UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549________________________________________________________________________________FORM 10-K(Mark One)☒ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.For the fiscal year ended June 30, 2019☐TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.For the transition period from __________ to __________ Commission file number: 001-35647________________________________________________________________________________LIFEVANTAGE CORPORATION(Exact name of registrant as specified in its charter)Delaware 90-0224471(State or other jurisdiction ofincorporation or organization) (IRS EmployerIdentification No.)9785 S Monroe Street, Suite 400Sandy, Utah 84070(Address of principal executive offices, including zip code)(801) 432-9000Registrant's telephone numberSecurities registered pursuant to Section 12(b) of the Act:Common Stock, par value $0.0001 LFVN The Nasdaq Stock Market LLCTitle of each class Trading Symbol(s) Name of each exchange on which registeredSecurities registered pursuant to Section 12(g) of the Act: None________________________________________________________________________________Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or anemerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company"in Rule 12b-2 of the Exchange Act.Large accelerated filer☐ Accelerated filer☒Non-accelerated filer☐ Smaller reporting company☒Emerging growth company☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒The aggregate market value of the registrant's common stock held by non-affiliates as of December 31, 2018, the end of the registrant's second fiscal quarter,was approximately $188.2 million, based on a closing market price of $13.19 per share.The number of shares of common stock (par value $0.0001) outstanding as of August 9, 2019 was 14,116,377 shares.________________________________________________________________________________DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant’s definitive proxy statement to be filed subsequent to the date hereof with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the registrant’s fiscal year 2020 annual meeting of shareholders are incorporated by reference into Part III of this report.Such definitive proxy statement will be filed with the Commission not later than 120 days after the end of the registrant’s fiscal year ended June 30, 2019. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSCertain statements contained in this report and the information incorporated by reference herein may contain “forward-looking statements” (as such termis defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended). These statements,which involve risks and uncertainties, reflect our current expectations, intentions, or strategies regarding our possible future results of operations,performance, and achievements. Forward-looking statements include, without limitation: statements regarding future products or product development;statements regarding future selling, general and administrative costs and research and development spending; statements regarding the future performance ofour network marketing efforts; statements regarding our expectations regarding ongoing litigation; statements regarding international growth; and statementsregarding future financial performance, results of operations, capital expenditures and sufficiency of capital resources to fund our operating requirements.These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and applicablerules of the Securities and Exchange Commission and common law.These forward-looking statements may be identified in this report and the information incorporated by reference by words such as “anticipate,”“believe,” “could,” “estimate,” “expect,” “intend,” “plan,” “predict,” “project,” “should” and similar terms and expressions, including references toassumptions and strategies. These statements reflect our current beliefs and are based on information currently available to us. Accordingly, these statementsare subject to certain risks, uncertainties, and contingencies, which could cause our actual results, performance, or achievements to differ materially fromthose expressed in, or implied by, such statements.The following factors are among those that may cause actual results to differ materially from our forward-looking statements:•Inability to properly manage, motivate and retain our independent distributors or to attract new independent distributors on an ongoing basis;•Inability to manage existing markets, open new international markets or expand our operations;•Non-compliance by our independent distributors with applicable legal requirements or our policies and procedures;•Inability of new products and technological innovations to gain distributor or market acceptance;•Inability to execute our product launch process due to increased pressure on our supply chain, information systems and management;•Inability to appropriately manage our inventory;•Potential adverse effects on our business and stock price due to ineffective internal controls;•Disruptions in our information technology systems;•Inability to protect against cyber security risks and to maintain the integrity of data;•Inability to comply with financial covenants imposed by our credit facility and the impact of debt service obligations and restrictive debtcovenants;•International trade or foreign exchange restrictions, increased tariffs, foreign currency exchange fluctuations;•Inability to raise additional capital or complete desired acquisitions;•Dependence upon a few products for revenue;•High quality materials for our products may become difficult to obtain or expensive;•Dependence on third parties to manufacture our products;•Disruptions to the transportation channels used to distribute our products;•We may be subject to a product recall;•Unfavorable publicity on our business or products;•Our direct selling program could be found to not be in compliance with current or newly adopted laws or regulations in various markets;2 •Legal proceedings may be expensive and time consuming;•Strict government regulations on our business;•Regulations governing the production or marketing of our products;•Risk of investigatory and enforcement action by the Federal Trade Commission;•Government authorities may question our tax positions or transfer pricing policies or change their laws in a manner that could increase our effectivetax rate or otherwise harm our business;•Failure to comply with anti-corruption laws;•Loss of, or inability to attract, key personnel;•We may be held responsible for certain taxes or assessments and other obligations relating to the activity of our independent distributors;•Competition in the dietary supplement market;•Our inability to protect our intellectual property rights;•Third party claims that we infringe on their intellectual property;•Product liability claims against us;•Economic, political, foreign exchange and other risks associated with international operations;•Potential delisting of our common stock due to non-compliance with Nasdaq's continued listing requirements;•Volatility of the market price of our common stock;•Substantial sales of shares may negatively impact the market price of our common stock; and•Dilution of outstanding common shares may occur if holders of our existing options exercise their securities or upon future vesting of performancerestricted stock units.When considering these forward-looking statements, you should keep in mind the cautionary statements in this report and the documents incorporatedby reference. Except as required by law, we have no obligation and do not undertake to update or revise any such forward-looking statements to reflect eventsor circumstances after the date of this report.3 TABLE OF CONTENTS PagePART IItem 1. Business 5Item 1A. Risk Factors 19Item 1B. Unresolved Staff Comments 31Item 2. Properties 31Item 3. Legal Proceedings 32Item 4. Mine Safety Disclosures 32PART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 32Item 6. Selected Financial Data 34Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 35Item 7A. Quantitative and Qualitative Disclosures About Market Risk 44Item 8. Financial Statements and Supplementary Data 45Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 45Item 9A. Controls and Procedures 45Item 9B. Other Information 46PART IIIItem 10. Directors, Executive Officers and Corporate Governance 46Item 11. Executive Compensation 46Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 46Item 13. Certain Relationships and Related Transactions, and Director Independence 46Item 14. Principal Accountant Fees and Services 46PART IVItem 15. Exhibits, Financial Statement Schedules 46Signatures 504 PART IITEM 1 — BUSINESSOverviewLifeVantage Corporation (sometimes used herein, the "Company," "we," "us," "our," and similar terms) is a company focused on biohacking the agingcode through nutrigenomics, the study of how nutrition and naturally occurring compounds affect our genes to support good health. We are dedicated tohelping people achieve their health, wellness and financial goals. We provide quality, scientifically-validated products and a financially rewarding directsales opportunity to customers and independent distributors. We sell our products in the United States, Mexico, Japan, Australia, Hong Kong, Canada,Thailand, the United Kingdom, the Netherlands, Germany, Taiwan, Austria, Spain, Ireland and Belgium. We also sell our products in a number of countries tocustomers for personal consumption only. In addition, we sell our products in China through our e-commerce business model.We engage in the identification, research, development and distribution of advanced nutraceutical dietary supplements and personal care products,including our scientifically-validated Protandim® line of dietary supplements, LifeVantage® Omega+ and ProBio dietary supplements, TrueScience®, our lineof skin and hair care products, Petandim™ for Dogs, our companion pet supplement formulated to combat oxidative stress in dogs, Axio®, our Smart EnergyDrink mixes, and PhysIQ™, our Smart Weight Management System.We were incorporated in Colorado in June 1988 under the name Andraplex Corporation. We changed our corporate name to Yaak River Resources, Inc.in January 1992, and subsequently changed it again in October 2004 to Lifeline Therapeutics, Inc. In October 2004 and March 2005, we acquired all of theoutstanding common stock of Lifeline Nutraceuticals Corporation. In November 2006, we changed our name to LifeVantage Corporation. From our fiscalyear 2005 until our fiscal year 2009, we marketed and sold a single product, Protandim®, through traditional retail stores. In October 2008, we announcedthat we were transitioning our business model from a traditional retail model to a direct sales model in which Protandim® would be sold primarily through ournetwork of independent distributors. Since entering direct sales, we have increased our geographic reach by entering new international markets and increasedour product offering by introducing additional scientifically-validated products.On March 9, 2018, following approval by our stockholders at our 2018 Annual Meeting of Stockholders, we changed our state of incorporation from theState of Colorado to the State of Delaware pursuant to a plan of conversion. All outstanding shares of common stock, options and share units of the Coloradocorporation were converted into an equivalent share, option or share unit of the Delaware corporation and the par value of our common stock was adjustedto $0.0001. All directors and officers of the Colorado corporation held the same position within the Delaware corporation on the date of reincorporation.Fiscal Year 2019 HighlightsNew Product OfferingsIn fiscal year 2019, we continued to launch innovative new products. Our award-winning TrueScience® Hair Care System first debuted in October 2018at the company’s Global Convention in Salt Lake City. The system, which features an Invigorating Shampoo, Nourishing Conditioner, and Scalp Serum,differentiates itself by specifically targeting biohackers and stands out in the hair care market, which typically forces consumers to choose betweencleanliness and effectiveness. At our Elite Academy in February 2019, we launched PhysIQ™ Prebiotic as part of a refresh and relaunch of our enhancedPhysIQ™ Smart Weight Management System. PhysIQ™ Prebiotic is a supplement geared to support a balanced gut microbiome and promote a healthybacteria balance and digestive tract. The Prebiotic completely sold out of the inventory in stock at the event.Global ExpansionTo further support our global expansion initiative, we expanded our business operations in Europe with the launch of our Austria market in September2018, Spain in March 2019, Ireland in May 2019, and Belgium in June 2019.Technology InnovationWe continued to develop, enhance and improve the LifeVantage app, which is available for download on iTunes and Google Play stores. This custom-developed platform is pioneering new ways for us to interact with our distributors and customers and gives us and our distributor leadership valuable insightinto the activities of our distributor base. The app provides distributors with tools and communications that help simplify business activities, walk newdistributors through starting their business, improve prospecting and close new clients and distributors.5 Biohacking CultureWe have continued to develop our nutrigenomic story and the biohacking culture we have been building with distributors and customers. Biohacking isbecoming the underlying message for our independent distributors, leveraging our core competencies and existing products, and is supporting our uniqueposition in the market. We are focused on capitalizing on this trend by highlighting it across our communications with our independent distributors and inour marketing materials, and have additional marketing and media assets in development to promote this story.Red Carpet ProgramWe continued to grow through our Red Carpet program, which is designed to attract and incentivize experienced direct selling sales leaders who are intransition to join LifeVantage. We have seen a strong positive response to our Red Carpet program as evidenced by an increase in revenue. We havesignificantly increased leadership enrollments and hope to see improved retention and active distributor counts as a result of this program.Our Competitive AdvantagesWe believe we have a competitive advantage in several key areas:•Our Compensation: We believe our distributor compensation plan is one of the more financially rewarding in the direct selling industry. Ourpercentage of sales paid to independent distributors as compensation and incentives is one of the highest percentages reported in the direct sellingindustry. Our compensation plan also enables independent distributors to earn compensation early and often as they sell our products. Someelements of our compensation plan are paid weekly, allowing new independent distributors to receive compensation quickly. We believe morefrequent payments of compensation helps us retain new independent distributors by allowing them to experience success soon after enrolling. Wealso offer a variety of incentive programs to our independent distributors for achieving specified sales goals. We believe our compensation plan andincentive programs help motivate our independent distributors to achieve success.•Our Products: We have a focus in nutrigenomics, the study of how nutrition and naturally occurring compounds affect our genes to support goodhealth. We have developed quality, scientifically-validated nutrigenomics products focused on helping individuals look, feel and perform better.Our products are the Protandim® line of scientifically-validated dietary supplements, LifeVantage® Omega+ and ProBio dietary supplements,TrueScience®, our line of skin and hair care products, Petandim™ for Dogs, our companion pet supplement formulated to combat oxidative stress indogs, Axio®, our Smart Energy Drink mixes, and PhysIQ™, our Smart Weight Management System. The Protandim® product line includesProtandim® NRF1 and Nrf2 Synergizers. The Protandim® NRF1 Synergizer is formulated to increase cellular energy and performance by boostingmitochondria to support cellular repair and slow cellular aging. The Protandim® Nrf2 Synergizer contains a patented blend of ingredients and hasbeen shown to combat oxidative stress by increasing the body’s natural antioxidant protection at the gene level, inducing the production ofnaturally-occurring protective antioxidant enzymes including superoxide dismutase, catalase, and glutathione synthase. LifeVantage® Omega+ is adietary supplement that combines DHA and EPA Omega-3 fatty acids, Omega-7 fatty acids, and Vitamin D3 to support cognitive health,cardiovascular health, skin health, and the immune system. LifeVantage® ProBio is a dietary supplement designed to support optimal digestion andimmune system function. Our TrueScience® anti-aging skin care line includes TrueScience® Facial Cleanser, TrueScience® Perfecting Lotion,TrueScience® Eye Serum, TrueScience® Anti-Aging Cream, and TrueScience® Hand Cream. Our TrueScience® Hair Care System includesTrueScience® Invigorating Shampoo, TrueScience® Nourishing Conditioner and TrueScience® Scalp Serum. Petandim™ for Dogs is a supplementspecially formulated to combat oxidative stress in dogs through Nrf2 activation. Axio® is our line of Smart Energy Drink mixes formulated topromote alertness and support mental performance. PhysIQ™ is our Smart Weight Management System which includes PhysIQ™ Fat Burn, PhysIQ™Prebiotic, and PhysIQ™ Protein Shake mix, all formulated to aid in weight management. We believe our significant number of customers whoregularly purchase our products without the intention of becoming independent distributors is a strong indicator of the benefits of our products.•Technology-Enabled Distributor Training and Resources: We are committed to providing our independent distributors with resources and trainingdesigned to increase their productivity and potential for success. We are dedicated to using technology to facilitate a streamlined approach forindependent distributors to manage their businesses and sell our products. The LifeVantage app, which is available for download on iTunes andGoogle Play stores, is a custom-developed platform that provides new ways for us to interact with our distributors and customers and gives us andour distributor leadership valuable insight into the activities of our distributor base. The LifeVantage app was designed to allow users to conductany aspect of their business on a single platform from anywhere in the world. Ultimately, through artificial intelligence and machine learning, weexpect that the app will be able to guide users on what to6 share, when to share it, and with whom. In addition, we provide training materials and we encourage our independent distributors to participate incompany-sponsored events, including conventions, promotions and incentives.•Our Culture: We are committed to creating a culture for our independent distributors, customers and employees that focuses on ethical, legal andtransparent business practices. At enrollment, our independent distributors agree to abide by our policies and procedures. Our policies andprocedures, when followed, are designed to ensure that our independent distributors comply with applicable laws and regulations. Our compliancedepartment monitors the activities of our independent distributors as part of our effort to enforce our policies and procedures. Similarly, our code ofbusiness conduct and ethics sets forth guidelines and expectations for our employees. We believe our ethical, legal and transparent culture attractshighly qualified employees and independent distributors who share our commitment to these principles.•Customer Acquisition: We introduced our global customer acquisition program in April 2018 to expand the number of countries where customerscan purchase and use our products for personal consumption only. This program allows us to enter additional markets at low incremental cost andenables our distributors to leverage their international relationships outside of their home countries. The program initially launched in eight marketsand we plan to continue exploring additional potential markets. To further drive customer acquisition, we launched our Auto-Assigned CustomerProgram, which allows new customers to order directly through www.lifevantage.com without being required to go through a distributor on theirinitial order. After the initial order, these new customers are then assigned to distributors for ongoing support. This program provides consumerseasier access to our innovative products while providing referrals to our distributor force.•Our Employees: We believe that our employees are an essential asset. We have a dedicated team of professionals that support our system ofindependent distributors, work to generate long-term value for our shareholders and contribute to the broader public through charitable programs,including LifeVantage Legacy. In turn, we offer competitive compensation and direct their focus on the long-term goals of our independentdistributors and shareholders.Scientific BackgroundOxidative StressOxidative stress refers to the cellular and tissue damage caused by chemically reactive oxygen species that is generated as a natural result of cellularmetabolism and the body's use of oxygen to generate energy. Levels of reactive oxygen species, also known as ROS, and free radicals can be elevated under awide variety of conditions, including radiation, UV light, smoking, excessive alcohol consumption, as well as medical conditions involving inflammation,cardiovascular disease, neurodegenerative disease, diabetes and advancing age. Elevated ROS levels inflict structural damage on nucleic acid, lipid,carbohydrate and protein components of cells, thereby directly contributing to or exacerbating tissue dysfunction, disease and age-related debilitation.Cellular antioxidant enzymes normally serve to maintain levels of ROS at those compatible with normal cell function. Important among these cellularantioxidant enzymes are superoxide dismutase and catalase. However, the levels of these protective antioxidant enzymes decrease with age and in a numberof disease conditions. As we age, and the levels of antioxidant enzymes decrease, oxidative stress levels increase significantly, and our body is unable tomaintain homeostasis relative to elevated ROS levels.Oxidative stress is widely believed to be a key factor in many of the undesirable effects of aging because it promotes cell death. Additionally, high levelsof oxidative stress have also been linked as a causative or associated factor in over 100 diseases.Nrf2 ActivationNuclear factor (erythroid-derived 2)-like 2, also known as NFE2L2 or Nrf2, is a transcription factor that in humans is encoded by the NFE2L2 gene. Nrf2is the master regulator of the antioxidant response, which is important for the reduction of oxidative stress. Because Nrf2 is able to induce gene activityimportant in combating oxidative stress, thereby activating the body’s own protective response, it helps protect from a variety of complications related tooxidative stress.Under normal or unstressed conditions, Nrf2 resides in the cytoplasm of the cell, outside the nucleus, and is targeted for degradation. When activated,Nrf2 is able to move into the nucleus where it promotes the expression of several hundred genes, including those that encode antioxidant enzymes as well asanti-inflammatory and stress response proteins.In recent years, Nrf2 has become the subject of intense research. A common theme in much of this research is that activation of Nrf2 upregulates acoordinated antioxidant response and is therefore capable of protecting against oxidative7 stress-related injury and inflammatory disease in a wide variety of animal models. Therefore, Nrf2 represents an important therapeutic target.NRF1 ActivationNuclear Respiratory Factor 1 or NRF1 is a transcription factor that contributes to the expression of many genes required for the maintenance and functionof the mitochondria. Mitochondria are subcellular self-autonomous organelles and are primarily responsible for the generation of the chemical energy (ATP)that cells require to stay alive. Mitochondria constantly expand and divide based on the demand of the tissue cells in which they reside. They also play animportant role in triggering the signaling cascade that results in the death of cells (apoptosis). Proper regulation of these mitochondrial functions is vitallyimportant for the life and death of cells and for human health.Dysfunction of mitochondria has been associated with many chronic diseases in a wide variety of animal models. Therefore, the upregulation of NRF1represents an important therapeutic target to support the proper function of mitochondria and human health.Research and DevelopmentHistorically, we have focused our research and development efforts on creating and supporting scientifically-validated products under the Protandim®,TrueScience®, Petandim™ for Dogs, Axio®, PhysIQ™ and LifeVantage® federation of brands. We anticipate that our future research and development effortswill be focused on creating, developing and evaluating new products that are consistent with our commitment to provide quality, scientifically-validatedproducts. We intend to build on our foundation of combating oxidative stress and targeting specific benefit areas through biohacking that help individualsfeel, look and perform better. We also plan to continue sponsoring additional studies on our current products in an effort to further validate the benefits theyprovide.Product OverviewProduct StackingA stack consists of multiple products bundled together that are designed to achieve a specific result. By studying the effects of nutrients and naturalcompounds, we have developed scientifically-backed nutrigenomics products that promote healthy aging on the cellular level. By stacking these productstogether, we have created a foundation for biohacking a healthier life.The Vitality Stack is designed to provide a great foundation for wellness. It includes four of our nutrigenomics products that help support healthy organs,including the brain, heart, eyes, and other vitals. Protandim® NRF1 Synergizer boosts mitochondrial function to help organs work efficiently and Protandim®Nrf2 Synergizer protects those same cells from oxidative stress. LifeVantage® Omega+ supports the cell membranes and receptors that improve the way theheart, blood, and genes function while providing the heart, eye, and brain the structural support they need. LifeVantage® ProBio provides an increaseddiversity of gut bacteria and beta glucans to support healthy immune function, nutrient production and balance and promote better gut-brain health. VitalityStack is our premier product bundle and we also offer stacks for our PhysIQ™ and TrueScience® product lines.Protandim® Nrf2 SynergizerProtandim® Nrf2 Synergizer is a patented dietary supplement that has been shown in a clinical trial to reduce the age-dependent increase in markers ofoxidative stress, and has also been shown to provide substantial benefits to combat the variety of negative health effects linked to oxidative stress.Protandim® Nrf2 Synergizer combats oxidative stress by increasing the body’s natural antioxidant protection at the gene level. The unique blend ofphytonutrients in Protandim® Nrf2 Synergizer signals the activation of Nrf2 to increase production of antioxidant enzymes, specifically superoxidedismutase and catalase, and other cell-protective gene products. The body's internally produced antioxidant enzymes provide a better defense againstoxidative stress than externally derived sources of antioxidants such as Vitamin C, Vitamin E and Coenzyme Q-10. Unlike externally derived sources ofantioxidants, these enzymes are “catalytic,” which means these enzymes are not used up upon neutralizing free radicals.We hold multiple U.S. and international patents relating to Protandim® Nrf2 Synergizer. We believe these patents set Protandim® apart from other dietarysupplements and protect the original formula as well as certain formula modifications we could create to extend our Protandim® product line. We sellProtandim® Nrf2 Synergizer in three formulas.8 Protandim® Nrf2 Synergizer has been, and is expected to continue to be, the subject of numerous independent scientific studies at various universitiesand research facilities including Ohio State University, Louisiana State University, University of Colorado Denver, Virginia Commonwealth University,Colorado State University, Texas Tech University and the National Institute on Aging. The results of these studies have been published in a variety of peer-reviewed scientific journals, including Free Radical Biology & Medicine, Enzyme Research, Circulation-the scientific journal of the American HeartAssociation, American Journal of Physiology-Lung Cellular and Molecular Physiology, PLoS One, Journal of Dietary Supplements, Molecular Aspects ofMedicine, Oxidative Medicine and Cell Longevity, Exercise & Sports Science Reviews, Clinical Pharmacology, the FASEB Journal, and the Journal ofApplied Physiology.Protandim® NRF1 SynergizerProtandim® NRF1 Synergizer is a dietary supplement which was formulated to strengthen the mitochondria, the powerhouse of all cells, for bettercellular health. It is designed to work in tandem with our flagship Protandim® Nrf2 Synergizer and further enhance the body's internal ability to naturallyproduce antioxidants and reduce the effects of cellular stress. Protandim® NRF1 Synergizer activates NRF1, a protein that regulates the expression of genesinvolved in mitochondrial DNA transcription, translation and repair. The unique blend of ingredients in Protandim® NRF1 Synergizer supports themitochondria to slow cellular aging and increase cellular energy.LifeVantage® Omega+LifeVantage® Omega+ is a dietary supplement that combines DHA and EPA Omega-3 fatty acids, Omega-7 fatty acids, and Vitamin D3 to supportcognitive health, cardiovascular health, skin health, and the immune system.LifeVantage® ProBioLifeVantage® ProBio is a dietary supplement designed to support long-term gut health by restoring healthy gut bacteria to support digestive systemhealth.PhysIQ™ Smart Weight Management SystemWe sell a full line of weight management products under our PhysIQ™ brand, which consists of:•PhysIQ™ Fat Burn: a supplement containing naturally derived active ingredients to stimulate the breakdown of abdominal fat, increase energy andsupport long-term weight management.•PhysIQ™ Prebiotic: a supplement designed to support the “good” bacteria in the gut and a healthy microbiome, resulting in a healthier digestivetract and a healthier metabolism.•PhysIQ™ Protein Shake: a combination of fast and slow release proteins designed to satisfy hunger and deliver amino acids to support quickrecovery and improved muscle synthesis.TrueScience® Skin CareWe sell a full line of anti-aging skin care products under our LifeVantage TrueScience® brand, which consists of:•TrueScience® Facial Cleanser: a concentrated, ultra-rich cleanser used to remove impurities and light make-up without drying or stripping naturaloils in the skin.•TrueScience® Perfecting Lotion: a hybrid lotion formulated for smoother, radiant and brighter looking skin.•TrueScience® Eye Serum: a serum that noticeably improves the visible signs of fine lines, creases and wrinkles around the entire eye area,diminishes puffiness above and below the eye, firms and tightens the upper eyelid area and evens skin tone and dark circles that are visible signs ofaging.•TrueScience® Anti-Aging Cream: a cream that deeply moisturizes and helps to combat the appearance of fine lines and wrinkles.•TrueScience® Hand Cream: a cream formulated with Nrf2 ingredients to moisturize skin and improve the visible signs of premature aging on thehands.Our TrueScience® Beauty System includes the following products in a TSA-compliant set: TrueScience® Facial Cleanser, TrueScience® PerfectingLotion, TrueScience® Eye Serum, and TrueScience® Anti-Aging Cream.9 We received two composition patents for our LifeVantage TrueScience® skin care products, which were tested in an independent third-party clinicalstudy and shown to reduce the visible signs of aging by utilizing Nrf2 technology to mitigate the visible effects of skin damage caused by oxidative stress.Our LifeVantage TrueScience® skin care products leverage our research on Nrf2 activation and oxidative stress.TrueScience® Hair CareWe sell a full line of hair care products under our LifeVantage TrueScience® brand, which consists of:•TrueScience® Invigorating Shampoo: Mild surfactant and added amino acid blend cleans hair without drying out the scalp.•TrueScience® Nourishing Conditioner: Deeply nourishing weightless conditioner helps hair feel soft and smooth and look fuller and thicker.