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What changed in MANNATECH INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MANNATECH INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+231 added−245 removedSource: 10-K (2024-03-28) vs 10-K (2023-03-17)

Top changes in MANNATECH INC's 2023 10-K

231 paragraphs added · 245 removed · 172 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

58 edited+10 added−9 removed176 unchanged
Biggest changeWe are fully committed to providing the highest level of support services to our independent associates and preferred customers and believe that we meet expectations and build customer loyalty through the following: ▪ offering highly-personalized and responsive customer service; ▪ offering a satisfaction guarantee product return policy; ▪ providing comprehensive corporate websites that provide instant access to Internet ordering, marketing, technical and educational information, and unique and innovative marketing tools (including www.mannatech.com, www.allaboutmannatech.com, www.mannatechscience.org, library.mannatech.com, training.mannatech.com, events.mannatech.com, and www.mannafest.com); ▪ maintaining an extensive web-based downline management system called Success Tracker™ that provides access to web conferencing and downline organization reporting for our independent associates at minimal costs; ▪ providing Mannatech+, an app and web-based platform that provides personalized web pages, to share videos, digital flyers, and more; ▪ providing Social Media Studio, an app that assists Associates in creating custom social media postings, while utilizing the latest methods to identify non-compliant posts and alert Associates to make alterations before posting; ▪ offering, in the United States and Canada, an effective compilation of online marketing and training tools; ▪ offering updated training/orientation and compliance programs for our independent associates; ▪ providing strategically based distribution fulfillment centers to ensure products are shipped on time and at minimal cost; and ▪ sponsoring marketing events, designed to provide information, education, and motivation for our dedicated business-building associates and to help stimulate business development.
Biggest changeW e are fully committed to providing the highest level of support services to our independent associates and preferred customers and believe that we meet expectations and build customer loyalty through the following: ▪ offering highly personalized and responsive customer service; 8 Table of Contents ▪ offering a satisfaction guarantee product return policy; ▪ providing comprehensive corporate websites that provide instant access to Internet ordering, marketing, technical and educational information, and unique and innovative marketing tools (including www.mannatech.com, www.allaboutmannatech.com, library.mannatech.com, mannatechai.com, training.mannatech.com, events.mannatech.com, and www.mannafest.com); ▪ maintaining an extensive web-based downline management system called Success Tracker™ that provides access to downline organization reporting and sales reporting for our independent associates, free their first year as an associate and then at a minimal cost thereafter; ▪ providing Mannatech Now Tech, an app and web-based platform that provides a vast library of marketing resources, which are easily shareable and maintain full attribution to the associate who shares the resource.
Included in the system is the TruPLENISH TM Nutritional Shake, TruPURE ® Cleanse Slimsticks and TruSHAPE TM Fat-Loss Capsules. • In 2017, Mannatech launched several new products, including GlycoCafé ® , a glyconutritional coffee made with the whole coffee fruit, and Luminovation, a line of mass-market and premium Korean beauty products. 4 Table of Contents • In 2018, Mannatech launched a unique fitness drink, EMPACT+ ® , combining fueling, hydration and recovery in one product.
Included in the system is the TruPLENISH TM Nutritional Shake, TruPURE ® Cleanse Slimsticks and TruSHAPE TM Fat-Loss Capsules. 4 Table of Contents • In 2017, Mannatech launched several new products, including GlycoCafé ® , a glyconutritional coffee made with the whole coffee fruit, and Luminovation, a line of mass-market and premium Korean beauty products. • In 2018, Mannatech launched a unique fitness drink, EMPACT+ ® , combining fueling, hydration and recovery in one product.
Item 1. Business Overview Mannatech, Incorporated ("Mannatech" or the "Company") is a global wellness solution provider, which was incorporated and began operations in November 1993. We develop and sell innovative, high quality, proprietary nutritional supplements, topical and skin care and anti-aging products, and weight-management products that target optimal health and wellness.
Item 1. Business Overview Mannatech, Incorporated ("Mannatech" or the "Company") is a global wellness solution provider, which was incorporated and began operations in November 1993. We develop and sell innovative, high quality, proprietary nutritional supplements, skin care and anti-aging products, and weight-management products that target optimal health and wellness.
We sell our products through network marketing distribution channels via our active associates (“independent associate” or “associates” or “distributors”) and to our “preferred customers,” which we believe is the most cost-effective way to introduce our products and communicate information about our business to the global marketplace quickly and effectively.
We sell our products principally through network marketing distribution channels via our active associates (“independent associate” or “associates” or “distributors”) and to our “preferred customers,” which we believe is the most cost-effective way to introduce our products and communicate information about our business to the global marketplace quickly and effectively.
We believe our global associate career and compensation plan fairly compensates our independent associates at every stage of building their business by quickly rewarding our independent associates for both their sales and the sales of those in their downline organization.
We believe our global associate career and compensation plan fairly compensates our independent associates at every stage of building their business by quickly rewarding our independent associates for their sales and the sales of those in their downline organization.
We believe we can successfully compete for independent associates by emphasizing the following: • our exclusive, proprietary blend of high-quality products; • our 28 year track record in the business of selling nutritional products; • our business model which does not require our independent associates to carry inventory or accounts receivable; • our unique and financially rewarding global associate compensation plan; • our innovative marketing and educational tools; and • our easy and convenient delivery system.
We believe we can successfully compete for independent associates by emphasizing the following: • our exclusive, proprietary blend of high-quality products; • our 29 year track record in the business of selling nutritional products; • our business model which does not require our independent associates to carry inventory or accounts receivable; • our unique and financially rewarding global associate compensation plan; • our innovative marketing and educational tools; and • our easy and convenient delivery system.
Our operations are also subject to a variety of other regulations, including: • social security taxes; • value-added taxes; • goods and services taxes; • sales taxes; • consumption taxes; • income taxes; • customs duties; • employee/independent contractor regulations; • employment, service pay, retirement pay, and profit sharing requirements; • import/export regulations; • federal securities laws; and • antitrust laws.
Our operations are also subject to a variety of other regulations, including: • social security taxes; • value-added taxes; • goods and services taxes; • sales taxes; • consumption taxes; • income taxes; • customs duties; • employee/independent contractor regulations; • employment, service pay, retirement pay, and profit sharing requirements; • data security and data privacy regulations; • import/export regulations; • federal securities laws; and • antitrust laws.
Operating Strengths High-Quality, Innovative, Proprietary Products . We base our product concept on the scientific belief that certain glyconutrients, also known as glycans, monosaccharides and polysaccharides, are essential for maintaining a healthy immune system.
Operating Strengths High-Quality, Innovative, Proprietary Products . We base our product concept on the scientific findings that certain glyconutrients, also known as glycans, monosaccharides and polysaccharides, are essential for maintaining a healthy immune system.
Once the FDA issues the requisite rulemaking, cosmetic manufacturers will be required to comply with cosmetics-specific current Good Manufacturing Processes. We develop and maintain product substantiation dossiers, which contain the scientific literature pertinent to each product and its ingredients. An independent scientist reviews these dossiers, which provide the scientific basis for product claims.
Once the FDA issues the requisite rule-making, cosmetic manufacturers will be required to comply with cosmetics-specific current Good Manufacturing Processes. We develop and maintain product substantiation dossiers, which contain the scientific literature pertinent to each product and its ingredients. An independent scientist reviews these dossiers, which provide the scientific basis for product claims.
This policy allows the associate or preferred customer to return an order within one year of the purchase date upon terminating his/her account. If an associate or preferred customer returns a product unopened and in good condition, he/she may receive a full refund minus a 10% restocking fee.
This policy allows the associate or preferred customer to return an order within one year of the purchase date upon voluntarily terminating his/her account. If an associate or preferred customer returns a product unopened and in good condition, he/she may receive a full refund minus a 10% processing fee.
We believe the network marketing channel also allows us to effectively communicate the potential benefits and unique properties of our proprietary products to our consumers. In addition, network marketing provides our business-building associates with an avenue to supplement their income and develop financial freedom by building their own business centered on our business philosophies and unique products.
We believe the network marketing channel also allows us to effectively communicate the potential benefits and unique properties of our proprietary products to our consumers. 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.
To aid in our monitoring efforts, we provide each independent associate with a copy of our policies and procedures prior to or upon signing up as an independent associate. We engage a third-party service provider to assist in managing our compliance monitoring process.
To aid in our monitoring efforts, we provide each independent associate with a copy of our policies and procedures prior to or upon sig ning up as an independent associate. We engage a third-party service provider to assist in managing our compliance monitoring process.
We support our independent associates by providing an array of support services that can be tailored to meet individual needs, including: • offering educational meetings and corporate-sponsored events that emphasize business-building and compliance related information; • sponsoring various informative and science-based conference calls, web casts, and seminars; • providing automated services through the Internet and telephone that offer a full spectrum of information and business-building tools; • maintaining an efficient decentralized ordering and distribution system; • providing highly personalized and responsive order processing and customer service support accessible by multiple communication channels including telephone, Internet, or e-mail; • offering 24-hour, seven days a week access to information and ordering through the Internet; • offering Success Tracker ™ , a customized business-building genealogy system, which contains graphs, maps, alerts, reports, and web video conferencing for our independent associates; • offering, in the United States and Canada, a compilation of online marketing and training tools, including personalized web pages; and • providing a wide assortment of business-building and educational materials to help stimulate product sales and simplify enrollment.
We support our independent associates by providing an array of support services that can be tailored to meet individual needs, including: • offering educational meetings and corporate-sponsored events that emphasize business-building and compliance related information; • sponsoring various informative and science-based conference calls, web casts, and seminars; • providing automated services through the Internet, mobile app and telephone that offer a full spectrum of information and business-building tools; • maintaining an efficient decentralized ordering and distribution system; • providing highly personalized and responsive order processing and customer service support accessible by multiple communication channels including telephone, Internet, or e-mail; • offering 24-hour, seven days a week access to information and ordering through the Internet; • offering Success Tracker ™ , a customized business-building genealogy system, which contains sales reporting, graphs, maps, alerts, rank advancement guidance, and business volume reports; • offering, in the United States and Canada, a compilation of online marketing and training tools, including personalized web pages; and • providing a wide assortment of business-building and educational materials to help stimulate product sales and simplify enrollment.
This certification is designed to ensure that Good Manufacturing Practices are used in the manufacturing facility. All of Mannatech's dietary supplements have been confirmed to be gluten-free. 8 Table of Contents High-Caliber, Industry-Leading Independent Associates .
This certification is designed to ensure that Good Manufacturing Practices are used in the manufacturing facility. All of Mannatech's dietary supplements have been confirmed to be gluten-free. High-Caliber, Industry-Leading Independent Associates .
When considering new products and compounds, our product committee considers the following criteria: • marketability and proprietary nature of the product; • demand for the product; • competitors’ products; • regulatory considerations; • availability of ingredients; and • data supporting claims of efficacy and safety.
When considering new products and compounds, our product development team considers the following criteria: • marketability and proprietary nature of the product; • demand for the product; • competitors’ products; • regulatory considerations; • availability of ingredients; and • data supporting claims of efficacy and safety.
In the event we become unable to source any products or ingredients from our suppliers, we believe that we would be able to replace those products with alternate suppliers, except Arabinogalactan and Manapol ® powder.
In the event we become unable to source any products or ingredients from our suppliers, we believe that we would be able to replace those products with alternate suppliers, except Arabinogalactan.
Currently, we have six patent applications pending in various jurisdictions relating to the technology supporting many of the above listed products. Patent protection means that the patented invention cannot be commercially made, used, distributed or sold without the patent owner's consent.
Currently, we have two patent applications pending in two foreign jurisdictions relating to the technology supporting many of the above listed products. Patent protection means that the patented invention cannot be commercially made, used, distributed or sold without the patent owner's consent.
The associate may return or exchange the product based on the associate product return policy. In China, where we sell our products under a cross-border e-commerce model, we have a 14-day return policy. • Associate and Preferred Customer Product Return Policy.
The associate may return or exchange the product based on the associate product return policy. In China, where we sell our products under a cross-border e-commerce model, we have a 14-day return policy. 12 Table of Contents • Associate and Preferred Customer Product Return Policy.
We also regularly provide training on using online tools such social media and our own suite of web marketing tools specifically designed for associates to use. We also offer a variety of brochures, monthly newsletters, and other promotional materials to associates to assist in their sales efforts, training, and continuing education.
We also regularly provide training on using online tools, such as social media and our own suite of web marketing tools specifically designed for associates to use. In addition, we offer a variety of printable brochures, monthly newsletters delivered electronically, and other promotional materials to assist in sales efforts, training, and continuing education.
Our product committee continues to focus on potential new products and compounds that help target or promote overall health and wellness.
Product Development . Our product development team continues to focus on potential new products and compounds that help target or promote overall health and wellness.
In most jurisdictions, renewal annuities or maintenance fees must be paid regularly during the term of the patent to keep the patent in force. 10 Table of Contents Associate Distribution System Overview . Our sales philosophy is to distribute our products through network marketing channels where consumers purchase products for personal consumption or resale.
In most jurisdictions, renewal annuities or maintenance fees must be paid regularly during the term of the patent to keep the patent in force. 10 Table of Contents Associate Distribution System Overview . Our sales philosophy is to distribute our products to consumers for personal consumption or resale.
We believe direct selling is a channel of distribution with healthy cash flow, high return on invested capital, and long-term prospects for global expansion. According to the worldwide direct sales data published by the World Federation of Direct Selling Association, in 2021, approximately 128 million global direct sellers collectively generated annual retail sales of $186.1 billion.
We believe direct selling is a channel of distribution with healthy cash flow, high return on invested capital, and long-term prospects for global expansion. According to the worldwide direct sales data published by the World Federation of Direct Selling Association, in 2022, approximately 115 million global direct sellers collectively generated annual retail sales of $172.9 billion.
As of December 31, 2022, we had 11 patents for technology related to our Ambrotose ® formulation, all of which are in 10 f oreign jurisdictions.
As of December 31, 2023, we had 13 patents for technology related to our Ambrotose ® formulation, all of which are in 11 f oreign jurisdictions.
Overall, as of December 31, 2022, 94 patents have been assigned, issued, granted or validated to Mannatech in major global markets for the technology relating to our Ambrotose ® , Ambrotose AO ® , Ambrotose Life ® , GI‑ProBalance™, PhytoMatrix ® , and NutriVerus™ product formulations, as well as in the field of biomarker assays.
Overall, as of December 31, 2023, 96 patent s have been assigned, issued, granted or validated to Mannatech in major global markets for the technology relating to our Ambrotose ® , Ambrotose AO ® , Ambrotose Life ® , GI‑ProBalance™, PhytoMatrix ® , and NutriVerus™ product formulations, as well as in the field of biomarker assays.
