred revenue ( 716 ) ( 551 ) Net cash (used in) provided by operating activities ( 1,368 ) 1,874 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment ( 489 ) ( 61 ) Cash used in investing activities ( 489 ) ( 61 ) CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of note payable ( 84 ) ( 161 ) Repayment of finance lease obligations and other long-term liabilities ( 82 ) ( 89 ) Cash used in financing activities ( 166 ) ( 250 ) Effect of currency exchange rate changes on cash and cash equivalents ( 49 ) ( 1,408 ) Net (decrease) increase in cash, cash equivalents, and restricted cash ( 2,072 ) 155 Cash, cash equivalents, and restricted cash at the beginning of the period 12,515 9,387 Cash, cash equivalents, and restricted cash at the end of the period $ 10,443 $ 9,542 See accompanying notes to unaudited condensed consolidated financial statements. 5 Three Months Ended March 31, 2025 2024 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Income taxes paid $ — $ 73 Interest paid on finance leases and other financing arrangements $ 130 $ 23 NON-CASH INVESTING AND FINANCING ACTIVITIES Assets acquired through other financing arrangements $ — $ 446 Operating lease right-of-use assets acquired in exchange for new operating lease liabilities $ 242 $ 205 See accompanying notes to unaudited condensed consolidated financial statements. 6 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). 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, 2024 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, 2024 and filed with the United States Securities and Exchange Commission (the “SEC”) on March 25, 2025 (the “2024 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 2024 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, 2024 included in our 2024 Annual Report. There have been no significant changes in our accounting policies or the application thereof during the first quarter of 2025. 7 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Basis of Presentation Certain prior year amounts have been reclassified on the Condensed 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 $ 9.3 million at March 31, 2025 and $ 11.4 million at December 31, 2024. 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 each of March 31, 2025 and December 31, 2024, credit card receivables were $ 1.6 million, and cash and cash equivalents held in bank accounts in foreign countries totaled $ 3.8 million and $ 5.1 million at March 31, 2025 and December 31, 2024, 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. 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 each of March 31, 2025 and December 31, 2024, our total restricted cash was $ 1.1 million. 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, 2025 December 31, 2024 Cash and cash equivalents $ 9,323 $ 11,396 Current restricted cash 550 550 Long-term restricted cash 570 569 Cash, cash equivalents, and restricted cash $ 10,443 $ 12,515 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, 2025 and December 31, 2024, 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, 2025 December 31, 2024 Accounts receivable, net $ 102 $ 19 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. 8 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS At March 31, 2025 and March 31, 2024, the Company held an allowance for credit losses of $ 0.9 million and $ 1.2 million, respectively. March 31, 2025 March 31, 2024 Allowance for credit losses at beginning of period $ 935 $ 1,278 Provision in current period 40 ( 75 ) Accounts charged off against the allowance ( 99 ) ( 3 ) Allowance for credit losses at end of period $ 876 $ 1,200 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): March 31, 2025 December 31, 2024 Investment in Korea Mutual Aid Cooperative & Consumer $ 1,257 $ 1,255 Deposits for building leases 1,182 1,152 Manapol Trademark 237 237 $ 2,676 $ 2,644 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): March 31, 2025 December 31, 2024 Accrued compensation $ 1,333 $ 1,320 Accrued legal and accounting fees 949 823 Customer deposits and sales returns 337 480 Other accrued operating expenses 775 530 Accrued shipping and handling costs 355 306 Accrued sales and other taxes 204 157 Accrued travel expenses related to corporate events 170 127 Accrued inventory purchases 148 45 Accrued royalties 36 39 Accrued rent expense — 5 $ 4,307 $ 3,832 9 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 2024 Annual Report for more information. March 31, 2025 December 31, 2024 Government required severance $ 892 $ 853 Accrued lease restoration costs 332 326 Defined benefit plan obligation 227 211 $ 1,451 $ 1,390 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. 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 Free on Board ("FOB") destination, so the Company recognized revenue upon delivery of the product to the customer. The Company's deferred revenue balances related to product orders in transit were $0 at each of March 31, 2025 and December 31, 2024. The Company's remaining performance obligations related to associate fees were $ 0.1 million at both March 31, 2025 and December 31, 2024. 