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Item 2. Management’s Discussion and Analysis

2025-08-12 compared with 2025-05-13 · 150 added, 72 removed, 250 unchanged (47% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is intended to assist in the understanding of our consolidated financial position and results of operations for the three months ended March 31, 2025 as compared to the same period in 2024 and should be read in conjunction with Item 1 “Financial Statements” in Part I of this quarterly report on Form 10-Q and Item 1A “Risk Factors” in Part I of our 2024 Annual Report.

The following discussion is intended to assist in the understanding of our consolidated financial position and results of operations for the three and six months ended June 30, 2025 as compared to the same period in 2024 and should be read in conjunction with Item 1 “Financial Statements” in Part I of this quarterly report on Form 10-Q and Item 1A “Risk Factors” in Part I of our 2024 Annual Report.

Unless stated otherwise, all financial information presented below, throughout this report, and in the condensed consolidated financial statements and related notes includes Mannatech and all of our subsidiaries on a consolidated basis.

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In addition, network marketing provides our associates with an avenue to supplement their income by building their own business centered on our business philosophies and unique products.

As of March 31, 2025, we had approximately 129,000 active associates and preferred customer positions held by individuals that purchased our products and/or packs or paid associate fees during the last twelve months.

As of June 30, 2025, we had approximately 125,000 active associates and preferred customer positions held by individuals that purchased our products and/or packs or paid associate fees during the last twelve months.

At the time of purchase, a customer may choose to sign up as a “preferred customer” to receive the same pricing on our products as our associates and to receive emails about our products and promotions.

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Unlike Mannatech’s business operations in other markets, Meitai operates under a cross-border e-commerce model, where consumers in China can buy Mannatech products manufactured overseas via Meitai’s website.

Meitai is currently not a direct selling company in China nor can it operate under a multi-level marketing model in China.

Currently, Meitai is not a direct selling company in China nor can it operate under a multi-level marketing model in China.

Products purchased on Meitai’s website are for personal use and not for resale.

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Overview of Operating Results

Consolidated net sales for the three months ended March 31, 2025 was $26.6 million, as compared to $29.4 million for the three months ended March 31, 2024, a decrease of $2.8 million, or 9.6%.

The decline in revenues was principally due to slowing demand in Asia due to weakened economic conditions, relative to the prior year.

Net realized and unrealized foreign currency loss for the quarter ended March 31, 2025 was $0.4 million, primarily related to the effects of translation of the Company's balance sheet as the U.S.

Consolidated net sales for the three months ended June 30, 2025 was $25.7 million, as compared to $27.7 million for the three months ended June 30, 2024, a decrease of $2.1 million, or 7.4%.

Consolidated net sales for the six months ended June 30, 2025 was $52.2 million, as compared to $57.1 million for the six months ended June 30, 2024, a decrease of $4.9 million, or 8.6%.

The decline in revenues was principally due to slowing demand in certain regions we operate within due to weakened economic conditions, relative to the prior year.

Net realized and unrealized foreign currency loss for the quarter ended June 30, 2025 was $2.7 million, primarily related to the effects of translation of the Company's balance sheet as the U.S.

Dollar strengthened relative to other currencies.

The quarter ended March 31, 2024 resulted in a foreign exchange gain of $0.9 million.

Net loss was $1.5 million for the three months ended March 31, 2025, or $0.80 per diluted share, as compared to net income of $1.2 million, or $0.63 per diluted share for the three months ended March 31, 2024.

The quarter ended June 30, 2024, resulted in a foreign exchange gain of $1.1 million.

Net loss was $4.3 million for the three months ended June 30, 2025, or $2.27 per diluted share, as compared to net loss of $0.6 million, or $0.33 per diluted share for the three months ended June 30, 2024.