Currently, products in this category are only offered in Korea. 5 Table of Contents The following table summarizes our global product offerings, by category: Product Category Representative Products Integrative Health Ambrotose ® Complex, Ambrotose AO ® , Advanced Ambrotose ® , Ambrotose Life ® Catalyst™, Cognitate ® , Manapol ® Powder, MannaBears™, MultiKids, Nutriverus™, Optimal Support Packets, PhytoMatrix ® , PLUS™, Chaga Cafe, Glycentials™, MannaTea™, PhytoCleanse, GlycoCafe®, MightyBears™, MannaGel™, Tru-C™ and TruCoffee ® Targeted Health BounceBack ® , CardioBALANCE ® , GI-ProBalance ® Slimstick, GI-Zyme ® , GI-Defense®, Blood Sugar ProBalance, ImmunoSTART ® , Manna-C ™, MannaBOOM ® Slimsticks, MannaCLEANSE™, Omega-3 with Vitamin D3, PhytAloe ® , I-Start, MannaAloe ® with AloePrime ® , Chlorophyll, MANNAGEL™, MegaKids, GlyCollagen con Aloe Prime, M Gold+ con aloe Prime™ and GlycoForce + con aloePrime™ Weight and Fitness OsoLean ® , SPORT™, TruHealth Fat Loss System, including: TruPLENISH™, TruPURE ® , TruSHAPE™, EMPACT+ ® , EM∙PACT ® and Mannashake Skin Care Emprizone ® , FIRM with Ambrotose ® , Uth ® Facial Cleanser, Uth ® Skin Rejuvenation Crème, Uth ® Moisturizer, FreshDen ® , Luminovation™ and MannaDent Essentials Catalyst™ Multivitamin, Eye Support, Liver Support, Joint Support and SUPERFOOD Home Living SERENITY Oils and Blends, Organt® and PURO A significant portion of our revenue is derived from our Ambrotose Life ® , TruHealth ™ , Advanced Ambrotose ® , Manapol® Powder and Optimal Support Packets.
Currently, products in this category are only offered in Korea. 5 Table of Contents The following table summarizes our global product offerings, by category: Product Category Representative Products Integrative Health Ambrotose ® Complex, Ambrotose AO ® , Advanced Ambrotose ® , Ambrotose Life ® Catalyst™, Cognitate ® , Manapol ® Powder, MannaBears ® , MultiKids, Nutriverus™, Optimal Support Packets, PhytoMatrix ® , PLUS™, Chaga Cafe, Glycentials™, MannaTea™, PhytoCleanse, GlycoCafe®, MightyBears ® , MannaGel™, Tru-C™ and TruCoffee ® Targeted Health BounceBack ® , CardioBALANCE ® , GI-ProBalance ® , GI-Zyme ® , GI-Defense®, Blood Sugar ProBalance, ImmunoSTART ® , Manna-C ™, MannaBOOM ® , MannaCLEANSE™, Omega-3 with Vitamin D3, PhytAloe ® , I-Start, MannaAloe ® with AloePrime ® , Chlorophyll, MANNAGEL™, MegaKids, GlyCollagen con Aloe Prime, M Gold+ con aloe Prime™ and GlycoForce + con aloePrime™ , EnzymeProBalance and Trulu ™ AM/PM Weight and Fitness OsoLean ® , SPORT™, TruHealth™ Fat Loss System, including: TruHealth™ Shake, TruHealth™ Cleanse, TruSHAPE™, EM∙PACT ® and Mannashake™ Skin Care Emprizone ® , FIRM with Ambrotose ® , FreshDen ® , Luminovation™ and MannaDent Essentials Catalyst™ Multivitamin, Eye Support, Liver Support, Joint Support SUPERFOOD, Sleep Support gummies and Stress Support gummies Home Living Organt® and PURO A significant portion of our revenue is derived from our Ambrotose, Ambrotose Life ® , TruHealth ™ , Manapol®, and Optimal Support Packets products.
Provide Outstanding Product Value and Results to Customers. We work to ensure that all associates and their customers have a great experience with each of our products that deliver tangible results, are supported by science, and are backed by a powerful satisfaction guarantee. Mannatech has created a culture around Customer Obsession.
Provide Outstanding Product Value and Results to Customers. We work to ensure that all associates and their customers have a great experience with each of our products that deliver tangible results, are supported by science, and are backed by a powerful satisfaction guarantee.
Our entire management team is committed to delivering high-quality products and superior service. 9 Table of Contents Business Strategy Our long-term goal is to be one of the world’s leading network marketing companies founded on the best science-based proprietary products by incorporating a powerful global independent network distribution model into our charitable giving program.
Our entire management team is committed to delivering high-quality products and superior service. Business Strategy Our long-term goal is to be one of the world’s leading direct sellers of nutritional supplements founded on the best science-based proprietary products by incorporating a powerful global independent network distribution model and our charitable giving program.
If we discover abuse of the refund policy, we may terminate the associate's or preferred customer's account. 12 Table of Contents Information Technology Systems Our information technology and e-commerce systems include a transaction-processing database, financial systems, an associate management system, and comprehensive management tools that are designed to: • minimize the time required to process orders and distribute products; • provide customized ordering information; • quickly respond to information requests, including providing detailed and accurate information to independent associates about qualification and downline activity; • provide detailed reports about paid commissions and incentives; • support order processing and customer service departments; and • help monitor, analyze, and report operating and financial results.
Information Technology Systems Our information technology and e-commerce systems include a transaction-processing database, financial systems, an associate management system, and comprehensive management tools that are designed to: • minimize the time required to process orders and distribute products; • provide customized ordering information; • quickly respond to information requests, including providing detailed and accurate information to independent associates about qualification and downline activity; • provide detailed reports about paid commissions and incentives; • support order processing and customer service departments; and • help monitor, analyze, and report operating and financial results.
Employees At December 31, 2022 and 2021, we employed 228 and 247 people, respectively, as set forth below: 2022 2021 Americas 133 146 Asia/Pacific 83 89 EMEA 12 12 Total 228 247 2022 2021 Full-time employees 228 246 Part-time employees — 1 Total 228 247 These numbers do not include our independent associates, who are independent contractors and are not employees. 22 Table of Contents
Employees At December 31, 2023 and 2022, we employed 213 and 228 people, respectively, as set forth below: 2023 2022 Americas 123 133 Asia/Pacific 83 83 EMEA 7 12 Total 213 228 2023 2022 Full-time employees 213 228 Total 213 228 These numbers do not include our independent associates, who are independent contractors and are not employees. 22 Table of Contents
Independent associates and preferred customers purchase our products at a discounted wholesale value. Independent associates are eligible to participate in our global associate career and compensation plan. All of our associates are independent contractors.
We principally distribute our products through network marketing channels where independent associates and preferred customers purchase our products at a discounted wholesale value. Independent associates are eligible to participate in our global associate career and compensation plan. All of our associates are independent contractors.
This point volume system, referred to as our global seamless downline structure, allows independent associates to build their network by expanding their existing downlines into all international markets except China.
This point volume system, referred to as our global associate career and compensation plan, allows independent associates to build their network by expanding their existing downlines into all international markets except China.
As of December 31, 2022, we had approximately 145,000 active associate and preferred customer positions held by individuals in our network associated with the purchase of our products and packs and/or payment of associate fees within the last 12 months. The Company also operates a non-direct selling business in mainland China.
As of December 31, 2023, we had approximately 145,000 active associate and preferred customer positions held by individuals in our network associated with the purchase of our products and packs and/or payment of associate fees within the last 12 months.
The types of conduct governed by these types of regulations may include: • claims made about our products; • promises or claims of income or other promises or claims by our independent associates; and • sales of products in markets where the products have not been approved or licensed. 20 Table of Contents In some markets, including the United States, improper product claims by independent associates could result in our products being scrutinized by regulatory authorities.
The types of conduct governed by these types of regulations may include: • claims made about our products; • promises or claims of income or other promises or claims by our independent associates; and 20 Table of Contents • sales of products in markets where the products have not been approved or licensed.
Where available, we rely on common law trademark rights to protect our unregistered trademarks, even though such rights do not provide us with the same level of protection as afforded by a United States federal trademark registration. Common law trademark rights are limited to the geographic area in which the trademark is actually used.
Globally, the protection available in foreign jurisdictions may not be as extensive as the protection available to us in the United States. Where available, we rely on common law trademark rights to protect our unregistered trademarks, even though such rights do not provide us with the same level of protection as afforded by a United States federal trademark registration.
Information for each of our two most recent fiscal years, with respect to our net sales, results of operations, and identifiable assets is set forth in the Consolidated Financial Statements of this report.
Our common stock trades on The Nasdaq Global Select Market (“Nasdaq”) under the symbol “MTEX.” Information for each of our two most recent fiscal years, with respect to our net sales, results of operations, and identifiable assets is set forth in the Consolidated Financial Statements of this report.
We believe our board members have a wealth of knowledge and experience in most aspects of our business operations and are especially well versed in network marketing, finance, nutritional products, regulatory matters, and corporate governance.
At December 31, 2023, our Board of Directors is composed of five directors, including three independent directors. We believe our board members have a wealth of knowledge and experience in all aspects of our business operations and are especially well versed in network marketing, finance, nutritional products, regulatory matters, and corporate governance.
These contractors must be compliant and current with required certifications and they must strictly adhere to our own quality standards for all markets.
Mannatech uses only qualified manufacturing contractors to produce, test, and package our finished products. These contractors must be compliant and current with required certifications and they must strictly adhere to our own quality standards for all markets.
We use systematic processes for the research and development of our unique proprietary product formulas, as well as the identification of quality suppliers and manufacturers.
We use systematic processes for the research and development of our unique proprietary product formulas, as well as the identification of quality suppliers and manufacturers. Our research and quality assurance programs are outlined on our corporate websites, www.mannatech.com and www.allaboutmannatech.com .
To support our research and development efforts, we have strategic alliances with our suppliers, consultants, and manufacturers that allow us to effectively identify and develop high-quality, innovative, proprietary products that increase our competitive advantage in the marketplace.
To support our research and development efforts, we have strategic alliances with our suppliers, consultants, and manufacturers that allow us to effectively identify and develop high-quality, innovative, proprietary products that increase our competitive advantage in the marketplace. 7 Table of Contents These efforts include developing and maintaining quality standards, supporting development efforts for new ingredients and compounds, and improving or enhancing existing products or ingredients.
Due to the unique nature of each ingredient, important components used in the formulation of our Ambrotose ® complex, we are unable to identify an alternative supplier at this time for these ingredients. Industry Overview Nutrition Industry. We operate in the nutritional supplement industry and distribute and sell our products through our own global network marketing channel.
Due to the unique nature of this ingredient and important components used in the formulation of our Ambrotose products, we are unable to identify an alternative supplier at this time for this ingredient. 6 Table of Contents Industry Overview Nutrition Industry.
This review could result in our products being re-classified as drugs or classified into another product category that requires stricter regulations or labeling changes.
In some markets, including the United States, improper product claims by independent associates could result in our products being scrutinized by regulatory authorities. This review could result in our products being re-classified as drugs or classified into another product category that requires stricter regulations or labeling changes.
Certain of our supply agreements contain exclusivity clauses for the supply of certain raw materials and products, some of which are conditioned upon compliance with minimum purchase requirements.
We procure select products from single vendors who control certain product formulations, ingredients, or other intellectual property rights associated with such products. Certain of our supply agreements contain exclusivity clauses for the supply of certain raw materials and products, some of which are conditioned upon compliance with minimum purchase requirements.
The nutritional supplement industry is fast-paced, highly fragmented, and intensely competitive. It includes companies that manufacture and distribute products that are intended to support the body’s performance and well-being. Nutritional supplements include vitamins, minerals, dietary supplements, herbs, botanicals, and compounds derived therefrom.
We operate in the nutritional supplement industry and distribute and primarily sell our products through our own global network marketing channel. The nutritional supplement industry is fast paced, highly fragmented, and intensely competitive. It includes companies that manufacture and distribute products that are intended to support the body’s performance and well-being.
Prior to 1990, all dietary supplements in the United States were tightly regulated by the FDA and only included essential nutrients such as vitamins, minerals, and proteins. In 1990, the Nutrition Labeling and Education Act expanded the category to include “herbs or similar nutritional substances”, but the FDA maintained control over pre-market approval.
Nutritional supplements include vitamins, minerals, dietary supplements, herbs, botanicals, and compounds derived therefrom. Prior to 1990, all dietary supplements in the United States were tightly regulated by the FDA and only included essential nutrients such as vitamins, minerals, and proteins.
Research and development efforts include new product development, enhancement of existing products, clinical studies and trials, FDA compliance, safety monitoring/adverse event reporting and science and substantiation of products. Quality Assurance Program . Mannatech uses only qualified manufacturing contractors to produce, test, and package our finished products.
In addition, our research and development team identifies other quality-driven suppliers and manufacturers for both our global and regional needs. Research and development efforts include new product development, enhancement of existing products, clinical studies and trials, FDA compliance, safety monitoring/adverse event reporting and science and substantiation of products. Quality Assurance Program .
Under DSHEA, vendors of dietary supplements are now able to educate consumers regarding the effects of certain component ingredients. Nutritional supplements are available through mass-market retailers, drug stores, supermarkets, discount stores, health food stores, mail order companies, and direct sales organizations.
Nutritional supplements are available through mass-market retailers, drug stores, supermarkets, discount stores, health food stores, direct-to-consumer companies, and direct sales organizations.
However, in 1994, the Dietary Supplement Health and Education Act of 1994 (“DSHEA”) was passed in the United States, drastically changing the dietary supplement marketplace. DSHEA was instrumental in expanding the category of dietary supplements to further include herbal and botanical supplements and ingredients such as ginseng, fish oils, enzymes, and various mixtures of these ingredients.
DSHEA was instrumental in expanding the category of dietary supplements to further include herbal and botanical supplements and ingredients such as ginseng, fish oils, enzymes, and various mixtures of these ingredients. Under DSHEA, vendors of dietary supplements are now able to educate consumers regarding the effects of certain component ingredients.
The Company's sole reporting segment is one where we sell proprietary nutritional supplements, skin care and anti-aging products, and weight-management and fitness products through network marketing distribution channels operating in twenty-four markets. Mannatech’s subsidiary in China, Meitai, operates under a cross-border e-commerce model, where consumers in China can buy Mannatech products directly from Meitai via the internet. Products.
We operate in the nutritional supplement industry. The Company's sole reporting segment is one where we sell proprietary nutritional supplements, skin care and anti-aging products, and weight-management and fitness products operating in twenty-five markets. The Company sells its products in most markets through network marketing distribution channels.
Targeted Health , which is designed to give bodies an extra edge with products designed to target specific areas and provide additional nutrients that help support body system health. Weight and Fitness , which offers products designed to curb appetite and burn fat, build lean muscle tissue, and support recovery from overexertion.
Weight and Fitness , which offers products designed to curb appetite and burn fat, build lean muscle tissue, and support recovery from overexertion.
We had approximately 145,000 active associate and preferred customer positions held by individuals that purchased our products and/or packs or paid associate fees during the year ended December 31, 2022, and we had approximately 163,000 active associate and preferred customer positions held by individuals that purchased our products and/or packs or paid associate fees during the year ended December 31, 2021.
We had approximately 145,000 active associate and preferred customer positions held by individuals that purchased our products and/or packs or paid associate fees during each of the years ended December 31, 2023, and 2022. We have a loyalty program through which consumers earn loyalty points from qualified automatic orders, which can be applied to future purchases. Independent Associate Development .
In addition, this team works in collaboration with other research firms, universities, institutions, and scientists. Our products have been the focus of numerous pre-clinical and clinical studies.
Mannatech’s team of experienced researchers and scientists continually reviews the latest published research data, attends scientific conferences, and draws upon its vast knowledge and expertise to develop new products and support existing ones. In addition, this team works in collaboration with other research firms, universities, institutions, and scientists. Our products have been the focus of numerous preclinical and clinical studies.