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) revenue from the loyalty program; (ii) prepaid registration fees from customers planning to attend a future corporate-sponsored event; and (iii) prepaid annual associate fees. The table below presents the changes to deferred revenue balances (in thousands) . Three Months Ended March 31, 2025 2024 Total deferred revenue at beginning of the period $ 3,027 $ 4,786 Amount recognized as revenue during the period that is included in beginning of the period ( 1,536 ) ( 3,733 ) New deferrals at the end of the period, net 831 3,182 Total deferred revenue at end of the period $ 2,322 $ 4,235 10 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 March 31, 2025 and March 31, 2024 was $ 2.2 million and $ 3.1 million, respectively. Three Months Ended March 31, Loyalty program (in thousands) 2025 2024 Loyalty deferred revenue at beginning of the period $ 2,921 $ 3,242 Loyalty points forfeited or expired ( 651 ) ( 718 ) Loyalty points used ( 2,316 ) ( 2,381 ) Loyalty points vested 1,923 2,152 Loyalty points unvested 354 761 Loyalty deferred revenue at end of period $ 2,231 $ 3,056 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 March 31, 2025 2024 Deferred commissions at beginning of the period $ 1,259 $ 2,130 Amount recognized as commissions expense ( 572 ) ( 1,411 ) New commission deferrals at the end of the period 74 1,117 Total deferred commissions at end of the period $ 761 $ 1,836 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) : March 31, 2025 March 31, 2024 Sales reserve at beginning of period $ 56 $ 41 Provision in current period 127 178 Returns charged off against the reserve ( 139 ) ( 166 ) Sales reserve at end of period $ 44 $ 53 11 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 Loss and Accumulated Other Comprehensive Loss 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 loss consists of the Company’s net 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 Income Tax Reporting (ASU 2023-09) — Income Taxes (Topic 740): Improvements to Income Tax Disclosures(“ASC 2023-09”). In December 2023, the FASB issued accounting guidance to expand the annual disclosure requirements for income taxes, primarily related to the rate reconciliation and income taxes paid. This guidance is effective January 1, 2025, with early adoption permitted. This guidance can be applied prospectively or retrospectively. The Company is currently evaluating the disclosure impacts of ASU 2023-09 on its consolidated financial statements as well as the impacts to its financial reporting process and related internal controls. Income Statement Expenses (ASU 2024-03) — Income Statement (Subtopic 220-40) - Reporting Comprehensive Income - Expense Disaggregation Disclosures. In November 2024, the FASB issued accounting guidance which is intended to improve expense disclosures, primarily by requiring disclosure of disaggregated information about certain income statement expense line items on an annual and interim basis. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU 2024-03 becomes effective January 1, 2027. The Company is currently evaluating the disclosure impacts of ASU 2024-03 on its consolidated financial statements as well as the impacts to its financial reporting process and related internal controls. Other recently issued accounting pronouncements did not or are not believed by management to have a material impact on the Company’s present or future financial statements. 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 $ 0.3 million and $ 0.6 million at March 31, 2025 and December 31, 2024, respectively. Inventories as of March 31, 2025 and December 31, 2024, consisted of the following (in thousands) : March 31, 2025 December 31, 2024 Raw materials $ 4,215 $ 4,438 Finished goods and promotional materials 7,605 5,967 Total $ 11,820 $ 10,405 12 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 3: INCOME TAXES For the three months ended March 31, 2025 and 2024, the Company’s effective tax rate was ( 15.1 )% and 36.0 %, respectively. For the three months ended March 31, 2025 and 2024, the Company's effective tax rate was determined based on the estimated annual effective income tax rate. The effective tax rate for the three months ended March 31, 2025 and March 31, 2024, 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. NOTE 4: NOTES PAYABLE Notes payable were $ 2.9 million and $ 3.0 million as of March 31, 2025 and December 31, 2024, respectively. The current portion was $ 0 and $ 0.1 million at March 31, 2025 and December 31, 2024, respectively, as a result of insurance financing arrangements. The long-term portion of notes payable relates to three unsecured notes, described below. The long-term portion of notes payable was $ 2.9 million at each of March 31, 2025 and December 31, 2024. 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 March 31, 2025, there was no current portion and the long-term portion of the balance was $2.0 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 March 31, 2025, there was no current portion and the long-term portion of the balance was $0.8 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 March 31, 2025, there was no current portion and the long-term portion of the balance was $0.1 million. As of March 31, 2025, the Company's future principal payments on notes payable were as follows (in thousands): Principal Payments Remaining 2025 2026 Thereafter Total Jade Capital Note $ — $ 2,014 $ — $ 2,014 J.S. Fredrick Note — 806 — 806 K. Robbins Note — 80 — 80 Total $ — $ 2,900 $ — $ 2,900 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 March 31, 2025, the Company had a total of 101,188 shares available for grant under the 2017 Plan, which expires on April 16, 2027. 