Net loss was $5.8 million for the six months ended June 30, 2025, or $3.07 per diluted share, as compared to net income of $0.6 million, or $0.30 per diluted share for the six months ended June 30, 2024.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

The table below summarizes our consolidated operating results in dollars and as a percentage of net sales for the three months ended March 31, 2025 and 2024 (in thousands, except percentages):

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

The table below summarizes our consolidated operating results in dollars and as a percentage of net sales for the three months ended June 30, 2025 and 2024 (in thousands, except percentages):

2025 2024 Change from

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Total operating expenses 20,344 79.2 % 22,520 81.2 % (2,176) (9.7) %

(Loss) income from operations (833) (3.1) % 820 2.8 % (1,653) (201.6) %

Interest (expense) income, net (73) (0.3) % 18 0.1 % (91) (505.6) %

Loss from operations (1,443) (5.6) % (1,143) (4.1) % (300) 26.2 %

Interest expense, net (102) (0.4) % (105) (0.4) % 3 (2.9) %

Other (expense) income, net (2,744) (10.7) % 1,120 4.0 % (3,864) (345.0) %

Loss before income taxes (4,289) (16.7) % (128) (0.5) % (4,161) 3,250.8 %

Income tax expense (23) (0.1) % (496) (1.8) % 473 (95.4) %

Net loss $ (4,312) (16.8) % $ (624) (2.2) % $ (3,688) 591.0 %

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

The table below summarizes our consolidated operating results in dollars and as a percentage of net sales for the six months ended June 30, 2025 and 2024 (in thousands, except percentages):

2025 2024 Change from

net sales Total

net sales Dollar Percentage

Net sales $ 52,242 100.0 % $ 57,133 100.0 % $ (4,891) (8.6) %

Cost of sales 13,605 26.0 % 12,658 22.2 % 947 7.5 %

Gross profit 38,637 74.0 % 44,475 77.8 % (5,838) (13.1) %

Operating expenses:

Commissions and incentives 20,120 38.5 % 23,345 40.9 % (3,225) (13.8) %

Selling and administrative expenses 20,793 39.8 % 21,452 37.5 % (659) (3.1) %

Total operating expenses 40,913 78.3 % 44,797 78.4 % (3,884) (8.7) %

Loss from operations (2,276) (4.4) % (322) (0.6) % (1,954) 606.8 %

Interest expense, net (175) (0.3) % (87) (0.2) % (88) 101.1 %

Other (expense) income, net (3,162) (6.1) % 1,990 3.5 % (5,152) (258.9) %

(Loss) income before income taxes (5,613) (10.7) % 1,581 2.8 % (7,194) (455.0) %

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Currency impact is determined as the difference between the actual GAAP results and the recalculated results for the current year at the Constant dollar rates.

For the three months ended March 31, 2025, our net sales decreased $1.6 million or 5.4% on a Constant dollar basis,(see reconciliation of Non-GAAP Financial Measures in the tables below);

and unfavorable foreign exchange caused a $1.2 million decrease in GAAP net sales as compared to the same periods in 2024, respectively.

A reconciliation non-GAAP financial measures to GAAP results for the three months ended March 31, 2025 and 2024 is presented as follows (in millions, except percentages) :

Three-month period ended March 31, 2025 March 31, 2024 Constant $ Change

For the three and six months ended June 30, 2025, our net sales decreased $1.8 million and $3.4 million, or 6.5% and 6.0% on a Constant dollar basis, respectively (see reconciliation of Non-GAAP Financial Measures in the tables below);

and unfavorable foreign exchange caused a $0.2 million and $1.5 million decrease in GAAP net sales as compared to the same periods in 2024, respectively.