•TrueScience® Scalp Serum: Nourishes scalp to support normal hair growth while soothing all scalp types.Petandim™ for DogsPetandim™ for Dogs is a supplement specially formulated to combat oxidative stress in dogs through Nrf2 activation. Petandim™ for Dogs builds uponthe active ingredients in Protandim® Nrf2 Synergizer to reduce oxidative stress and support joint function, mobility and flexibility in dogs. Petandim™ forDogs received the Quality Seal from the National Animal Supplement Council.Axio® Axio® is our line of Smart Energy Drink mixes, formulated to promote alertness and support mental performance. These energy drink powders deliversustained energy, as well as improved mental focus and promote a positive mood. Axio® is derived from a unique combination of scientifically-validatedingredients.Distribution of ProductsWe believe our products are well suited for person-to-person sales through our direct selling model. This model allows our independent distributors toeducate our customers regarding the benefits of our unique products more thoroughly than other business models. Our direct selling model also allows ourindependent distributors to offer personalized customer service to our customers and encourage regular use of our products.Product Return PolicyAll products purchased directly from us include a customer satisfaction guarantee. Subject to some exceptions based on local regulations, customers mayreturn unopened product to us within 30 days of purchase for a refund of the purchase price less shipping and handling. In addition, our inventory repurchaseprogram allows independent distributors who terminate their distributorship to return certain amounts of unopened, unexpired product purchased within theprior 12 months for a refund of the purchase price less a 10% restocking fee. The amount of inventory we will repurchase from an independent distributor issubject to specified consumption limitations.MembersWe generally categorize our members as independent distributors and customers.Independent DistributorsAn independent distributor in our company is someone who participates in our direct sales opportunity by purchasing our products at wholesale pricesand selling our products to others. We believe our independent distributors are typically entrepreneurs who believe in our products and desire to earn incomeby building a business of their own. Many of our independent distributors are attracted by the opportunity to sell unique, scientifically-validated productswithout incurring significant start-up costs. Independent distributors sign a contract with us that includes a requirement that they adhere to strict policies andprocedures. Independent distributors purchase product from us for individual consumption, but also purchase small quantities of product from us to use fordemonstrations and one-off, person-to-person retailing opportunities. They also encourage others to purchase our products, either for personal consumptionor resale.10 While we provide support, product samples, brochures, magazines, and other sales and marketing materials, independent distributors are primarilyresponsible for attracting, enrolling and educating new independent distributors with respect to our products and compensation plan. An independentdistributor creates multiple levels of compensation by selling our products and enrolling new independent distributors who sell our products. These newlyenrolled independent distributors form a “downline” for the independent distributor who enrolled them. If downline independent distributors enroll newindependent distributors who purchase our products, they create additional levels of compensation and their downline independent distributors remain in thesame downline network as the original enrolling independent distributor. We pay commissions only upon the sale of our products. We do not paycommissions for enrolling independent distributors.We define “active independent distributors” as those independent distributors who have purchased product from us for retail or personal consumptionduring the prior three months. As of June 30, 2019 and 2018, we had approximately 66,000 and 63,000 active independent distributors, respectively.Independent Distributor CompensationWe believe our compensation plan is one of the more financially rewarding in the direct selling industry. Our percentage of sales paid to independentdistributors as compensation and incentives is one of the highest percentages reported in the direct selling industry. Some elements of our compensation planare paid weekly. We believe this gives us a competitive advantage and helps retain new distributors by allowing them to experience success quickly fromtheir efforts. Our compensation plan is intended to appeal to a broad cross-section of people, particularly those seeking to supplement family income, start ahome-based business or pursue entrepreneurial opportunities full- or part-time. Our independent distributors earn compensation on their product sales andproduct sales made by independent distributors within their sales organization, or "downline." Our independent distributors can also earn money bypurchasing product from us at our wholesale cost and selling that product to others at the retail cost. We generally pay commissions in the local currency ofthe independent distributor’s home country.Independent Distributor Motivation and TrainingOur revenue depends in part on the success and productivity of our independent distributors. We provide tools, training and technology designed toincrease our independent distributors' productivity and increase their potential for success. We offer training and business development opportunities to ourindependent distributors, including the following:•Blueprint: professionally-designed training materials independent distributors can utilize in their sales efforts;•Digital Training: our digital audio series presented by our independent distributor leaders provides training and tips on becoming more productiveindependent distributors;•Elite Academy and Global Convention: regularly occurring company-sponsored events intended to provide training and motivation to ourindependent distributors;•Promotions and Incentive Trips: we hold special promotions and incentive trips from time to time in order to motivate our independent distributorsto accomplish specific sales goals; and•Mobile Application: The LifeVantage app was designed to allow users to conduct any aspect of their business on a single platform from anywhere inthe world. Ultimately, through artificial intelligence and machine learning, we expect that the app will be able to guide users on what to share, whento share it, and with whom.We are continuing to evaluate new ways in which to incorporate new technology and training opportunities to improve distributor success.Distributor Compliance ActivitiesGiven that our independent distributors are independent contractors, we do not control or direct their promotional efforts. We do, however, require thatour independent distributors abide by policies and procedures that require them to act in an ethical manner and in compliance with applicable laws andregulations. As a member of the United States Direct Selling Association and similar organizations in many of the markets where we do business, we are alsosubject to the ethical business practices and consumer service standards required by the industry's code of ethics.Independent distributors must represent to us that their receipt of commissions is based on retail sales and substantial personal sales efforts. We mustproduce or pre-approve all sales aids used by distributors such as brochures and online materials. Products may be promoted only by personal contact or bycollateral materials produced or approved by us. Independent distributors may not use our trademarks or other intellectual property without our consent.11 We monitor and systematically review alleged independent distributor misbehavior through our internal compliance department. If we determine one ofour independent distributors has violated any of our policies and procedures, we may discipline the independent distributor and may terminate theindependent distributor’s rights to distribute our products. When necessary, we have brought legal action against independent distributors, or formerindependent distributors, to enforce our policies and procedures. Short of termination or legal action, we may impose sanctions against independentdistributors whose actions are in violation of our policies and procedures. Such sanctions may include warnings, probation, withdrawal or denial of an award,suspension of privileges of a distributorship, fines and/or withholding of commissions until specified conditions are satisfied, or other appropriate injunctiverelief.CustomersCustomers purchase products directly from us at our wholesale price on a monthly subscription basis for personal consumption, without the intent toresell or earn commissions from the sale of products. A customer may enroll as an independent distributor at any time if he or she becomes interested inreselling the product. We believe our customers are a great source of word-of-mouth advertising for our products. We also believe our large base of customersvalidates the benefits of our products, separate from the direct selling opportunity.We define an “active customer” as a customer who has purchased product from us within the prior three months. As of June 30, 2019 and 2018, we hadapproximately 119,000 and 116,000 active customers, respectively.Sales of Our ProductsWe accept orders for our products through our own website at www.lifevantage.com and through personalized websites we provide to our independentdistributors, which we refer to as “Virtual Offices”. Orders placed through Virtual Offices and through our website are processed daily at our fulfillmentcenters, where orders are shipped directly to the consumer.We offer toll-free numbers for our independent distributors and other customers to order product or ask questions. Our customer service representativesassist customers in placing orders through our web order processing system, answering questions, tracking packages, and initiating refunds. The customerservice representatives receive extensive training about our products and our direct selling business model. Independent distributors and customers generallypay for products by credit card, prior to shipment, and as a result, we carry minimal accounts receivable.SeasonalityIn addition to general economic factors, we are impacted by seasonal factors and trends such as major cultural events and vacation patterns. We believethat direct selling in Japan and the United States is also generally negatively impacted during our first fiscal quarter, from July 1 through September 30, whenmany individuals, including our independent distributors, traditionally take vacations.Although our product launch process may vary by market, we may introduce new products to our independent distributors and customers throughlimited-time offers and promotions. The limited-time offers and promotions typically generate significant activity and a high level of purchasing, which mayresult in a higher than normal increase in revenue during the quarter of the limited-time offer and skew year-over-year and sequential comparisons.Geographic InformationWe sell our products in the United States, Mexico, Japan, Australia, Hong Kong, Canada, Thailand, the United Kingdom, the Netherlands, Germany,Taiwan, Austria, Spain, Ireland and Belgium. We also sell our products in a number of countries to customers for personal consumption only. In addition, wesell our products in China through our e-commerce business model. In fiscal year 2019, revenue generated in the United States accounted for approximately67% of our total revenue and revenue generated from Japan accounted for approximately 18% of our total revenue. For reporting purposes, we generallydivide our markets into two geographic regions: the Americas region and the Asia/Pacific & Europe region. The following table sets forth net revenueinformation by region for the periods indicated (in thousands):12 For the fiscal years ended June 30, 2019 2018 2017Americas$163,236 72.2% $151,609 74.6% $150,841 75.6%Asia/Pacific & Europe62,722 27.8% 51,595 25.4% 48,648 24.4%Total$225,958 100.0% $203,204 100.0% $199,489 100.0%Additional comparative revenue and related financial information is presented in the section captioned "Segment Information" in Note 2 to ourconsolidated financial statements.MarketingWe have a sales, marketing, public relations and customer service group consisting of 137 full-time employees as of June 30, 2019. We utilize ournetwork of independent distributors located throughout the United States, Mexico, Japan, Australia, Hong Kong, Canada, Thailand, the United Kingdom, theNetherlands, Germany, Taiwan, Austria, Spain, Ireland and Belgium to market and sell our products. We also market our products in a number of countries tocustomers for personal consumption only. In addition, we market and sell our products in China through our e-commerce business model powered by in-country social marketers.Raw Materials and ManufacturingWe outsource the primary manufacturing, fulfillment, and shipping components of our business to companies we believe possess a high degree ofexpertise. We believe outsourcing provides us access to advanced manufacturing process capabilities and expertise without incurring fixed costs associatedwith manufacturing our own products.We currently outsource the manufacture of our products to multiple contract manufacturers. Our contract manufacturers have a legal obligation tocomply with the current Good Manufacturing Practices regulations that are applicable to those who manufacture, package, label and hold dietarysupplements. Additionally, we are subject to regulations that, among other things, obligate us to know what and how manufacturing activities are performedso that we can make decisions related to whether the packaged and labeled product conforms to our established specifications and whether to approve andrelease product for distribution. We maintain and qualify alternative manufacturing options in order to keep our costs low, maintain the quality of ourproducts, and be prepared for unanticipated spikes in demand or manufacturing failure. Our contract manufacturers deliver products to our fulfillment centersbased on our purchase orders.We acquire raw materials for our products from third-party suppliers. Although we generally have good relationships with our suppliers, we believe wecould replace any of our current suppliers without great difficulty or significant increase to our cost of goods sold. We also have ongoing relationships withsecondary and tertiary suppliers. Please refer to "Risk Factors - High quality material for our products may be difficult to obtain or expensive" for adiscussion of the risks and uncertainties associated with our sourcing of raw materials.Product Liability and Other InsuranceWe have product liability insurance coverage for our products that we believe is adequate for our needs. We also maintain commercial property andliability coverage and directors’ and officers’ liability insurance.Intellectual PropertyWe use commercially reasonable efforts to protect our intellectual property through patent protection, trademarks and trade secrets, licensed rights andcontractual protections, and intend to continue to develop a strong brand identity for our company and our products.Protandim® Nrf2 Synergizer is a proprietary, patented dietary supplement formulation for enhancing antioxidant enzymes including superoxidedismutase and catalase. The patents and patent applications protecting its formulations are held by our wholly-owned subsidiary, Lifeline NutraceuticalsCorporation. Our intellectual property is covered, in part, by many issued U.S. and select foreign patents to cover key markets around the world. Our patentsand patent applications claim the benefit of priority of multiple U.S. provisional patent applications, the earliest of which was filed on March 23, 2004, andrelate to compositions, methods of use, and methods of manufacture of various compositions, including those embodied by the Protandim® Nrf2 Synergizerformulation. The expected duration of our patent protection via granted patents for Protandim® Nrf2 Synergizer is at least through approximately March2025 and we continue to research and file new composition and13 method patents in the U.S. for enhanced and improved product formulations that will extend our patent protection for a variety of product formulations andmethods. During fiscal 2018, we received another composition patent for additional products within our LifeVantage TrueScience® line of skin care products.This patent expires in approximately February 2036.We continue to protect our products and brands using trademarks. We have filed and successfully procured registered trademarks for our key brandsconsisting of Protandim®, LifeVantage®, and TrueScience® in many countries around the world, and we have pending trademark applications for these andother marks in many other countries. We anticipate seeking protection in other countries as we deem appropriate.In order to protect the confidentiality of our intellectual property, including trade secrets, know-how and other proprietary technical and businessinformation, it is our policy to limit access to such information to those who require access in order to perform their functions and to enter into agreementswith employees, consultants and vendors to contractually protect such information.CompetitionDirect Selling CompaniesWe compete with other direct selling companies, many of which have longer operating histories and greater visibility, name recognition and financialresources than we do. We also compete with newer direct selling companies that attempt to solicit our independent distributors by offering the possibility of amore financially rewarding opportunity by being among the Company's early distributor base. We compete for new independent distributors with thesecompanies on the basis of our business opportunity, product offerings, compensation plan, management and our operations. In order to successfully competein the direct selling industry and attract and retain independent distributors, we must maintain the attractiveness of our business opportunity, productofferings and compensation plan.Dietary Supplement MarketWe compete with other companies that sell dietary supplements. We believe the dietary supplement market is a highly fragmented and competitivemarket. We believe competition in the dietary supplement market is based primarily on quality, price, efficacy of products, brand name and recognition ofproduct benefits. In the dietary supplement industry, our competition includes numerous nutritional supplement companies, pharmaceutical companies andpackaged food and beverage companies. Many of these companies have broader product lines, larger sales volumes and greater financial resources than wedo. Additionally, some of these companies are able to compete more effectively due to greater vertical integration. Increased competition in the dietarysupplement market could have a material adverse effect on our results of operations and financial condition.Nrf2 ActivatorsIn the last few years we have seen the number of products marketed as Nrf2 activators increase. We anticipate the number of products that claim toactivate Nrf2 will continue to increase as the technology becomes more popular and more broadly accepted.Direct AntioxidantsVitamin C, Vitamin E, Coenzyme Q-10, and other sources of externally derived antioxidants may be considered competitors of Protandim® but they aremechanistically distinct from Protandim®. These other sources of antioxidants do not increase the body’s elimination of oxidants using internal antioxidantenzymes. Our research indicates that Protandim® increases production of hundreds of stress-related anti-inflammatory, and anti-fibrotic gene productsincluding antioxidant enzymes, such as superoxide dismutase and catalase, within the cells of the body. We believe that the body’s internally producedantioxidant enzymes provide a better defense against oxidative stress than externally derived sources of antioxidants.Oral Superoxide Dismutase and CatalaseThere are many companies performing research into antioxidants. Several companies sell oral forms of superoxide dismutase and catalase. Although webelieve Protandim® is a superior alternative to oral forms of superoxide dismutase and catalase, these products do compete with Protandim® in themarketplace. We anticipate additional companies will likely develop, purchase or in-license products that are competitive with Protandim®.14 Omega Fatty Acid ProductsThere are many companies that market Omega supplements, including Omega-3. Although LifeVantage® Omega+ contains a unique combination ofDHA and EPA Omega-3 fatty acids, Omega-7 fatty acids, and Vitamin D3, we anticipate additional companies will likely develop products that arecompetitive with LifeVantage® Omega+.Probiotic ProductsThere are many companies that market probiotic supplements and we anticipate additional companies will likely continue to develop products that arecompetitive with our LifeVantage® ProBio supplement.Personal Skin Care MarketIn the personal skin care market, we compete principally with large, well-known cosmetics companies that manufacture and sell broad product linesthrough retail establishments. Many of these competitors have greater financial resources and brand recognition than we do. We believe, however, we cancompete with these larger companies by leveraging our direct selling model and emphasizing our unique, science-based skin care products.Personal Hair Care MarketIn the personal hair care market, we compete principally with large, well-known hair care companies that manufacture and sell broad product linesthrough retail establishments. Many of these competitors have greater financial resources and brand recognition than we do. We believe, however, we cancompete with these larger companies by leveraging our direct selling model and emphasizing our unique, science-based hair care products.Animal Supplement MarketWe compete principally with large, well-known companies in the animal supplement market. Most of the companies we compete with in the animalsupplement market have broad distribution channels that include retail establishments. Many of these competitors have greater financial resources and brandrecognition than we do. We believe, however, we can compete with these larger companies by leveraging our direct selling model and emphasizing ourunique, science-based animal supplement product.Energy Drink MarketWe compete with large, well-known companies in the energy drink market. Most of the companies we compete with in the energy drink market havebroad distribution channels that include big box retail establishments. Many of these competitors have greater financial resources and brand recognition thanwe do. We intend to compete with these larger companies by leveraging our direct selling model and emphasizing our unique, science-based energy drinkproduct. Axio® is a no sugar, low-carbohydrate and low calorie energy drink that is also non-GMO, gluten-free and vegan.Weight Management MarketWe compete with large, well-known companies in the weight management market. Most of the companies we compete with in the weight managementmarket have broad distribution channels that include big box retail establishments. Many of these competitors have greater financial resources and brandrecognition than we do. We intend to compete with these larger companies by leveraging our direct selling model and emphasizing our unique, science-based weight management products.Regulatory EnvironmentThe formulation, manufacturing, packaging, labeling, and advertising of our products in the United States are subject to regulation by the Food and DrugAdministration, or FDA, and the Federal Trade Commission, or FTC, as well as comparable state laws.FDA Regulations and DSHEAWe market our Protandim® products as “dietary supplements” as defined in the Dietary Supplement Health and Education Act of 1994, or DSHEA.DSHEA is intended to promote access to safe, quality dietary supplements, and information about dietary supplements. DSHEA established a new frameworkgoverning the composition and labeling of dietary supplements.15 DSHEA does not apply to animal supplements like Petandim™ for Dogs. We are not required to obtain FDA pre-market approval to sell our products in theUnited States under current laws.DSHEA permits statements of nutritional support, called “structure-function” statements, to be included in labeling for dietary supplements without FDAmarketing approval. Such statements may claim a benefit related to a classical nutrient deficiency disease and disclose the prevalence of such disease in theUnited States, describe the role of a nutrient or dietary ingredient intended to affect the structure or function in humans, characterize the documentedmechanism by which a nutrient or dietary ingredient acts to maintain such structure or function, or describe general well-being from consumption of anutrient or dietary ingredient. Such statements may not expressly or impliedly claim that a dietary supplement is intended to diagnose, cure, mitigate, treat, orprevent a disease. A company that uses a structure-function statement in labeling must possess evidence substantiating that the statement is truthful and notmisleading and is supported by competent and reliable scientific evidence.The FDA may assert that a particular structure-function statement that a company is using is an illegal claim; that assertion, normally, is in the form of awarning letter to that company. We have a duty to send to the FDA a notice that lists each new structure-function statement made by us; we are obligated tosend that notice within 30 days after the first marketing of a supplement with such a statement.DSHEA also permits certain scientific literature, for example a reprint of a peer-reviewed scientific publication, to be used in connection with the sale ofa dietary supplement to consumers without the literature being subject to regulation as labeling. However, such literature must not be false or misleading, theliterature may not promote a particular manufacturer or brand of dietary supplement and it must include a balanced view of the available scientificinformation on the subject matter, among other requirements.The FDA's Center for Veterinary Medicine, or CVM, is responsible for enforcing the portion of the Federal Food, Drug, and Cosmetic Act, or the Act, thatrelates to animal supplements, like our Petandim™ for Dogs product. CVM's primary responsibility in enforcing the Act is to ensure that animal supplementsare safe, effective, and can be manufactured to a consistent standard. CVM has taken the position that DSHEA does not apply to products intended foranimals, but it is clear that products like Petandim™ for Dogs are under FDA jurisdiction.Our Petandim™ for Dogs product follows the labeling rules of the National Animal Supplement Council (NASC) of which LifeVantage is a member.Under the NASC rules, Petandim™ for Dogs is classified as a dosage form animal health product.While we exercise care in our formulation, manufacturing, packaging, labeling, and advertising of our products, we cannot guarantee the FDA will neverinform us that the FDA believes some violation of law has occurred either by us or by our independent distributors. Any allegations of our non-compliancemay result in time-consuming and expensive defense of our activities. The FDA’s normal course of action is to issue a warning letter if it believes that aproduct is misbranded or adulterated. The responsive action requested by the FDA differs depending upon the nature of the product and claims in question.Typically, the FDA expects a written response within 15 working days of the receipt of a warning letter. The warning letter is public information posted onthe FDA’s web site. That information could affect our relationships with our investors, independent distributors, vendors, and consumers. Warning letters alsooften spark private class action litigation under state consumer protection statutes. The FDA could also order compliance activities, such as an inspection ofour facilities and products, and could file a civil lawsuit in which an arrest warrant (seizure) could be issued as to some or all of our products. In extraordinarycases, we could be named a defendant and sued for declaratory and injunctive relief.FTC RegulationsAdvertising and marketing of our products in the United States are also subject to regulation by the FTC under the Federal Trade Commission Act, orFTC Act. Among other things, the FTC Act prohibits unfair methods of competition and unfair false or deceptive acts or practices in or affecting commerce.The FTC Act also makes it illegal to disseminate or cause to be disseminated any false advertisement. The FTC Act provides that disseminating any falseadvertisement pertaining to foods, which would include dietary supplements, is an unfair or deceptive act or practice. An advertiser is required to havecompetent and reliable scientific evidence for all express and implied health-related product claims at the time the claims are first made. We are required tohave adequate scientific substantiation for all material advertising claims made for our products in the United States. The FTC routinely reviews websites toidentify questionable advertising claims and practices. Competitors sometimes inform the FTC when they believe other competitors are violating the FTCAct and consumers also notify the FTC of what they believe may be wrongful advertising. The FTC may initiate a non-public investigation that focuses onour advertising claims, which usually involves non-public pre-lawsuit extensive formal discovery. Such an investigation may be very expensive to defend,be lengthy, and result in a publicly disclosed Consent Decree, which is a settlement agreement. If no settlement can be reached, the FTC may start anadministrative proceeding or a federal court lawsuit against us or our principal officers. The FTC often seeks to recover from the defendants, whether in aConsent Decree or a proceeding, any or all of the following: (i) consumer redress in the form of monetary relief or disgorgement of profits; (ii) significantreporting requirements16 for several years; and (iii) injunctive relief. In addition, most, if not all, states have statutes prohibiting deceptive and unfair acts and practices. Therequirements under these state statutes are similar to those of the FTC Act.The National Advertising Division, or NAD, of the national Better Business Bureau, a non-governmental not-for-profit organization through itsAdvertising Self-Regulatory Council, or ASRC, is also actively engaged in conducting investigations, called inquiries, which are focused on determiningwhether the requisite claim substantiation standard exists for advertising claims, including specific structure-function claims. Although the results of eachinquiry or proceeding are not binding on the recipient, they are posted on NAD’s website, and the NAD often refers cases to the FTC if the advertisers do notagree to modify their advertising in conformance with the NAD decision. We have been the subject of a NAD proceeding in 2008 and 2009, which wasconcluded in 2009.Regulation of Direct Selling ActivitiesDirect selling activities are regulated by the FTC, as well as various federal, state and local governmental agencies in the United States and foreigncountries. These laws and regulations are generally intended to prevent fraudulent or deceptive schemes, often referred to as “pyramid” schemes, whichcompensate participants primarily for recruiting additional participants without significant emphasis on product sales. The laws and regulations often:•require us or our distributors to register with governmental agencies;•impose caps on the amount of commission we can pay;•impose reporting requirements; and•require that we ensure, among other things, that our distributors maintain levels of product sales to qualify to receive commissions and that ourdistributors are being compensated primarily for sales of products and not primarily for recruiting additional participants.The laws and regulations governing direct selling are modified from time to time, and, like other direct selling companies, we may be subject from timeto time to government investigations related to our direct selling activities. This may require us to make changes to our business model and ourcompensation plan.State RegulationsIn addition to United States federal regulation, each state has enacted its own food and drug laws. We may receive requests to supply informationregarding our sales or advertising to state regulatory agencies. We remain subject to the risk that, in one or more of our present or future markets, our products,sales, and advertising could be found non-compliant with state laws and regulations. If we fail to comply with these laws and regulations, it could have amaterial adverse effect on our business in a particular market or in general. In addition, these laws and regulations could affect our ability to enter newmarkets.The FDA Food Safety Modernization ActThe FDA Food Safety Modernization Act, or FSMA, was enacted in 2011 and is now part of the Federal Food, Drug and Cosmetic Act, or FFDCA. TheFSMA is a comprehensive set of laws that gives the FDA considerable authority with respect to the prevention of food contamination and the seriousproblems associated with such contamination. Among other things, it does the following:•gives the FDA explicit authority to compel a recall if the FDA believes there is a reasonable probability of serious adverse health consequences ordeath;•places strict obligations on food and dietary supplement importers to verify that food from foreign suppliers is not adulterated or misbranded; and•provides whistle blower protection for employees of conventional food or dietary supplement companies who provide information to governmentalauthorities about violations of the FFDCA.International RegulationsIn addition to the regulations applicable to our activities in the United States, all other markets in which we operate our business regulate our productsunder a variety of statutory and regulatory schemes. We typically market our Protandim® line of products in international markets as foods, health foods ordietary supplements under applicable regulatory regimes. However, because of varied regulations, some products or ingredients that are recognized as a“food” in certain markets may be treated as17 a “pharmaceutical” or equivalent in other markets. In the event a product, or an ingredient in a product, is classified as a drug or pharmaceutical product inany market, we will generally not be able to distribute that product through our distribution channel because of pre-marketing approval requirements andstrict regulations applicable to drug and pharmaceutical products. In Japan, for example, ashwagandha was determined to be inappropriate for inclusion infood products. Ashwagandha is one of the ingredients in Protandim® Nrf2 Synergizer. While we disagree with the assessment of ashwagandha by Japaneseregulatory authorities, we are restricted from selling a formulation of Protandim® Nrf2 Synergizer that contains ashwagandha in Japan. As such, wereformulated Protandim® Nrf2 Synergizer for the Japan market to exclude ashwagandha. This reformulated Protandim® Nrf2 Synergizer was introduced inJapan in fiscal year 2013.Similarly, our other markets outside the United States regulate advertising and product claims regarding the efficacy of our products and requireadequate substantiation of claims. As such, we are unable to claim that any of our products will diagnose, cure, mitigate, treat or prevent diseases. Forexample, in Japan, Protandim® Nrf2 Synergizer is considered a food product, which significantly limits our ability to make claims regarding the product. Ifmarketing materials make claims that exceed the scope of allowed claims for dietary supplements, regulatory authorities could deem our products to beunapproved drugs and we could experience substantial harm.Our business model is also subject to regulatory frameworks that may limit or significantly alter the way business is done in foreign markets vis-à-vis theUnited States. For example, our marketing of products or business opportunity as a distributor in the United Kingdom differs significantly from marketing toUnited States customers and distributors. Consequently, we may experience additional costs and delays in entering or continuing to do business in foreignmarkets in order to comply with local regulations.Potential FDA and Other RegulationWe could become subject to additional laws or regulations administered by the FDA, FTC, or other federal, state, local or international regulatoryauthorities, to the repeal of laws or regulations that we consider favorable, such as DSHEA, or to more stringent interpretations of current laws or regulations.Because of negative publicity associated with some adulterated or misbranded supplements, including pharmaceutical drugs marketed as dietarysupplements, there has been an increased movement in the United States and other markets to expand the regulation of dietary supplements, which couldimpose additional restrictions or requirements in the future. In recent years, there also has been increased pressure in the United States to enhance regulationof cosmetics. In general, the regulatory environment is becoming more complex with increasingly strict regulations.The Dietary Supplement and Nonprescription Drug Consumer Protection Act requires us to report to the FDA all serious adverse events and to maintainfor six years records of all adverse events, whether or not serious. An adverse event is defined as any health-related event associated with the use of a dietarysupplement that is adverse. In addition, this law requires the label of each dietary supplement, including our Protandim® products, to include a domesticaddress or telephone number by which the company selling the product may receive a report of a serious adverse event associated with such product. Thelabels of our Protandim® products comply with that statutory provision.EmployeesAs of June 30, 2019 and 2018, we had 227 and 220 full-time employees, respectively. As of June 30, 2019, 177 of our full-time employees were based inthe United States, 29 were based in Japan and 21 were based in Thailand, Hong Kong, Taiwan and Australia. We do not include our independent distributorsin our number of employees because our independent distributors are independent contractors and not employees. We outsource our manufacturing anddistribution operations.Available InformationOur principal offices are located at 9785 S. Monroe Street, Suite 400, Sandy, UT 84070. Our telephone number is (801) 432-9000 and our fax number is(801) 880-0699. Our website address is www.lifevantage.com; however, information found on our website is not incorporated by reference into this report.Our website address is included in this annual report as an inactive textual reference only.The reports filed with the Securities and Exchange Commission, or SEC, by us and by our officers, directors, and significant shareholders are availablefor review on the SEC’s website at www.sec.gov. You may also read and copy materials that we file with the SEC at the SEC’s Public Reference Room at 100F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.18 ITEM 1A — RISK FACTORSBecause of the following risks, as well as other risks affecting our financial condition and operating results, past financial performance should not beconsidered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.The risks described below are those we currently believe could materially affect us. The following risks are not necessarily all of the important factors thatcould cause our actual results of operations to differ materially from those expressed in the forward-looking statements in this report.Risks Relating to Our CompanyAn inability to properly motivate and manage our independent distributors could harm our business.Motivating our independent distributors and providing them with appropriate resources, including technology, tools and training, are important to thegrowth and success of our business. From time to time, we face challenges in motivating and managing our independent distributors. For example, as wepreviously disclosed in Item 9A of our Annual Report on Form 10-K for the year ended June 30, 2016, the audit committee of our board of directorsconducted an independent review related to the distribution of our products into countries outside the U.S. in which those products were not registered or thatotherwise imposed stringent restrictions on our direct selling model, and the associated revenue and tax and other accruals associated with such sales. Thisindependent review was initiated following internal reviews conducted by Company personnel and was further informed by the content of employeecomplaints. Actions we take from time to time to enforce our policies and procedures, may cause discord among some of our independent distributors. Theloss of key distributors due to various factors including, but not limited to, voluntary termination or involuntary termination or suspension resulting fromnon-compliance with our policies and procedures, could distract our distributors and disrupt our business. For example, in the past, we have experienceddiscord among our leading independent distributors in Japan, which is a significant part of our business. If we fail to properly manage any discord among ourleading independent distributors in Japan and other markets, we could lose additional leaders, including to competing direct selling companies, which couldhave a significant negative impact on our revenue. Further, from time to time, we are involved in legal proceedings with former distributors. Such legalproceedings can be a distraction to our active independent distributors and can be expensive, time-consuming and cause a disruption to our business. Ourinability to properly manage these and other distractions may have a negative impact on our business.We may not be successful in expanding our operations.We may not be successful in expanding our operations. Although we began to sell our products through our direct selling network in fiscal year 2009, westill have limited experience in selling our products through direct selling compared to other companies in our industry. As such, we may have limitedinsight into trends, disruptions and other factors that may emerge and affect our business. For example, from time to time, we are compelled to terminate oneor more of our independent distributors for actions contrary to their contractual obligations with us. In the past, some of these terminations have causeddisruption among our independent distributors, and such terminations or resulting disruption in the future may slow our growth. Additionally, we may not besuccessful in keeping our leading independent distributors focused and motivated or in aligning their goals with the goals of our company. We also havelimited experience expanding into new geographic markets. This limited experience was a contributing factor to the conduct that led to the independentreview conducted by our audit committee in 2016. Although we are seeking to continue our expansion, if we fail to effectively expand our operations intoadditional markets, we may be unable to generate consistent operating profit growth in future periods.