13 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. 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 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: March 2025 Grant Estimated fair value per share of options granted: $ 5.51 Assumptions: Annualized dividend yield — % Risk-free rate of return 4.0 % Common stock price volatility 66.3 % 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 three months ended March 31, 2025, the Company granted 3,000 stock options. The weighted average fair value of stock options granted during the three months ended March 31, 2025 was approximately $ 5.51 . The Company granted no stock options during the three months ended March 31, 2024. Stock Grants On March 11, 2024, the Company issued a grant of 8,187 restricted stock units (“RSUs”) 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 $3 thousand for the three months ended March 31, 2025 and 2024, respectively. The Company recognized compensation expense related to the fair values of options and RSUs as follows for the three months ended March 31 (in thousands): Three Months Ended March 31, 2025 2024 Total gross compensation expense $ 22 $ 92 Total tax benefit associated with compensation expense ( 1 ) ( 12 ) Total net compensation expense $ 21 $ 80 14 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2025, the Company expects to record compensation expense related to stock options and RSUs in the future as follows (in thousands) : Nine months ending December 31, 2025 Years ending December 31, 2026 2027 Total gross unrecognized compensation expense $ 38 $ — $ — 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 three months ended March 31, 2025 and 2024, the Company issued a total of 16,116 and 24,660 shares of 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 three months ending March 31, 2025 and 2024. 15 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 6: SHAREHOLDERS’ EQUITY Treasury Stock There were no shares repurchased during each of the three months ended March 31, 2025 and 2024. As of March 31, 2025 and December 31, 2024 , the Company had 841,927 and 858,043 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, 2024 $ ( 6,080 ) $ 414 $ ( 5,666 ) Current-period change (1) 238 — 238 Balance as of March 31, 2025 $ ( 5,842 ) $ 414 $ ( 5,428 ) (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 each of the three months ended March 31, 2025 and 2024, the Company did not pay any dividends. NOTE 7: LITIGATION Litigation in General As of March 31, 2025, 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. 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 2024 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 March 31, 2025 and December 31, 2024, 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 each of the three months ended March 31, 2025 and 2024, the Company had earned less than $ 0.1 million income from the sublease. 16 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2025, the Company had net operating lease right-of-use assets of $ 2.0 million and net finance lease right-of-use assets of $ 0.9 million. At March 31, 2025, our operating lease liabilities were $ 2.5 million and our finance lease liabilities were $ 0.9 million. The weighted-average remaining lease term and discount rate related to the Company’s operating lease liabilities as of March 31, 2025 were 2.77 years and 5.0 %, respectively. The weighted-average remaining lease term and discount rate related to the Company’s finance lease liabilities as of March 31, 2025 were 2.96 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, 2025 and December 31, 2024 our right-of-use assets and lease liabilities balances, net of accumulated amortization, were as follows (in thousands) : Leases Classification March 31, 2025 December 31, 2024 Right-of-use assets Operating leases Operating lease right-of-use assets $ 1,963 $ 2,094 Finance leases Property and equipment, net 921 961 Total right-of-use assets $ 2,884 $ 3,055 Current portion of lease liabilities Operating leases Current portion of operating leases $ 981 $ 1,178 Finance leases Current portion of finance leases 279 275 Long-term portion of lease liabilities Operating leases Operating lease liabilities, excluding current portion 1,548 1,576 Finance leases Finance leases, excluding current portion 609 680 Total lease liabilities $ 3,417 $ 3,709 As of March 31, 2025, 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 2025 856 245 ( 99 ) 2026 856 327 ( 132 ) 2027 749 315 ( 132 ) 2028 281 90 ( 55 ) Total minimum lease payments 2,742 977 ( 418 ) Imputed interest ( 213 ) ( 89 ) — Present value of minimum lease payments $ 2,529 $ 888 $ ( 418 ) 17 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 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 March 31, 2025. As of March 31, 2025 and December 31, 2024, the carrying amount of the financial instruments such as cash and cash equivalents (excluding money market funds disclosed in the table below), restricted cash, long-term restricted cash and accounts payable approximate their fair value due to short-term nature and the market rates of interest of these