A reconciliation non-GAAP financial measures to GAAP results for the three and six months ended June 30, 2025 and 2024 is presented as follows (in millions, except percentages) :

Three-month period ended June 30, 2025 June 30, 2024 Constant $ Change

Total $ Translation Adjustment Non-GAAP

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Gross profit $ 18.9 $ 0.2 $ 19.1 $ 21.4 $ (2.3) (10.7) %

(Loss) income from operations $ (0.8) $ 0.3 $ (0.5) $ 0.8 $ (1.3) (162.5) %

Loss from operations $ (1.4) $ — $ (1.4) $ (1.1) $ (0.3) 27.3 %

Six-month period ended June 30, 2025 June 30, 2024 Constant $ Change

Total $ Translation Adjustment Non-GAAP

Constant $ GAAP

Total $ Dollar Percent

Net sales $ 52.2 $ 1.5 $ 53.7 $ 57.1 $ (3.4) (6.0) %

Gross profit 38.6 1.2 39.8 44.5 (4.7) (10.6) %

Loss from operations (2.3) $ 0.3 (2.0) (0.3) (1.7) 566.7 %

Net Sales by Region

Operations outside of the Americas accounted for approximately 66.2% of our consolidated net sales in the three months ended March 31, 2025, as compared to 65.3% in the same period last year.

Consolidated net sales by region for the three months ended March 31, 2025 and 2024 were as follows (in millions, except percentages) :

Operations outside of the Americas accounted for approximately 67.7% of our consolidated net sales in the three months ended June 30, 2025, as compared to 65.7% in the same period last year.

Operations outside of the Americas accounted for approximately 67.0% of our consolidated net sales in the six months ended June 30, 2025, as compared to 65.5% in the same period last year.

Consolidated net sales by region for the three months ended June 30, 2025 and 2024 were as follows (in millions, except percentages) :

Region Three Months Ended

March 31, 2025 Three Months Ended

March 31, 2024

June 30, 2025 Three Months Ended

June 30, 2024

Americas $ 8.3 32.3 % $ 9.5 34.3 %

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Total $ 25.7 100.0 % $ 27.7 100.0 %

For the three months ended March 31, 2025, net sales in the Americas decreased by $1.2 million, or 11.8%, to $9.0 million, as compared to $10.2 million for the same period in 2024.

Consolidated net sales by region for the six months ended June 30, 2025 and 2024 were as follows (in millions, except percentages) :

Region Six Months Ended

June 30, 2025 Six Months Ended

June 30, 2024

Americas $ 17.2 33.0 % $ 19.7 34.5 %

Asia/Pacific 30.7 58.8 % 33.0 57.8 %

EMEA 4.3 8.2 % 4.4 7.7 %

Total $ 52.2 100.0 % $ 57.1 100.0 %

For the three months ended June 30, 2025, net sales in the Americas decreased by $1.2 million, or 12.6%, to $8.3 million, as compared to $9.5 million for the same period in 2024.

The number of active independent associates and preferred customers decreased by 14.6%, which was partially offset by a 2.3% increase in revenue per active independent associate and preferred customer.

Foreign currency had the effect of decreasing revenue by $0.2 million for the three months ended March 31, 2025 when compared to the same period in 2024.

Foreign currency had the effect of decreasing revenue by $0.1 million for the three months ended June 30, 2025 when compared to the same period in 2024.

The currency impact is primarily due to the weakening of the Mexican Peso.

For the three months ended March 31, 2025, Asia/Pacific net sales decreased by $1.7 million, or 9.9%, to $15.4 million, as compared to $17.1 million for the same period in 2024.

For the six months ended June 30, 2025, net sales in the Americas decreased by 2.5 million, or 12.7%, to $17.2 million, as compared to $19.7 million for the same period in 2024.

The number of active independent associates and preferred customers decreased by 12.3%, which was partially offset by a 2.2% increase in revenue per active independent associate and preferred customer.

Foreign currency exchange had the effect of decreasing revenue by $1.0 million for the three months ended March 31, 2025, as compared to the same period in 2024.

Foreign currency had the effect of decreasing revenue by $0.3 million for the six months ended June 30, 2025 when compared to the same period in 2024.

The currency impact is primarily due to the weakening of the Mexican Peso.

For the three months ended June 30, 2025, Asia/Pacific net sales decreased by $0.6 million, or 3.8%, to $15.3 million, as compared to $15.9 million for the same period in 2024.