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our business has grown significantly since we initiated our direct selling model in fiscal 2009. This growth placed substantial strain on our management,operational, financial and other resources. If we are able to continue expanding our operations in the United States and in other countries where we believeour products will be successful, such expansion could place increased strain on our management, operational, financial and other resources. In addition, aninability to leverage our current resources in an efficient manner could have a material adverse effect on our business, operating margins and results ofoperations.We may not succeed in growing existing markets or opening new markets.We sell our products in the United States, Mexico, Japan, Australia, Hong Kong, Canada, Thailand, the United Kingdom, the Netherlands, Germany,Taiwan, Austria, Spain, Ireland and Belgium. We also sell our products in a number of countries to customers for personal consumption only. In addition, wesell our products in China through our e-commerce business model. In fiscal 2019, we generated approximately 33% of our revenue from our internationaloperations, a majority of which was generated from Japan. We believe that our ability to achieve future growth is dependent in part on our ability toeffectively expand into new international markets. In some of our international markets, we have experienced unexpected difficulties19 which have resulted in adverse consequences to our business and financial results, including slower than anticipated growth, the closure of one of ourmarkets (the Philippines) and disruption to our business as we implemented changes to our systems and distributor enrollment requirements as a result of theindependent review conducted by our audit committee in 2016. Our business and financial results may also be negatively impacted if a particular market ornew business model, such as our China e-commerce business model, is not widely accepted and adopted. We must overcome significant regulatory and legalbarriers before we can begin marketing in any international market. Also, before marketing commences in a new country or market, it is difficult to assess theextent to which our products and sales techniques will be accepted or successful in any given country. In addition to significant regulatory barriers, we mayalso encounter problems conducting operations in new markets with different cultures and legal systems from those encountered elsewhere. We may berequired to reformulate one or more of our products before commencing sales of that product in a given country. Once we have entered a market, we mustadhere to the regulatory and legal requirements of that market. We may not be able to obtain and retain necessary permits and approvals in new markets, orwe may have insufficient capital to finance our expansion efforts in a timely manner.Our independent distributors could fail to comply with applicable legal requirements or our distributor policies and procedures, which could result inclaims against us that could harm our business.Our independent distributors are independent contractors and, accordingly, we are not in a position to directly provide the same oversight, direction andmotivation as we would if they were our employees. As a result, there can be no assurance that our independent distributors will comply with applicable lawsor regulations or our distributor policies and procedures, participate in our marketing strategies or plans, or accept our introduction of new products.Extensive federal, state, local and international laws regulate our business, products and direct selling activities. Because we have expanded into foreigncountries, our policies and procedures for our independent distributors differ slightly in some countries due to the different legal requirements of eachcountry in which we do business. In addition, as we have expanded internationally, some of our distributors have carried or shipped our products intocountries in which such products are not registered or that otherwise impose stringent restrictions on our direct selling model. While we have taken steps tostop or restrict these sales from occurring, including through our distributor policies and procedures, it can be difficult to enforce these policies andprocedures because of the large number of distributors and their independent status. If relevant regulatory authorities determined that any such activities arenot compliant with all regulatory requirements, we could be subject to related fines, penalties and other assessments. Activities by our independentdistributors that violate applicable laws or regulations could result in government or third-party actions against us, which could harm our business. Inaddition, violations by our independent distributors of our policies and procedures could reflect negatively on our products and operations and harm ourbusiness reputation. Further, it is possible that a court could hold us civilly or criminally accountable based on vicarious liability because of the actions ofour independent distributors. In the past, we have had independent distributors investigated by government agencies for conduct violating the law and ourpolicies. This type of investigation can have an adverse effect on us even if we are not involved in the independent distributor's activities.Inability of new products and technological innovations to gain distributor or market acceptance could harm our business.We believe our ability to introduce new products that gain acceptance among our distributors and customers is an important part of our ability to growour revenue in future periods. However, any new products we introduce may not gain distributor and market acceptance to the extent we anticipate or project.Factors that could affect our ability to introduce new products include, among others, government regulations, the inability to attract and retain qualifiedresearch and development staff, the termination of third-party research and collaborative arrangements, proprietary protections of competitors that may limitour ability to offer comparable products and the difficulties in anticipating changes in consumer tastes and buying preferences. In addition, new products weintroduce may not be successful or generate substantial revenue. The introduction of a new product could also negatively impact other product lines to theextent our distributor leaders focus their efforts on the new product instead of an existing product. If any of our products fails to gain distributor acceptance,we could see an increase in product returns.In addition, we believe our ability to introduce new technologies that gain acceptance among our distributors and customers is an important part of ourability to grow our revenue in future periods. However, these or other new technologies that we introduce may not gain distributor acceptance to the extentwe anticipate or project.Our business and stock price may be adversely affected if our internal control over financial reporting is not effective.As a public company, we are required to maintain internal controls over financial reporting and to report any material weaknesses in such internalcontrols. Section 404 of the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act) requires that we evaluate and determine the effectiveness of our internalcontrols over financial reporting and provide a management report on the internal controls over financial reporting, which must be attested to by ourindependent registered public accounting firm.20 In September 2016, our audit committee, with the assistance of outside legal counsel, commenced an independent review related to the distribution ofour products into countries outside the U.S. in which such products are not registered or that otherwise impose stringent restrictions on our direct sellingmodel, and the associated revenue and tax and other accruals associated with such sales. Based on its review, the audit committee determined that we hadsold our products to independent distributors who carried or shipped such products primarily into four countries outside the U.S. in which those products arenot registered or that otherwise impose stringent restrictions on our direct selling model and that we had allowed individuals who were resident in countriesthat impose stringent restrictions on our direct selling model to enroll as our independent distributors. Accordingly, we concluded that we had a materialweakness in our internal control over financial reporting related to our business policies, practices, monitoring and training governing our internationalbusiness operations, including the sale and distribution of our products in international markets. A “material weakness” is a deficiency, or a combination ofdeficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interimfinancial statements will not be prevented or detected on a timely basis. We also evaluated the effectiveness of the design and operation of our disclosurecontrols and procedures as of June 30, 2016 and concluded that our disclosure controls and procedures were not effective as of that date, because of thematerial weakness in our internal control over financial reporting.We adopted various measures that were designed to remediate the material weakness in our internal control over financial reporting, including thedevelopment and implementation of new control policies and procedures regarding the international business policies, practices, monitoring and training foreach country outside the U.S. in which we do business. However, we cannot assure you that significant deficiencies or material weaknesses in our internalcontrol over financial reporting will not exist in the future. Any failure to maintain or implement required new or improved controls, or any difficulties weencounter in their implementation, could result in significant deficiencies or material weaknesses, cause us to fail to timely meet our periodic reportingobligations, or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of periodic managementevaluations and annual auditor attestation reports regarding disclosure controls and the effectiveness of our internal control over financial reporting requiredunder Section 404 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder. The existence of a material weakness could result in errors in ourfinancial statements that could result in a restatement of financial statements, cause us to fail to timely meet our reporting obligations and cause investors tolose confidence in our reported financial information, leading to a decline in our stock price.Our business could be negatively impacted if we fail to execute our product launch process due to increased pressure on our supply chain, informationsystems and management.Although our product launch process may vary by market, we generally introduce new products to our independent distributors and customers throughlive cyber launches, limited-time offers and promotions. The limited-time offers typically generate significant activity and a high level of purchasing, whichmay result in a higher than normal increase in revenue during the quarter of the limited-time offer and skew year-over-year and sequential comparisons. Wemay experience difficulty effectively managing growth associated with these limited-time offers. In addition, the size and condensed schedule of theseproduct launches increases pressure on our supply chain. If we are unable to accurately forecast sales levels in each market, obtain sufficient ingredients orproduce a sufficient supply to meet demand, we may incur higher expedited shipping costs and we may temporarily run out of stock of certain products,which could negatively impact the enthusiasm of our independent distributors and customers. Conversely, if demand does not meet our expectations for aproduct launch, we could incur increased inventory write-offs. Any inventory write-off would negatively impact our gross margins. In addition, our orderprocessing systems could have difficulties handling the high volume of orders generated by limited-time offers. Although our previous limited-time offershave not materially affected our product return rate, these events may increase our product return rate in the future.Our business may be harmed if we are unable to appropriately manage our inventory.In the past, we have experienced difficulties in appropriately managing our inventory. For example, when we launched our PhysIQ™ product line inDecember 2015, we experienced higher than expected demand and did not have sufficient inventory to meet demand. More recently, our inventory balancesincreased significantly, causing us to engage in a deliberate effort to manage our inventory balances down to levels we view as appropriate. We review allinventory items quarterly for obsolescence, and when items become obsolete or are expired we write down our inventory accordingly. If we are unable to sellour inventory in a timely manner, we may experience additional inventory obsolescence charges, including for finished products in inventory that haveexpired. If we are unable to appropriately manage our inventory balances, our business may be harmed.21 We rely on our information technology systems to manage numerous aspects of our business, and a disruption in these systems could adversely affect ourbusiness.We depend on our information technology, or IT, systems to manage numerous aspects of our business, including our finance and accountingtransactions, to manage our independent distributor compensation plan and to provide analytical information to management. Our IT systems are an essentialcomponent of our business and growth strategies, and a serious disruption to our IT systems could significantly limit our ability to manage and operate ourbusiness efficiently. These systems are vulnerable to, among other things, damage and interruption from power loss or natural disasters, computer system andnetwork failures, loss of telecommunications services, physical and electronic loss of data, security breaches and computer viruses. Any disruption couldcause our business and competitive position to suffer and adversely affect our business and operating results. In addition, if we experience future growth, wewill need to scale or change some of our systems to accommodate the increasing number of independent distributors and other customers.Cyber security risks and the failure to maintain the integrity of data belonging to our company, employees, independent distributors and customers couldexpose us to data loss, litigation and liability, and our reputation could be significantly harmed.We collect and retain large volumes of data relating to our business and from our employees, independent distributors and customers for businesspurposes, including for transactional and promotional purposes, and our various information technology systems enter, process, summarize and report suchdata. The integrity and protection of this data is critical to our business. We are subject to significant security and privacy regulations, as well as requirementsimposed by the credit card industry. Maintaining compliance with these evolving regulations and requirements could be difficult and may increase ourexpenses. In addition, a penetrated or compromised data system or the intentional, inadvertent or negligent release or disclosure of data could result in theft,loss or fraudulent or unlawful use of data relating to our company or our employees, independent distributors or customers, which could harm our brand andreputation, disrupt our operations, or result in remedial and other costs, fines or lawsuits, all of which would substantially harm our business and operatingresults.Further, we are subject to changes in the regulatory environment regarding privacy and data protection. Our growth and expansion into a variety of newmarkets may potentially involve new regulatory issues and requirements. For example, many countries, such as European Union member countries as a resultof the General Data Protection Regulation (GDPR), are introducing, or have already introduced into local law some form of traffic and user data retentionrequirements. Compliance with these retention requirements can be difficult and costly from a legal, operational and technical perspective and could harmour business and operational results.Inability to comply with financial covenants imposed by our credit facility and the impact of debt service obligations and restrictive covenants couldimpede our operations and flexibility.We entered into a Financing Agreement in March 2016, which was subsequently amended in May 2018 and February 2019, that provides for a creditfacility consisting of a term loan in an aggregate principal amount of $10 million and a revolving loan facility in an aggregate principal amount not toexceed $5 million. As of June 30, 2019, the principal amount owing under the credit facility was approximately $1.5 million. The principal amount borrowedunder the credit facility is repayable in consecutive quarterly installments. We expect to generate the cash necessary to pay the principal and interest on thecredit facility from our cash flows provided by operating activities. However, our ability to meet our debt service obligations will depend on our futureperformance, which may be affected by financial, business, economic, demographic and other factors. If we do not have enough money to pay our debtservice obligations, we may be required to refinance all or part of our debt, sell assets, borrow more money or raise cash through the sale of equity. In such anevent, we may not be able to refinance our debt, sell assets, borrow more money or raise cash through the sale of equity on terms acceptable to us or at all.Also, our ability to carry out any of these activities on favorable terms, if at all, may be further impacted by any financial or credit crisis which may limitaccess to the credit markets and increase the cost of capital.The credit facility is secured by a lien on substantially all of our assets, and the assets of our subsidiaries, and contains customary covenants, includingaffirmative and negative covenants, that restrict our ability to incur or guarantee additional indebtedness, declare or pay dividends on or redeem capitalstock, make other payments to holders of our equity interests, make certain investments, purchase or otherwise acquire all or substantially all the assets orequity interests of other companies, sell our assets and enter into consolidations, mergers or transfers of all or substantially all of our assets. The credit facilityrequires that we maintain specified financial ratios and satisfy certain financial condition tests and meet certain informational requirements. Our ability tomeet these financial ratios and tests and informational requirements can be affected by events beyond our control and we may be unable to meet these ratiosand tests and informational requirements. A breach of any of the covenants, ratios, tests or restrictions imposed by the credit facility would result in an eventof default and the lender could declare all amounts outstanding under the credit facility to be immediately due and payable. Our assets may not be sufficientto repay the indebtedness if the lenders accelerate our repayment of the indebtedness under the credit facility.22 A substantial portion of our business is conducted in foreign markets, exposing us to the risks of trade or foreign exchange restrictions, increased tariffs,foreign currency fluctuations, disruptions or conflicts with our third-party importers and similar risks associated with foreign operations.Global economic conditions continue to be challenging and unpredictable. A substantial portion of our sales are generated outside the United States. Ifwe are successful in entering additional foreign markets, we anticipate that the percentage of our sales generated outside the United States will increase. Thereare substantial risks associated with foreign operations. For example, a foreign government may impose trade or foreign exchange restrictions, increasedtariffs or other legal, tax, customs or other financial burdens on us or our independent distributors, due, for example, to the structure of our operations invarious markets. Any such actions could negatively impact our operations and financial results. We are also exposed to risks associated with foreign currencyfluctuations. For instance, in preparing our financial statements, we translate revenue and expenses in our markets outside the United States from their localcurrencies into U.S. Dollars using weighted average exchange rates. If the U.S. Dollar strengthens relative to local currencies, our reported revenue, grossprofit and net income will likely be reduced. Foreign currency fluctuations can also result in losses and gains resulting from translation of foreign currencydenominated balances on our balance sheet. Additionally, purchases from suppliers are generally made in U.S. Dollars while sales to distributors are generallymade in local currencies. Accordingly, strengthening of the U.S. Dollar versus a foreign currency could have a negative impact on us. Specifically, because asignificant percentage of our revenue is generated in Japan, strengthening of the U.S. Dollar versus the Japanese yen has had and, in the future, could have anadverse impact on our financial results. Although we may engage in transactions intended to reduce our exposure to foreign currency fluctuations, there canbe no assurance that these transactions will be effective. Given the complex global political and economic dynamics that affect exchange rate fluctuations, itis difficult to predict future fluctuations and the effect these fluctuations may have upon future reported results or our overall financial condition.Additionally, we may be negatively impacted by conflicts with or disruptions caused or faced by third party importers, as well as conflicts between suchimporters and local governments or regulatory agencies. Our operations in some markets also may be adversely affected by political, economic and socialinstability in foreign countries.If we are to expand our product offerings, we may need to raise additional capital.Although we continue to introduce additional products, we primarily depend on the Protandim® product line for our revenue. We may decide to expandour product portfolio and may seek to do so by acquiring products by license or through product or company acquisitions. If cash generated from operationsis insufficient to satisfy our requirements in this regard, we may need to raise additional capital, which may be dilutive to our existing shareholders. If we areunable to raise additional required capital in a timely manner, we could be forced to reduce our growth plans.Risks Relating to Our Business and IndustryWe primarily depend on a few products for our revenue.Although we generate revenue through the sale of our Petandim™ for Dogs, Axio®, PhysIQ™ and LifeVantage® products, we primarily rely on ourProtandim® and TrueScience® product lines for our revenue, which collectively represent approximately 78% of our total revenue. We do not currently havea broad portfolio of other products that we could rely on to support our operations if we were to experience any difficulty with the manufacture, marketing,sale or distribution of these product lines. If we are unable to sustain or increase the price or sales levels for the Protandim® and TrueScience® product lines,our business could be harmed.If we are unable to retain our existing independent distributors or attract additional independent distributors, our revenue will not increase and may evendecline.Our independent distributors may terminate their services at any time, and we can and have in the past terminated distributors for conduct violative ofour policies and procedures. As such, like most direct selling companies, we have experienced and are likely to continue to experience turnover amongindependent distributors. The departure for any reason of one of our leading independent distributors can be a major disruption to other independentdistributors and can have a significant negative impact on our operating results. Independent distributors who join our company to purchase our products forpersonal consumption or for short-term income goals may only stay with us for a short time. While we take steps to help train, motivate, and retainindependent distributors, we cannot accurately predict the number or productivity of our independent distributors.23 Our operating results will be harmed if we and our independent distributor leaders do not generate sufficient interest in our business to retain existingindependent distributors and attract new independent distributors. The number and productivity of our independent distributors could be harmed by severalfactors, including:•any adverse publicity regarding us, our products, our distribution channel, or our competitors;•non-compliance by our independent distributors with applicable legal requirements or our policies and procedures;•lack of interest in existing or new products or their failure to achieve desired results;•lack of a compelling business opportunity sufficient to generate the interest and commitment of new independent distributors;•any changes we might make to our independent distributor compensation plan;•any negative public perception of our company or our products or their ingredients;•any negative public perception of our independent distributors and direct selling business in general;•our actions to enforce our policies and procedures;•any efforts to sell our products through competitive channels;•any regulatory actions or charges against us or others in our industry; and•general economic and business conditions.High quality materials for our products may be difficult to obtain or expensive.Raw materials account for a significant portion of our manufacturing costs and we rely on third-party suppliers to provide raw materials. Suppliers maybe unable or unwilling to provide the raw materials our manufacturers need in the quantities requested, at a price we are willing to pay, or that meet ourquality standards. We are also subject to potential delays in the delivery of raw materials caused by events beyond our control, including labor disputes,transportation interruptions and changes in government regulations. Our business could be adversely affected if we are unable to obtain a reliable source ofany of the raw materials used in the manufacturing of our products that meets our quality standards. Additionally, if demand for our products exceeds ourforecasts, we may have difficulties in obtaining additional raw materials in time to meet the excess demand. Any significant delay in or disruption of thesupply of raw materials could, among other things, substantially increase the cost of such materials, require reformulation or repackaging of products, requirethe qualification of new suppliers, or result in our inability to meet customer demands.Although our independent distributors are independent contractors, improper distributor actions that violate laws or regulations could harm our business.Our independent distributors are not employees and act independent of us. However, activities by our independent distributors that violate applicablelaws or regulations could result in government or third-party actions against us, which could harm our business. Our independent distributors agree to abideby our strict policies and procedures designed to ensure our independent distributors will comply with legal requirements. We have a compliance departmentthat addresses violations of our independent distributors when they become known to us. However, given the size of our independent distributor network, weexperience problems with independent distributors violating our policies and procedures from time to time and are not always able to discover or remedysuch violations.One of our most significant areas of risk with respect to independent distributor activities relates to improper product claims and claims regarding thebusiness opportunity of being an independent distributor. Any determination by the Federal Trade Commission, any state agency or other similargovernmental agency outside the United States that we or our independent distributors are not in compliance with applicable laws could materially harm ourbusiness. Even if governmental actions do not result in rulings or orders against us, they could create negative publicity that could detrimentally affect ourefforts to recruit or motivate independent distributors and attract customers or lead to consumer lawsuits against us. As we experience growth in the number ofour independent distributors, we have seen an increase in sales aids and promotional material being produced by distributors and distributor groups in somemarkets. This places an increased burden on us to monitor compliance of such materials and increases the risk that such materials could contain problematicproduct or marketing claims in violation of our policies and applicable regulations. As we expand internationally, our distributors sometimes attempt toanticipate additional new markets that we may enter in the future and begin marketing and sponsoring activities in markets where we are not qualified toconduct business. For example, some of our independent distributors have carried or shipped our products into countries in which such products are notregistered or that otherwise impose stringent restrictions on our direct selling model.24 These or other activities by our independent distributors that violate applicable laws or regulations could subject us to legal or regulatory claims or actions,which could result in fines, penalties or negative publicity, any of which could have an adverse impact on our business.We are dependent upon third parties to manufacture our products.We currently rely on third parties to manufacture the products we sell. We are dependent on the uninterrupted and efficient operation of third partymanufacturers’ facilities. We currently use multiple third-party manufacturers for our products. If any of our current manufacturers are unable or unwilling tofulfill our manufacturing requirements or seek to impose unfavorable terms, we will likely have to seek out other manufacturers, which could disrupt ouroperations and we may not be successful in finding alternative manufacturing resources. In addition, competitors who perform their own manufacturing mayhave an advantage over us with respect to pricing, availability of product, and in other areas through their control of the manufacturing process.Disruptions to transportation and other distribution channels for our products may adversely affect our margins and profitability.We generally rely on the uninterrupted and efficient operation of third-party logistics companies to transport and deliver our products. These third-partylogistics companies may experience disruptions to the transportation channels used to distribute our products, including increased airport and shipping portcongestion, a lack of transportation capacity, increased fuel expenses, and a shortage of manpower. Disruptions to the transportation channels experienced byour third-party logistics companies may result in increased costs, including the additional use of airfreight to meet demand. In addition, for our China e-commerce business model, we rely on a third party to process transactions, fulfill orders, and manage logistic and money flows. Disruptions to the businessmodel or our relationship with the third party if, for example, performance fails to meet our expectations, could harm our business.We are subject to risks related to product recalls.We have implemented measures in our manufacturing process that are designed to prevent and detect defects in our products, including contaminants.However, such measures may not prevent or reveal defects or detect contaminants in our products and such defects and contaminants may not becomeapparent until after our products have been sold into the market. Accordingly, there is a risk that product defects will occur, or that our products will containforeign contaminants, and that such defects and contaminants will require a product recall. We do not maintain product recall insurance. In December 2012,we commenced a voluntary recall of certain lots of Protandim® Nrf2 Synergizer to alleviate concerns that some tablets may have included small