instruments. As such, these instruments are classified as Level 1. The tables below present the recorded amount of financial assets measured at fair value (in thousands) on a recurring basis as of March 31, 2025 and December 31, 2024. March 31, 2025 Level 1 Level 2 Level 3 Total Assets Money Market Funds – JPMorgan Chase, US $ 3,603 $ — $ — $ 3,603 December 31, 2024 Level 1 Level 2 Level 3 Total Assets Money Market Funds – JPMorgan Chase, US $ 4,005 $ — $ — $ 4,005 The following table below present the carrying amount and estimated fair value of financial instruments as of March 31, 2025 and December 31, 2024, (in thousands) that are not measured at fair value: March 31, 2025 Carrying Value Estimated Fair Value Long-term notes payable $ 2,900 $ 2,812 December 31, 2024 Carrying Value Estimated Fair Value Long-term notes payable $ 2,900 $ 2,813 The carrying value of long-term notes payable approximates fair value and the fair value measurement is based on unobservable inputs, and as such, is classified as Level 3. 18 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 129,000 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. 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. The Chief Operating Decision Maker (“CODM”) is the Company’s Chief Executive Officer. The CODM regularly reviews consolidated financial information and performance used to make decisions about the Company as a whole and without distinguishing or grouping of operations based on asset type, revenue, geographic location, tenant or other factors. Accordingly, for disclosure purposes, the Company has a single reportable segment, which is reported on the Company’s consolidated financial statements. The CODM evaluates performance and allocates resources based on net income as reported in the consolidated statements of operations. Total expenditures for long-lived assets are reported on the consolidated statements of cash flows. Measure of total assets is consistent with the amounts reported on the consolidated balance sheet. The CODM reviews consolidated net income to evaluate income generated from assets (return on assets) in deciding whether to reinvest profits to grow the property portfolio or deploy income into other aspects of the Company, such as to repay debt, buy back common stock under the share repurchase program or pay dividends. 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, Thailand 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 months ended March 31, were as follows (in millions, except percentages) : Three Months Ended March 31, Region 2025 2024 Americas $ 9.0 33.8 % $ 10.2 34.7 % Asia/Pacific 15.4 57.9 % 17.1 58.2 % EMEA 2.2 8.3 % 2.1 7.1 % Total sales $ 26.6 100.0 % $ 29.4 100.0 % Three Months Ended March 31, 2025 2024 Product sales $ 25.5 $ 27.9 Pack sales and associate fees 0.7 1.1 Other 0.4 0.4 Total sales $ 26.6 $ 29.4 Long-lived assets, which include property and equipment and construction in process for the Company and its subsidiaries, as of March 31, 2025 and December 31, 2024, reside in the following regions, as follows (in millions) : Region March 31, 2025 December 31, 2024 Americas $ 2.6 $ 2.4 Asia/Pacific 0.5 0.5 EMEA — — Total long-lived assets $ 3.1 $ 2.9 19 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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, 2025 December 31, 2024 Americas $ 6.5 $ 6.0 Asia/Pacific 4.4 3.7 EMEA 0.9 0.7 Total inventory $ 11.8 $ 10.4 The following table presents the Company's segment revenue, segment expenses and segment (loss) income for the three months ended March 31, 2025 and 2024 ( in thousands): Three Months Ended March 31, 2025 2024 Net Sales $ 26,563 $ 29,393 Less: Cost of sales 6,827 6,296 Commissions and incentives 10,553 11,685 Human Resources 4,099 4,846 Distribution and warehouse 457 631 Selling and administrative expenses 5,167 4,699 Depreciation and amortization 293 416 Interest expense 133 27 Interest income ( 60 ) ( 45 ) Other (income) expense 418 ( 871 ) Income tax provision 206 529 Segment net income (loss) $ ( 1,530 ) $ 1,180 Reconciliation of profit or loss Adjustments and reconciling items — — Consolidated net income (loss) $ ( 1,530 ) $ 1,180 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 months ended March 31, 2025, the Company used the quarterly average common stock close price of $ 11.53 and per share. For the three months ended March 31, 2025, 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 March 31, 2025. 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 per share. 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, 8187 restricted stock units was 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, 199,824 shares underlying stock options were excluded from the diluted EPS calculation, as their effect would have been antidilutive. 20 MANNATECH, INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Calculation of net EPS— basic and diluted ( in thousands, except EPS ): Three Months Ended March 31, 2025 2024 Net (loss) earnings attributable to common stockholders $ ( 1,530 ) $ 1,180 Weighted average common shares outstanding (for basic calculation) 1,901 1,884 Dilutive effect of outstanding common stock options and RSU’s — — Weighted average common and common equivalent shares outstanding 1,901 1,884 EPS - Basic $ ( 0.80 ) $ 0.63 EPS - Diluted $ ( 0.80 ) $ 0.63 21