The number of active independent associates and preferred customers decreased by 12.2%, which was partially offset by a 9.7% increase in revenue per active independent associate and preferred customer.

Foreign currency exchange had the effect of decreasing revenue by $0.1 million for the three months ended June 30, 2025, as compared to the same period in 2024.

The currency impact is primarily due to the weakening of the Korean Won.

For the three months ended March 31, 2025, EMEA net sales increased by $0.1 million, or 4.8%, to $2.2 million, as compared to $2.1 million for the same period in 2024.

The increase was primarily due to a 9.9% increase in revenue per active independent associate and preferred customer, which was partially offset by a 4.7% decrease in the number of active independent associates and preferred customers.

There was no foreign currency impact on revenue for the three months ended March 31, 2025 as compared to the same period in 2024.

Our sales mix for the three months ended March 31, was as follows (in millions, except percentages):

Three-month period ended March 31, 2025 March 31, 2024 Constant $ Change

For the six months ended June 30, 2025, Asia/Pacific net sales decreased by $2.3 million, or 7.0%, to $30.7 million, as compared to $33.0 million for the same period in 2024.

The number of active independent associates and preferred customers decreased by 11.3%, which was partially offset by a 6.0% increase in revenue per active independent associate and preferred customer.

Foreign currency exchange had the effect of decreasing revenue by $1.2 million for the six months ended June 30, 2025, as compared to the same period in 2024.

The currency impact is primarily due to the weakening of the Korean Won.

For the three months ended June 30, 2025, EMEA net sales decreased by $0.2 million, or 8.7%, to $2.1 million, as compared to $2.3 million for the same period in 2024.

The decrease was primarily due to a 4.5% decrease in revenue per active independent associate and preferred customer and a 4.4% decrease in the number of active independent associates and preferred customers.

There was no foreign currency impact on revenue for the three months ended June 30, 2025 as compared to the same period in 2024.

For the six months ended June 30, 2025, EMEA net sales decreased by $0.1 million, or 2.3%, to $4.3 million, as compared to $4.4 million for the same period in 2024.

The decrease was primarily due to a 5.5% decrease in the number of active independent associates and preferred customers, which was partially offset by a 2.2% increase in revenue per active independent associate and preferred customer.

There was no foreign currency impact on revenue for the six months ended June 30, 2025 as compared to the same period in 2024.

Our sales mix for the three and six months ended June 30, was as follows (in millions, except percentages):

Three-month period ended June 30, 2025 June 30, 2024 Constant $ Change

Total $ Translation Adjustment Non-GAAP

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Total $ 25.7 $ 0.2 $ 25.9 $ 27.7 $ (1.8) (6.5) %

Six-month period ended June 30, 2025 June 30, 2024 Constant $ Change

Total $ Translation Adjustment Non-GAAP

Constant $ GAAP

Total $ Dollar Percent

Product 50.1 1.4 51.5 54.2 (2.7) (5.0) %

Pack sales and associate fees 1.3 0.1 1.4 2.1 (0.7) (33.3) %

Other 0.8 0.0 0.8 0.8 — — %

Total $ 52.2 $ 1.5 $ 53.7 $ 57.1 $ (3.4) (6.0) %

Product Sales

Our product sales consist primarily of sales made to our independent associates and preferred customers at published wholesale prices.

Product sales for the three months ended March 31, 2025 decreased by $2.4 million, or 8.6%, as compared to the same period in 2024.

On a Constant dollar basis, product sales for the three months ended March 31, 2025 decreased $1.3 million, or 4.7%, as compared to the same period in 2024.

The decrease in product sales for the three months ended March 31, 2025 reflects a 1.5% decrease in the number of orders processed and a decrease in the average order value to $153, as compared to $168 for the same period in 2024.

Product sales for the three months ended June 30, 2025 decreased by $1.6 million, or 6.1%, as compared to the same period in 2024.