metalfragments. We discovered these small metal fragments in certain batches of turmeric extract, an ingredient in Protandim® Nrf2 Synergizer we purchase fromthird-party suppliers. Product recalls and subsequent remedial actions can be expensive to implement and could have a material adverse effect on ourbusiness, results of operations and financial condition. In addition, product recalls could result in negative publicity and public concerns regarding the safetyof our products, either of which could harm the reputation of our products and our business and could cause the market value of our common stock to decline.The events that lead to and followed our voluntary product recall in December 2012 strained our relationships with some of our third-partymanufacturers. Additionally, following the voluntary recall we implemented more stringent measures, including several redundant measures, in ourmanufacturing process to detect contaminants. Third-party manufacturers may be reluctant to implement these redundant measures, may refuse tomanufacture our products, and these additional measures may increase our cost of goods sold and further strain our relationships with manufacturers.Laws and regulations may prohibit or severely restrict direct selling and cause our revenue and profitability to decline, and regulators could adopt newregulations that negatively impact our business.Various government agencies throughout the world regulate direct selling practices. The laws and regulations applicable to us and our independentdistributors in Japan are particularly stringent. These laws and regulations are generally intended to prevent fraudulent or deceptive schemes, often referred toas “pyramid” schemes, which compensate participants primarily for recruiting additional participants without significant emphasis on the sale of product toend consumers. The laws and regulations in some of our markets impose cancellations, product returns, inventory buy-backs and cooling-off rights for ourindependent distributors and customers. Excessive refunds and/or product returns pursuant to local laws and regulations could have a negative impact on ouroperating results. Complying with these rules and regulations can be difficult and requires the devotion of significant resources on our part. We may not beable to continue business in existing markets or commence operations in new markets if we are unable to comply with these laws or adjust to changes in theselaws.25 Unfavorable publicity could materially harm our business.We are highly dependent upon consumers' perceptions of the safety, quality, and efficacy of our products, as well as competitive products distributed byother companies. In the past, we have experienced negative publicity that has harmed our business. Critics of our industry and other individuals whoseinterests are not aligned with our interests, have in the past and may in the future utilize the Internet, the press and other means to publish criticism of theindustry, our company, our products and our competitors, or make allegations regarding our business and operations, or the business and operations of ourcompetitors. For instance, several prominent companies in our industry have been targeted by short sellers who profit if a company's stock price decreases.One such company was targeted by a short seller who, after taking a significant short position, publicly made allegations regarding the legality of thecompany's direct selling model. Short sellers have an incentive to publicly criticize our industry and business model and any such criticism may adverselyaffect our stock price.Future scientific research or publicity may not be favorable to our industry or any particular product. Because of our dependence upon consumerperceptions, adverse publicity associated with illness or other adverse effects resulting or claimed to have resulted from the consumption or use of ourproducts or any similar products distributed by other companies could have a material adverse impact on us. Such adverse publicity could arise even if theclaims are unsubstantiated or if the adverse effects associated with such products resulted from failure to consume or use such products as directed. Adversepublicity could also increase our product liability exposure, result in increased regulatory scrutiny and lead to the initiation of private lawsuits.Our direct selling program could be found to be not in compliance with current or newly adopted laws or regulations in one or more markets, which couldprevent us from conducting our business in these markets and harm our financial condition and operating results.Some of the legal and regulatory requirements concerning the direct selling business model are ambiguous and subject to interpretation. As a result,regulators and courts have discretion in their application of these laws and regulations, and the enforcement or interpretation of these laws and regulations bygovernmental agencies or courts can change. Recent allegations by short sellers regarding the legality of multi-level marketing companies generally havealso created intense public scrutiny of our industry and could cause governmental agencies to change their enforcement and interpretation of applicable lawsand regulations. The failure of our business to comply with current or newly adopted regulations or interpretations could negatively impact our business in aparticular market or in general and may adversely affect our stock price.We may become involved in legal proceedings that are expensive, time consuming and, if adversely adjudicated or settled, could adversely affect ourfinancial results.Litigation claims can be expensive and time consuming to bring or defend against and could result in settlements or damages that could significantlyaffect our financial results. It is not possible to predict the final resolution of litigation to which we may become a party, and the impact of litigationproceedings on our business, results of operations and financial condition could be material.We are currently involved in various legal matters, both as a plaintiff and as defendant. While we believe the suits against us are without merit, they arecostly to defend and we cannot be assured that we will ultimately prevail. If we do not prevail and are required to pay damages, it could harm our business.Our business is subject to strict government regulations.The manufacturing, packaging, labeling, advertising, sale and distribution of our products are subject to federal laws and regulations by one or morefederal agencies, including, in the United States, the Food and Drug Administration, or FDA, the Federal Trade Commission, or FTC, the Consumer ProductSafety Commission, and the United States Department of Agriculture. These activities are also regulated by various state, local, and international laws andagencies of the states, localities and countries in which our products are sold. For instance, the FDA regulates, among other things, the composition, safety,labeling, and marketing of dietary supplements (including vitamins, minerals, herbs and other dietary ingredients for human use). Government regulationsmay prevent or delay the introduction of our products, or require us to reformulate our products or change the claims we make about them, which could resultin lost revenue, increased costs and delay our expansion into new international markets.The FDA may determine that a particular dietary supplement or ingredient is adulterated or misbranded or both, and may determine that a particularclaim or statement of nutritional support that we make to support the marketing of a dietary supplement is an impermissible drug claim, or is an unauthorizedversion of a “health claim.” The FDA, the FTC, or state attorneys general may also determine that a particular claim we make for our products is notsubstantiated. Determining whether a claim is improper frequently involves a degree of subjectivity by the regulatory agency or individual regulator. Any ofthese determinations by the FDA or other regulators could prevent us from marketing that particular dietary supplement product, or making certain claims forthat product. The FDA could also require us to remove a particular product from the26 market. Any future recall or removal would result in additional costs to us, including lost revenue from any product that we are required to remove from themarket, which could be material. Any product recalls or removals could also lead to liability, substantial costs, and reduced growth prospects.In April 2017, we received a warning letter from the FDA alleging that information on our website contained impermissible drug claims relating to ourProtandim® Nrf2 Synergizer product. We believe the letter from the FDA contained factual inaccuracies and we responded promptly to the FDA. The FDAsubsequently concluded that the issues set forth in the warning letter have been fully resolved. We believe we do not claim that any of our products prevent,diagnose, treat or cure any disease in any of our marketing materials or labeling and we proactively and consistently engage distinguished experts in FDAlaw and regulation to ensure our promotional materials and websites adhere to applicable requirements and restrictions. Nevertheless, in the future, we mayreceive similar warning letters from the FDA if it believes some violation of law has occurred either by us or by our independent distributors. Any allegationsof our non-compliance may result in time-consuming and expensive defense of our activities. FDA warning letters are available to the public on the FDA’swebsite. That information could negatively affect our relationships with our investors, independent distributors, vendors, and consumers. Warning letters mayalso spark private class action litigation under state consumer protection statutes. The FDA could also order compliance activities, such as an inspection ofour facilities and products, and could file a civil lawsuit in which an arrest warrant (seizure) could be issued as to some or all of our products. In extraordinarycases, we could be named a defendant and sued for declaratory and injunctive relief.Additional or more stringent regulations of dietary supplements and other products have been considered from time to time. In recent years, there hasbeen increased pressure in the United States and other markets to increase regulation of dietary supplements. New regulations, or new interpretations of thoseregulations, could impose additional restrictions, including requiring reformulation of some products to meet new standards, recalls or discontinuance ofsome products not able to be reformulated, additional record-keeping requirements, increased documentation of the properties of some products, additionalor different labeling, additional scientific substantiation, additional adverse event reporting, or other new requirements. Any of these developments couldincrease our costs significantly.In the United States, for example, some legislators and industry critics continue to push for increased regulatory authority by the FDA over dietarysupplements, and in early 2019 FDA announced its plan to strengthen the regulation of dietary supplements by modernizing its oversight of supplements.Our business could be harmed if more restrictive legislation is successfully introduced and adopted in the future. In the United States, the FTC’s GuidesConcerning the Use of Endorsements and Testimonials in Advertising, or Guides, require disclosure of material connections between an endorser and thecompany they are endorsing and generally do not allow marketing using atypical results. Our independent distributors have historically used testimonials tomarket and sell our products. Producing marketing materials that conform to the requirements and restrictions of the Guides may diminish the impact of ourmarketing efforts and negatively impact our sales results. If we or our distributors fail to comply with these Guides, the FTC could bring an enforcementaction against us and we could be fined and/or forced to alter our marketing materials. Our operations also could be harmed if new laws or regulations areenacted that restrict our ability to market or distribute dietary supplements or impose additional burdens or requirements on dietary supplement companies orrequire us to reformulate our products.In addition, the Dietary Supplement and Nonprescription Drug Consumer Protection Act imposes significant regulatory requirements on dietarysupplement manufacturers, packers and distributors including the reporting of “serious adverse events” to the FDA and record keeping requirements.Complying with this legislation could raise our costs and negatively impact our business. We and our suppliers are also required to comply with FDAregulations with respect to current Good Manufacturing Practices in manufacturing, packaging, or holding dietary ingredients and dietary supplements.These regulations require dietary supplements to be prepared, packaged, and held in compliance with procedures that we and our subcontractors mustdevelop and make available for inspection by the FDA. These regulations could raise our costs and negatively impact our business. Additionally, our third-party suppliers or vendors may not be able to comply with these rules without incurring substantial expenses. If our third-party suppliers or vendors are notable to comply with these rules, we may experience increased cost or delays in obtaining certain raw materials and third-party products.In 2016, the FDA published an updated draft guidance which is intended, among other things, to help manufacturers and distributors of dietarysupplement products determine when they are required to file with the FDA a New Dietary Ingredient, or NDI, notification with respect to a dietarysupplement product. In this draft guidance, the FDA highlighted the necessity for marketers of dietary supplements to submit NDI notifications as animportant preventive control to ensure that consumers are not exposed to potential unnecessary public health risks in the form of new ingredients withunknown safety profiles. Although we do not believe that any of our products contain an NDI, if the FDA were to conclude that we should have filed an NDInotification for any of our products, then we could be subject to enforcement actions by the FDA. Such enforcement actions could include product seizuresand injunctive relief being granted against us, any of which would harm our business.27 In May 2016, the FDA released a final rule updating the Nutrition Facts label for packaged foods and the Supplement Facts label for dietary supplements,with the objective to help consumers make better informed decisions. While the original compliance deadline for manufacturers of food and dietarysupplements to use the new label was July 26, 2018, FDA recently extended the compliance deadline to January 1, 2020. Change and implementation of thenew label may result in additional costs to our business.Regulations governing the production and marketing of our products could harm our business.We are subject to various domestic and foreign laws and regulations that regulate the production and marketing of our products. If, for example, adetermination that our dietary supplement products are used to diagnose, treat, cure, or prevent any disease or illness, including due to improper marketingclaims by our independent distributors, it may lead to a determination that the LifeVantage® supplements require pre-market approval as a drug. Suchregulations in any given market can limit our ability to import products and can delay product launches as we go through the registration and approvalprocess for those products. Furthermore, if we fail to comply with these regulations, we could face enforcement action against us and we could be fined,forced to alter or stop selling our products and/or be required to adjust our operations. Our operations also could be harmed if new laws or regulations areenacted that restrict our ability to market or distribute our products or impose additional burdens or requirements on the contents of our products or require usto reformulate our products.We are subject to the risk of investigatory and enforcement action by the FTC and state attorneys general.We are subject to the risk of investigatory and enforcement action by the FTC and state attorneys general based on our advertising claims and marketingpractices. The FTC routinely reviews product advertising, including websites, to identify significant questionable advertising claims and practices. The FTChas brought many actions against dietary supplement companies, including some actions that were brought jointly with state attorneys general, based uponallegations that applicable advertising claims or practices were deceptive or not substantiated. If the FTC initiates an investigation, the FTC can initiate pre-complaint discovery that may be nonpublic in nature. Any investigation may be very expensive to defend and may result in an adverse ruling or in a consentdecree.Government authorities may question our tax positions or transfer pricing policies or change their laws in a manner that could increase our effective taxrate or otherwise harm our business.As a U.S. company doing business in international markets through subsidiaries, we are subject to various tax and intercompany pricing laws, includingthose relating to the flow of funds between our company and our subsidiaries. From time to time, we are audited by tax regulators in the United States and inour foreign markets. If regulators challenge our tax positions, corporate structure, transfer pricing mechanisms or intercompany transfers, we may be subject tofines and payment of back taxes, our effective tax rate may increase and our operations may be harmed. Tax rates vary from country to country, and, if taxauthorities determine that our profits in one jurisdiction may need to be increased, we may not be able to fully utilize all foreign tax credits that aregenerated, which will increase our effective tax rate. The various customs, exchange control and transfer pricing laws are continually changing and aresubject to the interpretation of government agencies. We may experience increased efforts by customs authorities in foreign countries to reclassify ourproducts or otherwise increase the level of duties we pay on our products. Despite our efforts to be aware of and comply with such laws, and changes to andinterpretations thereof, there is a risk that we may not continue to operate in compliance with such laws. We may need to adjust our operating procedures inresponse to such changes and, as a result, our business may suffer. In addition, due to the international nature of our business, from time to time, we aresubject to reviews and audits by taxing authorities of other jurisdictions in which we conduct business throughout the world.Non-compliance with anti-corruption laws could harm our business.Our international operations are subject to anti-corruption laws, including the Foreign Corrupt Practices Act, also known as the FCPA. Any allegationsthat we are not in compliance with anti-corruption laws may require us to dedicate time and resources to an internal investigation of the allegations or mayresult in a government investigation. Any determination that our operations or activities are not in compliance with existing anti-corruption laws orregulations could result in the imposition of substantial fines, and other penalties. Although we have implemented anti-corruption policies and controls toprotect against violation of these laws, we cannot be certain that these efforts will be effective.The loss of or inability to attract key personnel could negatively impact our business.Our future performance will depend upon our ability to attract, retain, and motivate our executive and senior management team and scientific staff. Oursuccess depends to a significant extent both upon the continued services of our current executive and senior management team and scientific staff, as well asour ability to attract, hire, motivate, and retain additional qualified management and scientific staff in the future. Specifically, competition for executive andsenior staff in the direct selling and dietary supplement markets is intense, and our operations could be adversely affected if we cannot attract and retainqualified28 personnel. Additionally, former members of our executive and senior management team have in the past, and could in the future join or form companies thatcompete against us in the direct selling industry.All of our employees are “at will” employees, which means any employee may quit at any time and we may terminate any employee at any time. We donot carry “key person” insurance covering members of senior management or our employees.We may be held responsible for certain taxes or assessments and other obligations relating to the activities of our independent distributors, which couldharm our financial condition and operating results.Our distributors are subject to taxation, and in some instances, legislation or governmental agencies impose an obligation on us to collect or withholdtaxes, such as value added taxes or income taxes, and to maintain appropriate records. In the event that local laws and regulations or the interpretation oflocal laws and regulations change to require us to treat our independent distributors as employees, or that our distributors are deemed by local regulatoryauthorities in one or more of the jurisdictions in which we operate to be our employees rather than independent contractors under existing laws andinterpretations, or our independent distributors are deemed to be conducting business in countries outside of the country in which they are authorized to dobusiness, we may be held responsible for social security, income, and other related taxes in those jurisdictions, plus any related assessments and penalties,which could harm our financial condition and operating results. If our independent distributors were deemed to be employees rather than independentcontractors, we may be obligated to pay certain employee benefits, such as workers compensation and unemployment insurance. Further, if our independentdistributors are misclassified as employees, we would also face the threat of increased vicarious liability for their actions.The dietary supplement market is highly competitive.Our flagship product line, Protandim®, competes in the dietary supplements market, which is large, highly competitive and fragmented. Participantsinclude specialty retailers, supermarkets, drugstores, mass merchants, multi-level marketing organizations, on-line merchants, mail-order companies, and avariety of other smaller participants. Many of our competitors have greater financial and other resources available to them and possess better manufacturing,independent distribution and marketing capabilities than we do. We believe some of these competitors with greater resources are currently working ondeveloping and releasing products that will compete directly with the Protandim® product line and be marketed as NRF1 and Nrf2 activators. One or more ofthese products could significantly reduce the demand for the Protandim® product line and have a material adverse effect on our revenue. We believe that themarket is also highly sensitive to the introduction of new products, including various prescription drugs, which may rapidly capture a significant share of themarket. Moreover, because of regulatory restrictions concerning claims about the efficacy of dietary supplements, we may have difficulty differentiating ourproducts from our competitors’ products, and competing products entering the dietary supplements market could harm our revenue. In the United States andJapan, we also compete for sales with heavily advertised national brands manufactured by large pharmaceutical and food companies, as well as other retailers.In addition, as some products become more mainstream, we experience increased competition for those products as more participants enter the market. Ourinternational competitors include large international pharmacy chains, major international supermarket chains, and other large U.S.-based companies withinternational operations. We may not be able to compete effectively and our attempt to do so may result in increased pricing pressure, which may result inlower margins and have a material adverse effect on our results of operations and financial condition.Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products and brand.The loss of our intellectual property rights in our products could permit our competitors to manufacture their own version of our products. We haveattempted to protect our intellectual property rights in our products through a combination of patents, patent applications, trademarks, confidentialityagreements, non-compete agreements and other contractual protection mechanisms, and we will continue to do so. While we intend to defend against anythreats to our intellectual property, our patents or various contractual protections may not adequately protect our intellectual property. In addition, we couldbe required to expend significant resources to defend our rights to proprietary information, and may not be successful in such defense.Moreover, our intellectual property rights are more limited outside of the United States than they are in the United States. As such, we may not besuccessful in preventing third parties from copying or misappropriating our intellectual property. There can also be no assurance that pending patentapplications owned by us will result in patents being issued to us, that patents issued to or licensed by us in the past or in the future will not be challenged orcircumvented by competitors or that such patents will be found to be valid or sufficiently broad to protect our products or to provide us with any competitiveadvantage. Third parties could also obtain patents that may require us to negotiate to obtain licenses to conduct our business, and any required licenses maynot be available on reasonable terms or at all. We also rely on confidentiality and non-compete agreements with certain employees, independent distributors,consultants and other parties to protect, in part, trade secrets and other proprietary rights. There can be no assurance that these agreements will not bebreached, that we will have adequate remedies for any29 breach, that others will not independently develop substantially equivalent proprietary information or that third parties will not otherwise gain access to ourtrade secrets or proprietary knowledge.Third parties might claim that we infringe on their intellectual property rights.Although the dietary supplement industry has historically been characterized by products with naturally occurring ingredients, recently it is becomingmore common for suppliers and competitors to apply for patents or develop proprietary technologies and processes. Third parties may assert intellectualproperty infringement claims against us despite our efforts to avoid such infringement. Such claims could prevent us from offering competitive products orresult in litigation or threatened litigation.Our business is susceptible to product liability claims.The manufacture and sale of any product for human consumption raises the risk of product liability claims. These claims may derive from the productitself or a contaminant found in the product from the manufacturing, packaging, sales process or even due to tampering by unauthorized third parties. Ourproducts consist of vitamins, minerals, herbs, and other ingredients that are classified as foods or dietary supplements and are not subject to pre-marketregulatory approval in the United States. Our products could contain contaminated substances, and some of our products contain ingredients that do not havelong histories of human consumption. Previously unknown adverse reactions resulting from human consumption of these ingredients could occur. Inaddition, third-party manufacturers produce all of the products we sell. As a distributor of products manufactured by third parties, we may also be liable forvarious product liability claims for these products despite not manufacturing them. We may be subject to various product liability claims, including, amongothers, that our products include inadequate instructions for use or inadequate warnings concerning possible side effects and interactions with othersubstances. Any product liability claim against us could result in increased costs and could adversely affect our reputation with our customers, which in turncould adversely affect our revenue and operating income. Although we maintain insurance coverage, there is a risk that our insurance will not cover ourpotential exposure completely or would fail to cover a particular claim, in which case we may not have the financial resources to satisfy such claim. Inaddition, certain types of damages, such as punitive damages, are not covered by our insurance policy.Economic, political, and other risks associated with our international operations could adversely affect our revenue and international growth prospects.As part of our business strategy, we intend to continue to expand our international presence. Our international operations are subject to a number of risksinherent to operating in foreign countries, and any expansion of our international operations will increase the effects of these risks. These risks include,among others:•political and economic instability of foreign markets;•foreign governments’ restrictive trade policies;•lack of well-established or reliable legal systems in certain areas in which we operate;•inconsistent product regulation or sudden policy changes by foreign agencies or governments;•the imposition of, or increase in, duties, taxes, government royalties, or non-tariff trade barriers;•difficulty in collecting international accounts receivable and potentially longer payment cycles;•the possibility that a foreign government may limit our ability to repatriate cash;•increased costs in maintaining international marketing efforts;•problems entering international markets with different cultural bases and consumer preferences; and•fluctuations in foreign currency exchange rates.Any of these risks could have a material adverse effect on our international operations and our growth strategy.Risks Related to Ownership of Our Common StockIf we are unable to maintain compliance with Nasdaq requirements for continued listing, our common stock could be delisted from trading.As previously disclosed, in fiscal 2016, we were delinquent in the filing of our periodic reports with the SEC and, as a result, were not in compliance withthe continued listing requirements of the Nasdaq Stock Market. Accordingly, we were30 subject to having our stock delisted from trading on Nasdaq though we later were successful in regaining compliance with the Nasdaq continued listingrequirements. However, there can be no assurance that our common stock will not be subject to delisting by Nasdaq in the future. If our common stock were tobe delisted, there can be no assurance whether or when it would again be listed for trading on Nasdaq or any other exchange. In addition, if our common stockwere to be delisted, the market price of our shares will likely decline and become more volatile, and our stockholders may find that their ability to trade in ourstock will be adversely affected. Furthermore, institutions whose charters do not allow them to hold securities in unlisted companies might sell our shares,which could have a further adverse effect on the price of our stock.Our stock price may experience future volatility.The trading price of our common stock has historically been subject to wide fluctuations. The price of our common stock may fluctuate in the future inresponse to quarter-to-quarter variations in operating results, material announcements by us or competitors, governmental regulatory action, conditions in thedietary supplement industry, or other events or factors, many of which are beyond our control, and some of which do not have a strong correlation to ouroperating performance.Substantial sales of shares may impact the market price of our common stock.If our shareholders sell substantial amounts of our common stock, the market price of our common stock may decline. These sales also might make itmore difficult for us to sell equity or equity-related securities in the future at a time and price that we consider appropriate.Additional shares that may be issued upon the exercise of currently outstanding options or upon future vesting of performance restricted stock units, woulddilute the voting power of our currently outstanding common stock and could cause our stock price to decline.As of June 30, 2019, we had 14.1 million shares of common stock outstanding. As of June 30, 2019, we also had stock options outstanding for anaggregate of 0.5 million shares of common stock. Additionally, the future vesting of performance restricted stock units may further increase our outstandingshares of common stock. The issuance of these shares will dilute the voting power of our currently outstanding common stock and could cause our stock priceto decline.We have never paid dividends on our capital stock, and we do not currently anticipate paying any cash dividends in the foreseeable future.We have paid no cash dividends on any of our classes of capital stock to date. We currently intend to retain our future earnings, if any, to fund thedevelopment and growth of our business. Additionally, the Financing Agreement we entered into in March 2016, as amended, in connection with our creditfacility contains a customary covenant that restricts our ability to pay dividends. As a result, capital appreciation, if any, of our common stock is likely to bethe sole source of gain for the foreseeable future.ITEM 1B — UNRESOLVED STAFF COMMENTSNone.ITEM 2 — PROPERTIESCorporate OfficesDuring fiscal year 2014, we moved into our corporate headquarters located at 9785 South Monroe Street, Suite 400, Sandy, Utah 84070. The lease for ourcorporate headquarters is for a term of ten years commencing on February 10, 2014, with an option for us to terminate the lease in our discretion after sevenyears. The lease includes approximately 44,353 square feet with options to occupy additional space in the future if needed.Our subsidiary, LifeVantage Japan K.K., leases approximately 10,400 square feet of office space in Tokyo, Japan. The lease for the Tokyo, Japan propertyexpires in July 2020.Warehouse FacilitiesSince fiscal year 2010, Visible Supply Chain Management (formerly IntegraCore, LLC) has provided fulfillment services to us, including servicesrelating to procurement, warehousing, ordering, processing and shipping. We have also entered into arrangements to receive similar services in some of ourinternational markets.31 ITEM 3 — LEGAL PROCEEDINGSSee Note 12 of the Notes to the Consolidated Financial Statements contained within this Annual Report on Form 10-K for a discussion of the Company'slegal proceedings.ITEM 4 — MINE SAFETY DISCLOSURESNot applicable.PART IIITEM 5 — MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket Information and HoldersOur common stock began trading on the NASDAQ Capital Market ("NASDAQ") under the symbol "LFVN" in September 2012. Our common stock waspreviously quoted on the OTC Bulletin Board under the symbol “LFVN.” On October 19, 2015, the Company effected a one-for-seven reverse stock split.Our common stock is issued in registered form and the following information is taken from the records of our current transfer agent, Computershare TrustCompany, Inc. As of June 30, 2019, we had 90 shareholders of record and 14.1 million shares of common stock outstanding. This does not include anunknown number of persons who hold shares in street name through brokers and dealers and who are not listed on our shareholder records.Stock Performance GraphThe following line graph and table compares the cumulative total shareholder return on our common stock with the cumulative total return of (i) theNASDAQ Composite Index and (ii) a market-weighted index of publicly-traded peer companies (the "Peer Group") for the period from June 30, 2014 throughJune 30, 2019. The data shown assumes an investment on June 30, 2014 of $100 and reinvestment of all dividends into additional shares of the same class ofequity, if applicable, to the stock or