Integrative Health , which offers a variety of nutritional supplements that are designed to aid in optimizing overall health and wellness. This category includes a variety of daily nutritional supplements, health solutions for children, and additional nutrients designed to help keep specific body systems at optimal levels.
This category includes a variety of daily nutritional supplements, health solutions for children, and additional nutrients designed to support the body's optimal levels. Targeted Health , which is designed to give bodies an extra edge with products designed to target specific areas and provide additional nutrients that help support body system health.
These events provide an interactive venue for introducing new products and services and allow interaction between our management teams, outside researchers, and independent associates. Flexible Operating Strategy . We believe efficiency, focus, and flexibility are paramount to our operations.
These events provide an interactive venue for introducing new products and services and allow interaction between our management teams, outside researchers, and independent associates. Experience and Depth of Our Management Team and Board of Directors . We believe that our team of executives has extensive experience in every aspect of business operations and is highly focused on our success.
However, as a safety measure, we continue to identify and approve alternative suppliers and manufacturers to ensure that our global demands are met in a timely manner and to help minimize any risk of business interruption. 6 Table of Contents We procure select products from single vendors who control certain product formulations, ingredients, or other intellectual property rights associated with such products.
We believe our suppliers and manufacturers are capable of meeting our current and projected inventory requirements over the next several years. However, as a safety measure, we continue to identify and approve alternative suppliers and manufacturers to ensure that our global demands are met in a timely manner and to help minimize any risk of business interruption.
Our Customers are at the center of everything we do. Intellectual Property Trademarks. We pursue registrations for various trademarks associated with our key products and branding initiatives. As of December 31, 2022, we had 41 registered trademarks in the United States and three trademark applications pending with the United States Patent and Trademark Office.
Mannatech has created a culture around “customer obsession.” Our customers are at the center of everything we do. 9 Table of Contents Intellectual Property Trademarks. We pursue registrations for various trademarks associated with our key products and branding initiatives.
Mannatech introduced two unique drink mixes in Mexico, MannaForce+ and M Gold+. Mannatech offers products that include glyconutrients, a unique category of nutrients sourced from plants and designed to provide a variety of health benefits. We focus on producing products that are from natural sources, as well as other scientifically based efficacious sources.
We focus on producing products that are from natural sources, as well as other scientifically based efficacious sources in the following product categories: Integrative Health , which offers a variety of nutritional supplements that are designed to aid in optimizing overall health and wellness.
As of December 31, 2022, we had 592 registered trademarks in 40 countries and 16 trademark applications pending in 11 foreign jurisdictions. Globally, the protection available in foreign jurisdictions may not be as extensive as the protection available to us in the United States.
As of December 31, 2023, we had 36 registered trademarks in the United States and five trademark applications pending with the United States Patent and Trademark Office. As of December 31, 2023, we had 559 registered trademarks in 35 foreign jurisdictions and 42 trademark applications pending in 11 foreign jurisdictions.
We have a loyalty program through which consumers earn loyalty points from qualified automatic orders, which can be applied to future purchases. Independent Associate Development . Network marketing consists of enrolling individuals who build a network of independent associates, preferred customers, and retail customers who purchase products.
Network marketing consists of enrolling individuals who build a network of independent associates, preferred customers, and retail customers who purchase products.
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Customs regulations in China include purchase limits to ensure that purchased products are for personal consumption. Our common stock trades on The Nasdaq Global Select Market (“Nasdaq”) under the symbol “MTEX”.
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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. Preferred customers do not participate in the Company’s compensation plan. The Company also operates a non-direct selling business in mainland China.
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Revenue from these products were as follows for the years ended December 31, 2022 and 2021 (in thousands, except percentages) : 2022 2021 Sales by product % of total net sales Sales by product % of total net sales Ambrotose Life ® $ 28,734 20.9 % $ 28,776 18.0 % TruHealth ™ 15,730 11.5 % 18,010 11.3 % Advanced Ambrotose ® 9,624 7.0 % 11,158 7.0 % Manapol ® Powder 7,909 5.8 % 13,141 8.2 % Optimal Support Packets 6,916 5.0 % 7,593 4.7 % Total $ 68,913 50.2 % $ 78,678 49.2 % Product Development .
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Customs regulations in China include purchase limits to ensure that purchased products are for personal consumption. In June 2023, the Company launched a tiered affiliate program in the United States under the brand name, “Trulu™” (“Trulu”). The Trulu brand is operated by our wholly owned subsidiary, New Economy Marketing Opportunities, LLC (“NEMO”), and is separate from our network marketing business.
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We believe our suppliers and manufacturers are capable of meeting our current and projected inventory requirements over the next several years.
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Trulu affiliates earn commissions on the sale of Trulu products under a commission plan that is separate from the Mannatech network marketing commission plan. Although Trulu’s affiliate program is a separate business model with its own compensation structure, our Mannatech associates may participate in the Trulu affiliate program and earn commissions on the sale of Trulu products.
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Our research and quality assurance programs are outlined on our corporate websites, www.mannatechscience.org , www.mannatech.com , and www.allaboutmannatech.com . 7 Table of Contents Mannatech’s team of experienced researchers and scientists continually reviews the latest published research data, attends scientific conferences, and draws upon its vast knowledge and expertise to develop new products and support existing ones.
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Mannatech’s subsidiary in China, Meitai, operates under a cross-border e-commerce model, where consumers in China can buy Mannatech products directly from Meitai via the internet. Mannatech's subsidiary, NEMO, operates an affiliate business model under the brand name, “Trulu”, in the United States. Products.
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These efforts include developing and maintaining quality standards, supporting development efforts for new ingredients and compounds, and improving or enhancing existing products or ingredients. In addition, our research and development team identifies other quality-driven suppliers and manufacturers for both our global and regional needs.
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Mannatech introduced two unique drink mixes in Mexico, MannaForce+ and M Gold+. • In 2023, Mannatech's latest product launches included our Korean Luminovation skincare line in the United States and Australia. Sleep and Stress Support gummies were introduced in the United States as part of the Essentials product line.
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For more than a decade, we have contracted with third parties to supply and manufacture our proprietary raw materials and products, which we believe allows us to minimize capital expenditures, capitalize on such parties’ expertise, and build additional resources for strategic alliances in the areas of distribution and logistics, product registration, and export requirements.
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Korea had numerous product launches, including: MannaTea, MultiVItaGummy, Immune Jelly, Luminovation Glyco, Collagen Capsule Kit, Waterfull Sun milk and Pet Food. Additionally, our subsidiary, NEMO, launched the Trulu AM/PM product. Mannatech offers products that include glyconutrients, a unique category of nutrients sourced from plants and designed to provide a variety of health benefits.
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By contracting with various suppliers and manufacturers and by outsourcing distribution for all of our operations, we believe we can quickly adapt operations to current demands in a timely, efficient, and cost-effective manner. We monitor the performance of our third-party contractors to ensure they maintain a high quality of service.
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In 1990, the Nutrition Labeling and Education Act expanded the category to include “herbs or similar nutritional substances,” but the FDA maintained control over pre-market approval. However, in 1994, the Dietary Supplement Health and Education Act of 1994 (“DSHEA”) was passed in the United States, drastically changing the dietary supplement marketplace.
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In addition, we identify alternative sources for our raw materials suppliers and finished goods manufacturers to help prevent any risk of interruption in production should any existing contractors become unable to perform satisfactorily. Experience and Depth of Our Management Team and Board of Directors .
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This app is a hub for the associates’ business, providing prompts to help with delivering excellent customer care and maintaining a person connection with customers and downline members. ▪ offering, in the United States and Canada, an effective compilation of online marketing and training tools; ▪ offering updated compliance programs for our independent associates; ▪ providing strategically based distribution fulfillment centers to ensure products are shipped on time and at minimal cost; and ▪ sponsoring marketing events, designed to provide information, education, and motivation for our dedicated business-building associates and to help stimulate business development.
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We believe that our team of executives has extensive experience in every aspect of business operations and is highly focused on our success. At December 31, 2022, our Board of Directors is composed of six directors, including four independent directors.
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Common law trademark rights are limited to the geographic area in which the trademark is actually used.
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If we discover abuse of the refund policy, we may terminate the associate's or preferred customer's account.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOne of our supply agreements, under which the supplier provides us with certain aloe vera-based raw materials, requires us to purchase raw materials in an aggregate amount of $ 7.9 million through 2024. Failure to satisfy minimum purchase requirements could result in the loss of exclusivity, which could adversely affect our business.
Biggest changeCertain of our supply agreements contain exclusivity clauses for the supply of certain raw materials and products, some of which are conditioned upon compliance with minimum purchase requirements. One of our supply agreements, under which the supplier provides us with certain aloe vera-based raw materials, requires us to purchase raw materials in an aggregate amount of $4.2 million through 2024.
However, our business, profitability, and growth prospects could be adversely affected if we fail to receive adequate protection of our proprietary rights. Although several patents pertaining to Ambrotose ® technology have expired, Mannatech continues to actively explore additional patent protection of its technology and pursue expanded patent protection strategies.
However, our business, profitability, and growth prospects could be adversely affected if we fail to receive adequate protection of our proprietary rights. Although several patents pertaining to our Ambrotose ® technology have expired, Mannatech continues to actively explore additional patent protection of its technology and pursue expanded patent protection strategies.
These regulations primarily involve the following: • the formulation, manufacturing, packaging, labeling, distribution, importation, sale, and storage of our products; • the health and safety of dietary supplements, cosmetics and foods; • trade practice laws and network marketing laws (e.g., licensing and registration requirements; regulations pertaining to commission payments); • our product claims and advertising by our independent associates; • our network marketing system; • pricing restrictions regarding transactions with our foreign subsidiaries or other related parties and similar regulations that affect our level of foreign taxable income; • the assessment of customs duties; 33 Table of Contents • further taxation of our independent associates, which may obligate us to collect additional taxes and maintain additional records; and • export and import restrictions.
These regulations primarily involve the following: • the formulation, manufacturing, packaging, labeling, distribution, importation, sale, and storage of our products; • the health and safety of dietary supplements, cosmetics and foods; • trade practice laws and network marketing laws (e.g., licensing and registration requirements; regulations pertaining to commission payments); • our product claims and advertising by our independent associates; • our network marketing system; • pricing restrictions regarding transactions with our foreign subsidiaries or other related parties and similar regulations that affect our level of foreign taxable income; 33 Table of Contents • the assessment of customs duties; • further taxation of our independent associates, which may obligate us to collect additional taxes and maintain additional records; and • export and import restrictions.
Most of our patents for the Ambrotose AO ® , GI-ProBalance ® ™, PhytoMatrix ® , NutriVerus™, and PhytoBlend ® formulations and our patents in the field of biomarker assays do not expire for another three or more years. 24 Table of Contents Our inability to develop and introduce new products that gain independent associate, preferred customer, and market acceptance could harm our business.
Most of our patents for the Ambrotose AO ® , GI-ProBalance ® ™, PhytoMatrix ® , NutriVerus™, and PhytoBlend ® formulations and our patents in the field of biomarker assays do not expire for another two or more years. 24 Table of Contents Our inability to develop and introduce new products that gain independent associate, preferred customer, and market acceptance could harm our business.
Although we maintain policies and processes surrounding the protection of sensitive data, which we believe to be adequate, there can be no assurances that we will not be subject to such claims in the future. 28 Table of Contents We rely upon our existing cash balances and cash flow from operations to fund our business and meet our contractual obligations.
Although we maintain policies and processes surrounding the protection of sensitive data, which we believe to be adequate, there can be no assurances that we will not be subject to such claims in the future. We rely upon our existing cash balances and cash flow from operations to fund our business and meet our contractual obligations.
Any substantial compromise of our data security, whether externally or internally, or misuse of associate, customer, or employee data, could cause considerable damage to our reputation, cause the public disclosure of confidential information, and result in lost sales, significant costs, and litigation, which would negatively affect our financial position and results of operations.
Any substantial compromise of our data security, whether externally or internally, or misuse of associate, customer, or employee data, could cause considerable damage to our 28 Table of Contents reputation, cause the public disclosure of confidential information, and result in lost sales, significant costs, and litigation, which would negatively affect our financial position and results of operations.
As of December 31, 2022, we had approximately 145,000 active associates and preferred customer positions held by individuals who purchased our products and/or packs or paid associate fees within the last 12 months, of which 185 occupied the highest associate levels under our global compensation plan. These independent associate leaders are important in maintaining and growing our revenue.
As of December 31, 2023, we had approximately 145,000 active associates and preferred customer positions held by individuals who purchased our products and/or packs or paid associate fees within the last 12 months, of which 159 occupied the highest associate levels under our global compensation plan. These independent associate leaders are important in maintaining and growing our revenue.
As of December 31, 2022, we had 11 pat ents for the technology relating to our Ambrotose ® formulation, all of which were issued, granted, and validated in 10 foreign jurisdictions. In addition, we have entered into confidentiality agreements with our independent associates, suppliers, manufacturers, directors, officers, and consultants to help protect our proprietary rights.
As of December 31, 2023, we had 13 pat ents for the technology relating to our Ambrotose ® formulation, all of which were issued, granted, and validated in 11 foreign jurisdictions. In addition, we have entered into confidentiality agreements with our independent associates, suppliers, manufacturers, directors, officers, and consultants to help protect our proprietary rights.
Additionally, many of the international countries in which we operate have proposed or enacted laws or regulations on the appropriate use and disclosure of financial and personal data. The EU adopted the General Data Protection Regulation (“GDPR”) on April 27, 2016. The GDPR went into effect on May 25, 2018.
Additionally, many U.S. states and countries in which we operate have proposed or enacted laws or regulations on the appropriate use and disclosure of financial and personal data. The EU adopted the General Data Protection Regulation (“GDPR”) on April 27, 2016. The GDPR went into effect on May 25, 2018.
Several factors affect our ability to attract and retain independent associates and preferred customers, including: • on-going motivation of our independent associates; • general economic conditions; • significant changes in the amount of commissions paid; • public perception and acceptance of the wellness industry; • public perception and acceptance of network marketing; • public perception and acceptance of our business and our products, including any negative publicity; • the limited number of people interested in pursuing network marketing as a business; • our ability to provide proprietary quality-driven products that the market demands; and • competition in recruiting and retaining independent associates.
Several factors affect our ability to attract and retain independent associates and preferred customers, including: • on-going motivation of our independent associates; • general economic conditions; • significant changes in the amount of commissions paid; • public perception and acceptance of the wellness industry; • public perception and acceptance of network marketing; • public perception and acceptance of our business and our products, including any negative publicity; • the limited number of people interested in pursuing network marketing as a business; • our ability to provide proprietary quality-driven products that the market demands; and • competition with other direct selling companies and gig economy companies in recruiting and retaining independent associates.
Foreign Corrupt Practices Act, and similar anti-bribery and corruption acts and regulations in many of the markets in which we operate; • trademark availability and registration issues; • changes in exchange rates; • changes in taxation; • wars, civil unrest, acts of terrorism and other hostilities; • political, economic, and social conditions; • the effects of COVID-19; • changes to trade practice laws or regulations governing direct selling and network marketing; • increased government scrutiny surrounding direct selling and network marketing; • changes in the perception of network marketing; and • risk of our independent associates offering business opportunities in China.