On a Constant dollar basis, product sales for the three months ended June 30, 2025 decreased $1.4 million, or 5.3%, as compared to the same period in 2024.

The decrease in product sales for the three months ended June 30, 2025 reflects a 10.5% decrease in the average order value to $148, as compared to $166 for the same period in 2024, which was partially offset by a 2.1% increase in the number of orders processed.

Product sales for the six months ended June 30, 2025 decreased by $4.1 million, or 7.6%, as compared to the same period in 2024.

On a Constant dollar basis, product sales for the six months ended June 30, 2025 declined $2.7 million, or 5.0%, as compared to the same period in 2024.

The decrease in product sales for the six months ended June 30, 2025 reflects a 9.5% decrease in the average order value to $151, as compared to $167 for the same period in 2024 which was partially offset by a 0.3% increase in the number of orders processed.

Pack sales, Associate Fees and Recruiting

Recruitment of new independent associates and preferred customers decreased by 13.9% to 13,749 in the first quarter of 2025, as compared with 15,970 in the first quarter of 2024.

We attribute the lower number of orders processed in the three months ended March 31, 2025 to a combination of the lower number of new independent associates and preferred customers recruited during the period.

Recruitment of new independent associates and preferred customers decreased by 22.7% to 12,908 in the second quarter of 2025, as compared with 16,690 in the second quarter of 2024.

We attribute the lower number of orders processed in the three months ended June 30, 2025 to a combination of the lower number of new independent associates and preferred customers recruited during the period.

Pack sales and associate fees are closely related to recruiting and retention of business-building associates.

The approximate number of new and continuing active independent associates and preferred customers who purchased our packs or products or paid associate fees during the twelve months ended March 31, 2025 and 2024 were as follows:

New 57,000 45.6 % 74,000 52.1 %

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The decline in pack sales occurred principally in Korea.

Pack sales and associate fees for the three months ended March 31, 2025 decreased by $0.4 million, or 36.4%, to $0.7 million, as compared to $1.1 million for the same period in 2024.

On a constant dollar basis, pack sales and associate fees for the three months ended March 31, 2025 decreased $0.3 million, or 27.3%, as compared to 2024.

Pack sales and associate fees for the three months ended June 30, 2025 decreased by $0.4 million, or 40.0%, to $0.6 million, as compared to $1.0 million for the same period in 2024.

On a constant dollar basis, pack sales and associate fees for the three months ended June 30, 2025 decreased $0.4 million, or 40.0%, as compared to 2024.

The decrease in pack sales and associate fees reflects a 36.7% decrease in the number of orders processed and a decrease in the average order value of $40, as compared to $43 for the same period in 2024.

Pack sales and associate fees for the six months ended June 30, 2025 decreased by $0.8 million, or 38.1%, to $1.3 million, as compared to $2.1 million for the same period in 2024.

On a constant dollar basis, pack sales and associate fees for the six months ended June 30, 2025 declined $0.7 million, or 33.3%, as compared to 2024.

The decrease in pack sales and associate fees reflects a 30.7% decrease in the number of orders processed and a decrease in the average order value of $43, as compared to $47 for the same period in 2024.

We do not collect associate fees or sell packs in our non-direct selling business in mainland China.

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Promotional materials, training, database applications and business management tools support our independent associates, which in turn helps stimulate product sales.

For each of the three months ended March 31, 2025 and 2024, other sales were $0.4 million.

For the three months ended March 31, 2025, gross profit decreased by $3.4 million, or 14.6%, to $19.7 million, as compared to $23.1 million for the same period in 2024.

For the three months ended March 31, 2025, gross profit as a percentage of net sales decreased to 74.3%, as compared to 78.6% for the same period in 2024.

For each of the three months ended June 30, 2025 and 2024, other sales were $0.4 million.

For each of the six months ended June 30, 2025 and 2024, other sales were $0.8 million.

For the three months ended June 30, 2025, gross profit decreased by $2.5 million, or 11.6%, to $18.9 million, as compared to $21.4 million for the same period in 2024.