index. There is no expectation that the rate of return achieved in the prior 5 years will be achievable in the upcomingyears.32 The Peer Group consists of the following companies, which compete in our industry and product categories: Nature's Sunshine Products, Inc.; Nu SkinEnterprises, Inc.; Mannatech, Incorporated; Herbalife LTD.; Reliv International, Inc.; Avon Products, Inc.; USANA Health Sciences, Inc. and TupperwareBrands Corporation.Measured Period LFVN NASDAQ Composite Peer GroupJune 30, 2014 $100.00 $100.00 $100.00June 30, 2015 $36.81 $114.44 $73.49June 30, 2016 $134.92 $112.51 $67.32June 30, 2017 $42.96 $144.35 $83.39June 30, 2018 $63.19 $178.42 $98.71June 30, 2019 $128.77 $192.30 $76.49DividendsWe have not declared any dividends on any class of our equity securities since incorporation, and we do not currently anticipate declaring anydividends. Additionally, the 2016 Credit Facility, as amended, contains customary covenants that, among other things, restrict our ability to pay dividends.Purchases of Equity SecuritiesOn November 27, 2017, we announced a share repurchase program authorizing us to repurchase up to $5 million in shares of our common stock. Therepurchase program permits us to purchase shares through a variety of methods, including in the open market, through privately negotiated transactions orother means as determined by our management. As part of the repurchase program, the Company has entered into a pre-arranged stock repurchase plan whichoperates in accordance with guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. Accordingly, any transactionsunder such stock repurchase plan will be completed in accordance with the terms of the plan, including specified price, volume33 and timing conditions. The authorization may be suspended or discontinued at any time and expires on November 27, 2020. On February 1, 2019, our boardof directors approved an amendment to the share repurchase program to increase the authorized share repurchase amount from $5 million to $15 million.During the three months ended June 30, 2019, we repurchased 0.2 million shares of our common stock on the open market at an aggregate purchase priceof $2.9 million under this repurchase plan.The following table provides information with respect to all purchases made by us during the three months ended June 30, 2019. All purchases listedbelow were made in the open market at prevailing market prices.Period Total Number of SharesPurchased Average Price Paid PerShare Total Number of SharesPurchased as Part ofPublicly Announced Plansor Programs Maximum Dollar Valueof Shares that May Yet BePurchased Under thePlans or ProgramsApril 1 - April 30 — $— — $—May 1 - May 31 165,458 $12.09 165,458 $9,793,882June 1 - June 30 80,400 $11.80 80,400 $8,845,365Total 245,858 245,858 Recent Sale of Unregistered SecuritiesNone.Equity Compensation Plan InformationThis information is incorporated by reference to Part III, Item 12 of this report.ITEM 6 — SELECTED FINANCIAL DATAThe following table summarizes certain historical financial information at the dates and for the periods indicated prepared in accordance with GAAP.The consolidated statement of operations data for each of the fiscal years ended June 30, 2019, 2018 and 2017, and the consolidated balance sheet dataas of June 30, 2019 and 2018, have been derived from our consolidated financial statements audited by WSRP, LLC, an independent registered publicaccounting firm, included elsewhere in this annual report on Form 10-K. The consolidated statement of operations data for each of the fiscal yearsended June 30, 2016 and 2015, and the consolidated balance sheet data as of June 30, 2017, 2016 and 2015, have been derived from our financial statementsnot included herein. The selected consolidated financial data should be read in conjunction with “Management's Discussion and Analysis of FinancialCondition and Results of Operations” and the consolidated financial statements and notes thereto, which are included elsewhere in this annual report onForm 10-K. Our historical results are not necessarily indicative of operating results to be expected in the future.34 Years Ended June 30, 2019 2018 2017 2016 2015(In thousands, except per share data) Statement of Operations Data: Revenue, net$225,958 $203,204 $199,489 $206,540 $190,336Cost of sales37,973 34,848 33,456 33,932 28,010 Gross profit187,985 168,356 166,033 172,608 162,326Operating expenses: Commissions and incentives108,620 98,193 96,662 103,120 91,074 Selling, general and administrative69,551 59,840 64,922 56,074 57,353 Total operating expenses178,171 158,033 161,584 159,194 148,427Operating income9,814 10,323 4,449 13,414 13,899Other expense: Interest expense(323) (456) (570) (3,321) (3,087) Other expense, net(261) (319) (969) (1,409) (159) Total other expense(584) (775) (1,539) (4,730) (3,246)Income before income taxes9,230 9,548 2,910 8,684 10,653 Income tax expense(1,801) (3,787) (1,302) (2,578) (3,528)Net income$7,429 $5,761 $1,608 $6,106 $7,125Net income per share: Basic$0.53 $0.41 $0.12 $0.44 $0.51Diluted$0.50 $0.41 $0.11 $0.42 $0.50Weighed-average shares outstanding: Basic14,055 13,992 13,881 13,730 13,899Diluted14,980 14,136 14,118 14,531 14,150 As of June 30, 2019 2018 2017 2016 2015(In thousands) Balance Sheet Data: Cash and cash equivalents$18,824 $16,652 $11,458 $7,883 $13,905Working capital16,993 15,133 12,191 12,484 3,259Total assets55,273 51,142 45,249 50,855 40,065Current liabilities26,195 23,805 23,355 30,628 27,663Long-term debt, net of unamortized discount— 3,412 5,440 7,409 8,533Total liabilities28,074 29,195 30,722 40,206 38,259Total stockholders' equity27,199 21,947 14,527 10,649 1,806ITEM 7 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSYou should read the following discussion and analysis in connection with our financial statements and related notes beginning on page F-1 following PartIII of this report.OverviewWe are a company focused on biohacking the aging code through nutrigenomics, the study of how nutrition and naturally occurring compounds affecthuman genes to support good health. We are dedicated to helping people achieve their health, wellness and financial goals. We provide quality,scientifically-validated products and a financially rewarding direct sales opportunity to customers and independent distributors. We engage in theidentification, research, development and distribution of advanced nutraceutical dietary supplements and skin care products. We currently sell our productsto customers and independent distributors in two geographic regions that we have classified as the Americas region and the Asia/Pacific & Europe region.35 Our revenue depends on the number and productivity of our independent distributors and the number of our customers. When we are successful inattracting and retaining independent distributors and customers, it is largely because of:•Our products, including Protandim®, our line of scientifically-validated dietary supplements, LifeVantage® Omega+ and ProBio dietarysupplements, TrueScience®, our line of skin and hair care products, Petandim™ for Dogs, our companion pet supplement formulated to combatoxidative stress in dogs, Axio®, our Smart Energy Drink mixes, and PhysIQ™, our Smart Weight Management System;•Our compensation plan and other sales initiatives; and•Our delivery of superior customer service.As a result, it is vital to our success that we leverage our product development resources to develop and introduce compelling and innovative productsand provide opportunities for our independent distributors to sell these products in a variety of markets. We sell our products in the United States, Mexico,Japan, Australia, Hong Kong, Canada, Thailand, the United Kingdom, the Netherlands, Germany, Taiwan, Austria, Spain, Ireland and Belgium. We also sellour products in a number of countries to customers for personal consumption only. In addition, we sell our products in China through our e-commercebusiness model. Entering a new market requires a considerable amount of time, resources and continued support. If we are unable to properly support anexisting or new market, our revenue growth may be negatively impacted.Our ProductsOur line of scientifically-validated dietary supplements includes Protandim® NRF1 and Nrf2 Synergizers, LifeVantage® Omega+ and ProBio. TheProtandim® NRF1 Synergizer is formulated to increase cellular energy and performance by boosting mitochondria production to improve cellular repair andslow cellular aging. The Protandim® Nrf2 Synergizer contains a proprietary blend of ingredients and has been shown to combat oxidative stress and enhanceenergy production by increasing the body’s natural antioxidant protection at the genetic level, inducing the production of naturally-occurring protectiveantioxidant enzymes including superoxide dismutase, catalase, and glutathione synthase. LifeVantage® Omega+ is a dietary supplement that combines DHAand EPA Omega-3 fatty acids, Omega-7 fatty acids, and Vitamin D3 to support cognitive health, cardiovascular health, skin health, and the immune system.LifeVantage® ProBio is a dietary supplement designed to support optimal digestion and immune system function. Our TrueScience® line of anti-aging skinand hair care products includes TrueScience® Facial Cleanser, TrueScience® Perfecting Lotion, TrueScience® Eye Serum, TrueScience® Anti-Aging Cream,TrueScience® Hand Cream, TrueScience® Invigorating Shampoo, TrueScience® Nourishing Conditioner and TrueScience® Scalp Serum. Petandim™ for Dogsis a supplement specially formulated to combat oxidative stress in dogs through Nrf2 activation. Axio® is our line of Smart Energy Drink mixes formulated topromote alertness and support mental performance. PhysIQ™ is our Smart Weight Management System which includes PhysIQ™ Fat Burn, PhysIQ™ Prebioticand PhysIQ™ Whey Protein, all formulated to aid in weight management. The following table shows revenues by major product line for the fiscal years endedJune 30, 2019, 2018 and 2017. Years ended June 30, 2019 2018 2017Protandim® product line$155,499 68.8% $133,923 65.9% $130,873 65.6%TrueScience® product line20,881 9.2% 21,665 10.7% 24,440 12.3%Other49,578 22.0% 47,616 23.4% 44,176 22.1%Total$225,958 100.0% $203,204 100.0% $199,489 100.0%Our revenue is largely attributed to two product lines, Protandim® and TrueScience®, which each accounted for more than 10% of total revenue for eachof the fiscal years ended June 30, 2018 and 2017. For the fiscal year ended June 30, 2019, Protandim® was the only product line that accounted for more than10% of total revenue. On a combined basis, these products represent approximately 78.0%, 76.6% and 77.9% of our total net revenue for the fiscal yearsended June 30, 2019, 2018 and 2017, respectively.We currently have additional products in development. Any delays or difficulties in introducing compelling products or attractive initiatives or toolsinto our markets may have a negative impact on our revenue and our ability to attract new independent distributors and customers.36 MembersBecause we primarily utilize a direct selling model for the distribution of our products, the success and growth of our business depends in large part onthe effectiveness of our independent distributors in selling our products and on our ability to attract new and retain existing independent distributors.Changes in our product sales are typically the result of variations in product sales volume relating to fluctuations in the number of active independentdistributors and customers purchasing our products. The number of active independent distributors and customers is, therefore, used by management as a keynon-financial measure.The following tables summarize the changes in our active member base by geographic region. These numbers have been rounded to the nearest thousandas of the dates indicated. For purposes of this report, we only count as active members those independent distributors and customers who have purchased fromus at any time during the most recent three-month period, either for personal use or for resale. As of June 30, 2019 2018 Change fromPrior Year Percent ChangeActive Independent Distributors Americas44,000 66.7% 45,000 71.4% (1,000) (2.2)% Asia/Pacific & Europe22,000 33.3% 18,000 28.6% 4,000 22.2 % Total Active Independent Distributors66,000 100.0% 63,000 100.0% 3,000 4.8 % Active Customers Americas95,000 79.8% 94,000 81.0% 1,000 1.1 % Asia/Pacific & Europe24,000 20.2% 22,000 19.0% 2,000 9.1 % Total Active Customers119,000 100.0% 116,000 100.0% 3,000 2.6 % Active Members Americas139,000 75.1% 139,000 77.7% — — % Asia/Pacific & Europe46,000 24.9% 40,000 22.3% 6,000 15.0 % Total Active Members185,000 100.0% 179,000 100.0% 6,000 3.4 %Income Statement PresentationWe report revenue in two geographic regions and we translate revenue from each market's local currency into U.S. Dollars using weighted-averageexchange rates. Revenue consists primarily of product sales, fee revenue, and shipping and handling fees, net of applicable sales discounts. Revenue isrecognized at the time of shipment, which is when the passage of title and risk of loss to customers occurs. Also reflected in revenue is a provision for productreturns and allowances, which is estimated based on our historical experience. The following table sets forth net revenue information by region for the yearsindicated. The following table should be reviewed in connection with the tables presented under "Results of Operations" (in thousands): For the fiscal years ended June 30, 2019 2018 2017Americas$163,236 72.2% $151,609 74.6% $150,841 75.6%Asia/Pacific & Europe62,722 27.8% 51,595 25.4% 48,648 24.4%Total$225,958 100.0% $203,204 100.0% $199,489 100.0%Cost of sales primarily consists of costs of products purchased from and manufactured by third-party vendors, costs of adjustments to inventory carryingvalue, and costs of marketing materials which we sell to our distributor sales force, as well as freight, duties and taxes that are associated with the import andexport of our products. As our international sales increase as a percentage of total revenue, cost of sales as a percentage of revenue likely will increase as aresult of additional duties, freight, and other factors, such as changes in currency exchange rates.37 Commissions and incentives expenses are our most significant expenses and are classified as operating expenses. Commissions and incentives expensesinclude sales commissions paid to our independent distributors, special incentives, costs for incentive trips and other rewards. Commissions and incentivesexpenses do not include any amounts we pay to our independent distributors for personal purchases. Commissions paid to independent distributors onpersonal purchases are considered a sales discount and are reported as a reduction to our net revenue. Our global sales compensation plan, which we employin all our markets, is an important factor in our ability to attract and retain our independent distributors. Under our global sales compensation plan,independent distributors can earn commissions for product sales to their customers as well as the product sales made through the sales networks they havedeveloped and trained. We do not pay commissions on sales materials, which are sold to our independent distributors. Commissions and incentives expenses,as a percentage of net revenue, may be impacted by the timing and magnitude of non-commissionable revenue derived from the sales of marketing materials,event tickets, and promotional items, investment in our Red Carpet program, limited-time offers and the timing, magnitude and number of incentive trips andother promotional activities. From time to time, we make modifications and enhancements to our global sales compensation plan in an effort to help motivateour sales force and develop leadership characteristics, which can have an impact on commissions and incentives expenses.Selling, general and administrative expenses include wages and benefits, stock compensation expenses, marketing and event costs, professional fees,rents and utilities, depreciation and amortization, research and development, travel costs, and other operating expenses. Wages and benefits and stockcompensation expenses represent the largest component of selling, general and administrative expenses. Marketing and event costs include costs ofdistributor conventions and events held in various markets worldwide, which we expense in the period in which they are incurred. Marketing and event costsalso include expenses associated with our sponsorship of the Major League Soccer team, Real Salt Lake.Sales to customers outside the United States are transacted in the respective local currencies and are translated to U.S. Dollars at weighted-averagecurrency exchange rates for each monthly accounting period to which they relate. Consequently, our net sales and earnings are affected by changes incurrency exchange rates. In general, sales and gross profit are affected positively by a weakening U.S. Dollar and negatively by a strengthening U.S. Dollar.Currency fluctuations, however, have the opposite effect on our commissions paid to independent distributors and selling, and general and administrativeexpenses. In our revenue discussions that follow, we approximate the impact of currency fluctuations on revenue by translating current year revenue at theaverage exchange rates in effect during the comparable prior year periods.Results of OperationsFor the fiscal years ended June 30, 2019, 2018 and 2017, we generated net revenue of $226.0 million, $203.2 million and $199.5 million, respectively,recognized operating profit of $9.8 million, $10.3 million and $4.4 million, respectively, and recognized net income of $7.4 million, $5.8 million and $1.6million, respectively.The following table presents certain consolidated earnings data as a percentage of net revenue for the years indicated: For the fiscal years ended June 30, 2019 2018 2017Revenue, net100.0 % 100.0 % 100.0 %Cost of sales16.8 17.1 16.8Gross profit83.2 82.9 83.2Operating expenses: Commissions and incentives48.1 48.3 48.5Selling, general and administrative30.8 29.4 32.5Total operating expenses78.9 77.7 81.0Operating income4.3 5.2 2.2Other expense: Interest expense(0.2) (0.2) (0.3)Other expense, net(0.1) (0.2) (0.5)Total other expense(0.3) (0.4) (0.8)Income before income taxes4.0 4.8 1.4Income tax expense(0.8) (1.9) (0.7)Net income3.2 % 2.9 % 0.7 %38 Comparison of Fiscal Years Ended June 30, 2019 and 2018Revenue, net. We generated net revenue of $226.0 million and $203.2 million during the fiscal years ended June 30, 2019 and 2018, respectively.Foreign currency fluctuations negatively impacted our net revenue $1.6 million or 0.8%. During fiscal 2019, we generated year over year increases inrevenue in all of our markets, except for Japan, resulting in an overall increase in revenue of $22.8 million. We began full sales operations in Austria, Spain,Ireland and Belgium and had our first full year of operations in Taiwan, which was launched in June 2018. These market launches, as well as continuedexpansion of our product lines and additional investment in our red carpet program, contributed to the year over year increase.Americas. The following table sets forth revenue for the fiscal years ended June 30, 2019 and 2018 for the Americas region (in thousands): For the fiscal years ended June 30, 2019 2018 % changeUnited States$151,966 $142,452 6.7%Other11,270 9,157 23.1%Americas Total$163,236 $151,609 7.7%Revenue in the Americas region for the fiscal year ended June 30, 2019 increased $11.6 million, or 7.7%, compared to the prior year. Revenue in theAmericas increased due to the continued investment in our red carpet program, the introduction of our new TrueScience® Hair Care System, an increase inactive customers during the current year period and further expansion of our product lines in Mexico and Canada.Asia/Pacific & Europe. The following table sets forth revenue for the fiscal years ended June 30, 2019 and 2018 for the Asia/Pacific & Europe region andits principal markets (in thousands): For the fiscal years ended June 30, 2019 2018 % changeJapan$40,796 $41,843 (2.5)%Greater China7,924 1,493 430.7 %Other14,002 8,259 69.5 %Asia/Pacific & Europe Total$62,722 $51,595 21.6 %Revenue in the region for the fiscal year ended June 30, 2019 was negatively impacted approximately $1.2 million, or 2.3%, by foreign currencyexchange rate fluctuations.On a year over year basis, revenue increased in all markets within the region, except for Japan. We saw encouraging revenue growth in Greater China,which is comprised of Taiwan, Hong Kong and our China e-commerce business. The growth in Greater China was led by Taiwan as we completed our first fullyear of operations in the market and have attracted strong distributor leadership. We also had substantial increases in our Europe, Thailand and Australiamarkets as we continue to focus on growth in these regions. Our European markets were bolstered during fiscal 2019 with the full market launches of Austria,Spain, Ireland and Belgium. Growth in Thailand and Australia was substantial as we expanded the product offerings during fiscal 2019 in those markets andstrengthened distributor leadership, which is driving the growth.Revenue in Japan decreased by 2.5% as compared to the prior year. On a constant currency basis, revenue in Japan decreased 1.9% in fiscal 2019compared to fiscal 2018. During the fiscal year ended June 30, 2019 the Japanese yen, on average, weakened against the U.S. Dollar, negatively impactingour revenue in this market by $0.3 million or 0.7%. Revenue in Japan decreased mainly due to an overall decrease in active members during the year.Our sales and marketing efforts continue to be directed toward building our worldwide sales. We successfully launched four new markets during fiscal2019, completed our first full year of operations in Taiwan and have plans for future market expansion. We launched new products during fiscal 2019,including our award winning TrueScience® Hair Care line of products and PhysIQ™ Prebiotic, and rebranded our entire PhysIQ™ Smart Weight Managementline of products. Throughout the year, we continued the expansion and roll out of our product offerings internationally and have plans for continued productexpansion in the future. We expect this expansion will continue to drive revenue growth globally through increased average order size and increased abilityto attract and retain new independent distributors and customers with a compelling product lineup. We plan to continue investing in our red carpet program,which we believe has increased our ability to attract and retain strong distributor leadership and drive revenue growth throughout our markets. We remaincommitted to further refining and39 developing our Greater China markets, including our China e-commerce business model to take advantage of the growth opportunities in that region.Gross Margin. Cost of sales were $38.0 million for the fiscal year ended June 30, 2019, and $34.8 million for the fiscal year ended June 30, 2018,resulting in a gross margin of $188.0 million, or 83.2%, and $168.4 million, or 82.9%, respectively. The increase in gross margin is primarily due to benefitsof a price increase during the second half of fiscal 2018, decreased inventory obsolescence and handling costs, partially offset by changes to our geographicand product sales mix related to the revenue growth and product expansion outside of the United States.Commissions and Incentives. Commissions and incentives expenses for the fiscal year ended June 30, 2019 were $108.6 million or 48.1% of revenuecompared to $98.2 million or 48.3% of revenue for the fiscal year ended June 30, 2018. The increase in total expense of $10.4 million in fiscal 2019 was dueto the increase in revenue. Commissions and incentives expenses as a percentage of revenue remained consistent during the comparable periods.Commissions and incentives expenses, as a percentage of revenue, may fluctuate in future periods based on the timing and magnitude of compensation,incentive and promotional programs.Selling, General and Administrative. Selling, general and administrative expenses for the fiscal year ended June 30, 2019 were $69.6 million or 30.8% ofrevenue compared to $59.8 million or 29.4% of revenue for the fiscal year ended June 30, 2018. The increase of $9.7 million primarily was due to expensesassociated with Global Convention and other events, including our U.S. Elite Academies, our Japan Convention and our Japan Elite Academy. Expensesassociated with employee salary and benefits, stock compensation, and other employee incentive programs increased mainly due to improved financialperformance and increases in our share price as compared to fiscal 2018.Primary factors that may cause our selling, general and administrative expenses to fluctuate in the future include changes in the number of employees,the timing and number of events we hold, marketing and branding initiatives and costs related to legal matters, if and as they arise. A fluctuation in our stockprice may also impact our share-based compensation expense recorded for liability classified awards and equity awards made in future years.Other Expense. We recognized other expense for the fiscal year ended June 30, 2019 of $0.6 million as compared to $0.8 million for the fiscal year endedJune 30, 2018. The decrease of $0.2 million was due to a decrease in interest expense related to the reduction in the outstanding balance on our term loanduring the year and a decrease in other expenses, net related to increased interest income, partially offset by increased foreign currency exchange losses.The following table sets forth interest expense for the fiscal years ended June 30, 2019 and 2018 (in thousands): For the fiscal years ended June 30, 2019 2018Contractual interest expense: 2016 Term Loan$227 $346Amortization of deferred financing fees: 2016 Term Loan6 11Amortization of debt discount: 2016 Term Loan36 21Other54 78Total interest expense$323 $456Income Tax Expense. Our income tax expense for the fiscal year ended June 30, 2019 was $1.8 million as compared to income tax expense of $3.8million for the fiscal year ended June 30, 2018.The effective tax rate was 19.5% of pre-tax income for the fiscal year ended June 30, 2019, compared to 39.7% for the fiscal year ended June 30, 2018.The tax rate for fiscal 2019 was favorably benefited by discrete book to tax differences resulting from the vesting of performance restricted stock units andfavorable return to provision adjustments that occurred during the period. In addition, the effective tax rate reflects the federal tax reform legislation enactedduring December 2017 that reduced the corporate tax rate to 21%.Our provision for income taxes for the fiscal year ended June 30, 2019 consisted primarily of federal, state, and foreign tax on anticipated fiscal 2019income which was partially offset by tax benefits. We expect our effective rate to fluctuate in future periods based on the impact of permanent items inrelation to pre-tax income.40 Net Income. As a result of the foregoing factors, net income for the fiscal year ended June 30, 2019 increased to $7.4 million compared to $5.8 million forthe fiscal year ended June 30, 2018.Comparison of Fiscal Years Ended June 30, 2018 and 2017For a discussion of our results of operations for the fiscal 2018 compared with fiscal 2017, refer to “Part II. Item 7. Management's Discussion and Analysisof Financial Condition and Results of Operations" in our annual report on Form 10-K for the fiscal year ended June 30, 2018, as filed with the SEC on August15, 2018.Liquidity and Capital ResourcesLiquidityOur primary liquidity and capital resource requirements are to service our debt and finance the cost of our planned operating expenses and workingcapital (principally inventory purchases), as well as capital expenditures. We have generally relied on cash flow from operations to fund operating activitiesand we have, at times, incurred long-term debt in order to fund stock repurchases and strategic transactions.At June 30, 2019, our cash and cash equivalents were $18.8 million. This represented an increase of $2.2 million from the $16.7 million in cash and cashequivalents as of June 30, 2018.During the fiscal year ended June 30, 2019, our net cash provided by operating activities was $17.8 million as compared to net cash provided byoperating activities of $13.3 million during the fiscal year ended June 30, 2018. The increase in cash provided by operating activities during the fiscal yearended June 30, 2019 primarily was due to an increase in net income, an increase in stock-based compensation and a decrease in cash used for payables,partially offset by an increase in income tax receivable.During the fiscal year ended June 30, 2019, our net cash used in investing activities was $4.5 million, as a result of investments in a convertible notereceivable and the purchase of fixed assets. During the fiscal year ended June 30, 2018, our net cash used in investing activities was $4.6 million, as a resultof the purchase of fixed assets.Cash used in financing activities during the fiscal year ended June 30, 2019 was $11.1 million, as a result of our quarterly and accelerated principalpayments on the 2016 Term Loan, shares purchased as payment of tax withholding and repurchase of company stock, partially offset by proceeds from stockoption exercises. Cash used in financing activities during the fiscal year ended June 30, 2018 was $3.5 million, as a result of principal payments on the 2016Term Loan and repurchase of company stock.At June 30, 2019 and 2018, the total amount of our foreign subsidiary cash was $6.3 million and $4.3 million, respectively. The December 2017 taxreform previously mentioned enacted a 100% dividend deduction for > 10% owned foreign corporations. Therefore, in the future, if needed, we expect to beable to repatriate cash from foreign subsidiaries without paying additional U.S. taxes.At June 30, 2019, we had working capital (current assets minus current liabilities) of $17.0 million compared to working capital of $15.1 million atJune 30, 2018. The increase in working capital primarily was due to an increases in cash, income tax receivable and prepaid expenses, partially offset by anincrease in accounts payable. We believe that our cash and cash equivalents balances and our ongoing cash flow from operations will be sufficient to satisfyour cash requirements for at least the next 12 months. The majority of our historical expenses have been variable in nature and as such, a potential reductionin the level of revenue would reduce our cash flow needs. In the event that our current cash balances and future cash flow from operations are not sufficient tomeet our obligations or strategic needs, we would consider raising additional funds, which may not be available on terms that are acceptable to us, or at all.Our credit facility, however, contains covenants that restrict our ability to raise additional funds in the debt markets and repurchase our equity securitieswithout prior approval from the lender. Additionally, our credit facility provides for a revolving loan facility in an aggregate principal amount up to $5.0million, as amended. We would also consider realigning our strategic plans including a reduction in capital spending and expenses.Capital ResourcesOn March 30, 2016, we entered into a loan agreement (the "2016 Loan Agreement") to refinance our outstanding debt. In connection with the 2016 LoanAgreement and on the same date, we entered into a security agreement (the "Security Agreement"). The 2016 Loan Agreement provides for a term loan in anaggregate principal amount of $10.0 million (the "2016 Term Loan") and a revolving loan facility in an aggregate principal amount not to exceed $2.0million (the "2016 Revolving Loan," and collectively with the 2016 Term Loan, the 2016 Loan Agreement and the Security Agreement, the "2016 CreditFacility").41 The principal amount of the 2016 Term Loan is payable in consecutive quarterly installments in the amount of $0.5 million plus accrued interestbeginning with the fiscal quarter ended June 30, 2016. If we borrow under the 2016 Revolving Loan, interest will be payable quarterly in arrears on the lastday of each fiscal quarter.On May 4, 2018, we entered into a loan modification agreement, which amended the 2016 Credit Facility (“Amendment No. 1”). Amendment No. 1revised the maturity date from March 30, 2019 to March 31, 2021 and increased the fixed interest rate for the term loan from 4.93% to 5.68%. AmendmentNo. 