Foreign Corrupt Practices Act, and similar anti-bribery and corruption acts and regulations in many of the markets in which we operate; • trademark availability and registration issues; • changes in exchange rates; • changes in taxation; • wars, civil unrest, acts of terrorism, conflicts and other hostilities; • political, economic, and social conditions; • the continuing effects of COVID-related factors; 29 Table of Contents • changes to trade practice laws or regulations governing direct selling and network marketing; • increased government scrutiny surrounding direct selling and network marketing; • changes in the perception of network marketing; and • risk of our independent associates offering business opportunities in China.
We have rigorous product safety and quality standards, which we expect our third-party contract manufacturers to meet. However, despite our commitment to product safety and quality, our contract manufacturers may not always meet these standards, particularly as we expand our manufacturing operations and product offerings.
We have rigorous product safety and quality standards, 25 Table of Contents which we expect our third-party contract manufacturers to meet. However, despite our commitment to product safety and quality, our contract manufacturers may not always meet these standards, particularly as we expand our manufacturing operations and product offerings.
Our success and competitive position largely depend on our ability to protect the following proprietary rights: • our Ambrotose ® complex, a glyconutritional dietary supplement ingredient consisting of a blend of monosaccharides, or sugar molecules, used in the majority of our products; • the MTech AO Blend ® formulation, our proprietary antioxidant technology used in the Ambrotose AO ® product; and • a compound used in our reformulated Advanced Ambrotose ® complex that allows for a more potent concentration of the full range of mannose-containing polysaccharides occurring naturally in aloe.
Our success and competitive position largely depend on our ability to protect the following proprietary rights: • our Ambrotose ® complex, a glyconutritional dietary supplement consisting of a blend of monosaccharides, or sugar molecules, which is a stand-alone product and also used as an ingredient in many of our products; • the MTech AO Blend ® formulation, our proprietary antioxidant technology used in the Ambrotose AO ® product; and • a compound used in our reformulated Advanced Ambrotose ® complex that allows for a more potent concentration of the full range of mannose-containing polysaccharides occurring naturally in aloe.
For example, our 2022 net sales decreased 7.6% on a Constant dollar basis (see Item 7, Non-GAAP Financial Measures ), and unfavorable foreign exchange caused a $10.5 million decrease in GAAP net sales as compared to 2021. In other words, 2022 sales would have been $10.5 million higher than the reported value, except for the impact of foreign exchange.
For example, our 2023 net sales decreased 2.1% on a Constant dollar basis (see Item 7, Non-GAAP Financial Measures ), and unfavorable foreign exchange caused a $2.3 million decrease in GAAP net sales as compared to 2022. In other words, 2023 sales would have been $2.3 million higher than the reported value, except for the impact of foreign exchange.
If our contract manufacturers fail to comply with our product safety and quality standards or applicable law, or if our products are or become contaminated, damaged, adulterated, mislabeled, or misbranded, whether caused by us or someone in our supply chain or events outside of our or their control, we may be required to undertake costly remediation efforts, which may include product recalls, formulation changes, the destruction of inventory, and supply chain interruption, and may become subject to negative publicity, regulatory action or fines, and product liability claims, which could materially harm our reputation, business, financial condition, and operating results. 25 Table of Contents The loss of suppliers or shortages of raw materials could have an adverse effect on our business, financial condition, or results of operations.
If our contract manufacturers fail to comply with our product safety and quality standards or applicable law, or if our products are or become contaminated, damaged, adulterated, mislabeled, or misbranded, whether caused by us or someone in our supply chain or events outside of our or their control, we may be required to undertake costly remediation efforts, which may include product recalls, formulation changes, the destruction of inventory, and supply chain interruption, and may become subject to negative publicity, regulatory action or fines, and product liability claims, which could materially harm our reputation, business, financial condition, and operating results.
Challenges by private parties to the form of our network marketing system could harm our business. 32 Table of Contents We may be subject to challenges by private parties, including our independent associates and preferred customers, to the form of our network marketing system or elements of our business.
We may be subject to challenges by private parties, including our independent associates and preferred customers, to the form of our network marketing system or elements of our business.
For the year ended December 31, 2022, we recognized 78.3% of net sales in markets outside of the United States and 69.7% in markets outside of the Americas. For the year ended December 31, 2021, we recognized 78.1% of net sales in markets outside of the United States and 70.7% in markets outside of the Americas.
For the year ended December 31, 2023, we recognized 77.1% of net sales in markets outside of the United States and 67.6% in markets outside of the Americas. For the year ended December 31, 2022, we recognized 78.3% of net sales in markets outside of the United States and 69.7% in markets outside of the Americas.
We believe that we, our suppliers, and our manufacturers maintain adequate product liability insurance coverage. However, a substantial future product liability claim could exceed the amount of insurance coverage or could be excluded under the terms of an existing insurance policy, which could adversely affect our overall future financial condition.
However, a substantial future product liability claim could exceed the amount of insurance coverage or could be excluded under the terms of an existing insurance policy, which could adversely affect our overall future financial condition.
As of December 31, 2022, our directors and executive officers collectively with their families and affiliates, beneficially owned approximately 47.22% of our total outstanding common stock.
As of December 31, 2023, our directors and executive officers collectively with their families and affiliates, beneficially owned approximately 45.1% of our total outstanding common stock.
We appeal to a wide demographic consumer profile and offer a broad selection of health and wellness products. A downturn in the economy, including as a result of COVID-19, could adversely impact consumer purchases of discretionary items such as health and wellness products.
We appeal to a wide demographic consumer profile and offer a broad selection of health and wellness products. A downturn in the economy, including as a result of the continuation of COVID-related factors or other rapidly spreading communicable diseases, could adversely impact consumer purchases of discretionary items such as health and wellness products.
A downturn in the economy, including as a result of COVID-19, could affect consumer purchases of discretionary items such as the health and wellness products that we offer, which could have an adverse effect on our business, financial condition, profitability, and cash flows.
A downturn in the economy, including as a result of continuing COVID-related factors such as variants and post-COVID conditions, or other communicable and rapidly spreading diseases could affect consumer purchases of discretionary items such as the health and wellness products that we offer, which could have an adverse effect on our business, financial condition, profitability, and cash flows.
We have experienced challenges in getting these materials and ingredients to our contract manufacturers and finished products to our distribution centers resulting from reductions in global transportation capacity and other logistical issues within the supply chain.
Beginning in 2020 and continuing through 2023 , the Company experienced challenges in getting certain materials and ingredients to our contract manufacturers and finished products to our distribution centers resulting from reductions in global transportation capacity and other logistical issues within the supply chain.
The price of our common stock is subject to sudden and material increases and decreases. Decreases could adversely affect investments in our common stock.
Risks Related to Owning Our Common Stock Our stock price is volatile and may fluctuate significantly. The price of our common stock is subject to sudden and material increases and decreases. Decreases could adversely affect investments in our common stock.
The suspension of issuing direct selling licenses continues. Many direct selling companies operating in China are still experiencing negative effects to their business operations including limited sales meetings, media scrutiny, and unfavorable consumer sentiment towards direct selling companies. Chinese officials of various ministries and agencies stated that they will continue to monitor healthcare product and direct selling companies.
The suspension of issuing direct selling licenses continues. Many direct selling companies operating in China are still experiencing negative effects to their business operations including limited sales meetings, media scrutiny, and unfavorable consumer sentiment towards direct selling companies.
The suspension on issuing direct selling licenses remains in effect and it is unclear whether there will be changes to the application processes if and when the suspension is lifted. 34 Table of Contents Increased regulatory scrutiny of nutritional supplements as well as new regulations that are being adopted in some of our markets with respect to nutritional supplements could result in more restrictive regulations and harm our results if our supplements or advertising activities are found to violate existing or new regulations or if we are not able to effect necessary changes to our products in a timely and efficient manner to respond to new regulations.
Increased regulatory scrutiny of nutritional supplements as well as new regulations that are being adopted in some of our markets with respect to nutritional supplements could result in more restrictive regulations and harm our results if our supplements or advertising activities are found to violate existing or new regulations or if we are not able to effect necessary changes to our products in a timely and efficient manner to respond to new regulations.
In particular, the continued spread of COVID-19 globally could adversely impact our operations, including among others, our manufacturing and supply chain, sales and marketing and clinical trial operations and could have an adverse impact on our business and our financial results.
In particular, the spread of new COVID-19 variants or other rapidly spreading communicable diseases globally could adversely impact our operations, including among others, our manufacturing and supply chain, sales and marketing and clinical trial operations and could have an adverse impact on our business and our financial results. We maintain supply agreements with our suppliers and manufacturers.
Specifically, we are susceptible to adverse or negative publicity regarding: • the nutritional supplements industry; • skeptical consumers; • competitors; • the safety and quality of our products and/or our ingredients; • regulatory investigations of our products or our competitors’ products; • the actions of our independent associates; • the direct selling/network marketing industry; and • scandals or regulatory investigations regarding the business practices or products or our competitors, specifically those competitors within the direct selling channel. 27 Table of Contents If our information technology system fails or if the implementation of new information technology systems is not executed efficiently and effectively, our business, financial position, and operating results could be adversely affected.
Specifically, we are susceptible to adverse or negative publicity regarding: • the nutritional supplements industry; • skeptical consumers; • competitors; • the safety and quality of our products and/or our ingredients; • regulatory investigations of our products or our competitors’ products; • the actions of our independent associates; 27 Table of Contents • the direct selling/network marketing industry; and • scandals or regulatory investigations regarding the business practices or products or our competitors, specifically those competitors within the direct selling channel.
The amounts ultimately paid upon resolution of these or subsequent tax audits could be materially different from the amount previously included in our income tax provision, and, therefore, could have a material impact on our profitability. 35 Table of Contents Risks Related to Owning Our Common Stock Our stock price is volatile and may fluctuate significantly.
We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision. The amounts ultimately paid upon 35 Table of Contents resolution of these or subsequent tax audits could be materially different from the amount previously included in our income tax provision, and, therefore, could have a material impact on our profitability.
If we are exposed to product liability claims, we may be liable for damages and expenses, which could affect our overall financial condition, results of operations and cash flows. We could face financial liability from product liability claims if the use of our products results in significant loss or injury.
Failure to satisfy minimum purchase requirements could result in the loss of exclusivity, which could adversely affect our business. If we are exposed to product liability claims, we may be liable for damages and expenses, which could affect our overall financial condition, results of operations and cash flows.
We depend on outside suppliers for raw materials. Our contract manufacturers acquire all of the raw materials for manufacturing our products from third-party suppliers. In the event we were to lose any significant suppliers and have trouble in finding or transitioning to alternative suppliers, it could result in product shortages or product back orders, which could harm our business.
In the event we were to lose any significant suppliers and have trouble in finding or transitioning to alternative suppliers, it could result in product shortages or product back orders, which could harm our business.
For example, in March 2020, the WHO declared the outbreak of COVID-19 as a pandemic, which has spread throughout our international regions and throughout the United States. Beginning in 2020 and continuing through 2022, the Company experienced shortages of raw materials and ingredients for some of its products.
For example, in March 2020, the WHO declared the outbreak of COVID-19 as a pandemic, which spread throughout our international regions and throughout the United States.
We can make no assurances that we will not be exposed to any substantial future product liability claims. Such claims may include claims that our products contain contaminants, that we provide our independent associates and consumers with inadequate instructions regarding product use, or that we provide inadequate warnings concerning side effects or interactions of our products with other substances.
Such claims may include claims that our products contain contaminants, that we provide our independent associates and consumers with inadequate instructions regarding product use, or that we provide inadequate warnings concerning side effects or interactions of our products with other substances. We believe that we, our suppliers, and our manufacturers maintain adequate product liability insurance coverage.
Additionally, escalation by Russia beyond Ukraine and into other countries within the region, could also reduce our sales and have a negative effect on our European operations. 29 Table of Contents The risks outlined above could adversely affect our ability to sell products, obtain international customers, or to operate our international business profitably, which would have a negative impact on our overall business and results of operations.
The risks outlined above could adversely affect our ability to sell products, obtain international customers, or to operate our international business profitably, which would have a negative impact on our overall business and results of operations.
As of December 31, 2022 and 2021, cash and cash equivalents held in bank accounts in foreign countries totaled $11.3 million and $22.6 million, respectively. We maintain supply agreements with our suppliers and manufacturers.
As of December 31, 2023 and 2022, cash and cash equivalents held in bank accounts in foreign countries totaled $3.5 million and $11.3 million, respectively.
Additional funding may not be available or may only be available on unfavorable terms. Risks Related to Our International Operations If our international markets are not successful, our business could suffer.
Risks Related to Our International Operations If our international markets are not successful, our business could suffer.
However, as new variants of the virus continue to emerge, such impact could grow and our business, results of operations, financial position, and cash flows could be materially adversely affected. 30 Table of Contents Risks Related to Regulation If government regulations regarding network marketing change or are interpreted or enforced in a manner adverse to our business, we may be subject to new enforcement actions and material limitations regarding our overall business model.
For example, COVID-19 variants have caused some of the pandemic’s negative impacts to return, and COVID-related factors affected our business in some of our Asian markets. 30 Table of Contents Risks Related to Regulation If government regulations regarding network marketing change or are interpreted or enforced in a manner adverse to our business, we may be subject to new enforcement actions and material limitations regarding our overall business model.
Concentration Risk A significant portion of our revenue is derived from our Ambrotose Life ® , TruHealth ™ , Advanced Ambrotose ® , Manapol® Powder and Optimal Support Packets. A decline in sales value of such products could have a material adverse effect on our earnings, cash flows, and financial position.
Concentration Risk A significant portion of our revenue is derived from our Ambrotose, Ambrotose Life ® , TruHealth ™ , Manapol®, and Optimal Support Packets products.
The extent to which COVID-19 impacts our future operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information which may emerge concerning the severity of multiple new variants of the virus that causes COVID-19, and the actions to contain COVID-19 or treat its impact, or the safety and efficacy of the various vaccines approved to treat COVID-19, among others.
The extent to which COVID-related factors impact our future operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the continued use of updated COVID-19 vaccines, the impact of variants of COVID-19 and post-COVID conditions often referred to as “Long COVID” or “long-haul COVID,” among others.
To date, we have not entered into any hedging contracts or participated in any hedging or derivative activities. The spread of COVID-19 underscores certain risks we face, and the rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact to us of COVID-19.
To date, we have not entered into any hedging contracts or participated in any hedging or derivative activities. COVID-related factors and the possibility of other epidemics or rapidly spreading communicable disease may continue to negatively impact our business.
Removed
Revenue from these products were as follows for the years ended December 31, 2022 and 2021 (in thousands, except percentages) : 2022 2021 Sales by product % of total net sales Sales by product % of total net sales Ambrotose Life ® $ 28,734 20.9 % $ 28,776 18.0 % TruHealth ™ 15,730 11.5 % 18,010 11.3 % Advanced Ambrotose ® 9,624 7.0 % 11,158 7.0 % Manapol ® Powder 7,909 5.8 % 13,141 8.2 % Optimal Support Packets 6,916 5.0 % 7,593 4.7 % Total $ 68,913 50.2 % $ 78,678 49.2 % 26 Table of Contents Our business is not currently exposed to customer concentration risk given that no independent associate has ever accounted for more than 10% of our consolidated net sales.
Added
As previously disclosed, on January 8, 2024, we were notified by David A. Johnson, the Company's Chief Financial Officer, of his resignation from his position effective January 22, 2024. Additionally, as previously disclosed, on March 13, 2024, the Company announced the retirement of Alfredo (Al) Bala, the Chief Executive Officer, on April 1, 2024.
Removed
Certain of our supply agreements contain exclusivity clauses for the supply of certain raw materials and products, some of which are conditioned upon compliance with minimum purchase requirements.
Added
Landen Fredrick will be promoted to President and Chief Executive Officer, and he will continue to serve as interim Chief Financial Officer. We are conducting a search for a permanent Chief Financial Officer, but there is no assurance that we will be able to identify, attract or hire a replacement in a timely manner.
Removed
On March 11, 2020 the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020 the United States declared a national emergency with respect to COVID-19. The spread of COVID-19 underscores certain risks we face in our business that are described in this Annual Report on Form 10-K.
Added
Our inability to develop products, sales platforms, affiliate opportunities, and other initiatives or maintain an affiliate salesforce and market acceptance for our new Trulu brand and products could harm our business. The failure of our Trulu brand and products to attract or gain acceptance from affiliates or consumers could negatively affect our operating results.
Removed
Governmental and non-governmental organizations may not effectively combat the spread and severity of COVID-19, which could adversely impact our profitability. The adverse economic effects of COVID-19 may materially decrease demand for our products based on changes in consumer behavior or the restrictions in place by governments trying to curb the outbreak.
Added
Our operating results have been and could be adversely affected if the Trulu products, affiliate platform, and business opportunity do not generate sufficient enthusiasm and financial benefit to attract affiliates who are interested in selling the Trulu products, building a customer base, and promoting the affiliate program. In 2023, our Trulu product sales and affiliate participation were below expectations.
Removed
For example, we rescheduled in-person corporate sponsored events in 2021 and in 2022, opting instead to hold virtual events. In many cases, our associates canceled in-person sales meetings and utilized online platforms to meet virtually.
Added
Potential factors affecting interest in the Trulu affiliate program and its products include, among other things, perceived product quality and value, similarities to other products, product effectiveness, growth of the gig economy, perceived economic success in the affiliate business opportunity, our technology infrastructure and capabilities, restrictions in social or digital media for sharing products and attracting consumers, and regulatory restrictions on claims.
Removed
The majority of our events in 2022 were held virtually and those events that were in-person had much lower attendance as compared to similar meetings prior to the pandemic. While we do plan to hold corporate sponsored in-person events in 2023, we are prepared to transition those planned in-person events to virtual events.
Added
If we are unable to anticipate changes in consumer preferences and trends, our business, financial condition, and operating results could be materially adversely affected. Additionally, if we are unable to anticipate changes in the gig and sharing economies and adapt our business opportunity accordingly, our ability to capture growth trends in the social-selling e-commerce marketplace could be materially adversely affected.
Removed
The continued uncertainty regarding the spread and duration of the COVID-19 pandemic, including the multiple new variants of the virus that causes COVID-19, could lead to adverse impacts on our sales in fiscal year 2023 and our overall liquidity.
Added
The loss of suppliers, shortages of raw materials or our failure to satisfy minimum purchase requirements could have an adverse effect on our business, financial condition, or results of operations. We depend on outside suppliers for raw materials. Our contract manufacturers acquire all of the raw materials for manufacturing our products from third-party suppliers.
Removed
Notwithstanding the relaxation of pandemic-related constraints in certain markets, considerable uncertainty remains surrounding the potential effects and the effectiveness of government initiatives to contain the spread of COVID-19 domestically and in our international markets, could continue to have material and adverse effects on our ability to operate effectively.
Added
We could face financial liability from product liability claims if the use of our products results in significant loss or injury. We can make no assurances that we will not be exposed to any substantial future product liability claims.
Removed
Our ability and the ability of our independent associates to conduct business remains constrained in some of our key markets due to partial closure of certain businesses and the inability of our associates to market our products as a result of lockdowns and similar policies that may be implemented in an effort to mitigate the spread of COVID-19.
Added
A decline in sales value of such products could have a material adverse effect on our earnings, cash flows, and financial position. 26 Table of Contents Our business is not currently exposed to customer concentration risk given that no independent associate has ever accounted for more than 10% of our consolidated net sales.
Removed
Furthermore, the outbreak of COVID-19 continues to impact global economic activity, and has caused significant volatility and negative pressure in the financial markets. We experienced challenges in getting raw materials and ingredients to our contract manufacturers and finished products to our distribution centers resulting from reductions in global transportation capacity.
Added
Currently, the Republic of Korea is our largest market. An economic decline in the market, a shift in consumer demand for our products or business opportunity, or regulatory changes affecting our business model, products, or compensation plan in this market could have a material adverse effect on our earnings, cash flows, and financial position.
Removed
The fluidity of this situation precludes any prediction as to the ultimate adverse impact to us of COVID-19. We are continuing to monitor the spread of COVID-19 and related risks. The magnitude and duration of the pandemic and its impact on our business, results of operations, financial position, and cash flows is uncertain as this continues to evolve globally.
Added
If our information technology system fails or if the implementation of new information technology systems is not executed efficiently and effectively, our business, financial position, and operating results could be adversely affected.
Removed
We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision.
Added
If our third-party vendors do not maintain adequate security measures, do not require their sub-contractors to maintain adequate security measures, do not perform as anticipated and in accordance with contractual requirements, or become targets of cyber-attacks, we may experience breach of customer data or operational difficulties and increased costs, which could materially and adversely affect our business.
Added
Additional funding may not be available or may only be available on unfavorable terms. We are subject to liquidity risk, which could adversely affect our financial condition and results of operations Effective liquidity management is essential for the operation of our business.
Added
Although we have implemented strategies to maintain sufficient and diverse sources of funding to accommodate planned, as well as unanticipated, changes in assets and liabilities, under various economic conditions, an inability to raise capital through operations and other sources could have a material adverse effect on our liquidity.
Added
Our access to funding sources in amounts adequate to finance our activities could be impaired by factors that affect us specifically or the direct selling industry in general.
Added
Factors that could detrimentally impact our access to liquidity sources include credit availability through commercial banking, foreign exchange controls, limitations on the repatriation of funds, and changes in currency policies or practices of foreign jurisdictions. Deterioration in economic conditions may increase our cost of funding and limit our access to some sources of liquidity.
Added
Additionally, escalation by Russia beyond Ukraine and into other countries within the region, could also reduce our sales and have a negative effect on our European operations.
Added
Due to the person-to-person nature of our direct selling business model, our financial results have been, and will likely continue to be, harmed if the fear of a communicable and rapidly spreading disease results in travel restrictions or cause people to avoid group meetings or gatherings or interaction with other people.
Added
It is difficult to predict the impact on our business, if any, of the emergence of COVID-19 variants, COVID-related factors such as “Long COVID” or “Long-haul COVID” remain ongoing, new epidemics, or other crises.
Added
The outbreak of COVID-19 in 2020 and ensuing pandemic resulted in significant contraction of economies around the world and interrupted global supply chains as many governments issued shelter-in-place orders to combat the spread of COVID-19.
Added
Government-imposed restrictions and public hesitance regarding in-person gatherings, travel and visiting public places reduced our associates’ ability to hold sales meetings, resulted in cancellations of corporate-sponsored and associate-sponsored events, and incentive trips.
Added
Our supply chain and logistics incurred some interruptions and cost impacts, and we could experience more significant interruptions and cost impacts or face more significant closures in the future, whether due to the ongoing effects of COVID-19 directly, or other related factors such as resistance to vaccines or resistance to vaccine requirements.
Added
These factors and other events related to COVID-19 have negatively impacted our sales and operations and could continue to negatively affect our business and our financial results. Although some of the negative impacts of COVID-19 have improved and many government restrictions have been lifted, this situation continues to be fluid and there is uncertainty regarding its duration and future impacts.
Added
Laws regarding independent contractor status in certain jurisdictions, including the U.S., continue to evolve and have been applied unfavorably to gig economy companies, platform companies, and some of our counterparts in the direct selling channel.
Added
If federal, state, or local laws and regulations or the interpretation of those laws and regulations require us to treat our independent associates or Trulu affiliates as employees, or if they are deemed by local regulatory authorities in one or more of the jurisdictions in which we operate to be our employees rather than independent contractors, under existing laws and interpretations, we may be deemed to be responsible for a variety of obligations that are imposed upon employers relating to their employees, including social security and related taxes in those jurisdictions, wages, employee benefits, plus any related assessments and penalties, which could harm our financial position and operations. 32 Table of Contents Challenges by private parties to the form of our network marketing system could harm our business.
Added
Chinese officials of various ministries and agencies stated that they will continue to monitor healthcare product and direct 34 Table of Contents selling companies. The suspension on issuing direct selling licenses remains in effect and it is unclear whether there will be changes to the application processes if and when the suspension is lifted.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed2 unchanged
Biggest changeLeonards, Australia (Australian headquarters) 3,940 sq. feet N/A (1) Shibuya-ku, Tokyo, Japan (Japanese headquarters) 5,338 sq. feet September 2022 Minago-Ku Tokyo, Japan (Shinagawa Grand Central Tower) 3,497 sq. feet April 2025 Yeongnam Tower, Sincheon-dong, (Daegu Center) 3,557 sq. feet June 2024 Gangnam-gu, Seoul, Korea (Republic of Korea headquarters) 10,596 sq. feet June 2025 Gangnam-gu Seoul, Korea (Seoul training center) 18,441 sq. feet June 2025 Haewoondae-gu, Busan, Korea (Pusan training center) 6,800 sq. feet March 2027 Incheon, South Korea (Incheon training center) 7,754 sq. feet April 2023 Taipei, Taiwan (Taiwan headquarters) 260 sq. feet January 2023 Tsuen Wan, New Territories, Hong Kong (office) 5,306 sq. feet N/A (1) Hengqin, Zhuhai, China (office) 930 sq. feet September 2023 Tianhe, Guangzhou, China (office) 110 sq. feet July 2024 Richmond, BC (Canada training center) 1,963 sq. feet September 2025 Markham, ON (office) 1,714 sq. feet September 2024 Bedfordview, South Africa (office) 4,123 sq. feet N/A (1) Guadalajara, Mexico (customer service center) 4,187 sq. feet March 2024 Mexico City, 1st flr Mexico (customer service center) 1,324 sq. feet August 2023 Mexico City, 3rd flr Mexico 1,324 sq. feet August 2023 Guadalajara, Mexico (office & balcony) 1,259 sq. feet May 2024 Colima, Mexico (office) 732 sq. feet December 2023 Amsterdam, Netherlands (shared office space) 50 sq.feet August 2023 (1) Renewable monthly.
Biggest changeLeonards, Australia (Australian headquarters) 1,668 sq. feet June 2026 Minago-Ku Tokyo, Japan (Shinagawa Grand Central Tower) 3,497 sq. feet April 2025 Yeongnam Tower, Sincheon-dong, (Daegu Center) 3,557 sq. feet June 2024 Gangnam-gu, Seoul, Korea (Republic of Korea headquarters) 10,596 sq. feet June 2025 Gangnam-gu Seoul, Korea (Seoul training center) 18,441 sq. feet June 2025 Haewoondae-gu, Busan, Korea (Pusan training center) 6,800 sq. feet March 2027 Incheon, South Korea (Incheon training center) 7,754 sq. feet May 2024 Taipei, Taiwan (Taiwan headquarters) 260 sq. feet January 2024 Taiwan Bldg 13F Taipei City (Shu-Yeng CHEN) 93 sq. feet August 2024 Tsuen Wan, New Territories, Hong Kong (office) 5,306 sq. feet July 2025 Hengqin, Zhuhai, China (office) 930 sq. feet September 2024 Tianhe, Guangzhou, China (office) 110 sq. feet July 2024 Richmond, British Columbia, Canada (Canada training center) 1,963 sq. feet September 2025 Markham, Ontario, Canada (office) 1,714 sq. feet September 2024 Bedfordview, South Africa (office) 4,123 sq. feet N/A (1) Guadalajara, Mexico (customer service center) 4,187 sq. feet March 2024 Mexico City, 1st flr Mexico (customer service center) 1,324 sq. feet August 2024 Mexico City, 3rd flr Mexico (office) 1,324 sq. feet August 2024 Monterrey, Mexico (office) 1,259 sq. feet May 2024 Colima, Mexico (office) 732 sq. feet December 2024 Amsterdam, Netherlands (shared office space) 50 sq.feet August 2024 Bangkok, Thailand 192 sq. feet March 2025 (1) Renewable monthly.
By entering into these third-party distribution facility agreements, our offices maintain flexible operating capacity, minimize shipping costs, and are able to process an order within 24-hours after order placement and receipt of payment. 38 Table of Contents
By entering into these third-party distribution facility agreements, our offices maintain flexible operating capacity, minimize shipping costs, and are able to process an order within 24-hours after order placement and receipt of payment. 39 Table of Contents

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+1 added−7 removed0 unchanged
Biggest changeRecent Sales of Unregistered Securities . None. Uses of Proceeds from Registered Securities . None. Issuer Purchases of Equity Securities .
Biggest changeNone. Issuer Purchases of Equity Securities . None.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Market for Our Common Stock . On February 12, 1999, we completed our initial public offering. Our common stock is currently trading on Nasdaq under the symbol “MTEX.” Holders . As of February 28, 2023, there were 1,089 s hareholders of record.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Market for Our Common Stock . On February 12, 1999, we completed our initial public offering. Our common stock is currently trading on Nasdaq under the symbol “MTEX.” Holders . As of February 29, 2024, there were 1,063 s hareholders of record. Dividends .
Removed
The following information is provided pursuant to Item 703 of Regulation S-K: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced programs (a) Dollar value of shares that may yet be purchased (b) (in thousands) October 1, 2022 - October 31, 2022 16,463 $ 22.59 16,463 $ 5,847 November 1, 2022 - November 30, 2022 1,822 $ 21.45 1,822 $ 5,808 December 1, 2022 - December 31, 2022 — $ — — $ 5,808 Total 18,285 18,285 (a) We have an ongoing authorization, originally approved by our Board on August 28, 2006 to repurchase up to $20.0 million of shares of our common stock, which was subsequently reactivated by our Board in August of 2016 and December of 2017, to repurchase up to $0.5 million (of the original $20.0 million authorization), respectively, in shares of our common stock in the open market.
Added
The declaration and payment of future dividends will be at the discretion of the board of directors and will depend, among other things, on future earnings, general financial condition and liquidity, success in business activities, capital requirements and general business conditions in addition to legal requirements. Recent Sales of Unregistered Securities . None. Uses of Proceeds from Registered Securities .
Removed
In August of 2018 and November of 2018, our Board reactivated an additional $0.5 million (of the original $20.0 million authorization), respectively, in shares of our common stock to be repurchased in the open market.
Removed
In December 2019, our Board approved a share repurchase program to acquire up to $1.0 million (of the original $20.0 million authorization) of our common stock through March 1, 2020. In August 2020, our Board approved a share repurchase program to acquire up to $1.0 million (of the original $20.0 million authorization) of our common stock through August 16, 2021.
Removed
In September 2021, our Board approved a share repurchase program to acquire up to $1.0 million (of the original $20.0 million authorization) of our common stock through September 21, 2022. In September 2022, our Board approved a share repurchase program to acquire up to $1.5 million (of the original $20.0 million authorization) of our common stock through September 18, 2023.
Removed
Any repurchases pursuant to an authorized share repurchase program would be made from time to time in the open market, through block trades or in privately negotiated transactions.
Removed
The timing, volume and nature of any share repurchases would be at the discretion of management and dependent on market conditions, applicable securities laws and other factors, and could be suspended or discontinued at any time. All or part of any such repurchases could be implemented under a Rule 10b5-1 trading plan.
Removed
(b) Remaining value of the original $20.0 million approved by our Board on August 28, 2006.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

70 edited+22 added−45 removed29 unchanged
Biggest changeOur 2022 net sales declined $12.1 million, or 7.6%, on a Constant dollar basis (see Non-GAAP Financial Measures, below), and unfavorable foreign exchange caused a $10.5 million decrease in GAAP net sales as compared to 2021. 41 Table of Contents RESULTS OF OPERATIONS Year Ended December 31, 2022 compared to Year Ended December 31, 2021 The tables below summarize our consolidated operating results in dollars and as a percentage of net sales for the years ended December 31, 2022 and 2021 (in thousands, except percentages) . 2022 2021 Change Total Dollars % of net sales Total Dollars % of net sales Dollar Percentage Net sales $ 137,208 100.0 % $ 159,762 100.0 % $ (22,554) (14.1) % Cost of sales 33,060 24.1 % 34,149 21.4 % (1,089) (3.2) % Gross profit 104,148 75.9 % 125,613 78.6 % (21,465) (17.1) % Operating expenses: Commissions and incentives 55,483 40.4 % 63,784 39.9 % (8,301) (13.0) % Selling and administrative expenses 27,470 20.0 % 29,427 18.4 % (1,957) (6.7) % Depreciation and amortization 1,627 1.2 % 1,719 1.0 % (92) (5.4) % Other operating costs 19,973 14.6 % 21,634 13.5 % (1,661) (7.7) % Total operating expenses 104,553 76.2 % 116,564 73.0 % (12,011) (10.3) % (Loss) income from operations (405) (0.3) % 9,049 5.7 % (9,454) (104.5) % Interest income 88 0.1 % 66 — % 22 33.3 % Other (expense) income, net (162) (0.1) % (223) (0.1) % 61 27.4 % (Loss) income before income taxes (479) (0.3) % 8,892 5.6 % (9,371) 105.4 % Income tax (provision) benefit (4,011) (2.9) % 950 0.6 % (4,961) (522.2) % Net (loss) income $ (4,490) (3.3) % $ 9,842 6.2 % $ (14,332) 145.6 % Non-GAAP Financial Measures To supplement our financial results presented in accordance with generally accepted accounting principles in the United States ("GAAP"), we disclose operating results that have been adjusted to exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, including changes in: Net Sales, Gross Profit, and Income (loss) from Operations.
Biggest changeExcluding the startup loss of NEMO from the consolidated operating loss on a Constant dollar basis, we would have generated an operating profit of approximately $0.7 million in 2023, as compared to an operating loss of $0.4 million in 2022 . 42 Table of Contents RESULTS OF OPERATIONS Year Ended December 31, 2023 compared to Year Ended December 31, 2022 The tables below summarize our consolidated operating results in dollars and as a percentage of net sales for the years ended December 31, 2023 and 2022 (in thousands, except percentages) . 2023 2022 Change Total Dollars % of net sales Total Dollars % of net sales Dollar Percentage Net sales $ 131,955 100.0 % $ 137,208 100.0 % $ (5,253) (3.8) % Cost of sales 29,090 22.0 % 33,060 24.1 % (3,970) (12.0) % Gross profit 102,865 78.0 % 104,148 75.9 % (1,283) (1.2) % Operating expenses: Commissions and incentives 53,588 40.6 % 55,483 40.4 % (1,895) (3.4) % Selling and administrative expenses 48,613 36.8 % 47,443 34.6 % 1,170 2.5 % Depreciation and amortization 1,628 1.2 % 1,627 1.2 % 1 0.1 % Total operating expenses 103,829 78.7 % 104,553 76.2 % (724) (0.7) % Loss from operations (964) (0.7) % (405) (0.3) % (559) 138.0 % Interest income 4 — % 88 0.1 % (84) (95.5) % Other expense, net (170) (0.2) % (162) (0.1) % (8) 4.9 % Loss before income taxes (1,130) (0.9) % (479) (0.3) % (651) 135.9 % Income tax provision (1,109) (0.8) % (4,011) (2.9) % 2,902 (72.4) % Net loss $ (2,239) (1.7) % $ (4,490) (3.3) % $ 2,251 50.1 % Non-GAAP Financial Measures To supplement our financial results presented in accordance with generally accepted accounting principles in the United States ("GAAP"), the table below summarizes operating results that have been adjusted to exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, including changes in: Net Sales, Gross Profit, and Loss from Operations.
This discussion should be read in conjunction with “Item 15. – Consolidated Financial Statements” beginning on page F-1 of this report and with other financial information included elsewhere in this report.
This discussion should be read in conjunction with “Item 15.1 – Consolidated Financial Statements” beginning on page F-1 of this report and with other financial information included elsewhere in this report.
New pack sales and the receipt of new associate fees in connection with new positions in our network are leading indicators for the long-term success of our business. New associate or preferred customer positions are created in our network when our associate fees are paid or packs and products are purchased for the first time under a new account.
New pack sales and the receipt of new associate fees in connection with new positions in our network are leading indicators for the long-term success of our business. New associate or preferred customer positions are created in our network when our associate fees are paid or products and packs are purchased for the first time under a new account.
We conduct our business as a single reporting segment and primarily sell our products through a network of approximately 145,000 active associates and preferred customer positions held by individuals that purchased our products and/or packs or paid associate fees during the last 12 months, who we refer to as current associates and preferred customers .
We conduct our business as a single reporting segment and primarily sell our products through a network of approximately 145,000 active associates and preferred customer positions held by individuals that purchased our products and/or packs or paid associate fees during the last 12 months, who we refer to as active associates and preferred customers .
Pack sales may be completed during the final stages of the registration process, entitling the Associates to earn commissions, benefits, and incentives for that year. These packs can provide new associates with valuable training and promotional materials, as well as products for resale to retail customers, demonstration purposes, and personal consumption.
Pack sales may be completed during the final stages of the registration process, entitling the Associates to earn commissions and incentives for that year. These packs can provide new associates with valuable training and promotional materials, as well as products for resale to retail customers, demonstration purposes, and personal consumption.
COMPANY OVERVIEW Mannatech is a global wellness solution provider, which was incorporated and began operations in November 1993. We develop and sell innovative, high quality, proprietary nutritional supplements, topical and skin care and anti-aging products, and weight-management products that target optimal health and wellness.
COMPANY OVERVIEW Mannatech is a global wellness solution provider, which was incorporated and began operations in November 1993. We develop and sell innovative, high quality, proprietary nutritional supplements, skin care and anti-aging products, and weight-management products that target optimal health and wellness.
Associate fees are paid annually by new and continuing associates to the Company, which entitle them to earn commissions, benefits and incentives for that year.
Associate fees are paid annually by new and continuing associates to the Company, which entitle them to earn commissions and incentives for that year.
The associate may return or exchange the product based on the associate product return policy. In China, where we sell our products under a cross-border e-commerce model, we have a 14-day return policy. 52 Table of Contents • Associate and Preferred Customer Product Return Policy.
The associate may return or exchange the product based on the associate product return policy. In China, where we sell our products under a cross-border e-commerce model, we have a 14-day return policy. 51 Table of Contents • Associate and Preferred Customer Product Return Policy.
Item 7. 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 our results of operations for each of the two years ended December 31, 2022 and 2021.
Item 7. 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 our results of operations for each of the two years ended December 31, 2023 and 2022.
Because we sell our products through network marketing distribution channels, the opportunities and challenges that affect us most are: recruitment of new and retention of current associates and preferred customers that occupy sales or purchasing positions in our network; entry into new markets and growth of existing markets; niche market development; new product introduction; and investment in our infrastructure.
Because we sell our products principally through network marketing distribution channels, the opportunities and challenges that affect us most are: recruitment of new and retention of active associates and preferred customers that occupy sales or purchasing positions in our network; entry into new markets and growth of existing markets; niche market development; new product introduction; and investment in our infrastructure.
The Company is required to restrict cash for (i) direct selling insurance premiums and credit card sales in the Republic of Korea; (ii) reserve on credit card sales in the United States and Canada; and (iii) Australia building lease collateral. The current portion of restricted cash at each of December 31, 2022 and 2021 was $0.9 million.
The current portion of restricted cash was $0.9 million at December 31, 2023 and 2022. The Company is required to restrict cash for (i) direct selling insurance premiums and credit card sales in the Republic of Korea; (ii) reserve on credit card sales in the United States and Canada; and (iii) Australia building lease collateral.
This policy allows the associate or preferred customer to return an order within one year of the purchase date upon terminating his/her account. If an associate or preferred customer returns a product unopened and in good condition, he/she may receive a full refund minus a 10% restocking fee.
This policy allows the associate or preferred customer to return an order within one year of the purchase date upon voluntarily terminating his/her account. If an associate or preferred customer returns a product unopened and in good condition, he/she may receive a full refund minus a 10% processing fee.
We have identified the following applicable critical accounting policies and estimates as of December 31, 2022: Inventory Reserves Inventory consists 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. We record the amounts charged by the vendors as the costs of inventory.
We have identified the following applicable critical estimates as of December 31, 2023: Inventory Reserves Inventory consists 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. We record the amounts charged by the vendors as the costs of inventory.
The Company provides associates with access to a complimentary three-month package for the Success Tracker TM and Mannatech+ online business tools with the first payment of an associate fee.
The Company provides associates with access to a complimentary three-month package for the Success TrackerTM and Mannatech+ online business tools with the first payment of an associate fee.
As of December 31, 2022, we maintained a valuation allowance for deferred tax assets arising from our operations of $9.8 million because they did not meet the “more likely than not” criteria as defined by the recognition and measurement provisions of FASB ASC Topic 740, Income Taxes.
As of December 31, 2023, we maintained a valuation allowance for deferred tax assets arising from our operations of $10.3 million because they did not meet the “more likely than not” criteria as defined by the recognition and measurement provisions of FASB ASC Topic 740, Income Taxes.
For the year ended December 31, 2022, we used approximately $0.8 million in the repayment of finance lease obligations and other long term liabilities, $1.5 million in the payment of dividends to shareholders, and $2.0 million in the repurchase of common stock.
For the year ended December 31, 2023, we used approximately $1.0 million in the repayment of finance lease obligations and other long-term liabilities, $0.7 million in the payment of dividends to shareholders, and $0.2 million in the repurchase of common stock.
At December 31, 2022, our operating lease liabilities were $5.8 million, of which $1.6 million was recorded in Accrued expenses and $4.2 million was recorded in Other long-term liabilities. We also have finance lease liabilities of $0.2 million and lease restoration liabilities of $0.3 million.
At December 31, 2023, our operating lease liabilities were $4.3 million, of which $1.7 million was recorded in Accrued expenses and $2.6 million was recorded in Other long-term liabilities. We also have finance lease liabilities of $1.2 million and lease restoration liabilities of $0.4 million.
We refer to these adjusted financial measures as Constant dollar items, which are Non-GAAP financial measures. We believe these measures provide investors an additional perspective on trends.
We refer to these adjusted financial measures as Constant dollar items, which are Non-GAAP financial measures. We believe these measures provide investors an additional perspective on trends and our operating results.
To exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, we calculate current year results and prior year results at a constant exchange rate, which is the prior year’s rate.
To exclude the impact of changes due to the translation of foreign currencies into U.S. dollars in the current year, we calculate current year results at a constant exchange rate utilizing the prior year’s rate.
As our primary source of liquidity is our cash flows from operations, this will be dependent on our ability to maintain and/or continue to improve revenue as compared to our operational expenses.
As our primary source of liquidity has historically been from our cash flows from operations, this will be dependent on our ability to maintain and/or improve revenue as compared to operational expenses.
In 2022, the Company’s effective tax rate differed from the statutory rate due to additional taxes assessed as a result of the settlement of the income tax audit in Korea, the Company recording a valuation allowance on U.S. deferred tax assets largely driven by changes in expected earnings mix between jurisdictions and the relative impact of these items on decreased earnings.
In 2022, the Company's effective rate differed from the statutory rate due to additional taxes assessed as a result of the settlement of the income tax audit in Korea, the Company recording a valuation allowance on U.S. deferred tax assets largely driven by changes in expected earnings mix between jurisdictions and the relative impact of these items on decreased earnings. 46 Table of Contents SEASONALITY We believe the impact of seasonality on our consolidated results of operations is minimal.
Net Cash Flows Our net consolidated cash flows consisted of the following, for the years ended December 31 (in millions) : Provided by / (used in): 2022 2021 Operating activities $ (2.6) $ 10.8 Investing activities $ (1.1) $ (0.7) Financing activities $ (4.3) $ (9.3) Operating Activities Cash provided by operating activities decreased by $13.4 million for the year ended December 31, 2022, as compared to the same period in 2021.
Net Cash Flows Our net consolidated cash flows consisted of the following, for the years ended December 31 (in millions) : Provided by / (used in): 2023 2022 Operating activities $ (2.4) $ (2.6) Investing activities $ (0.7) $ (1.1) Financing activities $ (1.9) $ (4.3) Operating Activities Cash used in operating activities was $2.4 million for the year ended December 31, 2023, as compared to $2.6 million in the prior year.
The costs of incentives, as a percentage of net sales increased to 2.2% for the year ended December 31, 2022, as compared to 1.4% for the same period in 2021. This increase was related to travel incentives in the Americas and Asia/Pacific. Selling and Administrative Expenses Selling and administrative expenses include a combination of both fixed and variable expenses.
The decrease was related to travel incentives in the Americas and Asia/Pacific. The costs of incentives, as a percentage of net sales, decreased to 2.0% for the year ended December 31, 2023, as compared to 2.2% for the same period in 2022. Selling and Administrative Expenses Selling and administrative expenses include a combination of both fixed and variable expenses.
For the year ended December 31, 2021, we used approximately $0.4 million in the repayment of finance lease obligations and other long term liabilities, $4.3 million in the payment of dividends to shareholders, and $5.1 million for the repurchase of common stock, which was partially offset by $0.5 million cash provided by the exercise of stock options. 48 Table of Contents General Liquidity and Cash Flows Short Term Liquidity We believe our existing liquidity and cash flows from operations are adequate to fund our normal expected future business operations for the next 12 months.
For the year ended December 31, 2022, we used approximately $0.8 million in the repayment of finance lease obligations and other long-term liabilities, $1.5 million in the payment of dividends to shareholders, and $2.0 million for the repurchase of common stock. 48 Table of Contents General Liquidity and Cash Flows Short Term Liquidity We believe our existing liquidity and projected cash flows from operations are adequate to fund our normal expected future business operations for the next 12 months.
Promotional materials, training, database applications and business management tools to support our independent associates, which in turn helps stimulate product sales. For the years ended December 31, 2022 and 2021, other sales remained constant at $0.8 million.
Promotional materials, training, database applications and business management tools are utilized to support our independent associates, which in turn helps stimulate product sales. For the years ended December 31, 2023 and 2022, other sales were $1.1 million and $0.8 million, respectively.
Foreign currency exchange had the effect of decreasing revenue by $1.2 million for the year ended December 31, 2022 as compared to the same period in 2021. The currency impact is primarily due to the weakening of the South African Rand, British Pound and Euro.
Foreign currency exchange had the effect of decreasing revenue by $0.9 million for the year ended December 31, 2023, as compared to the same period in 2022. The currency impact is primarily due to the weakening of the South African Rand.
Fluctuations in currency rates produced a decrease of $2.4 million in cash and cash equivalents in 2022 as compared to a decrease of $2.7 million in 2021. Our principal use of cash is to pay for operating expenses, including commissions and incentives, capital assets, inventory purchases, and periodic cash dividends.
Fluctuations in currency rates produced a decrease of $0.8 million in cash and cash equivalents in 2023. Our principal use of cash is to pay for operating expenses, including commissions and incentives, capital assets, inventory purchases, and periodic cash dividends.
MARKET RISKS Please see “Quantitative and Qualitative Disclosure about Market Risk” under Item 7A of this Form 10-K for additional information about our Market Risks. 50 Table of Contents CRITICAL ACCOUNTING ESTIMATES Our consolidated financial statements are prepared in accordance with GAAP.
We continuously monitor our compliance with the Nasdaq continued listing rules. MARKET RISKS Please see “Quantitative and Qualitative Disclosure about Market Risk” under Item 7A of this Form 10-K for additional information about our Market Risks. CRITICAL ACCOUNTING ESTIMATES Our consolidated financial statements are prepared in accordance with GAAP.
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.
However, we caution readers that actual results could differ from our estimates and assumptions applied in the preparation of our consolidated financial statements. 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.
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 sale of the product.
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 sale of the product.
Although we may receive foreign income tax credits that would reduce the total amount of income taxes owed in the United States, we may not be able to fully utilize our foreign income tax credits in the United States. U.S.
Income from our international operations is subject to taxation in the countries in which we operate. Although we may receive foreign income tax credits that would reduce the total amount of income taxes owed in the United States, we may not be able to fully utilize our foreign income tax credits in the United States.
However, if our existing capital resources or cash flows become insufficient to meet current business plans, projections, and existing capital requirements, we may be required to raise additional funds, which may not be available on favorable terms, if at all.
If our existing capital resources or cash flows become insufficient to meet current business plans, projections, and existing capital requirements, we may be required to raise additional funds, which may not be available on favorable terms, if at all. We are a multinational company operating in numerous tax jurisdictions. We are currently not engaged in any tax related audits.
Commissions as a percentage of net sales were 38.2% for the year ending December 31, 2022 and 38.5% for the same period in the prior year. Incentive costs increased for the year ended December 31, 2022 by 36.4%, or $0.8 million, to $3.0 million as compared to $2.2 million for the same period in 2021.
Commissions as a percentage of net sales was 38.6% for the year ended December 31, 2023 and 38.2% for the same period in the prior year. 45 Table of Contents Incentive costs decreased for the year ended December 31, 2023 by 13.3%, or $0.4 million, to $2.6 million as compared to $3.0 million for the same period in 2022.
Financing Activities For the year ended December 31, 2022, our financing activities used cash of $4.3 million compared to cash used of $9.3 million for the same period of 2021.
Financing Activities For the year ended December 31, 2023, we utilized $1.9 million for financing activities as compared to $4.3 million for the same period of 2022.
Currency impact is determined as the difference between actual growth rates and constant currency growth rates. 2022 2021 Constant Dollar Change GAAP Measure: Total $ Non-GAAP Measure: Constant $ GAAP Measure: Total $ Dollar Percent Net sales $ 137.2 $ 147.7 $ 159.8 $ (12.1) (7.6) % Product $ 130.2 $ 140.0 $ 151.0 $ (11.0) (7.3) % Pack and associate fees $ 6.2 $ 6.9 $ 8.0 $ (1.1) (13.8) % Other $ 0.8 $ 0.8 $ 0.8 $ — — % Gross profit $ 104.1 $ 112.4 $ 125.6 $ (13.2) (10.5) % (Loss) income from operations $ (0.4) $ 1.9 $ 9.0 $ (7.1) (78.9) % 42 Table of Contents Net Sales in Dollars and as a Percentage of Consolidated Net Sales Consolidated net sales by region for the years ended December 31, 2022 and 2021 were as follows (in millions, except percentages) : 2022 2021 Americas $ 41.6 30.3 % $ 46.8 29.3 % Asia/Pacific 83.8 61.1 % 97.7 61.1 % EMEA 11.8 8.6 % 15.3 9.6 % Total $ 137.2 100.0 % $ 159.8 100.0 % Consolidated domestic and foreign net sales for the years ended December 31, 2022 and 2021 were as follows (in millions, except percentages) : 2022 2021 Domestic $ 29.8 21.7 % $ 35.0 21.9 % Foreign 107.4 78.3 % 124.8 78.1 % Total $ 137.2 100.0 % $ 159.8 100.0 % Net Sales Overall net sales decreased by $22.6 million, or 14.1%, for 2022, as compared to 2021.
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 (in millions, except percentages). 2023 2022 Constant Dollar Change GAAP Measure: Total $ Translation Adjustment Non-GAAP Measure: Constant $ GAAP Measure: Total $ Dollar Percent Net sales $ 132.0 $ 2.3 $ 134.3 $ 137.2 $ (2.9) (2.1) % Gross profit $ 102.9 $ 1.7 $ 104.6 $ 104.1 $ 0.5 0.5 % Loss from operations $ (1.0) $ 0.6 $ (0.4) $ (0.4) $ — — % 43 Table of Contents Net Sales in Dollars and as a Percentage of Consolidated Net Sales Consolidated net sales by region for the years ended December 31, 2023 and 2022 were as follows (in millions, except percentages) : 2023 2022 Americas $ 42.8 32.4 % $ 41.6 30.3 % Asia/Pacific 79.4 60.2 % 83.8 61.1 % EMEA 9.8 7.4 % 11.8 8.6 % Total $ 132.0 100.0 % $ 137.2 100.0 % Consolidated domestic and foreign net sales for the years ended December 31, 2023 and 2022 were as follows (in millions, except percentages) : 2023 2022 Domestic $ 30.2 22.9 % $ 29.8 21.7 % Foreign 101.8 77.1 % 107.4 78.3 % Total $ 132.0 100.0 % $ 137.2 100.0 % Net sales decreased by $5.2 million, or 3.8%, for 2023, as compared to 2022.
We fund our business objectives, operations, and expansion of our operations through net cash flows from operations rather than incurring long-term debt. Working Capital Working capital represents total current assets less total current liabilities. At December 31, 2022, our working capital decreased by $7.6 million, or 59.8%, to $5.1 million from $12.7 million at December 31, 2021.
We have historically funded our business objectives, operations, and expansion of our operations through net cash flows from operations rather than incurring long-term debt. Working Capital Working capital represents total current assets less total current liabilities. At December 31, 2023, our working capital was $1.9 million as compared to $5.1 million at December 31, 2022.
This decrease was primarily due to a 25.9% decrease in the number of active independent associates and preferred customers, which was partially offset by a 0.6% increase in revenue per active independent associate and preferred customer.
This increase was primarily due to a 4.4% increase in revenue per active independent associate and preferred customer, which was partially offset by a 1.4% decline in the number of active independent associates and preferred customers. Sales in the Americas includes the Mexico region.
The market price of our common stock may also be adversely affected by the above factors. 47 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Cash and Cash Equivalents As of December 31, 2022, our cash and cash equivalents and restricted cash decreased by 40.7%, or $10.4 million, to $15.2 million from $25.6 million as of December 31, 2021.
The market price of our common stock may also be adversely affected by the above factors. 47 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Cash and Cash Equivalents Cash and cash equivalents was $7.7 million at December 31, 2023, as compared to $13.8 million as of December 31, 2022.
We have experienced and believe we will continue to experience variations on our quarterly results of operations in response to, among other things: • the timing of the introduction of new products and incentives; • our ability to attract and retain associates and preferred customers; • the timing of our incentives and contests; • the general overall economic outlook; • government regulations; • global pandemic; • the outcome of certain lawsuits; • the perception and acceptance of network marketing; and • the consumer perception of our products and overall operations.
We have experienced and believe we will continue to experience variations on our quarterly results of operations in response to, among other things: • the timing of the introduction of new products and incentives; • our ability to attract and retain associates and preferred customers; • the timing of our incentives and contests; • the general overall economic outlook; • government regulations; • the perception and acceptance of network marketing; • the consumer perception of our products and overall operations; and • cultural events and vacation patterns (for example, most Asian markets celebrate their respective local New Year in the first quarter, which generally has a negative effect on that quarter).
We recognize revenue from shipped packs and products upon receipt by the customer. We estimate order delivery dates using weighted averages of historical delivery data periodically provided by our freight carriers. Orders placed by associates or preferred customers constitute our contracts.
We recognize revenue from shipped packs and products upon receipt by the customer. We estimate order delivery dates using weighted averages of historical delivery data periodically provided by our freight carriers. We record the value of orders shipped but not yet delivered to customers as Deferred Revenue on our Consolidated Balance Sheet.
However, if our existing capital resources or cash flows become insufficient to meet anticipated business plans and existing capital requirements, we may be required to raise additional funds, which may not be available on favorable terms, if at all.
However, if our existing capital resources or cash flows become insufficient to meet anticipated business plans and existing capital requirements, we may be required to raise additional funds, which may not be available on favorable terms, if at all. 49 Table of Contents Our future access to the capital markets may be adversely impacted if we fail to maintain compliance with the Nasdaq Marketplace Rules for the continued listing of our stock.
Foreign currency exchange had the effect of decreasing revenue by $9.3 million for the year ended December 31, 2022, as compared to the same period in 2021 and partially explains the 10.4% decrease in revenue per active independent associate and preferred customer. The currency impact is primarily due to the weakening of the Korean Won, Japanese Yen and Australian Dollar.
Foreign currency exchange had the effect of decreasing revenue in 2023 by $1.9 million, as compared to the same period in 2022. The currency impact is primarily due to the weakening of the Korean Won, Japanese Yen and Australian Dollar.
Long Term Liquidity We believe our cash flows from operations should be adequate to fund our normal expected future business operations and possible international expansion costs for the long term. As our primary source of liquidity is from our cash flows from operations, this will be dependent on our ability to maintain and/or improve revenue as compared to operational expenses.
Long Term Liquidity We believe our cash flows from operations should be adequate to fund our normal expected future business operations and possible international expansion costs for the long term.
Our sales mix for the years ended December 31, was as follows (in millions, except percentages): Change 2022 2021 Dollar Percentage Consolidated product sales $ 130.2 $ 151.0 $ (20.8) (13.8) % Consolidated pack sales and associate fees 6.2 8.0 (1.8) (22.5) % Consolidated other 0.8 0.8 — — % Total consolidated net sales $ 137.2 $ 159.8 $ (22.6) (14.1) % 43 Table of Contents Product Sales Our product sales are made to our independent associates and preferred customers at published wholesale prices.
Our sales mix for the years ended December 31, was as follows (in millions, except percentages): 2023 2022 Constant Dollar Change GAAP Measure: Total $ Translation Adjustment Non-GAAP Measure: Constant $ GAAP Measure: Total $ Dollar Percent Product sales $ 125.3 $ 2.2 127.5 $ 130.2 $ (2.7) (2.1) % Pack sales and associate fees 5.6 0.1 5.7 6.2 (0.5) (8.1) % Other 1.1 — 1.1 0.8 0.3 37.5 % Total $ 132.0 $ 2.3 $ 134.3 $ 137.2 $ (2.9) (2.1) % 44 Table of Contents Our product sales consist primarily of sales made to our independent associates and preferred customers at published wholesale prices.
In addition, as of December 31, 2022, we had net deferred tax assets, after valuation allowance and deferred tax liabilities, totaling $1.5 million, which may not be realized if our assumptions and estimates change, which would affect our effective income tax rate and cash flows in the period of discovery or resolution.
In addition, as of December 31, 2023, we had net deferred tax assets, after valuation allowance and deferred tax liabilities, totaling $1.6 million , which may not be realized if our assumptions and estimates change, which would affect our effective income tax rate and cash flows in the period of discovery or resolution. 50 Table of Contents Transfer Pricing In many countries, including the U.S., we are subject to transfer pricing and other tax regulations designed to ensure that appropriate levels of income are reported as earned by our U.S. and foreign entities and are taxed accordingly.
Our subsidiary in China, Meitai, is currently operating as a traditional retailer under a cross-border e-commerce model. Meitai cannot legally conduct a direct selling business in China unless it acquires a direct selling license in China. Current Economic Conditions and Recent Developments Overall net sales decreased $22.6 million, or 14.1%, for 2022, as compared to 2021.
Our subsidiary in China, Meitai, is currently operating as a traditional retailer under a cross-border e-commerce model. Meitai cannot legally conduct a direct selling business in China unless it acquires a direct selling license in China.
Each of our subsidiaries sells similar products and exhibits similar economic characteristics, such as selling prices and gross margins.
We review and analyze net sales by geographical location and by products and packs on a consolidated basis. Each of our subsidiaries sells similar products and exhibits similar economic characteristics, such as selling prices and gross margins.
The method for estimating the sales returns and allowance liability has remained consistent as a result of adopting ASC Topic 606. Accounting for Stock-Based Compensation We grant stock options to our employees, board members, and consultants.
The method for estimating the sales returns and allowance liability has remained consistent as a result of adopting ASC Topic 606. 52 Table of Contents
As of December 31, 2022, there was nothing recorded in other long-term liabilities on our consolidated balance sheet related to uncertain income tax positions. 51 Table of Contents We also review the estimates and assumptions used in evaluating the probability of realizing the future benefits of our deferred tax assets and record a valuation allowance when we believe that a portion or all of the deferred tax assets may not be realized.
Tax Valuation Allowances We review the estimates and assumptions used in evaluating the probability of realizing the future benefits of our deferred tax assets and record a valuation allowance when we believe that a portion or all of the deferred tax assets may not be realized.
Each country in which we operate has specific product return guidelines. However, we allow our associates and preferred customers to exchange products as long as the products are unopened and in good condition. Our return policies for our retail customers and our associates and preferred customers are as follows: • Retail Customer Product Return Policy.
Refunds are not processed until proper approval is obtained. Refunds are processed and returned in the same form of payment that was originally used in the sale. Each country in which we operate has specific product return guidelines. However, we allow our associates and preferred customers to exchange products as long as the products are unopened and in good condition.
The transaction price is allocated between the three performance obligations on a relative standalone selling price basis. 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.
The transaction price is allocated between the three performance obligations on a relative standalone selling price basis and revenue is recognized over the period that access to the tool is active. Associates do not have complimentary access to online business tools after the first contractual period.
Gross Profit For the year ended December 31, 2022, gross profit decreased by $21.5 million, or 17.1%, to $104.1 million, as compared to $125.6 million for the same period in 2021.
Gross Profit For the year ended December 31, 2023, gross profit decreased by $1.3 million, or 1.2%, to $102.9 million, as compared to $104.1 million for the same period in 2022. The decrease in gross profit in dollar terms is principally due to the decline in sales.
For the year ended December 31, 2022, this decrease was due to an operating loss and cash invested in inventory. Investing Activities During the year ended December 31, 2022 and 2021, we invested $1.1 million and $0.7 million in computer hardware and software, respectively.
Investing Activities For the year ended December 31, 2023 and 2022, we invested $0.7 million and $1.1 million, respectively. During the year ended December 31, 2023, we invested approximately $0.7 million in back-office software projects and equipment, reported as property and equipment. During the year ended December 31, 2022, we invested $1.1 million in computer hardware and software.
Commission and Incentives As sales declined, commission expenses decreased for the year ended December 31, 2022, by 14.8%, or $9.1 million to $52.5 million, as compared to $61.6 million for the same period in 2021.
Commission and Incentives Commission expenses decreased $1.5 million, or 2.9%, to $51.0 million, for the year ended December 31, 2023, as compared to $52.5 million for the same period in 2022. Commissions are earned on sales. Commission expense in dollar terms decreased in 2023 primarily due to a decline in our sales in the year.
For the year ended December 31, 2022, our operations outside of the Americas accounted for approximately 69.7% of our consolidated net sales, whereas in the same period in 2021, our operations outside of the Americas accounted for approximately 70.7% of our consolidated net sales.
For the year ended December 31, 2023, our operations outside of the Americas accounted for 67.6% of our consolidated net sales, as compared to 69.7% in 2022. Sales for the Americas increased by $1.2 million, or 2.9%, to $42.8 million for 2023 as compared to $41.6 million for the same period in 2022.
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. For these contracts, the Company accounts for each of these obligations separately as they are each distinct.
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.
Product sales for the year ended December 31, 2022 decreased by $20.8 million, or 13.8%, to $130.2 million, as compared to $151.0 million for the same period in 2021. The decrease in product sales was primarily due to a decrease in the average order value.
Product sales for the year ended December 31, 2023 decreased by $4.9 million, or 3.8%, to $125.3 million, as compared to $130.2 million for the same period in 2022. On a constant dollar basis, product sales in 2023 decreased $2.7 million, or 2.1%, as compared to 2022.
We also analyze the need for certain estimates, including the need for such items as allowance for doubtful accounts, inventory reserves, long-lived fixed assets and capitalization of internal-use software development costs, reserve for uncertain income tax positions and tax valuation allowances, revenue recognition, sales returns, and deferred revenues, accounting for stock-based compensation, and contingencies and litigation.
We also analyze the need for certain estimates, including the need for such items as allowance for credit losses, inventory reserves, tax valuation allowances, revenue recognition, sales returns, deferred revenues, and accounting for stock-based compensation. Historically, actual results have not materially deviated from our estimates.
The decrease in selling and administrative expenses consisted of a $1.1 million decrease in payroll costs, a $0.5 million decrease in marketing costs and a $0.3 million decrease in distribution costs. Other Operating Costs Other operating costs include accounting/legal/consulting fees, travel and entertainment expenses, credit card processing fees, off-site storage fees, utilities, bad debt, and other miscellaneous operating expenses.
These expenses consist of compensation and benefits for employees, temporary and contract labor and marketing-related expenses, accounting, legal, and consulting fees, travel and entertainment expenses, credit card processing fees, off-site storage fees, utilities, bad debt, and other miscellaneous operating expenses.
The numbers of active independent associates and preferred customers decreased 6.9%. During 2022, EMEA sales decreased by $3.5 million, or 22.9%, to $11.8 million as compared to $15.3 million for 2021.
For the year ended December 31, 2023, EMEA sales decreased by $2.0 million, or 16.9%, to $9.8 million as compared to $11.8 million for 2022. This decrease was primarily due to a 14.5% decrease in the number of active independent associates and preferred customers, and a 2.9% decrease in revenue per active independent associate and preferred customer.
We have contractual purchase commitments with certain raw material suppliers to purchase minimum quantities and to ensure exclusivity of our raw materials and the proprietary nature of our products. At December 31, 2022, we have one supply agreement that requires the Company to purchase an aggregate of $7.9 million through 2024, with no purchase commitments thereafter.
At December 31, 2023, we have one supply agreement that requires the Company to purchase an aggregate of $4.2 million through 2024, with no purchase commitments thereafter. We are currently negotiating with the supplier to amend the agreement to meet current demand levels for these materials.
Our statutory income tax rates by jurisdiction are as follows, for the years ended December 31: Country 2022 2021 Australia 30.0 % 30.0 % Bermuda — % — % Canada 26.5 % 26.5 % China (1) 25.0 % 5.0 % Colombia (2) 35.0 % 31.0 % Cyprus 12.5 % 12.5 % Denmark 22.0 % 22.0 % Gibraltar (3) 12.5 % 11.3 % Hong Kong 16.5 % 16.5 % Japan 34.6 % 34.6 % Mexico 30.0 % 30.0 % Netherlands (4) 25.8 % — % Norway 22.0 % 22.0 % Republic of Korea 22.0 % 22.0 % Russia (5) 20.0 % 20.0 % Singapore 17.0 % 17.0 % South Africa 28.0 % 28.0 % Sweden 20.6 % 20.6 % Switzerland (6) 9.2 % 9.2 % Taiwan 20.0 % 20.0 % Ukraine (7) 18.0 % 18.0 % United Kingdom 19.0 % 19.0 % United States (8) 23.2 % 23.2 % (1) For 2021, the Company qualified for a reduced 5% tax rate in China as a Small Low Profit Enterprise, however in 2022, the Company no longer qualified for the reduced rate and is now taxed at the full 25% rate due to increased earnings.
Our statutory income tax rates by jurisdiction are as follows, for the years ended December 31: Country 2023 2022 China 25.0 % 25.0 % Hong Kong 16.5 % 16.5 % Japan 36.1 % 34.6 % Republic of Korea 20.9 % 22.0 % United States (1) 22.2 % 22.2 % (1) Includes blended state effective rate of 1.2% for 2023 and 2022 in addition to the U.S federal statutory rate of 21% and is now taxed at the full.
Tax For each of the years ended December 31, 2022 and 2021, the Company’s effective tax rate was (837.4)% and (10.7)%, respectively.
For each of the years ended December 31, 2023 and 2022, the Company’s effective tax rate was (98.1)% and (837.4)%, respectively. In 2023, the Company’s effective tax rate differed from the statutory rate due to the mix of earnings across jurisdictions and the associated valuation allowances recorded on losses in certain jurisdictions.
Other (Expense) Income, net Primarily due to foreign exchange losses, other expense was $0.2 million and $0.2 million for the years ending December 31, 2022 and 2021, respectively. Provision for Income Taxes Provision for income taxes include current and deferred income taxes for both our domestic and foreign operations.
Depreciation and Amortization Expense For each of the years ended December 31, 2023 and 2022, depreciation and amortization expense remained constant at $1.6 million. Other Expense, net Primarily due to foreign exchange losses, other expense wa s $0.2 million for each of the years ended December 31, 2023 and 2022.
Product Return Policy We stand behind our products and believe we offer a reasonable and industry-standard product return policy to all of our customers. We do not resell returned products. Refunds are not processed until proper approval is obtained. Refunds are processed and returned in the same form of payment that was originally used in the sale.
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. Product Return Policy We stand behind our products and believe we offer a reasonable and industry-standard product return policy to all of our customers. We do not resell returned products.
For the year ended December 31, 2022, other operating costs decreased by $1.6 million, or 7.7%, to $20.0 million, as compared to $21.6 million for the same period in 2021. For the year ended December 31, 2022, other operating costs, as a percentage of net sales, were 14.6%, as compared to 13.5% for the same period in 2021.
As a result of the strengthening of the Mexican Peso in 2023, foreign currency exchange had the effect of increasing revenue by $0.5 million for the year ended December 31, 2023, as compared to the same period in 2022. During 2023, Asia/Pacific sales decreased by $4.4 million, or 5.3%, to $79.4 million as compared to $83.8 million for 2022.
Gross profit as a percentage of net sales decreased to 75.9% for 2022, as compared to 78.6% for 2021 due to the impacts of foreign exchange (mostly Korea Won and Japanese Yen), and rising costs in our supply chain.
Gross profit as a percentage of net sales increased to 78.0% for 2023, as compared to 75.9% for 2022, largely due to reduced costs of freight and shipping and other supply chain initiatives, partially offset by certain raw materials price increases.
At each of December 31, 2022 and 2021, our inventory reserves were $0.4 million . Uncertain Income Tax Positions and Tax Valuation Allowances As required by ASC Topic 740, we use judgments and make estimates and assumptions related to evaluating the probability of uncertain income tax positions.
At each of December 31, 2023 and 2022, our inventory reserves were $0.4 million .
The average order value in 2022 was $175, as compared to $190 for the same period in 2021. The number of orders processed during the year ended December 31, 2022 decreased by 5.6% as compared to the same period in 2021. Pack Sales and Associate Fees The Company collects associate fees in lieu of selling packs in certain markets.
The decrease in product sales in 2023 reflects a 7.2% decrease in the number of orders processed, partially offset by an increase in the average order value of $180, as compared to $175 for the same period in 2022.
The Company has rescheduled corporate sponsored events, and in some cases, our associates have canceled sales meetings. Prolonged workforce disruptions, continued disruption in our supply chain, and potential decreases in consumer demands could negatively impact our sales as well as the Company’s overall liquidity in the next twelve months, however, such impact is currently unknown.
However, if our reorganization plans are not successful, or if we are unable to renegotiate a favorable outcome to our minimum purchase commitment contracts, or if we experience prolonged workforce disruptions, disruption in our supply chain, and/or potential decreases in consumer demands, our sales and our overall liquidity in the next twelve months could be negatively impacted.
Removed
We operate as a seller of nutritional supplements, topical and skin care and anti-aging products, and weight-management products through our network marketing distribution channels operating in 24 countries and direct e-commerce retail in China. We review and analyze net sales by geographical location and by packs and products on a consolidated basis.
Added
Current Economic Conditions and Recent Developments Consolidated net sales for the year ended December 31, 2023 was $132.0 million, as compared to $137.2 million for the year ended December 31, 2022 . Net sales decreased $5.2 million, or 3.8%, for 2023, as compared to 2022 .
Removed
Sales for the Americas decreased by $5.2 million, or 11.1%, to $41.6 million for 2022 as compared to $46.8 million for the same period in 2021 as we worked through an unprecedented supply challenge that put a headwind on recruiting and contributed to a 10.0% decline in the number of active independent associates and preferred customers, which was partially offset by 1.3% increase in revenue per active independent associate and preferred customer.
Added
Our 2023 net sales declined $2.9 million, or 2.1%, on a Constant dollar basis (see Non-GAAP Financial Measures, below), and unfavorable foreign exchange caused a $2.3 million decrease in GAAP net sales as compared to 2022.
Removed
During 2022, Asia/Pacific sales decreased by $13.9 million, or 14.2%, to $83.8 million as compared to $97.7 million for 2021.
Added
We incurred an operating loss of $1.0 million for the year ended December 31, 2023, as compared to $0.4 million for the same period last year. Our 2023 operating loss, on a Constant dollar basis (see Non-GAAP Financial Measures, below), was $0.4 million.
Removed
The dollar amount of pack sales and associate fees associated with new and continuing independent associate positions held by individuals in our network was as follows, for the years ended December 31 ( in millions, except percentages): Change 2022 2021 Dollar Percentage New $ 0.4 $ 0.5 $ (0.1) (20.0) % Continuing 5.8 7.5 (1.7) (22.7) % Total $ 6.2 $ 8.0 $ (1.8) (22.5) % Total pack sales and associate fees for the year ended December 31, 2022 decreased by $1.8 million, or 22.5%, to $6.2 million, as compared to $8.0 million for the same period in 2021.
Added
In June 2023, the Company launched a tiered affiliate program in the United States under the brand name, “Trulu™.” The Trulu brand is operated by our wholly owned subsidiary, “NEMO”, and is separate from our network marketing business.
Removed
The number of packs sold and associate fees collected decreased by 3.3%.
Added
For the year ended December 31, 2023 , we incurred an operating loss of $1.1 million in connection with the start-up of our NEMO business.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+0 added−0 removed9 unchanged
Biggest changeThe current (spot) rate, average currency exchange rates, and the low and high of such currency exchange rates as compared to the United States dollar, for each of these countries as of and for the year ended December 31, 2022 were as follows: Year ended December 31, 2022 As of December 31, 2022 Country (foreign currency name) Low High Average Spot Australia (Australian Dollar) 0.62084 0.75967 0.69513 0.67923 Canada (Canadian Dollar) 0.72052 0.80212 0.76917 0.73837 China (Renminbi) 0.13690 0.15849 0.14896 0.14445 Colombia (Peso) 0.00020 0.00027 0.00024 0.00021 Czech Republic (Koruna) 0.03902 0.04713 0.04292 0.04421 Denmark (Kroner) 0.12936 0.15398 0.14169 0.14360 Hong Kong (Hong Kong Dollar) 0.12739 0.12871 0.12771 0.12822 Japan (Yen) 0.00667 0.00880 0.00766 0.00758 Mexico (Peso) 0.04685 0.05203 0.04976 0.05131 New Zealand (New Zealand Dollar) 0.55670 0.69733 0.63632 0.63393 Norway (Krone) 0.09197 0.11627 0.10453 0.10148 Republic of Korea (Won) 0.00069 0.00084 0.00078 0.00079 Singapore (Singapore Dollar) 0.69382 0.74547 0.72574 0.74547 South Africa (Rand) 0.05449 0.06904 0.06141 0.05892 Sweden (Krona) 0.08813 0.11198 0.09930 0.09583 Switzerland (Franc) 0.99076 1.09692 1.04842 1.08295 Taiwan (New Taiwan Dollar) 0.03096 0.03632 0.03365 0.03258 United Kingdom (British Pound) 1.06884 1.37226 1.23759 1.20616 Various countries (1) (Euro) 0.96198 1.14574 1.05403 1.06772 (1) Austria, Germany, the Netherlands, Estonia, Finland, the Republic of Ireland and Spain 55 Table of Contents
Biggest changeThe current (spot) rate, average currency exchange rates, and the low and high of such currency exchange rates as compared to the United States dollar, for each of these countries as of and for the year ended December 31, 2023 were as follows: Year ended December 31, 2023 As of December 31, 2023 Country (foreign currency name) Low High Average Spot Australia (Australian Dollar) 0.62970 0.71173 0.66457 0.68183 Canada (Canadian Dollar) 0.72082 0.76071 0.74118 0.75491 China (Renminbi) 0.13623 0.14921 0.14149 0.14145 Colombia (Peso) 0.00020 0.00026 0.00023 0.00026 Czech Republic (Koruna) 0.04258 0.04735 0.04509 0.04470 Denmark (Kroner) 0.14041 0.15087 0.14517 0.14808 Hong Kong (Hong Kong Dollar) 0.12739 0.12837 0.12774 0.12807 Japan (Yen) 0.00659 0.00782 0.00714 0.00709 Mexico (Peso) 0.05134 0.05996 0.05646 0.05895 New Zealand (New Zealand Dollar) 0.58055 0.65089 0.61435 0.63207 Norway (Krone) 0.08911 0.10181 0.09484 0.09831 Republic of Korea (Won) 0.00074 0.00082 0.00077 0.00077 Singapore (Singapore Dollar) 0.72789 0.76520 0.74487 0.75805 South Africa (Rand) 0.05064 0.05957 0.05431 0.05470 Sweden (Krona) 0.08938 0.10053 0.09434 0.09922 Switzerland (Franc) 1.06165 1.19050 1.11343 1.18866 Taiwan (New Taiwan Dollar) 0.03082 0.03367 0.03213 0.03278 Thailand (Dollar) 0.02698 0.03063 0.02879 0.02912 United Kingdom (British Pound) 1.18342 1.31132 1.24378 1.27324 Various countries (1) (Euro) 1.04717 1.12401 1.08158 1.10381 (1) Austria, Germany, the Netherlands, Estonia, Finland, the Republic of Ireland and Spain 53 Table of Contents

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