For the three months ended June 30, 2025, gross profit as a percentage of net sales decreased to 73.6%, as compared to 77.1% for the same period in 2024.

The decrease in gross profit in dollar terms is principally due to increased product costs, including inventory markdowns, and increased freight costs.

The timing of certain sales promotions also reduced gross profit as a percentage of net sales during the quarter, compared with the same period in 2024.

For the six months ended June 30, 2025, gross profit decreased by $5.8 million, or 13.1%, to $38.6 million, as compared to $44.5 million for the same period in 2024.

For the six months ended June 30, 2025, gross profit as a percentage of net sales decreased to 74.0%, as compared to 77.8% for the same period in 2024.

The decrease in gross profit in dollar terms is principally due to increased product costs, including inventory markdowns, and increased freight costs.

The timing of certain sales promotions also reduced gross profit as a percentage of net sales during the quarter, compared with the same period in 2024.

Commissions and Incentives

Commission expense for the three months ended March 31, 2025 decreased by 10.5%, or $1.2 million, to $10.0 million, as compared to $11.2 million for the same period in 2024.

Commission expense for the three months ended June 30, 2025 decreased by 14.4%, or $1.6 million, to $9.5 million, as compared to $11.1 million for the same period in 2024.

Commissions are earned on sales.

Commission expense in dollar terms decreased during the three months ended March 31, 2025 primarily due to a decline in our sales.

For the three months ended March 31, 2025, commissions as a percentage of net sales decreased to 37.7% as compared to 38.1% for the same period in 2024.

Incentive costs for the three months ended March 31, 2025 and 2024 remained constant at $0.5 million.

For the three months ended March 31, 2025, incentives as a percentage of net sales increased to 2.0% as compared to 1.7% for the same period in 2024.

Commission expense in dollar terms decreased during the three months ended June 30, 2025 primarily due to a decline in our sales.

For the three months ended June 30, 2025, commissions as a percentage of net sales decreased to 37.0% as compared to 40.0% for the same period in 2024.

Commission expense for the six months ended June 30, 2025 decreased by 12.4%, or $2.8 million, to $19.5 million, as compared to $22.3 million for the same period in 2024.

Commissions are earned on sales.

Commission expense in dollar terms decreased during the six months ended June 30, 2025 primarily due to a decline in our sales.

For the six months ended June 30, 2025, commissions as a percentage of net sales decreased to 37.4% as compared to 39.0% for the same period in 2024.

Incentive costs for the three months ended June 30, 2025 and 2024 decreased to $0.1 million, as compared to $0.6 million for the same period in 2024.

For the three months ended June 30, 2025, incentives as a percentage of net sales decreased to 0.2% as compared to 2.0% for the same period in 2024.

Incentive costs for the six months ended June 30, 2025 and 2024 decreased to $0.6 million, as compared to $1.1 million for the same period in 2024.

For the six months ended June 30, 2025, incentives as a percentage of net sales decreased to 1.1% as compared to 1.8% for the same period in 2024.

Selling and Administrative Expenses

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and other miscellaneous operating expenses.

For the three months ended March 31, 2025, selling and administrative expenses decreased by $0.6 million, or 5.4%, to $10.0 million, as compared to $10.6 million for the same period in 2024.

The decrease in selling and administrative expenses was the result of a $0.8 million reduction in payroll costs, which was offset by a $0.2 million increase in legal and consulting fees.

Selling and administrative expenses, as a percentage of net sales, for the three months ended March 31, 2025 increased to 37.7% from 36.0% for the same period in 2024.

For the three months ended June 30, 2025, selling and administrative expenses decreased by $0.1 million, or 0.8%, to $10.8 million, as compared to $10.9 million for the same period in 2024.

The decrease in selling and administrative expenses was the result of a $0.4 million reduction in payroll costs, which was offset by a $0.2 million increase in marketing costs and a $0.1 million increase in office expenses.