1 also revised certain financial covenants. The minimum fixed charge coverage ratio (as defined in Amendment No. 1) was revised from a minimumof 1.50 to 1.00 to 1.25 to 1.00, measured on a trailing twelve-month basis, at the end of each fiscal quarter. The minimum working capital was increasedfrom $5.0 million to $8.0 million. The funded debt to EBITDA ratio was replaced with the total liabilities to tangible net worth ratio (as defined inAmendment No. 1) of not greater than 3.00 to 1.00 at the end of each quarter. The minimum tangible net worth measure was removed from the financialcovenants.Loans outstanding under the 2016 Credit Facility, as amended, may be prepaid in whole or in part at any time without premium or penalty. In addition,if, at any time, the aggregate principal amount outstanding under the 2016 Revolving Loan, as amended, exceeds $2.0 million, we must prepay an amountequal to such excess. Any principal amount of the 2016 Term Loan, as amended, which is prepaid or repaid may not be re-borrowed.On February 1, 2019, we entered into a loan modification agreement, which amended the 2016 Credit Facility, as amended ("Amendment No. 2"). UnderAmendment No. 2, we made a principal payment of $2.0 million and increased the revolving loan facility from $2.0 million to $5.0 million. Amendment No.2 also revised certain financial covenants. The minimum fixed charge coverage ratio (as defined in Amendment No. 2) was revised from a minimumof 1.25 to 1.00 to 1.10 to 1.00, measured on a trailing twelve-month basis, at the end of each fiscal quarter. The minimum working capital was decreasedfrom $8.0 million to $6.0 million.The 2016 Credit Facility, as amended, contains customary covenants, including affirmative and negative covenants that, among other things, restrict ourability to create certain types of liens, incur additional indebtedness, declare or pay dividends on or redeem capital stock, make other payments to holders ofour equity interests, make certain investments, purchase or otherwise acquire all or substantially all the assets or equity interests of other companies, sellassets or enter into consolidations, mergers or transfers of all or any substantial part of our assets. As of June 30, 2019, we were in compliance with allapplicable non-financial and restrictive covenants under the 2016 Credit Facility, as amended.The 2016 Credit Facility, as amended, also contains various financial covenants that require us to maintain certain consolidated working capitalamounts, total liabilities to tangible net worth ratios and fixed charge coverage ratios. Specifically, we must:•Maintain a minimum fixed charge coverage ratio (as defined in the 2016 Loan Agreement, as amended) of at least 1.10 to 1.00 at the end of eachfiscal quarter, measured on a trailing twelve month basis;•Maintain minimum consolidated working capital (as defined in the 2016 Loan Agreement, as amended) at the end of each fiscal quarter of atleast $6.0 million; and•Maintain a ratio of total liabilities to tangible net worth (as defined in the 2016 Loan Agreement, as amended) of not greater than 3.00 to 1.00 at theend of each quarter, measured on a trailing twelve month basis.As of June 30, 2019, we were in compliance with all applicable financial covenants under the 2016 Credit Facility, as amended. Additionally,management anticipates that in the normal course of operations we will be in compliance with the financial covenants during the ensuing year.Commitments and ObligationsThe following table summarizes our contractual payment obligations and commitments as of June 30, 2019 (in thousands): Payments due by periodContractual ObligationsTotal Less than1 year 1-3 years 3-5 years ThereafterLong-term debt obligations$1,500 $1,500 $— $— $—Interest on long-term debt obligations43 43 — — —Operating lease obligations4,012 2,872 1,140 — —Other operating obligations (1)22,665 11,916 9,271 1,478 —Total$28,220 $16,331 $10,411 $1,478 $—42 (1) Other operating obligations represent non-cancelable contractual obligations primarily related to marketing and sponsorship commitments and purchases of inventory. Off-Balance Sheet ArrangementsAt June 30, 2019 and 2018, we had no off-balance sheet arrangements.Critical Accounting PoliciesWe prepare our financial statements in conformity with accounting principles generally accepted in the United States of America. As such, we arerequired to make certain estimates, judgments, and assumptions that we believe are reasonable based upon the information available. These estimates andassumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expensesduring the periods presented. Actual results could differ from these estimates. Our significant accounting policies are described in Note 2 to our consolidatedfinancial statements. Certain of these significant accounting policies require us to make difficult, subjective, or complex judgments or estimates. We consideran accounting estimate to be critical if (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time theaccounting estimate was made and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that wereasonably could have used in the current period, would have a material impact on our financial condition or results of operations.There are other items within our financial statements that require estimation, but are not deemed critical as defined above. Changes in estimates used inthese and other items could have a material impact on our financial statements. Management has discussed the development and selection of these criticalaccounting estimates with our board of directors, and the audit committee has reviewed the disclosures noted below.Allowances for Product ReturnsWe record allowances for product returns at the time we ship the product based on estimated return rates. Subject to some exceptions based on localregulations, customers may return unopened product to us within 30 days of purchase for a refund of the purchase price less shipping and handling. As ofJune 30, 2019, our shipments of products sold totaling approximately $19.0 million were subject to our return policy. In addition, we allow terminatingdistributors to return up to 30% of unopened, unexpired product that they purchased within the prior twelve months.We monitor our product returns estimate on an ongoing basis and revise the allowances to reflect our experience. Our allowance for product returns was$0.4 million at June 30, 2019, compared with $0.4 million at June 30, 2018. To date, product expiration dates have not played any role in product returns,and we do not expect they will in the future as it is unlikely that we will ship product with an expiration date earlier than the latest allowable product returndate.Inventory ValuationWe value our inventory at the lower of cost or net realizable value on a first-in, first-out basis. Accordingly, we reduce our inventories for the diminutionof value resulting from product obsolescence, damage or other issues affecting marketability equal to the difference between the cost of the inventory and itsestimated market value. Factors utilized in the determination of estimated market value include (i) current sales data and historical return rates, (ii) estimatesof future demand, (iii) competitive pricing pressures, (iv) new production introductions, (v) product expiration dates, and (vi) component and packagingobsolescence.During the fiscal years ended June 30, 2019 and 2018, we recognized expenses of $0.8 million and $1.4 million, respectively, related to obsolete andslow-moving inventory.Revenue RecognitionWe ship the majority of our product directly to the consumer and receive substantially all payment for these sales in the form of credit card receipts.Revenue from direct product sales to customers is recognized upon shipment, which is when passage of title and risk of loss occurs.Stock-Based CompensationWe use the fair value approach to account for stock-based compensation in accordance with current accounting guidance. We recognize compensationcosts for awards with performance conditions when we conclude it is probable that the performance conditions will be achieved. We reassess the probabilityof vesting at each balance sheet date and adjust compensation costs based on our probability assessment. For awards with market-based performanceconditions, the cost of the43 awards is recognized as the requisite service is rendered by the employees, regardless of when, if ever, the market-based performance conditions are satisfied.Research and Development CostsWe expense all of our costs related to research and development activities as incurred.Legal AccrualsWe are occasionally involved in lawsuits and disputes arising in the normal course of business. Management regularly reviews all pending litigationmatters in which we are involved and establishes accruals as we deem appropriate for these litigation matters when a probable loss estimate can be made.Estimated accruals require management judgment about future events. The results of lawsuits are inherently unpredictable and unfavorable resolutions couldoccur. As such, the amount of loss may differ from management estimates.Recently Issued Accounting StandardsRefer to “Item 8. Financial Statements and Supplementary Data” and Note 2 to our consolidated financial statements included in Part IV, Item 15 of thisreport for discussion regarding the impact of accounting standards that were recently issued but not yet effective, on our consolidated financial statements.ITEM 7A — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKWe conduct business in several countries and intend to continue to grow our international operations. Net revenue, operating income, and net income areaffected by fluctuations in currency exchange rates and other uncertainties in doing business and selling products in more than one currency. In addition, ouroperations are exposed to risks associated with changes in social, political and economic conditions inherent in international operations, including changesin the laws and policies that govern international investment in countries where we have operations, as well as, to a lesser extent, changes in U.S. laws andregulations relating to international trade and investment.Foreign Currency RiskDuring the fiscal year ended June 30, 2019, approximately 33% of our net revenue was realized outside of the United States. The local currency of eachinternational subsidiary is generally the functional currency. All revenue and expenses are translated at weighted average exchange rates for the periodsreported. Therefore, our reported revenue and earnings will be positively impacted by a weakening of the U.S. Dollar and will be negatively impacted by astrengthening of the U.S. Dollar. Currency fluctuations, however, have the opposite effect on our expenses incurred outside the United States. Given the largeportion of our business derived from Japan, any weakening of the Japanese Yen will negatively impact our reported revenue and profits, whereas astrengthening of the Japanese Yen will positively impact our reported revenue and profits. Because of the uncertainty of exchange rate fluctuations, it isdifficult to predict the effect of these fluctuations on our future business, product pricing and results of operations or financial condition. Changes in variouscurrency exchange rates affect the relative prices at which we sell our products. We regularly monitor our foreign currency risks and periodically takemeasures to reduce the risk of foreign exchange rate fluctuations on our operating results. Additionally, we may seek to reduce our exposure to fluctuations inforeign currency exchange rates through the use of foreign currency exchange contracts. We do not use derivative financial instruments for trading orspeculative purposes. At June 30, 2019, we did not have any derivative instruments. A 10% strengthening of the U.S. Dollar compared to all of the foreigncurrencies in which we transact business would have resulted in a 3.0% decrease of our 2019 fiscal year revenue, in the amount of $6.7 million.44 Following are the average currency exchange rates of U.S. $1 into local currency for each of our international or foreign markets: Year ended June 30, 2019 Year ended June 30, 2018 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th QuarterJapan111.49 112.76 110.16 109.94 110.94 112.89 108.33 109.12Australia1.37 1.40 1.40 1.43 1.27 1.30 1.27 1.32Hong Kong7.85 7.83 7.85 7.84 7.82 7.81 7.83 7.85Mexico18.97 19.83 19.22 19.12 17.82 18.99 18.73 19.40Canada1.31 1.32 1.33 1.34 1.25 1.27 1.26 1.29Thailand33.08 32.90 31.70 31.67 33.44 32.99 31.63 31.99Europe0.86 0.88 0.88 0.89 0.85 0.85 0.81 0.84Taiwan30.68 30.86 30.85 31.13 30.26 30.13 29.32 29.80ITEM 8 — FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAThe information required by this Item 8 is set forth in the consolidated financial statements included in Part IV, Item 15 of this report and is incorporatedinto this Item 8 by reference.ITEM 9 — CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone.ITEM 9A — CONTROLS AND PROCEDURESDisclosure Controls and ProceduresWe maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) that are designed to ensure that theinformation required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded,processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated andcommunicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regardingrequired disclosure. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness ofour disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as amended, as of June 30, 2019. Based on thisevaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were designed and operatingeffectively as of June 30, 2019.Management’s Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rules13a-15(f) and 15d-15(f). Our system of internal control over financial reporting is designed to provide reasonable assurance to our management and board ofdirectors regarding the preparation and fair presentation of our consolidated and combined financial statements for external purposes in accordance withGAAP.Our management, under the supervision of our Chief Executive Officer and our Chief Financial Officer, assessed the effectiveness of our internal controlover financial reporting as of June 30, 2019. In making this assessment, we used the framework included in Internal Control - Integrated Framework publishedby the Committee of Sponsoring Organizations of the Treadway Commission 2013 (COSO). Based on that evaluation, our management has concluded thatinternal control over financing reporting was effective as of June 30, 2019.Auditor’s Attestation Report on Internal Control Over Financial ReportingWSRP, LLC, our independent registered public accounting firm, has audited our consolidated financial statements included in this annual report onForm 10-K and has issued an attestation report, included herein, on the effectiveness of our internal control over financial reporting as of June 30, 2019.Changes in Internal Control over Financial Reporting45 There were no changes in our internal control over financial reporting during the quarter ended June 30, 2019 that have materially affected or arereasonably likely to materially affect our internal control over financial reporting.Inherent Limitations on Effectiveness of ControlsOur management, including our Chief Executive Officer and our Chief Financial Officer, cannot provide absolute assurance that our disclosure controlsor our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, canprovide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact thatthere are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all controlsystems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues andinstances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and thatbreakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two ormore people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood offuture events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of anyevaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions ordeterioration in the degree of compliance with policies or procedures.ITEM 9B — OTHER INFORMATIONNone.PART IIICertain information required by Part III of this report is omitted from this report pursuant to General Instruction G(3) of Form 10-K because we will file adefinitive proxy statement pursuant to Regulation 14A for our 2019 annual meeting of shareholders (the “Proxy Statement”) not later than 120 days after theend of the fiscal year covered by this report, and the information included in the Proxy Statement that is required by Part III of this report is incorporatedherein by reference.ITEM 10 — DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEIncorporated herein by reference to the information to be set forth in the Proxy Statement.ITEM 11 — EXECUTIVE COMPENSATIONIncorporated herein by reference to the information to be set forth in the Proxy Statement.ITEM 12 — SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.Incorporated herein by reference to the information to be set forth in the Proxy Statement.ITEM 13 — CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS, AND DIRECTORS INDEPENDENCEIncorporated herein by reference to the information to be set forth in the Proxy Statement.ITEM 14 — PRINCIPAL ACCOUNTING FEES AND SERVICESIncorporated herein by reference to the information to be set forth in the Proxy Statement.PART IVITEM 15 — EXHIBITS, FINANCIAL STATEMENT SCHEDULESThe following documents are being filed as part of this report:46 Financial Statements(a)(1) Financial Statements. The following consolidated financial statements of LifeVantage Corporation and Report of Independent Registered PublicAccounting Firm are included in a separate section of this Annual Report on Form 10-K beginning on page F-1.(a)(2) All schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions orare inapplicable and therefore have been omitted.Exhibits(a)(3) The following exhibits are filed as part of, or incorporated by reference into, the Annual Report on Form 10-K.ExhibitNo. Document Description Filed Herewith or Incorporated by Reference From 3.1 Certificate of Incorporation Exhibit to 3.1 to Form 8-K filed on March 13, 2018. 3.2 Bylaws Exhibit to 3.2 to Form 8-K filed on March 13, 2018. 4.6 Form of Common Stock Certificate Exhibit to 4.1 to Form 8-K filed on March 13, 2018. 10.1 Manufacturing and Supply Agreement dated July 1, 2008 betweenCornerstone Research and Development and LifeVantageCorporation Exhibit 10.21 to Form 10-K/A for the fiscal year ended June 30, 2009filed October 28, 2009. 10.2# LifeVantage Distributor Compensation Plan Exhibit 10.14 to Form 10-K for the fiscal year ended June 30, 2010filed on September 15, 2010. 10.9# LifeVantage Corporation 2007 Long-Term Incentive Plan Appendix B to Proxy Statement on Schedule 14A filed onOctober 20, 2006. 10.10(a)# LifeVantage Corporation 2010 Long-Term Incentive Plan effective asof September 27, 2010 and as amended as of August 21, 2014 Annex A to Proxy Statement on Schedule A filed on October 6, 2014. 10.10(b)# Form of Nonstatutory Stock Option Agreement for the LifeVantageCorporation 2010 Long-Term Incentive Plan Exhibit 4.4 to Registration Statement on Form S-8 (File No. 333-175104) filed on June 23, 2011. 10.10(c)# Form of Incentive Stock Option Agreement for the LifeVantageCorporation 2010 Long-Term Incentive Plan Exhibit 4.5 to Registration Statement on Form S-8 (File No. 333-175104) filed on June 23, 2011. 10.10(d)# Form of Amended and Restated Stock Unit Agreement for theLifeVantage Corporation 2010 Long-Term Incentive Plan Exhibit 10.3 to Form 10-Q for the fiscal quarter ended March 31,2016 filed on May 4, 2016. 10.13# LifeVantage Corporation Performance Incentive Plan Exhibit 10.15 to Form 10-K for the fiscal year ended June 30, 2015filed on September 1, 2015. 10.18# LifeVantage Corporation Cash Settled Performance-Based Long TermIncentive Plan Exhibit 10.14 to Form 10-K for the fiscal year ended June 30, 2013filed on September 12, 2013. 10.19# Form of Performance Unit Agreement Exhibit 10.15 to Form 10-K for the fiscal year ended June 30, 2013filed on September 12, 2013. 10.20# Form of Performance Unit Agreement - FY2016 through FY2018 Exhibit 10.19 to Form 10-K for the fiscal year ended June 30, 2015filed on September 1, 2015.47 ExhibitNo. Document Description Filed Herewith or Incorporated by Reference From 10.21# Form of Performance Unit Agreement - FY2017 through FY2019 Exhibit 10.21 to the Form 10-K for the fiscal year ended June 30,2016 filed on December 12, 2016. 10.23# Employment Agreement by and between Darren Jensen andLifeVantage Corporation dated April 26, 2015 Exhibit 10.1 to Form 8-K filed on April 29, 2015. 10.26 Lease dated September 22, 2011 between Sandy Park I L.L.C. andLifeVantage Corporation Exhibit 10.3 to Form 10-Q for the fiscal quarter ended September 30,2011 filed on November 14, 2011. 10.27 Lease dated September 20, 2012 between Sandy Park II L.L.C. andLifeVantage Corporation Exhibit 10.1 to Form 10-Q for the fiscal quarter ended September 30,2012 filed on November 8, 2012. 10.28 First Amendment to Lease entered into as of March 24, 2014 betweenSandy Park II L.L.C. and LifeVantage Corporation Exhibit 10.3 to Form 10-Q for the fiscal quarter ended March 31,2014 filed on May 6, 2014. 10.29* Commercial Supply Agreement dated January 31, 2014 betweenLifeVantage Corporation and Deseret Laboratories, Inc. Exhibit 10.1 to Form 10-Q for the fiscal quarter ended March 31,2014 filed on May 6, 2014. 10.30* Software Service Agreement with JIA, Inc. dated September 28, 2012 Exhibit 10.1 to Form 10-Q/A for the fiscal quarter ended March 31,2013 filed on May 24, 2013. 10.31* Software License Agreement with JIA, Inc. dated September 28, 2012 Exhibit 10.2 to Form 10-Q/A for the fiscal quarter ended March 31,2013 filed on May 24, 2013. 10.32* Service Agreement entered into as of June 1, 2014 betweenIntegraCore, LLC and LifeVantage Exhibit 10.29 to Form 10-K for the fiscal year ended June 30, 2014filed on September 10, 2014. 10.33* Commercial Supply Agreement entered into as of May 30, 2014between LifeVantage Corporation and Wasatch Product Development Exhibit 10.30 to Form 10-K for the fiscal year ended June 30, 2014filed on September 10, 2014. 10.34# Financing Agreement, dated October 18, 2013, by and amongLifeVantage Corporation, the Guarantors and Lenders party theretoand TCW Special Situations, LLC as Collateral Agent andAdministrative Agent Exhibit (b) to the Schedule TO-I/A filed on October 18, 2013. 10.35# Amendment No. 1 to Financing Agreement, dated May 1, 2015, byand between LifeVantage Corporation, the Guarantors and lendersparty thereto and TCW Special Situations, LLC as Collateral Agentand Administrative Agent Exhibit 10.1 to Form 10-Q for the quarter ended March 31, 2015 filedon May 6, 2015. 10.36 Amendment No. 2 to Financing Agreement, dated August 27, 2015 byand between LifeVantage Corporation, the Guarantors and lendersparty thereto and TCW Special Situations, LLC as Collateral Agentand Administrative Agent Exhibit 10.39 to Form 10-K for the fiscal year ended June 30, 2015filed on September 1, 2015. 10.37 Form of Director and Officer Indemnification Agreement Exhibit to 99.1 to Form 8-K filed on March 13, 2018. 10.38 Loan Agreement, dated March 30, 2016, by and between Z.B., N.A.,LifeVantage Corporation and Lifeline Nutraceuticals Corporation Exhibit 10.1 to Form 8-K filed on April 4, 2016.48 ExhibitNo. Document Description Filed Herewith or Incorporated by Reference From 10.39 Security Agreement, dated March 30, 2016, by and between Z.B.,N.A., LifeVantage Corporation and Lifeline NutraceuticalsCorporation Exhibit 10.2 to Form 8-K filed on April 4, 2016. 10.40# Amended and Restated Employment Agreement, dated December 6,2016, by and between Darren Jensen and LifeVantage Corporation Exhibit 99.2 to Form 8-K filed on December 12, 2016. 10.41# Service Agreement, dated January 18, 2017, by and between CeriusInterim Executive Solutions and LifeVantage Corporation Exhibit 10.1 to Form 8-K filed on January 18, 2017. 10.42# Separation Agreement and General Release between Robert Urbanand LifeVantage Corporation Exhibit 10.1 to Form 10-Q filed for the fiscal quarter ended December31, 2016 filed on February 8, 2017. 10.43# Offer Letter by and between Charles J. Wach and LifeVantageCorporation dated February 22, 2017 Exhibit 10.1 to Form 8-K filed on March 9, 2017. 10.44# Key Employee Benefits Package by and between Charles J. Wach andLifeVantage Corporation dated February 27, 2017 Exhibit 10.2 to Form 8-K filed on March 9, 2017. 10.45# Separation Agreement and General Release between Mark Jaggi andLifeVantage Corporation Exhibit 10.1 to Form 10-Q filed for the fiscal quarter ended March 31,2017 filed on May 10, 2017. 10.46# Offer Letter, by and between Steven R. Fife and LifeVantageCorporation dated March 6, 2017 Exhibit 10.5 to Form 10-Q filed for the fiscal quarter ended March 31,2017 filed on May 10, 2017. 10.47# Key Employee Benefits Package by and between Steven R. Fife andLifeVantage Corporation dated March 6, 2017 Exhibit 10.6 to Form 10-Q filed for the fiscal quarter ended March 31,2017 filed on May 10, 2017. 10.48# Amended and Restated LifeVantage Corporation 2017 Long-TermIncentive Plan Exhibit 10.1 to the Form 8-K filed on November 19, 2018 10.49# Form of Restricted Stock Grant Agreement for the 2017 Long-TermIncentive Plan Exhibit 99.2 to the Registration Statement on Form S-8 (File No. 333-216957) filed on March 27, 2017 10.50# Form of Stock Unit Agreement for the 2017 Long-Term IncentivePlan Exhibit 99.3 to the Registration Statement on Form S-8 (File No. 333-216957) filed on March 27, 2017 10.52 Amended No.1 to Loan Agreement, dated May 4, 2018, by andbetween Z.B., N.A., LifeVantage Corporation and LifelineNutraceuticals Corporation Exhibit 10.1 to Form 10-Q filed for the fiscal quarter ended March 31,2018 filed on May 9, 2018. 10.53 Second Loan Modification Agreement dated February 1, 2019 by andbetween Zions Bank and the Company Exhibit 10.1 to the Form 8-K filed on February 4, 2019 10.54# LifeVantage Corporation 2019 Employee Stock Purchase Plan Exhibit 10.2 to the Form 8-K filed on November 19, 2018 21.1 List of Subsidiaries Filed herewith. 23.1 Consent of WSRP, LLC Filed herewith. 24.1 Power of Attorney Signature page to this report. 49 ExhibitNo. Document Description Filed Herewith or Incorporated by Reference From31.1 Certification of Chief Executive Officer pursuant to Section 302 ofthe Sarbanes-Oxley Act of 2002. Filed herewith. 31.2 Certification of Chief Financial Officer pursuant to Section 302 of theSarbanes-Oxley Act of 2002. Filed herewith. 32.1 Certification of Chief Executive Officer pursuant to Section 906 ofthe Sarbanes-Oxley Act of 2002. Furnished herewith. 32.2 Certification of Chief Financial Officer pursuant to Section 906 of theSarbanes-Oxley Act of 2002. Furnished herewith. 101 The following financial information from the registrant’s AnnualReport on Form 10-K for the year ended June 30, 2019 formatted inXBRL (eXtensible Business Reporting Language): (i) ConsolidatedBalance Sheets; (ii) Consolidated Statements of Operations and OtherComprehensive Income; (iii) Consolidated Statement ofStockholders’ Deficit; (iv) Consolidated Statements of Cash Flows;and (v) Notes to Consolidated Financial Statements, tagged as blocksof text. Filed herewith.# Management contract or compensatory plan.* The Company has been granted confidential treatment for portions of this agreement. Accordingly, certain portions of this agreement havebeen omitted in the version filed with this report and such confidential portions have been filed with the SEC.SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. LIFEVANTAGE CORPORATION By:/s/ Darren Jensen Darren Jensen President and Chief Executive OfficerDate:August 14, 2019Each person whose individual signature appears below hereby constitutes and appoints Darren Jensen and Steven Fife, and each of them, with full powerof substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name,place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendmentsto this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission,granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying andconfirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtuethereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated.50 Signature Date Title /s/ Darren Jensen August 14, 2019 President and Chief Executive Officer(Principal Executive Officer)Darren Jensen /s/ Steven R. Fife August 14, 2019 Chief Financial Officer(Principal Financial Officer andPrincipal Accounting Officer)Steven R. Fife /s/ Garry Mauro August 14, 2019 Chairman of the BoardGarry Mauro /s/ Michael A. Beindorff August 14, 2019 DirectorMichael A. Beindorff /s/ Erin Brockovich August 14, 2019 DirectorErin Brockovich /s/ Raymond B. Greer August 14, 2019 DirectorRaymond B. Greer /s/ Vinayak R. Hedge August 14, 2019 DirectorVinayak R. Hedge /s/ Darwin K. Lewis August 14, 2019 DirectorDarwin K. Lewis 51 LIFEVANTAGE CORPORATIONIndex to Consolidated Financial StatementsReports of Independent Registered Public Accounting Firm F - 2Consolidated Financial Statements: Consolidated Balance Sheets F - 4Consolidated Statements of Operations and Comprehensive Income F - 5Consolidated Statements of Stockholders’ Equity F - 6Consolidated Statements of Cash FlowsF - 7,F - 8Notes to Consolidated Financial Statements F - 9F - 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMThe Board of Directors and StockholdersLifeVantage CorporationSandy, UtahOpinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of LifeVantage Corporation and subsidiaries (the Company) as of June 30, 2019 and 2018,and the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-yearperiod ended June 30, 2019, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statementspresent fairly, in all material respects, the financial position of the Company as of June 30, 2019 and 2018, and the results of its operations and its cash flowsfor each of the years in the three-year period ended June 30, 2019, in conformity with accounting principles generally accepted in the United States ofAmerica.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’sinternal control over financial reporting as of June 30, 2019, based on criteria established in Internal Control-Integrated Framework (2013) issued by theCommittee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated August 14, 2019, expressed an unqualified opinion.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’sconsolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent withrespect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and ExchangeCommission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing proceduresto assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also includedevaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financialstatements. We believe that our audits provide a reasonable basis for our opinion./s/ WSRP, LLCWe have served as the Company's auditor since 2016.Salt Lake City, UtahAugust 14, 2019F - 2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMThe Board of Directors and StockholdersLifeVantage CorporationSandy, UtahOpinion on Internal Control over Financial ReportingWe have audited LifeVantage Corporation and subsidiaries’ (the Company’s) internal control over financial reporting as of June 30, 2019, based on criteriaestablished in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Inour opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2019, based on criteriaestablished in Internal Control-Integrated Framework (2013) issued by COSO.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidatedbalance sheets and the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows of the Company, andour report dated August 14, 2019, expressed an unqualified opinion.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness ofinternal control over financial reporting, included in the accompanying Item 9A. Our responsibility is to express an opinion on the Company’s internalcontrol over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent withrespect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and ExchangeCommission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financialreporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing andevaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures aswe considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/ WSRP, LLCSalt Lake City, UtahAugust 14, 2019F - 3 LIFEVANTAGE CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS June 30, 2019 2018(In thousands, except per share data) ASSETS Current assets Cash and cash equivalents$18,824 $16,652Accounts receivable2,066 2,067Income tax receivable1,236 451Inventory, net13,753 13,627Prepaid expenses and other7,309 6,141Total current assets43,188 38,938 Property and equipment, net7,131 6,587Intangible assets, net983 1,115Deferred income tax asset2,693 3,255Other long-term assets1,278 1,247TOTAL ASSETS$55,273 $51,142 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable$5,180 $3,813Commissions payable7,916 7,546Income tax payable592 39Other accrued expenses11,053 10,407Current portion of long-term debt, net1,454 2,000Total current liabilities26,195 23,805 Long-term debt Principal amount— 3,500Less: unamortized discount and deferred offering costs— (88)Long-term debt, net of unamortized discount and deferred offering costs— 3,412Other long-term liabilities1,879 1,978Total liabilities28,074 29,195Commitments and contingencies — Note 12 Stockholders’ equity Preferred stock — par value $0.0001 per share, 5,000 shares authorized, no shares issued oroutstanding— —Common stock — par value $0.0001 per share, 40,000 shares authorized and 14,114 and14,073 issued and outstanding as of June 30, 2019 and 2018, respectively1 1Additional paid-in capital127,096 124,663Accumulated deficit(99,960) (102,731)Accumulated other comprehensive income62 14Total stockholders’ equity27,199 21,947TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$55,273 $51,142The accompanying notes are an integral part of these consolidated financial statements.F - 4 LIFEVANTAGE CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME For the years ended June 30, 2019 2018 2017(In thousands, except per share data) Revenue, net$225,958 $203,204 $199,489Cost of sales37,973 34,848 33,456Gross profit187,985 168,356 166,033Operating expenses: Commissions and incentives108,620 98,193 96,662Selling, general and administrative69,551 59,840 64,922Total operating expenses178,171 158,033 161,584Operating income9,814 10,323 4,449Other expense: Interest expense(323) (456) (570)Other expense, net(261) (319) (969)Total other expense(584) (775) (1,539)Income before income taxes9,230 9,548 2,910Income tax expense(1,801) (3,787) (1,302)Net income$7,429 $5,761 $1,608Net income per share: Basic$0.53 $0.41 $0.12Diluted$0.50 $0.41 $0.11Weighted-average shares outstanding: Basic14,055 13,992 13,881Diluted14,980 14,136 14,118Other comprehensive income (loss), net of tax: Foreign currency translation adjustment48 108 (87)Other comprehensive income (loss), net of tax:48 108 (87)Comprehensive income$7,477 $5,869 $1,521The accompanying notes are an integral part of these consolidated financial statements.F - 5 LIFEVANTAGE CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITYFor the years ended June 30, 2019, 2018 and 2017 Common Stock AdditionalPaid-In Capital AccumulatedDeficit AccumulatedOtherComprehensiveIncome (Loss) Total Shares Amount (In thousands) Balances, June 30, 201614,028 $14 $119,242 $(108,600) $(7) $10,649Stock-based compensation— — 2,315 — — 2,315Exercise of options and warrants76 — 42 — — 42Issuance of shares related to restricted stock166 — — — — —Shares canceled or surrendered as payment of taxwithholding(38) — — — — —Currency translation adjustment— — — — (87) (87)Net income— — — 1,608 — 1,608Balances, June 30, 201714,232 $14 $121,599 $(106,992) $(94) $14,527Stock-based compensation— — 2,990 — — 2,990Exercise of options21 — 61 — — 61Issuance of shares related to restricted stock190 — — — — —Shares canceled or surrendered as payment of taxwithholding(66) — — — — —Repurchase of company stock(304) — — (1,500) — (1,500)Change in par value of common stock— (13) 13 — — —Currency translation adjustment— — — — 108 108Net income— — — 5,761 — 5,761Balances, June 30, 201814,073 $1 $124,663 $(102,731) $14 $21,947Cumulative effect of adoption of accounting principle— — — (3) — (3)Balances, July 1, 201814,073 $1 $124,663 $(102,734) $14 $21,944Stock-based compensation— — 4,899 — — 4,899Exercise of options155 — 701 — — 701Common stock issued under equity award plans515 — — — — —Shares canceled or surrendered as payment of taxwithholding(240) — (3,167) — — (3,167)Repurchase of company stock(389) — — (4,655) — (4,655)Currency translation adjustment— — — — 48 48Net income— — — 7,429 — 7,429Balances, June 30, 201914,114 $1 $127,096 $(99,960) $62 $27,199The accompanying notes are an integral part of these consolidated financial statements.F - 6 LIFEVANTAGE CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended June 30, 2019 2018 2017(In thousands) Cash Flows from Operating Activities: Net income$7,429 $5,761 $1,608Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization1,895 1,325 1,643Stock-based compensation5,525 3,196 2,647Amortization of deferred financing fees6 11 12Amortization of debt discount36 21 19Write-off of intangible assets— — 350Deferred income tax563 831 (740)Changes in operating assets and liabilities: Accounts receivable14 (730) 160Income tax receivable(785) 462 (912)Inventory, net(64) 2,953 8,309Prepaid expenses and deposits1,029 (993) 3,318Other long-term assets7 109 103Accounts payable1,369 (1,024) (6,210)Income tax payable552 (175) (3,132)Other accrued expenses545 1,935 135Other long-term liabilities(332) (426) (713)Net Cash Provided by Operating Activities17,789 13,256 6,597Cash Flows from Investing Activities: Investments in convertible note receivable(2,000) — —Purchase of equipment(2,506) (4,649) (1,055)Net Cash Used in Investing Activities(4,506) (4,649) (1,055)Cash Flows from Financing Activities: Payment of deferred financing fees— (60) —Repurchase of company stock(4,655) (1,500) —Payment on term loan(4,000) (2,000) (2,000)Shares canceled or surrendered as payment of tax withholding(3,167) — —Exercise of options and warrants701 61 42Net Cash Used in Financing Activities(11,121) (3,499) (1,958)Foreign Currency Effect on Cash10 86 (9)Increase in Cash and Cash Equivalents2,172 5,194 3,575Cash and Cash Equivalents — beginning of period16,652 11,458 7,883Cash and Cash Equivalents — end of period$18,824 $16,652 $11,458The accompanying notes are an integral part of these consolidated financial statements.F - 7 LIFEVANTAGE CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended June 30, 2019 2018 2017Non Cash Investing and Financing Activities: Increase in property and equipment/other long-term liabilities$— $— $116SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest$227 $345 $438Cash paid for income taxes$1,286 $2,865 $5,496Common stock shares issued upon cashless warrant exercises— — 53Total cashless exercise price of warrants$— $— $88Gross warrants underlying cashless exercises— — 63The accompanying notes are an integral part of these consolidated financial statements.F - 8 LIFEVANTAGE CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSNote 1 — The CompanyLifeVantage Corporation (the "Company") is a company focused on biohacking the aging code through nutrigenomics, the study of how nutrition andnaturally occurring compounds affect our genes. The Company is dedicated to helping people achieve their health, wellness and financial goals. TheCompany provides quality, scientifically-validated products and a financially rewarding direct sales opportunity to customers and independent distributors.LifeVantage sells its products in the United States, Mexico, Japan, Australia, Hong Kong, Canada, Thailand, the United Kingdom, the Netherlands, Germany,Taiwan, Austria, Spain, Ireland and Belgium. The Company also sells its products in a number of countries to customers for personal consumption only. Inaddition, the Company sells its products in China through its e-commerce business model.The Company engages in the identification, research, development and distribution of advanced nutraceutical dietary supplements and skin and haircare products, including Protandim®, its line of scientifically-validated dietary supplements, LifeVantage® Omega+ and ProBio dietary supplements,TrueScience®, its line of skin and hair care products, Petandim™ for Dogs, its companion pet supplement formulated to combat oxidative stress in dogs,Axio® Smart Energy Drink mixes, and PhysIQ™, its Smart Weight Management System.The Company was incorporated in Colorado in June 1988 under the name Andraplex Corporation. The Company changed its corporate name to YaakRiver Resources, Inc. in January 1992, and subsequently changed it again in October 2004 to Lifeline Therapeutics, Inc. In October 2004 and March 2005,the Company acquired all of the outstanding common stock of Lifeline Nutraceuticals Corporation. In November 2006, the Company changed its name toLifeVantage Corporation.On March 9, 2018, following approval by the Company's stockholders and its 2018 Annual Meeting of Stockholders, the Company changed its state ofincorporation from the State of Colorado to the State of Delaware pursuant to a plan of conversion. All outstanding shares of common stock, options andshare units of the Colorado corporation were converted into an equivalent share, option or share unit of the Delaware corporation and the par value of theCompany's common stock was adjusted to $0.0001. All directors and officers of the Colorado corporation held the same position within the Delawarecorporation on the date of reincorporation.Note 2 — Summary of Significant Accounting PoliciesConsolidationThe consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accountsand transactions are eliminated in consolidation. Certain other prior period balances have also been reclassified to conform to the current period presentation.Use of EstimatesThe Company prepares the consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in theUnited States of America (GAAP). In preparing these statements, the Company is required to use estimates and assumptions that affect the reported amounts ofassets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue andexpenses during the reporting period. Actual results could differ materially from those estimates and assumptions. On an ongoing basis, the Company reviewsits estimates, including those related to inventory valuation and obsolescence, sales returns, income taxes and tax valuation reserves, transfer pricingmethodology and positions, share-based compensation, and loss contingencies.Foreign Currency TranslationA portion of the Company’s business operations occurs outside the United States. The local currency of each of the Company’s subsidiaries is generallyits functional currency. All assets and liabilities are translated into U.S. Dollars at exchange rates existing at the balance sheet dates, revenue and expenses aretranslated at weighted-average exchange rates and stockholders’ equity is recorded at historical exchange rates. The resulting foreign currency translationadjustments are recorded as a separate component of stockholders’ equity in the consolidated balance sheets and as a component of comprehensive income.Transaction gains and losses are included in other expense, net in the consolidated statements of operations and comprehensive income.F - 9 Fair Value of Financial InstrumentsAccounting guidance on fair value measurements and disclosures requires disclosures about the fair value for all financial instruments, whether or notrecognized, for financial statement purposes. Disclosures about fair value of financial instruments are based on pertinent information available tomanagement as of June 30, 2019 and 2018. Accordingly, the estimates presented in these consolidated financial statements are not necessarily indicative ofthe amounts that could be realized on disposition of the financial instruments.Management has estimated the fair values of cash and cash equivalents, accounts receivable, accounts payable, commissions payable and other accruedexpenses to approximate their respective carrying values reported in these consolidated financial statements because of their short maturities.Cash and Cash EquivalentsThe Company considers only its monetary liquid assets with original maturities of three months or less to be cash and cash equivalents.Accounts ReceivableThe Company’s accounts receivable for the fiscal years ended June 30, 2019 and 2018 consist primarily of credit card receivables. Based on theCompany’s verification process for customer credit cards and historical information available, management has determined that an allowance for doubtfulaccounts on credit card sales related to its customer sales as of June 30, 2019 or 2018 is not necessary. No bad debt expense was recorded for the fiscal yearsended June 30, 2019, 2018 and 2017.InventoryAs of June 30, 2019 and 2018, inventory consisted of (in thousands): As of June 30, 2019 2018Finished goods$9,903 72.0% $7,859 57.7%Raw materials3,850 28.0% 5,768 42.3%Total inventory$13,753 100.0% $13,627 100.0%Inventories are carried and depicted above at the lower of cost or market, using the first-in, first-out method, which includes a reduction in inventoryvalues of $0.2 million and $1.4 million at June 30, 2019 and 2018, respectively, related to obsolete and slow-moving inventory.Convertible Note ReceivableThe Company entered into a convertible promissory note agreement with Gig Economy Group, Inc. ("GEG") pursuant to which the Company agreed toloan to GEG up to an aggregate of $2.0 million in a series of loan installments, evidenced by a convertible promissory note having a maturity date of May 31,2019 ("Convertible Note"). The Convertible Note accrues interest at a rate of 8% per annum, compounded annually. The principal and unpaid accruedinterest of the Convertible Note will either be repaid in cash or converted into shares of equity securities of GEG. On May 17, 2019, the Company and GEGentered into an amendment to the Convertible Note to extend the maturity date to December 31, 2019. In all other respects, the Convertible Note remainsunchanged from the original agreement. As of June 30, 2019, the note receivable balance was $2.1 million, including accrued interest, which is included inprepaid expenses and other on the condensed consolidated balance sheet.Property and EquipmentProperty and equipment are recorded at cost and depreciated using the straight-line method over the following useful lives: YearsEquipment (includes computer hardware and software)3 - 5Furniture and fixtures5Vehicles5F - 10 Leasehold improvements are depreciated over the shorter of estimated useful life of the related asset or the lease term.The cost of normal maintenance and repairs is charged to expense as incurred. When an asset is sold or otherwise disposed of, the cost and associatedaccumulated depreciation are removed from the accounts and the resulting gain or loss is recognized in the consolidated statements of operations andcomprehensive income in other expense, net. Significant expenditures that increase the useful life of an asset are capitalized and depreciated over theestimated useful life of the asset. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carryingamount of such assets may not be recoverable.Intangible AssetsIntangible assets are stated at cost less accumulated amortization. Definite-lived intangible assets are amortized over their related useful lives, using astraight-line method, consistent with the underlying expected future cash flows related to the specific intangible asset. Definite-lived intangible assets arereviewed for impairment whenever events or changes in circumstances exist that indicate the carrying amount of an asset may not be recoverable. Whenindicators of impairment exist, an estimate of undiscounted net cash flows is used in measuring whether the carrying amount of the asset or related assetgroup is recoverable. Measurement of the amount of impairment, if any, is based upon the difference between the asset’s carrying value and estimated fairvalue.Indefinite-lived intangible assets are not amortized; however, they are tested at least annually for impairment or more frequently if events or changes incircumstances exist that may indicate impairment. An impairment loss is recognized if the carrying amount of the asset exceeds its fair value. Annualimpairment tests on intangible assets were completed for the fiscal years ended June 30, 2019 and 2018, resulting in no impairment charges.Impairment of Long-Lived AssetsPursuant to guidance established for impairment or disposal of assets, the Company assesses impairment whenever events or changes in circumstancesindicate that the carrying amount of a long-lived asset may not be recoverable. When an assessment for impairment of long-lived assets, long-lived assets tobe disposed of, and certain identifiable intangibles related to those assets is performed, the Company is required to compare the net carrying value of long-lived assets on the lowest level at which cash flows can be determined on a consistent basis to the related estimates of future undiscounted net cash flows forsuch assets. If the net carrying value exceeds the net cash flows, then an impairment is recognized to reduce the carrying value to the estimated fair value,generally equal to the future discounted net cash flow. For the fiscal years ended June 30, 2019 and 2018, management has concluded that there are noindications of impairment.Concentration of Credit RiskAccounting guidance for financial instruments requires disclosure of significant concentrations of credit risk regardless of the degree of such risk.Financial instruments with significant credit risk include cash and cash equivalents. At June 30, 2019, the Company had $14.6 million in cash accounts atone financial institution and $4.2 million in other financial institutions. As of June 30, 2019 and 2018, and during the years then ended, the Company’s cashbalances exceeded federally insured limits.Commissions and IncentivesCommissions and incentives expenses are the Company’s most significant expenses and are classified as operating expenses. Commissions andincentives expenses include sales commissions paid to the Company's independent distributors, special incentives, costs for incentive trips and other rewards.Commissions and incentives expenses do not include any amounts the Company pays to its independent distributors for personal purchases. Commissionspaid to independent distributors on personal purchases are considered a sales discount and are reported as a reduction to net revenue.Shipping and HandlingShipping and handling costs associated with inbound freight and freight out to customers, including independent distributors, are included in cost ofsales. Shipping and handling fees charged to all customers are included in sales.Research and Development CostsThe Company expenses all costs related to research and development activities as incurred. Research and development expenses for the fiscal yearsended June 30, 2019, 2018 and 2017 were $1.1 million, $1.2 million and $1.1 million, respectively.F - 11 Stock-Based CompensationThe Company recognizes stock-based compensation by measuring the cost of services to be rendered based on the grant date fair value of the equityaward. The Company recognizes stock-based compensation, net of any estimated forfeitures, over the period an employee is required to provide service inexchange for the award, generally referred to as the requisite service period. The Company estimates forfeitures based on historical information and othermanagement assumptions. For awards with market-based performance conditions, the cost of the awards is recognized as the requisite service is rendered byemployees, regardless of when, if ever, the market-based performance conditions are satisfied.The Black-Scholes option pricing model is used to estimate the fair value of stock options. The determination of the fair value of stock options isaffected by the Company's stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expecteddividends. The Company uses historical data for estimating the expected volatility and expected life of stock options required in the Black-Scholes model.The risk-free interest rate assumption is based on observed interest rates appropriate for the expected terms of the stock options.The fair value of restricted stock grants is based on the closing market price of the Company's stock on the date of grant less the Company's expecteddividend yield. The fair value of performance restricted stock units that include market-based performance conditions is based on the closing market price ofthe Company's stock on the date of grant less the Company's expected dividend yield, with further adjustments made to reflect the market conditions thatmust be satisfied in order for the units to vest by using a Monte-Carlo simulation model. Key assumptions for the Monte-Carlo simulation model include therisk-free rate, expected volatility, expected dividends and the correlation coefficient. The fair value of cash-settled performance-based awards, accounted foras liabilities, is remeasured at the end of each reporting period and is based on the closing market price of the Company’s stock on the last day of thereporting period. The Company recognizes compensation costs for awards with performance conditions when it concludes it is probable that the performanceconditions will be achieved. The Company reassesses the probability of vesting at each balance sheet date and adjusts compensation costs accordingly.Income TaxesIncome taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequencesattributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating lossand tax credit carry-forwards. Deferred tax assets and liabilities are measured using statutory tax rates expected to apply to taxable income in the years inwhich those temporary differences are expected to be recovered or settled, updated for new corporate tax rates. The effect on deferred tax assets and liabilitiesfrom a change in tax rates is recognized in income in the period that includes the effective date of the change. The Company recognizes tax liabilities orbenefits from an uncertain position only if it is more likely than not that the position will be sustained upon examination by taxing authorities based on thetechnical merits of the issue. The amount recognized would be the largest liability or benefit that the Company believes has greater than a 50% likelihood ofbeing realized upon settlement.On December 22, 2017, the President of the United States of America signed tax reform legislation (the “2017 Tax Act”), which includes a broad rangeof tax reform affecting businesses, including corporate tax rates, business deductions, and international tax regulations. Among these changes, the 2017 TaxAct reduces the corporate tax rate from 35% to 21% effective December 31, 2017. The Company has incorporated all other changes resulting from the 2017Tax Act in its tax related accounts for the fiscal years ended June 30, 2019 and 2018.Income Per ShareBasic income per common share is computed by dividing the net income by the weighted-average number of common shares outstanding during theperiod, less unvested restricted stock awards. Diluted income per common share is computed by dividing net income by the weighted-average common sharesand potentially dilutive common share equivalents using the treasury stock method.For the fiscal years ended June 30, 2019, 2018 and 2017, the effects of approximately 0.2 million, 0.4 million and 0.2 million common shares,respectively, issuable upon exercise of options and non-vested shares of restricted stock, are not included in the computations as their effect was anti-dilutive.F - 12 The following is a reconciliation of net income per share and the weighted-average common shares outstanding for purposes of computing basic anddiluted net income per share (in thousands, except per share amounts): Years ended June 30, 2019 2018 2017Numerator: Net income$7,429 $5,761 $1,608Denominator: Basic weighted-average common shares outstanding14,055 13,992 13,881Effect of dilutive securities: Stock awards and options925 144 237Diluted weighted-average common shares outstanding14,980 14,136 14,118Net income per share, basic$0.53 $0.41 $0.12Net income per share, diluted$0.50 $0.41 $0.11Segment InformationThe Company operates in a single operating segment by selling products to an international network of independent distributors that operates in anintegrated manner from market to market. Commissions and incentives expenses are the Company’s largest expense comprised of the commissions paid to itsindependent distributors. The Company manages its business primarily by managing its international network of independent distributors. The Companydoes not use profitability reports on a regional or divisional basis for making business decisions. However, the Company does disaggregate revenue in twogeographic regions: the Americas region and the Asia/Pacific & Europe region. See disaggregated revenue in Note 3.The following table presents the Company's long-lived assets for its most significant geographic markets (in thousands): June 30, 2019 2018United States$9,772 $9,778Japan$955 $921New Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts withCustomers (Topic 606), and has subsequently issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, ASU2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU 2016-10,Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, ASU 2016-11, Revenue Recognition (Topic 605)and Derivatives and Hedging (Topic 815), ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and PracticalExpedients, and ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers (collectively, Topic 606).Topic 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedesmost current revenue recognition guidance, including industry-specific guidance. The core principle of Topic 606 is for companies to recognize revenue todepict the transfer of goods or services to customers in amounts that reflect the consideration it expects to receive in exchange for those goods or services.The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts,including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. This guidance was effective for theCompany beginning on July 1, 2018 with the option to adopt using either a full retrospective or a modified retrospective approach. The Company adoptedTopic 606 using the modified retrospective approach, under which the cumulative effect of initially applying Topic 606 was recognized as an immaterialadjustment to the opening balance of retained earnings as of July 1, 2018.The Company evaluated each of its revenue streams and identified similar performance obligations under Topic 606 as compared to previous revenuerecognition guidance. During its evaluation, the Company reviewed its loyalty points program and, based on the new guidance, changed the method ofaccounting from a cost provision method to a deferred revenue method, which resulted in immaterial adjustments to beginning balances upon adoption.During fiscal 2019, the CompanyF - 13 discontinued its loyalty points program, which resulted in an increase in revenue of approximately $0.5 million during the year ended June 30, 2019 from therecognition of deferred revenue related to accrued loyalty points.There are also considerations related to internal control over financial reporting associated with implementing Topic 606. The Company evaluated itscontrol framework for revenue recognition and identified no material changes needed in response to the new guidance. The Company also evaluated theexpanded disclosure requirements under Topic 606 and designed and implemented the appropriate controls over gathering and reporting the informationrequired under Topic 606. See Note 3.In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842). For lessees, this standard requires that for all leases not considered to be shortterm, a company recognize both a right-of-use asset and lease liability on its balance sheet, representing the obligation to make payments and the right to useor control the use of a specified asset for the lease term. This standard is effective for annual periods beginning after December 15, 2018 and interim periodswithin those annual periods. The Company expects the adoption will result in a material increase to the assets and liabilities on the consolidated balancesheet, but does not expect a material impact on the consolidated statements of operations and comprehensive income or consolidated statements of cashflows. The Company plans to adopt the standard in the first quarter of fiscal 2020 using the modified retrospective transition method as of the adoption date.The Company plans to elect the package of practical expedients available under the transition provisions of the new standard, including: not reassessingwhether expired or existing contracts are or contain leases; not reassessing the classification of expired or existing leases; not reassessing the initial directcost for any existing leases; and using hindsight in determining the lease term.In May 2017, FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. The standardprovides guidance about which changes to the terms or conditions of a share-based award require an entity to apply modification accounting in Topic 718.An entity should account for the effects of a modification unless all the following are met: (1) The fair value of the modified award is the same as the fairvalue of the original award immediately before the original award is modified, (2) The vesting conditions of the modified award are the same as the vestingconditions of the original award immediately before the original award is modified, (3) The classification of the modified award as an equity instrument or aliability instrument is the same as the classification of the original award immediately before the original award is modified. This standard became effectivefor the Company on July 1, 2018.Note 3 — RevenueRevenue is recognized when control of the promised goods or services are transferred to the customer, in an amount that reflects the consideration theCompany expects to be entitled to in exchange for those goods or services. Sales, value add, and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue.The Company generates the majority of its revenue through product sales to customers. These products include the Protandim® line of dietarysupplements, LifeVantage® Omega+ and ProBio dietary supplements, the TrueScience® line of Nrf2-infused skin and hair care products, Petandim™ for Dogs,Axio® Smart Energy Drink mixes, and the PhysIQ™ Smart Weight Management System. The Company ships most of its product directly to the consumer andreceives substantially all payment for product sales in the form of credit card receipts. Revenue from direct product sales to customers is recognized uponshipment, which is when passage of title and risk of loss occurs. For items sold in packs and bundles, the Company determines the standalone selling price atcontract inception for each distinct good, and then allocates the transaction price on a relative standalone selling price basis. Any discounts are accounted foras a direct reduction to the transaction price. Shipping and handling revenue is recognized upon shipment when the performance obligation is completed.The Company also charges amounts to independent distributors to attend events held by the Company. Tickets to events are sold as standalone itemsor included within packs. For event tickets sold in packs, the Company allocates a portion of the transaction price to the ticket on a relative standaloneselling price basis. Any discounts are accounted for as a direct reduction to the transaction price. Fee revenue associated with ticket sales is recorded in themonth that the event is held, which is when the Company has performed its obligations under the contract.Deferred RevenueThe Company records deferred revenue when cash payments are received or due in advance of performance, including amounts which are refundable.Deferred revenue is included in accrued expenses in the condensed consolidated balance sheets and includes pre-sell tickets to events and obligations relatedto the Company’s loyalty points program. The Company pre-sells tickets to its events. When cash payments are received in advance of events, the cashreceived is recorded to deferred revenue until the event is held, at which time the Company has performed its obligations under the contract and the revenueis recognized. Historically, the Company has offered a loyalty points program for its customers that allows the customers to earn points from ongoingpurchases that can be redeemed for products. As of December 31, 2018, the Company discontinued itsF - 14 loyalty points program and all revenue previously deferred under the program has been recognized. The Company accounted for these points prior to thediscontinuance of the program as a reduction to the transaction price based on estimated usage.Sales Returns and AllowancesEstimated returns are recorded when product is shipped. Subject to some exceptions based on local regulations, the Company’s return policy is toprovide a full refund for product returned within 30 days, if the returned product is unopened or defective. After 30 days, the Company generally does notissue refunds to direct sales customers for returned product. The Company allows terminating independent distributors to return up to 30% of unopened,unexpired product that they have purchased within the prior twelve months for a full refund, less a 10% restocking fee. The Company establishes a refundliability reserve and an asset reserve for its right to recover products based on historical experience. The returns asset reserve and returns liability reserve areevaluated on a quarterly basis. As of June 30, 2019 and 2018, the Company’s return liability reserve, net was $0.4 million and $0.4 million, respectively.Geographic InformationThe Company reports revenue in two geographic regions: the Americas region and the Asia/Pacific & Europe region. The following table presents theCompany's revenue disaggregated by these two geographic regions (in thousands): Years ended June 30, 2019 2018 2017Americas$163,236 $151,609 $150,841Asia/Pacific & Europe62,722 51,595 48,648Total revenue$225,958 $203,204 $199,489Additional information as to the Company’s revenue from operations in the most significant geographical areas is set forth below (in thousands): Years ended June 30, 2019 2018 2017United States$151,966 $142,452 $144,842Japan$40,796 $41,843 $39,390Major ProductsThe Company's revenue is largely attributed to two product lines, Protandim® and TrueScience®, which each accounted for more than 10% of totalrevenue for each of the fiscal years ended June 30, 2018 and 2017. For the fiscal year ended June 30, 2019, Protandim® was the only product line thataccounted for more than 10% of total revenue. On a combined basis, these products represent approximately 78.0%, 76.6% and 77.9% of the Company's totalrevenue for the fiscal years ended June 30, 2019, 2018 and 2017, respectively. The following table shows revenue by major product line for the fiscal yearsended June 30, 2019, 2018 and 2017. Years ended June 30, 2019 2018 2017Protandim® product line$155,499 68.8% $133,923 65.9% $130,873 65.6%TrueScience® product line20,881 9.2% 21,665 10.7% 24,440 12.3%Other49,578 22.0% 47,616 23.4% 44,176 22.1%Total$225,958 100.0% $203,204 100.0% $199,489 100.0%Note 4 — Property and Equipment, NetProperty and equipment, net consist of (in thousands):F - 15 June 30, 2019 2018Equipment (includes computer hardware and software)$12,625 $10,504Furniture and fixtures1,611 1,592Leasehold improvements3,975 3,761Vehicles51 51Accumulated depreciation(11,131) (9,321)Total property and equipment, net$7,131 $6,587Depreciation expense totaled $1.8 million, $1.2 million and $1.5 million for the fiscal years ended June 30, 2019, 2018 and 2017, respectively.Note 5 — Intangible Assets, NetIntangible assets, net consist of (in thousands): June 30, 2019 2018Patent costs$2,330 $2,330Accumulated amortization(1,592) (1,460)Total definite-lived intangible assets, net738 870 Trademarks and other indefinite-lived intangible assets245 245Total intangible assets, net$983 $1,115Amortization expense totaled $0.1 million, $0.1 million and $0.1 million for the fiscal years ended June 30, 2019, 2018 and 2017, respectively. As ofJune 30, 2019, the remaining weighted-average amortization period for definite-lived intangible assets was 5.75 years. Annual estimated amortizationexpense is expected to approximate $0.1 million for each of the five succeeding fiscal years.Note 6 — Other Accrued ExpensesOther accrued expenses consist of (in thousands): June 30, 2019 2018Accrued incentive compensation$5,726 $2,868Other taxes payable1,733 1,884Accrued other expenses1,617 2,087Deferred revenue998 1,107Accrued payroll and other employee expenses791 1,095Accrued incentives and promotions to distributors188 1,366Total other accrued expenses$11,053 $10,407Note 7 — Long-Term DebtOn March 30, 2016, the Company entered into a loan agreement (the "2016 Loan Agreement") to refinance its outstanding debt. In connection with the2016 Loan Agreement and on the same date, the Company entered into a security agreement (the "Security Agreement"). The 2016 Loan Agreement providesfor a term loan in an aggregate principal amount of $10.0 million (the "2016 Term Loan") and a revolving loan facility in an aggregate principal amount notto exceed $2.0 million (the "2016 Revolving Loan," and collectively with the 2016 Term Loan, the 2016 Loan Agreement and the Security Agreement, the"2016 Credit Facility").F - 16 The principal amount of the 2016 Term Loan is payable in consecutive quarterly installments in the amount of $0.5 million plus accrued interestbeginning with the fiscal quarter ended June 30, 2016. If the Company borrows under the 2016 Revolving Loan, interest will be payable quarterly in arrearson the last day of each fiscal quarter.On May 4, 2018, the Company entered into a loan modification agreement, which amended the 2016 Credit Facility (“Amendment No. 1”).Amendment No. 1 revised the maturity date from March 30, 2019 to March 31, 2021 and increased the fixed interest rate for the term loanfrom 4.93% to 5.68%. Amendment No. 1 also revised certain financial covenants. The minimum fixed charge coverage ratio (as defined in Amendment No. 1)was revised from a minimum of 1.50 to 1.00 to 1.25 to 1.00, measured on a trailing twelve-month basis, at the end of each fiscal quarter. The minimumworking capital was increased from $5.0 million to $8.0 million. The funded debt to EBITDA ratio was replaced with the total liabilities to tangible net worthratio (as defined in Amendment No. 1) of not greater than 3.00 to 1.00 at the end of each quarter. The minimum tangible net worth measure was removed fromthe financial covenants.The Company’s obligations under the 2016 Credit Facility, as amended, are secured by a security interest in substantially all of the Company’s assets.Loans outstanding under the 2016 Credit Facility, as amended, may be prepaid in whole or in part at any time without premium or penalty. In addition, if, atany time, the aggregate principal amount outstanding under the 2016 Revolving Loan, as amended, exceeds $2.0 million, the Company must prepay anamount equal to such excess. Any principal amount of the 2016 Term Loan, as amended, which is prepaid or repaid may not be re-borrowed.On February 1, 2019, the Company entered into a loan modification agreement, which amended the 2016 Credit Facility, as amended ("AmendmentNo. 2"). Under Amendment No. 2, the Company made a principal payment of $2.0 million and increased the revolving loan facility from $2.0 million to $5.0million. Amendment No. 2 also revised certain financial covenants. The minimum fixed charge coverage ratio (as defined in Amendment No. 2) was revisedfrom a minimum of 1.25 to 1.00 to 1.10 to 1.00, measured on a trailing twelve-month basis, at the end of each fiscal quarter. The minimum working capitalwas decreased from $8.0 million to $6.0 million.The 2016 Credit Facility, as amended, contains customary covenants, including affirmative and negative covenants that, among other things, restrictthe Company's ability to create certain types of liens, incur additional indebtedness, declare or pay dividends on or redeem capital stock, make otherpayments to holders of equity interests in the Company, make certain investments, purchase or otherwise acquire all or substantially all the assets or equityinterests of other companies, sell assets or enter into consolidations, mergers or transfers of all or any substantial part of the Company's assets. The 2016Credit Facility, as amended, also contains various financial covenants that require the Company to maintain a certain consolidated working capital amounts,total liabilities to tangible net worth ratios and fixed charge coverage ratios. Additionally, the 2016 Credit Facility, as amended, contains cross-defaultprovisions, whereby a default under the terms of certain indebtedness or an uncured default of a payment or other material obligation of the Company under amaterial contract of the Company will cause a default on the remaining indebtedness under the 2016 Credit Facility, as amended. As of June 30, 2019, theCompany was in compliance with all applicable covenants under the 2016 Credit Facility, as amended.The Company’s book value for the 2016 Credit Facility, as amended, approximates the fair value. The Company will repay the remaining $1.5 millionbalance of the 2016 Term Loan during fiscal 2020 in accordance with the terms of the 2016 Credit Facility, as amended.Note 8 — Stockholders’ EquityDuring the fiscal years ended June 30, 2019, 2018 and 2017, the Company issued 0.2 million, 21,000 and 0.1 million shares, respectively, of commonstock as a result of the exercise of options and warrants. During the fiscal years ended June 30, 2019, 2018 and 2017, the Company issued 0.5 million, 0.2million and 0.2 million shares, respectively, under the Company's equity incentive plans. During the fiscal years ended June 30, 2019, 2018 and 2017, 0.2million, 0.1 million and 38,000 shares, respectively of restricted stock were canceled or surrendered as payment of tax withholding upon vesting.On November 27, 2017, the Company announced a share repurchase program authorizing it to repurchase up to $5 million in shares of the Company'scommon stock. The repurchase program permits the Company to purchase shares through a variety of methods, including in the open market, throughprivately negotiated transactions or other means as determined by the Company's management. As part of the repurchase program, the Company has enteredinto a pre-arranged stock repurchase plan which operates in accordance with guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934,as amended. Accordingly, any transactions under such stock repurchase plan will be completed in accordance with the terms of the plan, including specifiedprice, volume and timing conditions. The authorization may be suspended or discontinued at any time and expires on November 27, 2020. On February 1,2019, the board of directors approved an amendment to the share repurchase program to increase the authorized share repurchase amount from $5 million to$15 million. During year ended June 30, 2019, the Company purchased 0.4 million shares of its common stock on the open market at an aggregate purchaseF - 17 price of $4.7 million under this repurchase program. At June 30, 2019, there is $8.8 million remaining under this repurchase program.The Company’s Certificate of Incorporation authorizes the designation and issuance shares of preferred stock. However, as of June 30, 2019, none havebeen issued nor have any rights or preferences been assigned to the preferred stock by the Company’s board of directors.Note 9 — Share-Based CompensationLong-Term Incentive PlansEquity-Settled PlansThe Company adopted, and the shareholders approved, the 2007 Long-Term Incentive Plan (the “2007 Plan”), effective November 21, 2006, to provideincentives to certain eligible employees, directors and consultants. A maximum of 1.4 million shares of the Company’s common stock can be issued underthe 2007 Plan in connection with the grant of awards. Awards to purchase common stock have been granted pursuant to the 2007 Plan and are outstanding tovarious employees, officers, directors, Scientific Advisory Board members and independent distributors at prices between $1.75 and $10.50 per share, withinitial vesting periods of one to three years. Awards expire in accordance with the terms of each award and the shares subject to the award are added back tothe 2007 Plan upon expiration of the award. The contractual term of stock options granted is generally ten years. As of June 30, 2019, there were stock optionawards outstanding, net of awards expired, for the purchase in aggregate of 44,000 shares of the Company’s common stock. No new awards can be grantedunder the 2007 Plan.The Company adopted, and the shareholders approved, the 2010 Long-Term Incentive Plan (the “2010 Plan”), effective September 27, 2010, asamended on August 21, 2014, to provide incentives to certain eligible employees, directors and consultants. A maximum of 1.0 million shares of theCompany’s common stock can be issued under the 2010 Plan in connection with the grant of awards. Awards to purchase common stock have been grantedpursuant to the 2010 Plan and are outstanding to various employees, officers and directors. Outstanding stock options awarded under the 2010 Plan haveexercise prices between $5.60 and $20.09 per share, and vest over one to four year vesting periods. Awards expire in accordance with the terms of each award.The contractual term of stock options granted is generally ten years. As of June 30, 2019, there were stock option awards outstanding, net of awards expired,for an aggregate of 0.1 million shares of the Company’s common stock. No new awards will be granted under the 2010 Plan and forfeited or terminated sharesmay be added to the 2017 Plan pool as described below.The Company adopted, and the shareholders approved, the 2017 Long-Term Incentive Plan (the “2017 Plan”), effective February 16, 2017 to provideincentives to certain eligible employees, directors and consultants. On February 2, 2018 and November 15, 2018, the shareholders approved amendments tothe 2017 Plan to increase by 425,000 shares and 715,000 shares, respectively, the number of shares of the Company's common stock that are available forissuance under the 2017 Plan. The maximum number of shares that can be issued under the 2017 Plan is not to exceed 2,265,000 shares, calculated as the sumof (i) 1,790,000 shares and (ii) up to 475,000 shares previously reserved for issuance under the 2010 Plan, including shares returned upon cancellation,termination or forfeiture of awards that were previously granted under that plan. As of June 30, 2019, a maximum of 2.3 million shares of the Company'scommon stock can be issued under the 2017 Plan in connection with the grant of awards. Outstanding stock options awarded under the 2017 Plan haveexercise prices of $4.44 per share, and vest over a three year vesting period. Awards expire in accordance with the terms of each award and, upon expiration ofthe award, the shares subject to the award are added back to the 2017 Plan. The contractual term of stock options granted are substantially the same asdescribed above for the 2007 Plan and 2010 Plan. As of June 30, 2019, there were stock option awards outstanding, net of awards expired, for an aggregate of0.4 million shares of the Company’s common stock.Cash-Settled PlansPerformance UnitsThe Company adopted a performance incentive plan effective July 1, 2016 (the "Fiscal 2017 Performance Plan"). The Fiscal 2017 Performance Plan isintended to provide selected employees an opportunity to earn performance-based cash bonuses whose value is based upon the Company’s stock value andto encourage such employees to provide services to the Company and to attract new individuals with outstanding qualifications. The Fiscal 2017Performance Plan seeks to achieve this purpose by providing for awards in the form of performance share units (the “Units”). No shares will be issued underthe Fiscal 2017 Performance Plan. Awards may be settled only with cash and will be paid subsequent to award vesting. The fair value of share-basedcompensation awards, that include performance shares, are accounted for as liabilities. Vesting for the Units is subject to achievement of both service-basedand performance-based vesting requirements. Performance-based vesting occurs in three installments if the Company meets certain performance criteriagenerally set for each year of a three-yearF - 18 performance period. The service-based vesting criteria occurs in a single installment at the end of the third fiscal year after the awards are granted if theparticipant has continuously remained in service from the date of award through the end of the third fiscal year. The fair value of these awards is based on thetrading price of the Company's common stock and is remeasured at each reporting period date until settlement. The Company adopted a separate performanceincentive plan effective July 1, 2017 (the "Fiscal 2018 Performance Plan"). The Fiscal 2018 Performance Plan includes performance-based and service-basedvesting requirements and payment terms that are substantially the same as described above for the Fiscal 2017 Performance Plan.Phantom UnitsDuring the fiscal year ended June 30, 2018, the Company awarded phantom units to its executive officers and senior management. The vesting date forthe phantom units was December 31, 2018, at which time the units would be settled in cash equal to (i) the number of vested units multiplied by (ii) thepositive difference (if any) between the value at December 31, 2018 and $4.76, the closing price of the Company's common stock on the start date. The startdate is December 29, 2017, the last business day of calendar year 2017. The fair value of these awards is based on the Black Scholes valuation model and isremeasured at each reporting period date until settlement.Upon vesting of the phantom units, the awards were partially settled in cash and partially settled with the issuance of restricted stock units. Therestricted stock units were issued on January 8, 2019 and vest in a single installment after a one-year vesting period, subject to continued service through thevesting date.Employee Stock Purchase PlanGeneral. The Company’s 2019 Employee Stock Purchase Plan ("ESPP") was adopted by its board of directors in September 2018 and its stockholdersapproved it in November 2018. The ESPP is intended to qualify under Section 423 of the Internal Revenue Code.Share Reserve. The Company has reserved 400,000 shares of its common stock for issuance under the ESPP. As of June 30, 2019, 400,000 shares wereavailable for issuance under the ESPP. The number of shares reserved under the ESPP will automatically be adjusted in the event of a stock split, stockdividend or a reverse stock split (including an adjustment to the per-purchase period share limit).Purchase Price. Employees may purchase each share of common stock under the ESPP at a price equal to 85% of the lower of the fair market values ofthe stock as of the beginning or the end of the six-month offering periods. An employee’s payroll deductions under the ESPP are limited to 15% of thecompensation, and up to a maximum of 3,000 shares may be purchased during any offering period. A participant shall not be granted an option under theESPP if such option would permit the participant’s rights to purchase stock to accrue at a rate exceeding $25,000 fair market value of stock for each calendaryear in which such option is outstanding at any time. Offering Periods. Unless otherwise determined by the compensation committee, the ESPP will be operated through a series of successive six-monthoffering periods, which will begin each year on March 1 and September 1. The first offering period under the ESPP began on March 1, 2019. During the fiscal year ended June 30, 2019, no shares of common stock werepurchased under the ESPP.Stock-Based CompensationIn accordance with accounting guidance for stock-based compensation, payments in equity instruments for goods or services are accounted for by thefair value method. For the fiscal years ended June 30, 2019, 2018 and 2017, stock-based compensation of $4.9 million, $3.0 million and $2.3 million,respectively, was reflected as an increase to additional paid in capital and $0.6 million, $0.2 million and $0.7 million, respectively, was reflected as anincrease to other accrued expenses, all of which was employee related.At June 30, 2019, there was $4.9 million of unrecognized compensation cost related to nonvested share-based compensation arrangements under the2010 and 2017 Plans, based on management's estimate of the shares that will ultimately vest. The Company expects to recognize such costs over a weighted-average period of 1.62 years.Stock OptionsDuring the fiscal year ended June 30, 2018, the Company awarded stock options ("FY 2018 Stock Options") to its executive officers and seniormanagement. The vesting period for the FY 2018 Stock Options is three years and occurs as follows, subject to continued service through the applicablevesting dates: one-third of the total number of shares awarded vests on January 1, 2019; and one-twelfth of the total number of shares awarded vests on thelast day of each fiscal quarter followingF - 19 January 1, 2019. The fair value of the stock options will be recognized on a straight-line basis over the requisite service period of the awards.There were no stock option grants during the fiscal years ended June 30, 2019 and June 30, 2017.The fair value of stock option awards was estimated using the Black-Scholes option-pricing model with the following assumptions and weighted-average fair value: June 30, 2018Weighted-average grant date fair value$2.25Risk-free interest rate2.3%Expected volatility59.0%Expected life (years)4.7The following is a summary of stock option activity for the fiscal years ended June 30, 2019, 2018 and 2017: Options (in thousands) WeightedAverageExercise Price WeightedAverage RemainingContractual Term (inyears) Aggregate IntrinsicValue (in thousands)Outstanding at June 30, 2016383 $7.28 Granted— $— Exercised(4) 4.14 $17Forfeited(62) 12.64 Expired or Canceled(7) 2.45 Outstanding at June 30, 2017310 6.35 Granted461 $4.44 Exercised(21) 2.96 $33Forfeited(20) 16.26 Expired or Canceled— — Outstanding at June 30, 2018730 4.96 Granted— $— Exercised(155) 4.52 $1,328Forfeited(19) 4.58 Expired or Canceled(29) 4.64 Outstanding at June 30, 2019527 5.12 7.28 $4,202Exercisable at June 30, 2019310 $5.60 6.37 $2,351F - 20 Restricted Stock AwardsThe following is a summary of restricted stock awards granted during the fiscal years ended June 30, 2019, 2018 and 2017: Shares(in thousands) Weighted Average Grant DateFair ValueNonvested at June 30, 2016 231 $6.24 Granted 156 $5.81Vested (88) 8.31Forfeited (22) 10.70Nonvested at June 30, 2017 277 4.98Vested at June 30, 2017 — — Granted 190 $4.57Vested (355) 4.62Forfeited (3) 5.22Nonvested at June 30, 2018 109 5.43Vested at June 30, 2018 — — Granted 37 $11.59Vested (56) 5.55Forfeited — —Nonvested at June 30, 2019 90 7.87Vested at June 30, 2019 — $—The total vesting date fair value of restricted shares that vested during the fiscal years ended June 30, 2019, 2018 and 2017 was $0.7 million, $1.6million and $0.7 million, respectively.Restricted Stock UnitsThe following is a summary of restricted stock units granted during the fiscal year ended June 30, 2019: Number of Units (in thousands) Weighted Average Grant DateFair ValueNonvested at June 30, 2018 — $— Granted 347 $13.81Vested — —Forfeited (7) 13.51Nonvested at June 30, 2019 340 13.81Vested at June 30, 2019 — —No restricted stock units were granted or outstanding during the fiscal years ended June 30, 2018 and 2017, respectively, and no restricted stock unitsvested during the fiscal year ended June 30, 2019.Performance Restricted Stock UnitsDuring the fiscal year ended June 30, 2019, the Company awarded performance restricted stock units ("FY 2019 Performance Restricted Stock Units") tocertain employees (the "FY 2019 Recipients"). Each FY 2019 Performance Restricted Stock Unit represents a contingent right for the FY 2019 Recipients toreceive a distribution of shares of common stock of the Company equal to 0% to 200% of the target number of performance restricted stock units subject tothe award. The actual number of shares distributed will be based on the Company's achievement of specified financial performance metrics. The performanceperiod for the FY 2019 Performance Restricted Stock Units ended June 30, 2019. The FY 2019 Performance Restricted Stock Units will vest only to theextent the specified financial performance criteria are achieved and subject to the FY 2019 Recipient’s continued service with the Company, as follows: (i) aportion of the earned award will vest on the first anniversary of the grant date and (ii) an additional portion of the earned award will vest thereafter in a seriesof quarterlyF - 21 installments. The fair values of the FY 2019 Performance Restricted Stock Units were based on the grant date fair value which is the closing price of theCompany's common stock on the date of grant.No performance restricted stock units were granted during the fiscal year ended June 30, 2018.During the fiscal year ended June 30, 2017, the Company awarded performance restricted stock units ("FY 2017 Performance Restricted Stock Units") toits executive officers and senior management (the "FY 2017 Recipients"). Vesting for the FY 2017 Performance Stock Units occurs in a single installment andis achieved at the end of the three year performance period if the participant has continuously remained in service from the date of the award through the endof the performance period. Each performance restricted stock unit represents a contingent right for the FY 2017 Recipients to receive, within thirty days afterthe end of the performance period, a distribution of shares of common stock of the Company equal to 0% to 200% of the target number of performancerestricted stock units subject to the award. The actual number of shares distributed will be based on the Company's total stockholder return ("TSR")performance during the relevant performance period, subject to acceleration upon a change in control of the Company. The vesting for 50% of the targetperformance restricted stock units is based upon the Company's absolute TSR for the performance period as compared to a matrix of fixed numeric values andthe vesting for the other 50% of the target performance restricted stock units is based upon the relative comparison of the Company's TSR to the VanguardRussell 2000 exchange traded fund TSR. The fair value of the performance restricted stock units will be recognized on a straight-line basis over the requisiteservice period of the awards, regardless of when, if ever, the market-based performance conditions are satisfied.The fair values of the FY 2017 Performance Restricted Stock Units were estimated using a Monte Carlo simulation model which included the followingassumptions in order to reflect the performance conditions that must be satisfied for the share units to vest: June 30, 2017Risk-free interest rate 1.5%Dividend yield —%Expected volatility - Company 62.0%Expected volatility - peer company 17.1%Total measurement period (years) 2.8The following is a summary of performance restricted stock units granted during the fiscal years ended June 30, 2019, 2018 and 2017: Number of Units (in thousands) Weighted Average Grant DateFair ValueNonvested at June 30, 2016 463 $13.07 Granted 420 $4.69Vested (10) 10.76Forfeited (111) 12.86Nonvested at June 30, 2017 762 8.51 Granted — $—Vested — —Forfeited (132) 7.02Nonvested at June 30, 2018 630 8.82 Granted(1) 348 $12.98Vested(1) (479) 13.28Forfeited (49) 4.99Nonvested at June 30, 2019 450 7.71Vested at June 30, 2019 — $—(1) Includes shares added by performance. F - 22 No performance restricted stock units vested during the fiscal year ended June 30, 2018. The total vesting date fair value of performance restricted stockunits that vested during the fiscal years ended June 30, 2019 and June 30, 2017 was $6.3 million and $0.1 million, respectively.Cash-Settled Performance UnitsThe following is a summary of cash-settled performance units granted during the fiscal years ended June 30, 2019, 2018 and 2017: Number of Units (in thousands) Weighted Average Grant DateFair ValueOutstanding at June 30, 2016, nonvested 51 Granted 95 $13.17Vested (25) —Forfeited (89) $12.43Outstanding at June 30, 2017, nonvested 32 Granted 87 $4.65Vested (32) —Forfeited (29) $6.48Outstanding at June 30, 2018, nonvested 58 Granted 42 $11.27Vested (32) —Forfeited (18) $9.07Outstanding at June 30, 2019, nonvested 50 The fair value of vested awards under the cash-settled performance plan for the fiscal years ended June 30, 2019, 2018 and 2017 was $0.4 million, $0.2million and $0.1 million, respectively. Payments of $0.3 million, $0.2 million and $0.2 million were made to settle vested cash-settled performance unitsduring the fiscal years ended June 30, 2019, 2018 and 2017, respectively.Cash-Settled Phantom UnitsThe fair value of phantom unit awards was estimated using the Black-Scholes option-pricing model with the following assumptions and weighted-average fair value as follows: June 30, 2018Weighted-average grant date fair value$0.40Risk-free interest rate2.1% - 2.3%Expected volatility56.2% - 57.0%Expected life (years)0.5 - 0.8The following is a summary of cash-settled phantom units granted during the fiscal years ended June 30, 2019 and 2018:F - 23 Number of Units (inthousands) Weighted Average RemainingContractual Term (in years) Aggregate Intrinsic Value (inthousands)Outstanding at June 30, 2017, nonvested — Granted 170 $— $68Vested — — Forfeited — $— Outstanding at June 30, 2018, nonvested 170 0.50 $273 Granted — $— Vested (170) — $1,619Forfeited — $— Outstanding at June 30, 2019, nonvested — — No phantom units were outstanding as of June 30, 2017 and 2016.WarrantsAs of June 30, 2019, the Company had no outstanding warrants.The following is a summary of the warrant activity for the fiscal years ended June 30, 2019, 2018 and 2017 (in thousands): CommonStockWarrantsOutstanding and exercisable, June 30, 201680 Issued—Canceled—Exercised(80)Expired—Outstanding and exercisable, June 30, 2017— Issued—Canceled—Exercised—Expired—Outstanding and exercisable, June 30, 2018— Issued—Canceled—Exercised—Expired—Outstanding and exercisable, June 30, 2019—As of June 30, 2019, 2018 and 2017, the Company had no warrants classified as derivative liabilities.F - 24 Note 10 — Other Expense, NetOther expense, net consists of the following (in thousands): Year ended June 30, 2019 2018 2017Foreign currency transaction loss, net$(121) $(92) $(182)Loss on settlement of forward contract(287) (175) (292)Loss on disposal of fixed assets— (6) (12)Write-off of intangible assets— — (350)Other income (expense), net147 (46) (133) Total other expense, net$(261) $(319) $(969)Note 11 — Income TaxesThe income tax expense for the fiscal years ended June 30, 2019, 2018 and 2017 consists of the following (in thousands): Year ended June 30, 2019 2018 2017Income Before Income Taxes: Domestic$6,596 $8,234 $1,642International2,634 1,315 1,268 $9,230 $9,549 $2,910Current Taxes: Federal$222 $2,413 $1,324State176 407 137Foreign833 150 510Total Current Income Tax Provision$1,231 $2,970 $1,971Deferred Taxes: Federal$502 $377 $(473)State109 59 (21)Foreign(41) 381 (175)Total Deferred Income Tax Provision$570 $817 $(669)Net Income Tax Provision$1,801 $3,787 $1,302F - 25 The effective income tax rate for the fiscal years ended June 30, 2019, 2018 and 2017 differs from the U.S. Federal statutory income tax rate due to thefollowing: Year ended June 30, 2019 2018 2017Federal statutory income tax rate21.0 % 28.0 % 34.0 %State income taxes, net of federal benefit3.1 % 2.5 % 5.9 %Foreign tax rate difference4.5 % 1.6 % (4.6)%Tax return to provision true-up(1.1)% (7.4)% 0.6 %Limit on future stock compensation due to 162(m)2.6 % 0.0 % 0.0 %Other differences(0.1)% 0.2 % (2.1)%Revalue of deferred for change in federal tax rate(0.6)% 14.9 % 0.0 %Permanent differences: — stock based compensation(7.7)% 0.7 % 4.6 %— foreign derived intangible income deduction(0.1)% 0.0 % 0.0 %— domestic production activities deduction0.0 % (1.5)% (3.3)%— tax credits(3.7)% (1.3)% (0.9)%— meals and entertainment0.7 % 0.9 % 3.4 %— penalties0.1 % 0.1 % 1.5 %— other1.6 % 0.9 % 4.3 %Change in valuation allowance(0.8)% 0.1 % 1.3 %Net income tax provision19.5 % 39.7 % 44.7 %The components of the deferred tax assets and liabilities as of June 30, 2019 and 2018 are as follows (in thousands): June 30, 2019 2018Deferred tax assets: Federal, state, and foreign net operating loss carryovers$448 $574Stock option compensation1,262 1,367Accrued vacation, allowance for returns, bonuses & other2,672 2,615Gross deferred tax asset$4,382 $4,556 Deferred tax liabilities: Patents and trademarks$(132) $(145)Property & equipment(1,194) (823)Other(104) (13)Gross deferred tax liabilities(1,430) (981)Less: valuation allowance(259) (320)Deferred tax assets, net$2,693 $3,255On December 22, 2017, the President of the United States signed into law an extensive tax reform bill known as the Tax Cuts and Jobs Act of 2017 (the"Tax Act"), which overhauled U.S. corporate income tax law by lowering the U.S. federal corporate income tax rate from 35% to 21% (blended rate in yearone for fiscal year filers), implementing a territorial tax system, imposing a one time "deemed repatriation" tax on all untaxed offshore earnings, andadding/modifying/deleting several major tax deductions significant to the company. For the fiscal year ending June 30, 2018, the Company was taxed at ablended Federal rate of 28%. For the fiscal year ended June 30, 2019, the Company will be taxed at the new 21% Federal Rate.In addition, the Tax Act also includes a provision to tax global intangible low-taxed income ("GILTI") of foreign subsidiaries and a base erosion anti-abuse tax ("BEAT") measure that taxes certain payments between a U.S. Corporation and its subsidiaries. For the fiscal year ended June 30, 2019, theCompany became subject to these provisions. The Company does not meet the threshold to be subject to BEAT, neither does it make the types of paymentssubject to BEAT. The Company does have an immaterial GILTI liability due to limitations on foreign tax credits.F - 26 The Tax Act also eliminated the Section 199 deduction and created the Foreign Derived Intangible Income Deduction ("FDII"). As opposed to theSection 199 deduction, which rewarded companies for domestic manufacturing activities, the FDII deduction rewards companies for foreign sales. In the past,the Company has significantly benefited from the Section 199 deduction, but does not currently derive as great a benefit from the FDII deduction due to ourbusiness activities.The Company has adopted accounting guidance for uncertain tax positions which provides that in order to recognize an uncertain tax benefit, thetaxpayer must be more likely than not of sustaining the position, and the measurement of the benefit is calculated as the largest amount that is more than 50%likely to be realized upon recognition of the benefit. The Company believes the Company has no material uncertain tax positions and do not expectsignificant changes in within the next twelve months in the amount of unrecognized tax benefits. Accordingly, the Company has not reserved for interest orpenalties. The tax years open for examination by the Internal Revenue Service (“IRS”) include returns for fiscal years June 30, 2016 through present and theopen tax years by state tax authorities include returns for fiscal years June 30, 2015 through present. In addition, the IRS and state tax authorities mayexamine NOL’s for any previous years if utilized by the Company.As of June 30, 2019, the Company had utilized all of its Federal net operating loss (“NOL”) carry-forwards. The net operating losses were to expire byJune 30, 2024 and are subject to review by the Internal Revenue Service, and are subject to U.S. Internal Revenue Code Section 382 limitations. As ofJune 30, 2019, state NOLs were $7.6 million and foreign NOLs were $0.6 million.The total recognized tax benefit from settlement of stock based awards for the period ending June 30, 2019 was $0.7 million.The Company conducts its business globally. As a result, the Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction andvarious state and foreign jurisdictions, and are subject to examination for the open tax years of June 30, 2015 through June 30, 2019.Note 12 — Commitments and ContingenciesOperating LeasesThe Company leases its facilities under non-cancelable operating leases, which expire at various dates through 2021. The facilities leases containrenewal options and are subject to cost increases. Future minimum annual payments under non-cancelable operating leases at June 30, 2019 are as follows (inthousands):Year ending June 30, Amount2020 $2,8722021 1,140Total future minimum lease payments $4,012Rent expense totaled $2.7 million, $2.7 million and $2.5 million for the fiscal years ended June 30, 2019, 2018 and 2017, respectively.ContingenciesThe Company accounts for contingent liabilities in accordance with Accounting Standards Codification ("ASC") Topic 450, Contingencies. Thisguidance requires management to assess potential contingent liabilities that may exist as of the date of the financial statements to determine the probabilityand amount of loss that may have occurred, which inherently involves an exercise of judgment. If the assessment of a contingency indicates that it isprobable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in theCompany’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or isprobable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material,would be disclosed. For loss contingencies considered remote, no accrual or disclosures are generally made. Management has assessed potential contingentliabilities as of June 30, 2019, and based on the assessment there are no probable loss contingencies requiring accrual or disclosures within its financialstatements.Legal AccrualsIn addition to commitments and obligations in the ordinary course of business, from time to time, the Company is subject to various claims, pendingand potential legal actions, investigations relating to governmental laws and regulations and other matters arising out of the Company's normal conduct ofbusiness. Management assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in the consolidatedfinancial statements. An estimated lossF - 27 contingency is accrued in the consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can bereasonably estimated. Because evaluating legal claims and litigation results are inherently unpredictable and unfavorable results could occur, assessingcontingencies is highly subjective and requires judgments about future events. When evaluating contingencies, management may be unable to provide ameaningful estimate due to a number of factors, including the procedural status of the matter in question, the presence of complex or novel legal theories,and/or the ongoing discovery and development of information important to the matters. In addition, damage amounts claimed or asserted against theCompany may be unsupported, exaggerated or unrelated to possible outcomes, and as such are not meaningful indicators of a potential liability.Management regularly reviews contingencies to determine the adequacy of financial statement accruals and related disclosures. The amount of ultimate lossmay differ from these estimates. It is possible that cash flows or results of operations could be materially affected in any particular period by the unfavorableresolution of one or more of these contingencies. Whether any losses finally determined in any claim, action, investigation or proceeding could reasonablyhave a material effect on the Company's business, financial condition, results of operations or cash flows will depend on a number of variables, including: thetiming and amount of such losses; the structure and type of any remedies; the significance of the impact any such losses, damages or remedies may have onthe consolidated financial statements; and the unique facts and circumstances of the particular matter that may give rise to additional factors.Class Action Lawsuit (Smith v. LifeVantage Corp.): On January 24, 2018, a purported class action was filed in the United States District Court for theDistrict of Connecticut, entitled Smith v. LifeVantage Corp., Case No. 3:18-cv-a35 (D. Connecticut filed Jan. 24, 2018). In this action, plaintiff alleged thatthe Company, its Chief Executive Officer, Chief Sales Officer and Chief Marketing Officer operated a pyramid scheme in violation of a variety of federal andstate statutes, including RICO and the Connecticut Unfair Trade Practices Act. On April 16, 2018, the Company filed motions with the court to dismiss thecomplaint against LifeVantage, dismiss the complaint against the Company's executives, transfer the venue of the case from the State of Connecticut to theState of Utah, and contest class certification. On July 23, 2018, the parties filed a stipulation with the Court agreeing to transfer the case to the Federal DistrictCourt for Utah. On September 20, 2018, Plaintiffs filed an amended complaint in Utah. As per the parties stipulated agreement, plaintiff's amended complaintdropped the RICO and Connecticut state law claims and removed the Company's Chief Sales Officer and Chief Marketing Officer as individual defendants(the Chief Executive Officer remains a defendant in the case). However, the amended complaint adds a new antitrust claim, alleging that the Companyfraudulently obtained patents for its products and is attempting to use those patents in an anti-competitive manner. LifeVantage filed a Motion to Dismiss theamended complaint on November 5, 2018, Plaintiffs filed a response to LifeVantage’s Motion to Dismiss on December 17, 2018, and LifeVantage filed areply brief on January 10, 2019. With the matter now being fully briefed, the Court can issue a ruling based on the briefs submitted by the parties or schedulea hearing for oral argument before entering a decision on the motion. The Company has not established a loss contingency accrual for this lawsuit as itbelieves liability is not probable or estimable, and the Company plans to vigorously defend against this lawsuit. Nonetheless, an unfavorable resolution ofthis matter could have a material adverse effect on the Company's business, results of operations or financial condition.Other Matters. In addition to the matters described above, the Company also may become involved in other litigation and regulatory mattersincidental to its business and the matters disclosed in this Annual Report on Form 10-K, including, but not limited to, product liability claims, regulatoryactions, employment matters and commercial disputes. The Company intends to defend itself in any such matters and does not currently believe that theoutcome of any such matters will have a material adverse effect on the Company's business, financial condition, results of operations and cash flows.Note 13 — Related Party TransactionsDuring the fiscal year ended June 30, 2018, the Company contracted with GEG for outsourced software application development services pursuant to anagreement entered into between the Company and GEG, which included a convertible note. For discussion related to the convertible note between theCompany and GEG, see Note 2. David Toole, who served as a member of the Company's board of directors until February 2, 2018, is a majority owner and anofficer of GEG. Additionally, two members of the Company's board of directors serve on the GEG board of directors.Note 14 — Interim Financial Results (Unaudited)The following summarizes selected quarterly financial information for quarterly periods during the fiscal years ended June 30, 2019 and 2018:LIFEVANTAGE CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED QUARTERLY RESULTSF - 28 (in thousands except per share data) Fiscal Quarter Year ended June30, 2019 First Second Third Fourth Revenue, net$55,609 $58,167 $56,012 $56,170 $225,958Gross profit46,410 48,373 46,742 46,460 187,985Net income$911 $829 $1,782 $3,907 $7,429Per common share: Income per share, basic$0.07 $0.06 $0.13 $0.27 $0.53Income per share, diluted$0.06 $0.06 $0.12 $0.26 $0.50 Fiscal Quarter Year ended June30, 2018 First Second Third Fourth Revenue, net$49,127 $49,482 $50,562 $54,033 $203,204Gross profit40,388 40,365 41,641 45,962 168,356Net income$817 $317 $1,635 $2,992 $5,761Per common share: Income per share, basic$0.06 $0.02 $0.12 $0.20 $0.41Income per share, diluted$0.06 $0.02 $0.12 $0.21 $0.41F - 29 Exhibit 21.1SUBSIDIARIES OF LIFEVANTAGE CORPORATIONSet forth below is a list of all subsidiaries of LifeVantage Corporation, a Delaware corporation, and the state or country of incorporation of each as of June 30,2019.Name State or Country of IncorporationLifeLine Nutraceuticals Corporation ColoradoDinng Creative, Inc. UtahLifeVantage Asia Pte. Ltd. SingaporeLifeVantage Australia Pty. Ltd. AustraliaLifeVantage Canada Ltd. CanadaLifeVantage Japan Kabushiki Kaisha (KK) JapanImportadora LifeVantage S. de R.L. de C.V. MexicoLifeVantage de Mexico S. de R.L. de C.V. MexicoLifeVantage Hong Kong Limited Hong KongLifeVantage Netherlands B.V. NetherlandsLifeVantage Singapore Pte. Ltd. SingaporeLifeVantage Taiwan Pte. Ltd. TaiwanLifeVantage Thailand Company Limited Thailand Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in this Registration Statement on Form S-8 (No. 333-200363) of LifeVantage Corporation and subsidiaries (the“Company”) of our report dated August 14, 2019 with respect to the consolidated balance sheets of the Company as of June 30, 2019 and 2018, and therelated consolidated statements of operations and comprehensive income, changes in stockholders' equity, and cash flows for the three-year period endedJune 30, 2019, which report appears in the Company's annual report on Form 10-K filed with the Securities and Exchange Commission on August 14, 2019,and the effectiveness of internal control over financial reporting as of June 30, 2019, which report appears in the June 30, 2019 annual report on Form 10-K ofthe Company.WSRP, LLCSalt Lake City, UtahAugust 14, 2019 EXHIBIT 31.1CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICERPURSUANT TO SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15(d)-14(a)AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Darren Jensen, certify that:1.I have reviewed this Annual Report on Form 10-K of LifeVantage Corporation;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.August 14, 2019/s/ Darren Jensen Darren Jensen President & Chief Executive Officer(Principal Executive Officer) EXHIBIT 31.2CERTIFICATION OF PRINCIPAL FINANCIAL OFFICERPURSUANT TO SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15(d)-14(a)AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Steven R. Fife, certify that:1.I have reviewed this Annual Report on Form 10-K of LifeVantage Corporation;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. August 14, 2019/s/ Steven R. Fife Steven R. FifeChief Financial Officer(Principal Financial Officer and PrincipalAccounting Officer) EXHIBIT 32.1CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTEDPURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the filing of this annual report on Form 10-K of LifeVantage Corporation (the “Company”) for the period ended June 30, 2019, withthe Securities and Exchange Commission on the date hereof (the “Report”), I, Darren Jensen, President and Chief Executive Officer of the Company, certify,pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.August 14, 2019/s/ Darren Jensen Darren JensenPresident & Chief Executive Officer(Principal Executive Officer) EXHIBIT 32.2CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTEDPURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the filing of this annual report on Form 10-K of LifeVantage Corporation (the “Company”) for the period ended June 30, 2019, withthe Securities and Exchange Commission on the date hereof (the “Report”), I, Steven R. Fife, Chief Financial Officer of the Company, certify, pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. August 14, 2019/s/ Steven R. Fife Steven R. FifeChief Financial Officer(Principal Financial Officer and PrincipalAccounting Officer)
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