Selling and administrative expenses, as a percentage of net sales, for the three months ended June 30, 2025 increased to 42.0% from 39.1% for the same period in 2024.

For the six months ended June 30, 2025, selling and administrative expenses decreased by $0.7 million, or 3.1%, to $20.8 million, as compared to $21.5 million for the same period in 2024.

The decrease in selling and administrative expenses was the result of a $1.3 million decrease in payroll costs and a $0.3 million decrease in warehouse costs, which was offset by a $0.3 million increase in marketing costs, a $0.2 million increase in office expenses, a $0.2 million increase in travel expenses and a $0.2 million increase in legal and consulting fees.

Selling and administrative expenses, as a percentage of net sales, for the six months ended June 30, 2025 increased to 39.8% from 37.5% for the same period in 2024.

Other Income (Expense), Net

Foreign exchange losses were $0.4 million for the three months ended March 31, 2025.

Foreign exchange gains were $0.9 million for the three months ended March 31, 2024.

Foreign exchange losses were $2.7 million for the three months ended June 30, 2025.

Foreign exchange gains were $1.1 million for the three months ended June 30, 2024.

Foreign exchange losses were $3.2 million for the six months ended June 30, 2025.

Foreign exchange gains were $2.0 million for the six months ended June 30, 2024.

Income Tax (Provision) Benefit

Income tax expense was $0.2 million for the three months ended March 31, 2025 as compared to $0.5 million in the same period in 2024.

Income tax expense was less than $0.1 million for the three months ended June 30, 2025 as compared to income tax expense of $0.5 million in the same period in 2024.

Income tax expense for the six months ended June 30, 2025 and 2024 was $0.2 million and $1.0 million, respectively.

Income tax (provision) or benefit includes current and deferred income taxes for both our domestic and foreign operations.

Our statutory income tax rates for key jurisdictions are as follows, for the three months ended March 31:

Our statutory income tax rates for key jurisdictions are as follows, for the six months ended June 30:

Country 2025 2024

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The provision for income taxes is directly related to our profitability and changes in the taxable income across countries of operation.

For the three months ended March 31, 2025 and 2024 , the Company’s effective tax rate was (15.1)% and 36.0%, respectively.

The effective tax rates for the three months ended March 31, 2025 and 2024 was different from the federal statutory rate due primarily to the mix of earnings across jurisdictions and the associated valuation allowances recorded on losses in certain jurisdictions.

For the three and six months ended June 30, 2025, the Company’s effective tax rate was (0.5)% and

(4.1)%, respectively.

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

The effective tax rates for the three and six months ended June 30, 2025 and 2024 was different from the federal statutory rate due primarily to the mix of earnings across jurisdictions and the associated valuation allowances recorded on losses in certain jurisdictions.

LIQUIDITY AND CAPITAL RESOURCES

Cash and Cash Equivalents

As of March 31, 2025, our cash and cash equivalents decreased by 18.2%, or $2.1 million, to $9.3 million from $11.4 million as of December 31, 2024.

As of June 30, 2025, our cash and cash equivalents decreased by 51.5%, or $5.9 million, to $5.5 million from $11.4 million as of December 31, 2024.

The Company is required to restrict cash for:

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and (iii) collateral for a building lease in Australia.

The current portion of restricted cash balances was $0.6 million at each of March 31, 2025 and December 31, 2024.

The long-term portion of restricted cash balances was $0.6 million at each of March 31, 2025 and December 31, 2024.

The current portion of restricted cash balances was $0.6 million at each of June 30, 2025 and December 31, 2024.

The long-term portion of restricted cash balances was $0.6 million at each of June 30, 2025 and December 31, 2024.

Our principal use of cash is to pay for operating expenses, including commissions and incentives, capital assets, inventory purchases, and periodic cash dividends.

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Working capital represents total current assets less total current liabilities.

At March 31, 2025 and December 31, 2024, our working capital was $4.0 million and $5.2 million , respectively.

At June 30, 2025 and December 31, 2024, our working capital was $2.2 million and $5.2 million , respectively.

Net Cash Flows

Our net consolidated cash flows consisted of the following, for the three months ended March 31 (in millions) :

Our net consolidated cash flows consisted of the following, for the six months ended June 30 (in millions) :

Provided by (Used in):

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Operating Activities

Operating activities used $1.4 million cash for the three months ended March 31, 2025 as compared to cash provided of $1.9 million in the same period in 2024.

Operating activities used $5.1 million cash for the six months ended June 30, 2025 as compared to a use of $0.8 million cash for the same period 2024.

Investing Activities

For the three months ended March 31, 2025 and 2024, we invested cash of $0.5 million and $0.1 million, respectively, principally for back-office software projects, reported as property and equipment.

For the six months ended June 30, 2025 and 2024, we invested cash of $0.6 million and $0.1 million, respectively, principally for back-office software projects, reported as property and equipment.

Financing Activities

For the three months ended March 31, 2025 and 2024, our financing activities used cash of $0.1 million and $0.1 million, respectively, in the repayment of finance lease obligations.

For the six months ended June 30, 2025, our financing activities used cash of $0.2 million.

For the six months ended June 30, 2025, we used $0.2 million in the repayment of finance lease obligations.

For the six months ended June 30, 2024, our financing activities provided cash of $3.1 million.

We received $3.6 million from the issuance of notes payable (see Note 4) and we used $0.5 million in the repayment of finance lease obligations.

General Liquidity and Cash Flows

Short Term Liquidity

As of March 31, 2025, our cash and cash equivalents was $9.3 million.

As of June 30, 2025, our cash and cash equivalents was $5.5 million.

We believe our existing liquidity and cash flows from operations are adequate to fund our normal expected future business operations for the next twelve months.

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

We have contractual purchase commitments with certain raw materials suppliers to purchase minimum quantities.

At March 31, 2025, we have one supply agreement, that requires the Company to purchase an aggregate of $0.2 million through 2025, with no purchase commitments thereafter.

We also maintain other supply agreements and manufacturing agreements to protect our products, regulate product costs, and help ensure quality control standards.

These agreements do not require us to purchase any minimum quantities.

We have operating lease liabilities for the property and equipment we use in our business operations.

These operating lease liabilities represent our minimum future payment obligations on operating leases, including imputed interest.

At March 31, 2025, our operating lease liabilities were $2.5 million, of which $1.0 million is presented as the current portion and $1.5 million is presented as Operating lease liabilities excluding current portion on our Condensed Consolidated Balance Sheets.

At June 30, 2025, our operating lease liabilities were $2.6 million, of which $1.0 million is presented as the current portion and $1.6 million is presented as Operating lease liabilities excluding current portion on our Condensed Consolidated Balance Sheets.

We also have finance lease liabilities of $0.8 million and lease restoration liabilities of $0.4 million.

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If circumstances change relating to the various assumptions or conditions used in our estimates, we could experience an adverse effect on our financial position, results of operations, and cash flows.

We have identified the following applicable significant accounting policies and critical estimates as of March 31, 2025.

We have identified the following applicable significant accounting policies and critical estimates as of June 30, 2025.

Inventory Reserves

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Tax Valuation Allowances

As of March 31, 2025, there was nothing recorded in other long-term liabilities on our condensed consolidated balance sheet related to uncertain income tax positions.

As of June 30, 2025, there was nothing recorded in other long-term liabilities on our condensed consolidated balance sheet related to uncertain income tax positions.

As required by Topic 740, we use judgments and make estimates and assumptions related to evaluating the probability of uncertain income tax positions.

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Previously, the Company's shipping terms were FOB destination, so the Company recognized revenue upon delivery of the product to the customer.

We recorded the value of orders shipped but not yet delivered to customers as Deferred revenue on our Consolidated Balance Sheet.

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis