2015 Annual Report
T O O U R S H A R E H O L D E R S
In 2015, Mannatech achieved its third consecutive
(cid:25)(cid:17)(cid:11)(cid:3)(cid:6) (cid:4)(cid:15)(cid:6) (cid:5)(cid:12)(cid:4)(cid:14)(cid:18)(cid:19)(cid:23)(cid:6) (cid:11)(cid:6) (cid:7)(cid:3)(cid:4)(cid:8)(cid:9)(cid:6) (cid:11)(cid:5)(cid:6) (cid:11)(cid:6) (cid:3)(cid:17)(cid:5)(cid:26)(cid:21)(cid:9)(cid:6) (cid:4)(cid:15)(cid:6) (cid:5)(cid:9)(cid:3)(cid:18)(cid:24)(cid:9)(cid:6)
operational oversight and very positive results from
(cid:4)(cid:26)(cid:3)(cid:6)(cid:18)(cid:19)(cid:9)(cid:17)(cid:3)(cid:19)(cid:11)(cid:9)(cid:18)(cid:4)(cid:19)(cid:11)(cid:21)(cid:6)(cid:16)(cid:11)(cid:3)(cid:22)(cid:17)(cid:9)(cid:5)(cid:27)(cid:6)(cid:28)(cid:11)(cid:5)(cid:9)(cid:6)(cid:25)(cid:17)(cid:11)(cid:3)(cid:6)(cid:14)(cid:17)(cid:6)(cid:24)(cid:4)(cid:19)(cid:9)(cid:18)(cid:19)(cid:26)(cid:17)(cid:29)(cid:6)(cid:9)(cid:4)(cid:6)
(cid:18)(cid:16)(cid:7)(cid:3)(cid:4)(cid:30)(cid:17)(cid:6)(cid:4)(cid:26)(cid:3)(cid:6)(cid:24)(cid:11)(cid:5)(cid:12)(cid:6)(cid:7)(cid:4)(cid:5)(cid:18)(cid:9)(cid:18)(cid:4)(cid:19)(cid:6)(cid:17)(cid:30)(cid:17)(cid:19)(cid:6)(cid:11)(cid:5)(cid:6)(cid:14)(cid:17)(cid:6)(cid:16)(cid:11)(cid:29)(cid:17)(cid:6)(cid:5)(cid:18)(cid:23)(cid:19)(cid:18)(cid:8)(cid:24)(cid:11)(cid:19)(cid:9)(cid:6)
investments in core elements of the company to help
generate revenue, transform and be more attractive
(cid:18)(cid:19)(cid:6)(cid:9)(cid:12)(cid:17)(cid:6)(cid:23)(cid:21)(cid:4)(cid:31)(cid:11)(cid:21)(cid:6)(cid:16)(cid:11)(cid:3)(cid:22)(cid:17)(cid:9)(cid:7)(cid:21)(cid:11)(cid:24)(cid:17)(cid:27)(cid:6)
Mannatech’s sales in U.S. dollars and income from
(cid:4)(cid:7)(cid:17)(cid:3)(cid:11)(cid:9)(cid:18)(cid:4)(cid:19)(cid:5)(cid:6) (cid:14)(cid:17)(cid:3)(cid:17)(cid:6) (cid:29)(cid:4)(cid:14)(cid:19)(cid:27)(cid:6) !(cid:11)(cid:19)(cid:19)(cid:11)(cid:9)(cid:17)(cid:24)(cid:12)"(cid:6) (cid:21)(cid:18)(cid:22)(cid:17)(cid:6) (cid:16)(cid:4)(cid:5)(cid:9)(cid:6)
#(cid:27)%(cid:27)&(cid:31)(cid:11)(cid:5)(cid:17)(cid:29)(cid:6) (cid:24)(cid:4)(cid:16)(cid:7)(cid:11)(cid:19)(cid:18)(cid:17)(cid:5)(cid:6) (cid:14)(cid:18)(cid:9)(cid:12)(cid:6) (cid:23)(cid:21)(cid:4)(cid:31)(cid:11)(cid:21)(cid:6) (cid:4)(cid:7)(cid:17)(cid:3)(cid:11)(cid:9)(cid:18)(cid:4)(cid:19)(cid:5)"(cid:6)
suffered from the strong dollar and the resulting
currency exchange.
Throughout 2015 and into 2016, the company
(cid:18)(cid:19)(cid:30)(cid:17)(cid:5)(cid:9)(cid:17)(cid:29)(cid:6) (cid:5)(cid:26)(cid:31)(cid:5)(cid:9)(cid:11)(cid:19)(cid:9)(cid:18)(cid:11)(cid:21)(cid:21)(cid:25)(cid:6)
(cid:18)(cid:19)(cid:6) (cid:19)(cid:17)(cid:14)(cid:6) (cid:24)(cid:4)(cid:19)(cid:5)(cid:26)(cid:16)(cid:17)(cid:3)&(cid:15)(cid:3)(cid:18)(cid:17)(cid:19)(cid:29)(cid:21)(cid:25)(cid:6)
(cid:7)(cid:3)(cid:4)(cid:29)(cid:26)(cid:24)(cid:9)(cid:6)(cid:21)(cid:18)(cid:19)(cid:17)(cid:5)"(cid:6)(cid:11)(cid:6)(cid:5)(cid:9)(cid:11)(cid:9)(cid:17)&(cid:4)(cid:15)&(cid:9)(cid:12)(cid:17)&(cid:11)(cid:3)(cid:9)(cid:6)(cid:31)(cid:11)(cid:24)(cid:22)(cid:6)(cid:4)(cid:15)(cid:8)(cid:24)(cid:17)(cid:6)(cid:9)(cid:17)(cid:24)(cid:12)(cid:19)(cid:4)(cid:21)(cid:4)(cid:23)(cid:25)(cid:6)
for its sales force and a rebrand that improves its
messaging, positioning and gives the company a
(cid:16)(cid:4)(cid:3)(cid:17)(cid:6) (cid:24)(cid:26)(cid:3)(cid:3)(cid:17)(cid:19)(cid:9)"(cid:6) (cid:23)(cid:21)(cid:4)(cid:31)(cid:11)(cid:21)(cid:6) (cid:21)(cid:4)(cid:4)(cid:22)(cid:6) (cid:11)(cid:21)(cid:21)(cid:6) (cid:14)(cid:12)(cid:18)(cid:21)(cid:17)(cid:6) (cid:24)(cid:4)(cid:19)(cid:9)(cid:18)(cid:19)(cid:26)(cid:18)(cid:19)(cid:23)(cid:6) (cid:18)(cid:9)(cid:5)(cid:6)
international expansion plans.
These initiatives enable Mannatech’s independent
(cid:5)(cid:11)(cid:21)(cid:17)(cid:5)(cid:6) ’(cid:5)(cid:5)(cid:4)(cid:24)(cid:18)(cid:11)(cid:9)(cid:17)(cid:5)(cid:6) (cid:11)(cid:19)(cid:29)(cid:6) !(cid:17)(cid:16)(cid:31)(cid:17)(cid:3)(cid:5)(cid:6) (cid:9)(cid:4)(cid:6) (cid:24)(cid:4)(cid:19)(cid:8)(cid:29)(cid:17)(cid:19)(cid:9)(cid:21)(cid:25)(cid:6)
(cid:4)(cid:7)(cid:17)(cid:3)(cid:11)(cid:9)(cid:17)(cid:6)(cid:9)(cid:12)(cid:17)(cid:18)(cid:3)(cid:6)(cid:31)(cid:26)(cid:5)(cid:18)(cid:19)(cid:17)(cid:5)(cid:5)(cid:17)(cid:5)(cid:6)(cid:23)(cid:21)(cid:4)(cid:31)(cid:11)(cid:21)(cid:21)(cid:25)"(cid:6)(cid:17)(cid:16)(cid:7)(cid:4)(cid:14)(cid:17)(cid:3)(cid:6)(cid:9)(cid:12)(cid:17)(cid:18)(cid:3)(cid:6)
(cid:17)(cid:19)(cid:9)(cid:3)(cid:17)(cid:7)(cid:3)(cid:17)(cid:19)(cid:17)(cid:26)(cid:3)(cid:18)(cid:11)(cid:21)(cid:6)(cid:5)(cid:7)(cid:18)(cid:3)(cid:18)(cid:9)(cid:6)(cid:11)(cid:19)(cid:29)(cid:6)(cid:23)(cid:18)(cid:30)(cid:17)(cid:6)(cid:9)(cid:12)(cid:17)(cid:16)(cid:6)(cid:24)(cid:4)(cid:19)(cid:8)(cid:29)(cid:17)(cid:19)(cid:24)(cid:17)(cid:6)(cid:18)(cid:19)(cid:6)(cid:6)
Mannatech’s 23 years of expertise and products,
(cid:14)(cid:12)(cid:18)(cid:24)(cid:12)(cid:6) (cid:5)(cid:17)(cid:9)(cid:6) (cid:9)(cid:12)(cid:17)(cid:6)
(cid:18)(cid:19)(cid:29)(cid:26)(cid:5)(cid:9)(cid:3)(cid:25)(cid:6) (cid:5)(cid:9)(cid:11)(cid:19)(cid:29)(cid:11)(cid:3)(cid:29)(cid:6) (cid:15)(cid:4)(cid:3)(cid:6) *(cid:26)(cid:11)(cid:21)(cid:18)(cid:9)(cid:25)(cid:6)
and research both in Glyconutrition and in the
direct-selling industry.
+(cid:26)(cid:3)(cid:18)(cid:19)(cid:23)(cid:6)/:;<"(cid:6)(cid:14)(cid:17)(cid:6)(cid:5)(cid:9)(cid:3)(cid:17)(cid:19)(cid:23)(cid:9)(cid:12)(cid:17)(cid:19)(cid:17)(cid:29)(cid:6)(cid:4)(cid:26)(cid:3)(cid:6)=(cid:4)(cid:11)(cid:3)(cid:29)(cid:6)(cid:4)(cid:15)(cid:6)+(cid:18)(cid:3)(cid:17)(cid:24)(cid:9)(cid:4)(cid:3)(cid:5)(cid:6)
(cid:14)(cid:18)(cid:9)(cid:12)(cid:6) (cid:9)(cid:12)(cid:17)(cid:6) (cid:11)(cid:29)(cid:29)(cid:18)(cid:9)(cid:18)(cid:4)(cid:19)(cid:6) (cid:4)(cid:15)(cid:6) +(cid:3)(cid:27)(cid:6) (cid:28)(cid:18)(cid:19)(cid:29)(cid:11)(cid:6) >(cid:17)(cid:3)(cid:3)(cid:17)(cid:21)(cid:21)"(cid:6) (cid:11)(cid:6) (cid:3)(cid:17)(cid:19)(cid:4)(cid:14)(cid:19)(cid:17)(cid:29)(cid:6)
professor of Leadership and Business Ethics at
Belmont University. We also increased Robert Toth’s
involvement as Vice Chairman of the Board and
(cid:5)(cid:9)(cid:3)(cid:17)(cid:19)(cid:23)(cid:9)(cid:12)(cid:17)(cid:19)(cid:17)(cid:29)(cid:6)(cid:9)(cid:12)(cid:17)(cid:6)(cid:24)(cid:4)(cid:16)(cid:7)(cid:11)(cid:19)(cid:25)(cid:6)(cid:14)(cid:18)(cid:9)(cid:12)(cid:6)(cid:9)(cid:12)(cid:17)(cid:6)(cid:11)(cid:7)(cid:7)(cid:4)(cid:18)(cid:19)(cid:9)(cid:16)(cid:17)(cid:19)(cid:9)(cid:6)(cid:6)(cid:4)(cid:15)(cid:6)
Mannatech’s President, Al Bala, to CEO.
Lastly, in 2015 the M5MSM(cid:6) >(cid:4)(cid:26)(cid:19)(cid:29)(cid:11)(cid:9)(cid:18)(cid:4)(cid:19)(cid:6) (cid:29)(cid:4)(cid:19)(cid:11)(cid:9)(cid:17)(cid:29)(cid:6) ;?(cid:6)
(cid:16)(cid:18)(cid:21)(cid:21)(cid:18)(cid:4)(cid:19)(cid:6)(cid:5)(cid:17)(cid:3)(cid:30)(cid:18)(cid:19)(cid:23)(cid:5)(cid:6)(cid:4)(cid:15)(cid:6)(cid:19)(cid:26)(cid:9)(cid:3)(cid:18)(cid:9)(cid:18)(cid:4)(cid:19)(cid:11)(cid:21)(cid:6)@(cid:12)(cid:25)(cid:9)(cid:4)=(cid:21)(cid:17)(cid:19)(cid:29)F(cid:6)(cid:7)(cid:4)(cid:14)(cid:29)(cid:17)(cid:3)(cid:6)(cid:9)(cid:4)(cid:6)
(cid:24)(cid:12)(cid:18)(cid:21)(cid:29)(cid:3)(cid:17)(cid:19)(cid:6)(cid:11)(cid:3)(cid:4)(cid:26)(cid:19)(cid:29)(cid:6)(cid:9)(cid:12)(cid:17)(cid:6)(cid:14)(cid:4)(cid:3)(cid:21)(cid:29)J(cid:14)(cid:12)(cid:4)(cid:6)(cid:15)(cid:11)(cid:24)(cid:17)(cid:6)(cid:29)(cid:11)(cid:18)(cid:21)(cid:25)(cid:6)(cid:19)(cid:26)(cid:9)(cid:3)(cid:18)(cid:9)(cid:18)(cid:4)(cid:19)(cid:11)(cid:21)(cid:6)
(cid:24)(cid:12)(cid:11)(cid:21)(cid:21)(cid:17)(cid:19)(cid:23)(cid:17)(cid:5)J(cid:9)(cid:12)(cid:3)(cid:4)(cid:26)(cid:23)(cid:12)(cid:6)(cid:18)(cid:9)(cid:5)(cid:6)(cid:7)(cid:11)(cid:3)(cid:9)(cid:19)(cid:17)(cid:3)(cid:5)(cid:12)(cid:18)(cid:7)(cid:6)(cid:14)(cid:18)(cid:9)(cid:12)(cid:6)!(cid:11)(cid:19)(cid:19)(cid:11)(cid:9)(cid:17)(cid:24)(cid:12)(cid:27)
K(cid:17)(cid:6) (cid:9)(cid:12)(cid:11)(cid:19)(cid:22)(cid:6) (cid:25)(cid:4)(cid:26)(cid:6) (cid:15)(cid:4)(cid:3)(cid:6) (cid:25)(cid:4)(cid:26)(cid:3)(cid:6) (cid:24)(cid:4)(cid:19)(cid:9)(cid:18)(cid:19)(cid:26)(cid:17)(cid:29)(cid:6) (cid:5)(cid:26)(cid:7)(cid:7)(cid:4)(cid:3)(cid:9)(cid:6) (cid:4)(cid:15)(cid:6)
!(cid:11)(cid:19)(cid:19)(cid:11)(cid:9)(cid:17)(cid:24)(cid:12)"(cid:6)(cid:11)(cid:19)(cid:29)(cid:6)(cid:14)(cid:17)(cid:6)(cid:14)(cid:18)(cid:21)(cid:21)(cid:6)(cid:24)(cid:4)(cid:19)(cid:9)(cid:18)(cid:19)(cid:26)(cid:17)(cid:6)(cid:4)(cid:26)(cid:3)(cid:6)(cid:24)(cid:4)(cid:16)(cid:16)(cid:18)(cid:9)(cid:16)(cid:17)(cid:19)(cid:9)(cid:6)(cid:9)(cid:4)(cid:6)
(cid:9)(cid:3)(cid:11)(cid:19)(cid:5)(cid:15)(cid:4)(cid:3)(cid:16)(cid:18)(cid:19)(cid:23)(cid:6)(cid:9)(cid:12)(cid:17)(cid:6)(cid:21)(cid:18)(cid:30)(cid:17)(cid:5)(cid:6)(cid:4)(cid:15)(cid:6)(cid:16)(cid:11)(cid:19)(cid:25)(cid:6)(cid:11)(cid:3)(cid:4)(cid:26)(cid:19)(cid:29)(cid:6)(cid:9)(cid:12)(cid:17)(cid:6)(cid:14)(cid:4)(cid:3)(cid:21)(cid:29)(cid:27)
For the year ended December 31
(in millions, except per share information and ratios)
Results of Operations
Net sales
(cid:2)(cid:3)(cid:4)(cid:5)(cid:5)(cid:6)(cid:7)(cid:3)(cid:4)(cid:8)(cid:9)
2015
$180
$146
Income before income taxes
$8.2
Income
$5.8
2014
$190
$152
$9.8
$6.5
Earnings per Share
Basic
Diluted
$2.18
$2.14
$2.44
$2.40
Statistics
Current ratio
Weighted-average shares
outstanding (in thousands)
Basic
Diluted
2,680
2,728
2,663
2,706
Inventory turnover ratio
Debt-to-equity ratio
Dividends paid per share
J. Stanley Fredrick
Chairman of the Board
Alfredo Bala
CEO and President
Financial Condition
2015
2014
Total cash
(cid:20)(cid:4)(cid:9)(cid:11)(cid:21)(cid:6)(cid:14)(cid:4)(cid:3)(cid:22)(cid:18)(cid:19)(cid:23)(cid:6)(cid:24)(cid:11)(cid:7)(cid:18)(cid:9)(cid:11)(cid:21)
Total assets
Total shareholders’ equity
(cid:10)(cid:11)(cid:5)(cid:12)(cid:6)(cid:13)(cid:4)(cid:14)(cid:5)(cid:6)(cid:15)(cid:3)(cid:4)(cid:16)(cid:6)(cid:4)(cid:7)(cid:17)(cid:3)(cid:11)(cid:9)(cid:18)(cid:4)(cid:19)(cid:5)
$32
$24
$69
$39
$4
1.9
3.4
0.78
—
$28
$16
$67
$31
$9
1.5
3.1
1.15
—
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[ ]
For the fiscal year ended December 31, 2015
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________to ________
Commission File No. 000-24657
MANNATECH, INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
Texas
(State or other Jurisdiction of Incorporation or Organization)
75-2508900
(I.R.S. Employer Identification No.)
600 S. Royal Lane, Suite 200, Coppell, Texas
(Address of Principal Executive Offices)
75019
(Zip Code)
Registrant’s Telephone Number, including Area Code: (972) 471-7400
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, par value $0.0001 per share
The Nasdaq Stock Market LLC
Securities 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 [X]
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [ ] No [X]
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during 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 filing requirements for the past 90 days.
Yes [X] No [(cid:2)]
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was
required to submit and post such files). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this Chapter) is not contained herein, and will not be
contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ]
Accelerated filer [ ]
Non-accelerated filer [ ]
Smaller reporting company [X]
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
At June 30, 2014, the aggregate market value of the common stock held by non-affiliates of the Registrant was $38,898,522 based on the closing sale
price of $18.00, as reported on the NASDAQ Global Select Market.
The number of shares of the Registrant’s common stock outstanding as of February 29, 2016 was 2,696,986 shares.
Documents Incorporated by Reference
Mannatech, Incorporated incorporates information required by Part III (Items 10, 11, 12, 13, and 14) of this report by reference to its
definitive proxy statement for its 2015 annual shareholders’ meeting to be filed pursuant to Regulation 14A no later than 120 days after the end of its
fiscal year.
TABLE OF CONTENTS
Special Note Regarding Forward-Looking Statements
Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
Item 10
Item 11
Item 12
Item 13
Item 14
Item 15
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Part I
Part II
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Part III
Directors, Executive Officers, and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedule
Signatures
Part IV
Page
1
2
21
32
32
33
33
34
34
35
49
50
50
50
52
52
52
52
52
52
52
53
Special Note Regarding Forward-Looking Statements
Certain disclosures and analysis in this Form 10-K, including information incorporated by reference, may include
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”),
Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation
Reform Act of 1995 that are subject to various risks and uncertainties. Opinions, forecasts, projections, guidance, or other
statements other than statements of historical fact are considered forward-looking statements and reflect only current views about
future events and financial performance. Some of these forward-looking statements include statements regarding:
(cid:2) management’s plans and objectives for future operations;
(cid:2)
(cid:2)
existing cash flows being adequate to fund future operational needs;
future plans related to budgets, future capital requirements, market share growth, and anticipated capital projects and
obligations;
the realization of net deferred tax assets;
the ability to curtail operating expenditures;
global statutory tax rates remaining unchanged;
the impact of future market changes due to exposure to foreign currency translations;
the possibility of certain policies, procedures, and internal processes minimizing exposure to market risk;
the impact of new accounting pronouncements on financial condition, results of operations, or cash flows;
the outcome of new or existing litigation matters;
the outcome of new or existing regulatory inquiries or investigations; and
other assumptions described in this report underlying such forward-looking statements.
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
Although we believe that the expectations included in these forward-looking statements are reasonable, these forward-
looking statements are subject to certain events, risks, assumptions, and uncertainties, including those discussed below and in the
“Risk Factors” section in Item 1A of this Form 10-K, and elsewhere in this Form 10-K and the documents incorporated by
reference herein. If one or more of these risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect,
actual results and developments could materially differ from those expressed in or implied by such forward-looking statements. For
example, any of the following factors could cause actual results to vary materially from our projections:
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overall growth or lack of growth in the nutritional supplements industry;
plans for expected future product development;
changes in manufacturing costs;
shifts in the mix of packs and products;
the future impact of any changes to global associate career and compensation plans or incentives;
the ability to attract and retain independent associates and members;
new regulatory changes that may affect operations or products;
the competitive nature of our business with respect to products and pricing;
publicity related to our products or network marketing; and
the political, social, and economic climate.
Forward-looking statements generally can be identified by use of phrases or terminology such as “may,” “will,” “should,”
“could,” “would,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “approximates,” “predicts,” “projects,”
“potential,” and “continues” or other similar words or the negative of such terms and other comparable terminology. Similarly,
descriptions of Mannatech’s objectives, strategies, plans, goals, or targets contained herein are also considered forward-looking
statements. Readers are cautioned when considering these forward-looking statements to keep in mind these risks, assumptions, and
uncertainties and any other cautionary statements in this report, as all of the forward-looking statements contained herein speak
only as of the date of this report.
Unless stated otherwise, all financial information throughout this report and in the Consolidated Financial Statements and
related Notes include Mannatech, Incorporated and all of its subsidiaries on a consolidated basis and may be referred to herein as
“Mannatech,” “the Company,” “its,” “we,” “our,” or “their.”
Our products are not intended to diagnose, cure, treat, or prevent any disease and any statements about our products
contained in this report have not been evaluated by the Food and Drug Administration, also referred to herein as the “FDA”.
1
Item 1. Business
Overview
PART I
Mannatech is a global wellness solution provider, which was incorporated and began operations in November 1993.
We develop and sell innovative, high quality, proprietary nutritional supplements, topical and skin care and anti-aging
products, and weight-management products that target optimal health and wellness. We currently sell our products in three
regions: (i) North America/South America (the United States, Canada, Colombia and Mexico); (ii) Europe/the Middle
East/Africa (“EMEA”) (Austria, the Czech Republic, Denmark, Estonia, Finland, Germany, the Republic of Ireland,
Namibia, the Netherlands, Norway, South Africa, Spain, Sweden and the United Kingdom); and (iii) Asia/Pacific (Australia,
Japan, New Zealand, the Republic of Korea, Singapore, Taiwan and Hong Kong). We conduct our business as a single
operating segment and primarily sell our products and packs through a network of independent associates and members who
occupy positions in our network. As of December 31, 2015, we had approximately 219,000 active independent associate and
member positions held by individuals in our network associated with the purchase of our products and packs within the last
12 months.
We sell our products through network marketing, which we believe is the most cost-effective way to quickly and
effectively introduce our products and communicate information about our business to the global marketplace. Network
marketing minimizes upfront costs, as compared to conventional marketing methods, and allows us to be more responsive to
the ever-changing overall market conditions, as well as continue to research and develop high quality products and focus on
controlled successful international expansion. We believe the network marketing channel also allows us to effectively
communicate the potential benefits and unique properties of our proprietary products to our consumers. In addition, network
marketing provides our business-building independent associates with an avenue to supplement their income and develop
financial freedom by building their own business centered on our business philosophies and unique products.
Our common stock is currently traded on the NASDAQ Global Select Market (“Nasdaq”) under the symbol
“MTEX”. Information for each of our two most recent fiscal years, with respect to our net sales, results of operations, and
identifiable assets is set forth in the Consolidated Financial Statements of this report.
Available Information
On our website (https://www.mannatech.com), we make available free of charge our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and certain other information filed or furnished with the
Securities and Exchange Commission (the “SEC”) as soon as reasonably practicable after electronically filing or furnishing
such material. The SEC maintains a website that contains reports, proxy and information statements, and other information
regarding issuers, including Mannatech, that electronically file with the SEC at http://www.sec.gov. Additionally, such
materials are available in print upon the written request of any shareholder to our principle executive office located at 600 S.
Royal Lane, Suite 200, Coppell, Texas 75019, Attention: Investor Relations, or by contacting our investor relations
department at (972) 471-6512 or IR@mannatech.com.
Business Segment, Products and Product Development
Business Segment. We conduct our business as a single operating segment – primarily through sales of nutritional
supplements, skin care and anti-aging products, and weight management and fitness products through network marketing
distribution channels in 25 countries. For more information with respect to the financial results and conditions of our
business segment, including financial information about geographic areas, see Note 16 to our Consolidated Financial
Statements, Segment Information.
Products. Scientists have discovered that a healthy body consists of many sophisticated components working in
harmony to achieve optimal health and wellness and requires cellular communication to function at an optimal level.
Scientists also discovered that there are more than 200 monosaccharides that form naturally. Specific monosaccharides are
considered vital components for cellular communication in the human body. Furthermore, scientists discovered that these
monosaccharides attach themselves to certain proteins, which then form a molecule called glycoprotein. Harper’s
Biochemistry, a leading and nationally recognized biochemistry reference, has recognized that these molecules are found in
human glycoproteins, and are believed to be essential in helping to promote and provide effective cell-to-cell communication
in the human body.
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The history of our proprietary ingredients and products is as follows:
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In 1994, we developed and began selling our first products containing Manapol® powder, an ingredient
formulated to support cell-to-cell communication.
In 1996, we enhanced our products based on the study of glycoproteins and our scientists developed our own
proprietary compound, Ambrotose® complex, which we patented. Our Ambrotose® complex is a blend of
polysaccharides (composed of monosaccharides) that helps provide support for the immune system.
In 2001, we broadened our proprietary ingredients by developing the Ambroglycin® blend, a balanced food-
mineral matrix which helps deliver nutrients to the body and which is used in our proprietary Catalyst™ and
Glycentials® vitamin/mineral supplements.
In 2004, we introduced our proprietary blend of antioxidant nutrients, MTech AO Blend® ingredient, which is
used in our proprietary antioxidant Ambrotose AO® product.
In 2006, we introduced a unique blend of plant-based minerals, natural vitamins, and standardized
phytochemicals for use in our proprietary PhytoMatrix® product. We also introduced a compound used in
reformulated Advanced Ambrotose® complex. This compound allows a more potent concentration of the full
range of mannose-containing polysaccharides occurring naturally in aloe to be produced in a stable powdered
form.
In 2007, we introduced into the United States market our skin care and anti-aging line of products that supports
skin’s natural texture, beauty, and elasticity. We also launched our PhytoMatrix® caplets, Advanced
Ambrotose® capsules and Manna•Bears™ supplement into international markets.
In 2008, we introduced a proprietary proteolytic enzyme and phytosterol dietary supplement that supports the
body’s natural recovery processes associated with physical activity in our BounceBack® capsules. We also
introduced a proprietary version of whey protein peptide technology that assists targeted fat loss when
combined with exercise and a healthy diet in our OsoLean™ powder.
In 2009, we introduced our Omega-3, which features EPA/DHA essential acids, PhytoBurst™ Nutritional
Chews formulated with vitamins, minerals, and phytonutrients from food-sourced ingredients, and GI-
ProBalance™ Slimstick, which is a synbiotic digestive product containing probiotics, prebiotics, and digestive
enzymes. In addition, we improved our Ambrotose® products to include beta-Carotene.
In 2010, we launched our Mannatech LIFT™ Skin Care System, which is paraben-free and formulated to give
skin a more natural youthful appearance.
In 2011, we introduced our reformulated version of our Omega-3 supplement, which now includes Vitamin D3
and features EPA/DHA essential acids. We expanded several previously launched products from our domestic
line to our international markets.
In 2012, we launched our NutriVerus™ powder, a single product that features all of our core scientific
technologies at a very affordable price. This unique, ground-breaking product combines our core glyconutrient
technologies with vitamins, minerals, antioxidants and stabilized rice bran, all based on Real Food Technology
solutions.
In 2013, we launched (cid:2)th™ skin cream, a breakthrough in anti-aging that incorporates Mannatech’s
glyconutrient technology along with a microsphere delivery system that supports more thorough delivery of the
active ingredients to all levels of the skin.
In 2014, we launched GlycoBOOM™ Advanced Immune Support Supplement, packed with nutrients that are
designed to support the body’s natural defenses.
In 2015, Mannatech introduced a new brain supplement, Cognitate™, featuring a proprietary blend of natural
ingredients to aid memory, recall and cognition.
Mannatech offers products based on Real Food Technology solutions, an approach that offers standardized amounts
of nutrients sourced from real foods and plants. We focus on producing products that are from all-natural sources. There are
three major categories of our products:
Health, which offers a variety of nutritional supplements that aid in optimizing overall health and wellness. This
category includes a variety of daily nutritional supplements, health solutions for children, and additional
nutrients designed to help keep specific body systems at optimal levels.
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Weight and Fitness, which offers products designed to curb appetite and burn fat, build lean muscle tissue, and
support recovery from overexertion.
Skin Care and Anti-Aging, which offers several products formulated with more than 30 botanical ingredients that
are designed to give the skin a more natural, youthful appearance by moisturizing, hydrating and reducing the
appearance of fine lines and wrinkles. In addition, we added our (cid:2)th™ skin rejuvenation crème to our skin care
and anti-aging line.
The following table summarizes our products by category:
Product Category
Representative Products
Health
Weight and Fitness
Skin Care and Anti-Aging
Manna-C™,
Packets, GI
Ambrotose®
complex, Ambrotose AO®, Advanced
Ambrotose®, PhytoMatrix®, Manna•Bears™, Catalyst™,
CardioBALANCE®,
PLUS™,
ImmunoSTART®, BounceBack®, MannaCLEANSE™,
PhytAloe®, GI-Zyme®, Omega-3 with Vitamin D3,
PhytoBurst™ Nutritional Chews, NutriVerus™, Optimal
Support
Slimstick,
GlycoBOOMTM Slimsticks, Manapol® powder, and
Cognitate™.
OsoLean™, GlycoSlim®, AmbroStart®, SPORT™, and
EM·PACT®.
Emprizone®, FIRM with Ambrotose®, LIFT™ Multiphase
Serum, LIFT™ Night Repair Crème, LIFT™ Body Lotion,
(cid:2)th™ Cleanser, (cid:2)th™ Skin Rejuvenation Crème, (cid:2)th™
Moisturizer, FreshDen™, Gel Mask, and Organt.
Pro Balance™
A significant portion of our revenue is derived from NutriVerus™, PLUS™, (cid:2)th™ Skin Rejuvenation, and our core
Ambrotose® complex products which include the Ambrotose® products and Advanced Ambrotose® products. Product
revenue from these products were as follows for the years ended December 31, 2015 and 2014 (in thousands, except
percentages):
Advanced Ambrotose®
Ambrotose®
NutriVerus™
PLUS™
(cid:2)th™ Skin Rejuvenation
Total
2015
2014
Sales by
product
% of total
net sales
Sales by
product
% of total
net sales
$
59,026
32.7 % $
9,686
8,541
8,239
5,394
$
90,886
5.4 %
4.7 %
4.6 %
3.0 %
50.4 % $
63,791
10,895
10,530
8,923
13,431
107,571
33.6 %
5.7 %
5.5 %
4.7 %
7.1 %
56.6 %
Product Development. Our product committee continues to focus on potential new products and compounds that
help target or promote overall health and wellness. When considering new products and compounds, our product committee
considers the following criteria:
(cid:2) marketability and proprietary nature of the product;
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demand for the product;
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competitors’ products;
regulatory considerations;
availability of ingredients; and
data supporting claims of efficacy and safety.
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To maintain a flexible operating strategy and the ability to increase production capacity, we contract with third-
parties to manufacture all of our products, which allows us to effectively respond to fluctuations in demand with minimal
investment and helps control our operating costs. We believe our suppliers and manufacturers are capable of meeting our
current and projected inventory requirements over the next several years. However, as a safety measure, we continue to
identify and approve alternative suppliers and manufacturers to ensure that our global demands are met in a timely manner
and to help minimize any risk of business interruption.
Industry Overview
Nutrition Industry
We operate in the nutritional supplement industry and distribute and sell our products through our own global
network marketing channel. The nutritional supplement industry is fast-paced, highly fragmented, and intensely competitive.
It includes companies that manufacture and distribute products that are intended to enhance the body’s performance and
well-being. Nutritional supplements include vitamins, minerals, dietary supplements, herbs, botanicals, and compounds
derived therefrom. Prior to 1990, all dietary supplements in the United States were tightly regulated by the FDA and only
included essential nutrients such as vitamins, minerals, and proteins. In 1990, the Nutrition Labeling and Education Act
expanded the category to include “herbs or similar nutritional substances”, but the FDA maintained control over pre-market
approval. However, in 1994, the Dietary Supplement Health and Education Act of 1994 (“DSHEA”) was passed in the
United States, drastically changing the dietary supplement marketplace. The DSHEA was instrumental in expanding the
category of dietary supplements to further include herbal and botanical supplements and ingredients such as ginseng, fish
oils, enzymes, and various mixtures of these ingredients. Under DSHEA, vendors of dietary supplements are now able to
educate consumers regarding the effects of certain component ingredients.
Nutritional supplements are available through mass-market retailers, drug stores, supermarkets, discount stores,
health food stores, mail order companies, and direct sales organizations. Direct selling, of which network marketing is a
significant segment, has grown significantly and has been enhanced in the past decade as a distribution channel due to
advancements in technology and communications resulting in improved product distribution and faster dissemination of
information.
Direct Selling/Network Marketing Channel
Since the 1990s, the direct selling and network marketing sales channel has grown in popularity and general
acceptance, including acceptance by prominent investors and capital investment groups who have invested in direct selling
companies. This has provided direct selling companies with additional recognition and credibility in the growing global
marketplace. In addition, many large corporations have diversified their marketing strategy by entering the direct selling
arena. Several consumer-product companies have launched their own direct selling businesses with international operations
often accounting for the majority of their revenues. Consumers and investors are beginning to realize that direct selling
provides unique opportunities and a competitive advantage in today’s markets. Businesses are able to quickly communicate
and develop strong relationships with their customers, bypass expensive ad campaigns, and introduce products and services
that would otherwise be difficult to promote through traditional distribution channels such as retail stores. Direct selling is a
channel of distribution with healthy cash flow, high return on invested capital, and long-term prospects for global expansion.
According to the worldwide direct sales data published by the World Federation of Direct Selling Association, in 2014
approximately 99 million global direct sellers collectively generated annual retail sales of $182.8 billion.
Operating Strengths
1. High-Quality, Innovative, Proprietary Products. We base our product concept on the scientific belief that certain
glyconutrients, also known as monosaccharides, are essential for maintaining a healthy immune system. We believe
the addition of effective nutritional supplements to a well-balanced diet, coupled with an effective exercise program,
will enhance and help maintain optimal health and wellness. We focus on producing products that are from all-
natural sources with no synthetic or chemically derived additives. We formulate our products with predominately
naturally-occurring, plant-derived, carbohydrate-based, safe ingredients that are designed to use nutrients working
through normal physiology to help achieve and maintain optimal health and wellness, rather than developing
common synthetic, carbohydrate-based products.
We believe that our patented blends and formulas distinguish us as a leader in the global nutritional
supplements industry. We also believe the use of unique compounds found in our products allows us to effectively
differentiate and distinguish our products from those of our competitors.
5
2. Research and Development Efforts. We are steadfast in our commitment to quality-driven research and
development. We use systematic processes for the research and development of our unique proprietary product
formulas, as well as the identification of quality suppliers and manufacturers. Our research and quality assurance
programs are outlined on our corporate websites www.mannatechscience.org, www.mannatech.com, and
www.allaboutmannatech.com.
Mannatech’s team of experienced researchers and scientists continually reviews the latest published
research data, attends scientific conferences, and draws upon its vast knowledge and expertise to develop new
products and support existing ones. In addition, this team works in collaboration with other research firms,
universities, institutes, and scientists. Our products have been the focus of numerous pre-clinical and clinical
studies.
To support our research and development efforts, we have strategic alliances with our suppliers,
consultants, and manufacturers that allow us to effectively identify and develop high-quality, innovative, proprietary
products that increase our competitive advantage in the marketplace.
These efforts include developing and maintaining quality standards, supporting development efforts for
new ingredients and compounds, and improving or enhancing existing products or ingredients. In addition, our
research and development team identifies other quality-driven suppliers and manufacturers for both our global and
regional needs.
Research and development costs – relating to new product development, enhancement of existing products,
clinical studies and trials, FDA compliance studies, general supplies, internal salaries, third-party contractors, and
consulting fees – were approximately $1.7 million for the year ended December 31, 2015 and $1.6 million for the
year ended December 31, 2014.
3. Quality Assurance Program. Mannatech uses only qualified manufacturing contractors to produce, test, and
package our finished products. These contractors must be compliant and current with required certifications and
they must strictly adhere to our own quality standards for all markets. Certifications and guidelines that our contract
manufacturers are required to carry and/or follow include:
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the FDA’s current Good Manufacturing Practices for manufacturing, packaging, labeling, and holding
of dietary supplements;
the FDA’s Good Manufacturing Practices for human food;
the requirements of the Natural Health Products Directorate of Canada;
the Korean Food and Drug Administration;
certification by the Therapeutic Goods Administration of Australia, when necessary;
the European Union’s Food Supplement Directive and Nutrition and Health Claims Regulations, as
well as individual member state legislation;
the Taiwan Food and Drug Administration;
the Japan Ministry of Health Labor and Welfare;
the Singapore Health Sciences Authority;
the South African Department of Health and Medicines Control Council; and
the Hong Kong Food and Environmental Hygiene Department and Department of Health Drug Office.
We have an established quality assurance program designed to ensure our manufacturers’ compliance with
these certifications and guidelines, and to ensure that proper controls are maintained during the manufacturing,
evaluation, packaging, storage, and distribution of our products. These controls include a comprehensive supplier
audit and surveillance program, third-party certifications, and continuous product monitoring.
A team of professionals, many of whom have extensive experience in the pharmaceutical industry, leads
our in-house quality assurance program and continually monitors the quality of our products, including the
production process. In addition, they work with suppliers and manufacturers to develop quality standards for raw
6
material components and products, and perform tests and inspections to ensure that finished products are safe and of
high quality prior to release.
We require our dietary supplements to be packaged with seals to help minimize the risk of tampering. We
also perform stability studies under both controlled ambient and accelerated temperature storage conditions to
ensure label claims throughout the shelf life of our products.
To further ensure product quality, we seek qualified independent organizations to conduct further product
testing. To date, numerous products have been tested, and:
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ten products are certified according to the NSF/ANSI 173 Dietary Supplement Standard—the only
American National Standard for dietary supplements. This certification ensures that this product
contains only the ingredients indicated on the label and is free of impurities, and that Good
Manufacturing Practices were used in the manufacturing facility; and
twenty-six products have been tested and confirmed to be gluten-free by Covance Laboratories.
4. Global Scientific Advisory Board. A charter for an advisory board has been established and will be filled by a
combination of independent scientists and doctors from multiple disciplines, along with two members of Mannatech
staff. Members of the Global Scientific Advisory Board (GSAB) will review each new and reformulated product to
ensure ingredients and products are up to Mannatech’s high standards and are in line with the latest, viable research.
GSAB may also make ingredient and product suggestions for new products.
5. High-Caliber, Industry-Leading Independent Associates. Our global team of independent associates is comprised
of dedicated, hard-working, high-caliber individuals, many of whom have been associated with the network
marketing industry for decades and have been loyal to us since our beginning in 1993. To capitalize on their wealth
of knowledge and experience, we sponsor a panel of independent associates, called the “North American Associate
Advisory Council” (the “Advisory Council”), which helps identify and effectively relay the needs of our
independent business-building associates to us. The members of the Advisory Council are elected by their peers and
serve a three-year term. The Advisory Council meets periodically with our team of senior management to
recommend changes, discuss issues, and provide new ideas or concepts, including a full spectrum of innovative
ideas for additional quality-driven nutritional supplements aimed at maintaining optimal health and wellness.
6. Support Philosophy for Our Independent Associates and Members. We are fully committed to providing the
highest level of support services to our independent associates and members and believe that we meet expectations
and build customer loyalty through the following:
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offering highly-personalized and responsive customer service;
offering a satisfaction guarantee product return policy;
providing comprehensive corporate websites (www.mannatech.com, www.allaboutmannatech.com,
www.mannatechscience.org, www.library.mannatech.com, www.events.mannatech.com,
www.mannafest.com, and www.mannatechlive.com), that provide instant access to Internet ordering,
marketing, technical and educational information, and unique and innovative marketing tools;
(cid:2) maintaining an extensive web-based downline management system called Success Tracker™ that
provides access to web conferencing and downline organization reporting for our independent
associates at minimal costs;
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offering, in the United States and Canada, an effective compilation of online marketing and training
tools, including MannaSocial, and our Navig8 Global Business System;
offering updated training/orientation and compliance programs for our independent associates;
providing strategically based distribution fulfillment centers to ensure products are shipped on time
and at minimal cost; and
sponsoring marketing events, designed to provide information, education, and motivation for our
dedicated business-building associates and to help stimulate business development. These events
provide an interactive venue for introducing new products and services and allow interaction between
our management teams, outside researchers, and independent associates.
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7. Flexible Operating Strategy. We believe efficiency, focus, and flexibility are paramount to our operations. For
more than a decade, we have contracted with third parties to supply and manufacture our proprietary raw materials
and products, which we believe allows us to minimize capital expenditures, capitalize on such parties’ expertise,
and build additional resources for strategic alliances in the areas of distribution and logistics, product registration,
and export requirements. By contracting with various suppliers and manufacturers and by outsourcing distribution
for all of our operations, we believe we can quickly adapt operations to current demands in a timely, efficient, and
cost-effective manner. We monitor the performance of our third party contractors to ensure they maintain a high
quality of service. In addition, we identify alternative sources for our raw materials suppliers and finished goods
manufacturers to help prevent any risk of interruption in production should any existing contractors become unable
to perform satisfactorily.
8. Experience and Depth of Our Management Team and Board of Directors. We believe that our team of executives
has extensive experience in every aspect of business operations and is highly focused on our success. At December
31, 2015, our Board of Directors is composed of seven directors, including five independent directors. We believe
our board members have a wealth of knowledge and experience in most aspects of our business operations and are
especially well versed in network marketing, finance, nutritional products, regulatory matters, and corporate
governance. Our entire management team is committed to delivering high-quality products and superior service.
Business Strategy
Our long-term goal is to be one of the world’s leading network marketing companies founded on the best science-
based proprietary products by incorporating a powerful global independent network distribution model into our social
entrepreneur consumption program. To achieve our goal, we believe we must focus on the following business priorities:
(cid:2) Strengthening our Financial Results and Adding Value to Our Shareholders and Independent Associates.
We focus on improving financial results by striving to increase our revenues in both our domestic and foreign
operations and to control our operating costs.
(cid:2) Attracting New Independent Associates and Retaining Existing Independent Associates. We continually
examine our global associate career and compensation plan and periodically offer incentives in order to attract,
motivate, and retain independent associates. We believe our global associate career and compensation plan
encourages greater associate retention, motivation, and productivity.
(cid:2) Carefully Planning and Executing New Market Entries. In order to expand efficiently around the globe, we
must continue to present maximum opportunity to our current independent associates as well as those who will
join us in the future.
(cid:2) Developing New Products and Enhancing Existing Products. We continue to focus on new areas for future
product development. We continue our research efforts and strive to ensure that all of our products are made
from high quality, effective ingredients that contain one or more of our proprietary compounds, which we
believe supports our goal to be a cutting-edge industry leader. We expect that any future products we develop
will further complement and enhance our existing products.
Intellectual Property
Trademarks. We pursue registrations for various trademarks associated with our key products and branding
initiatives. As of December 31, 2015, we had 29 registered trademarks in the United States and six trademark applications
pending with the United States Patent and Trademark Office. As of December 31, 2015, we had 328 registered trademarks in
38 countries and 32 trademark applications pending in 14 foreign jurisdictions. Globally, the protection available in foreign
jurisdictions may not be as extensive as the protection available to us in the United States. Where available, we rely on
common law trademark rights to protect our unregistered trademarks, even though such rights do not provide us with the
same level of protection as afforded by a United States federal trademark registration. Common law trademark rights are
limited to the geographic area in which the trademark is actually used. A United States federal trademark registration enables
us to stop infringing use of the trademark by a third party anywhere in the United States provided the unauthorized third
party user does not have superior common law rights in the trademark within a specific geographical area of a particular state
or region prior to the date our mark federally registers. In the United States (and in many foreign jurisdictions) a registered
trademark is valid for ten years and may be renewed subject to the trademark owner demonstrating continued use of the mark
in commerce.
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Patents. The Company applies for patent protection in various countries for the technology related to our product
formulations. As of December 31, 2015, we had 54 patents for technology related to our Ambrotose® formulation, five of
which are in the United States and the remainder of which are in 34 foreign jurisdictions. Overall, as of December 31, 2015,
118 patents have been issued, granted and validated to Mannatech in major global markets for the technology relating to our
Ambrotose®, Ambrotose AO®, GI-ProBalance™, PhytoMatrix®, NutriVerus™, and PhytoBurst® product formulations, as
well as in the field of biomarker assays. Currently, we have 40 patent applications pending in various jurisdictions relating to
the technology supporting the above listed products. Patent protection means that the patented invention cannot be
commercially made, used, distributed or sold without the patent owner's consent. These patent rights are usually enforced in
a court, which, in most jurisdictions, holds the authority to stop patent infringement. The protection is granted for a limited
period, generally 20 years. In most jurisdictions, renewal annuities or maintenance fees must be paid regularly during the
term of the patent to keep the patent in force.
Associate Distribution System
Overview. Our sales philosophy is to distribute our products through network marketing channels where consumers
purchase products for personal consumption or resale. Members purchase our products for personal use at a discounted retail
value, but do not participate in our global associate career and compensation plan. Independent associates purchase our
products at a discounted wholesale value and are eligible to participate in our global associate career and compensation plan.
All of our associates are independent contractors. We provide each new independent associate with our policies and
procedures that require the independent associates to comply with regulatory guidelines and act in a consistent and
professional manner.
Our revenues are heavily dependent upon the retention and productivity of independent associates who help us
achieve long-term growth. We believe the introduction of new innovative incentives, such as travel incentives, will continue
to motivate our independent associates and help expand our global purchasing base. We remain actively committed to
expanding the number of our independent associates through recruitment, support, motivation, and incentives. We had
approximately 219,000 active independent associate and member positions held by individuals purchasing our products or
packs during the 12 months ended December 31, 2015, and we had approximately 230,000 active independent associate and
member positions held by individuals purchasing our products or packs during the 12 months ended December 31, 2014. We
have a loyalty program through which consumers earn loyalty points from qualified automatic orders, which can be applied
to future purchases.
Independent Associate Development. Network marketing consists of enrolling individuals who build a network of
independent associates, members, and retail customers who purchase products. We support our independent associates by
providing an array of support services that can be tailored to meet individual needs, including:
(cid:2)
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offering educational meetings and corporate-sponsored events that emphasize business-building and
compliance related information;
sponsoring various informative and science-based conference calls, web casts, and seminars;
providing automated services through the Internet and telephone that offer a full spectrum of information and
business-building tools;
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providing highly personalized and responsive order processing and customer service support accessible by
multiple communication channels including telephone, Internet, or e-mail;
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offering 24-hour, seven days a week access to information and ordering through the Internet;
offering Success TrackerTM, a customized business-building genealogy system, which contains graphs, maps,
alerts, reports, and web video conferencing for our independent associates;
offering, in the United States and Canada, a compilation of online marketing and training tools, including
MannaSocial, and our Navig8 Global Business System; and
providing a wide assortment of business-building and educational materials to help stimulate product sales and
simplify enrollment.
We provide product and network marketing training and education for new independent associates. This includes a
unique global training/orientation program that uses audio, video and web components to familiarize new associates with the
Company, and includes short, segmented trainings on how to succeed as part of the sales force. We also regularly provide
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training on using online tools such social media and our own suite of web marketing tools specifically designed for
associates to use. We also offer a variety of brochures, monthly newsletters, and other promotional materials to associates to
assist in their sales efforts, training, and continuing education. We continually update our training and promotional materials
to provide our associates with the most current information and motivational tools.
Our global associate career and compensation plan consists of ten independent associate achievement levels; from
lowest to highest, these include regional, national, senior national, executive, senior executive, presidential, bronze, silver,
gold, and platinum. These achievement levels are determined by the growth and volume of the independent associates’ direct
and indirect commissionable net sales, as well as expanding their networks, which are all assigned a point volume.
Promotional materials and training aids are not assigned a point volume. This point volume system, referred to as our global
seamless downline structure, allows independent associates to build their network by expanding their existing downlines into
all international markets. Our global associate career and compensation plan is intended to comply with all applicable
governmental regulations that govern the various aspects of payments to independent associates in each country.
Based upon our knowledge of industry-related network marketing compensation plans, we believe our global
associate career and compensation plan remains strong in the industry and is currently among the most financially rewarding
plans offered. Together, our commissions and incentives range approximately from 39% to 43% of our consolidated net
sales.
Our global associate career and compensation plan pays various types of commissions and incentives based upon a
point system that calculates a percentage of the independent associate’s commissionable direct and indirect net product sales
and the attainment of certain associate achievement levels. All payments to our independent associates are made after they
have earned their commissions. We believe our global associate career and compensation plan fairly compensates our
independent associates at every stage of building their business by quickly rewarding an independent associate for both the
breadth and depth of their global seamless downline structure.
Our global associate career and compensation plan identifies and pays 18 types of commissions to our qualified
independent associates, which are based on the following:
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generating product sales from an independent associate’s global downline to earn certain achievement levels;
enrolling new independent associates or members who place a product order;
obtaining certain achievement levels and enrolling other independent associates who place qualifying orders;
obtaining and developing certain achievement levels within their downline organizations to qualify for
additional bonuses; and
various other incentive programs.
Management of Independent Associates. We actively monitor our independent associates’ activities related to sales
of our products and the promotion of certain business opportunities by requiring our independent associates to abide by our
policies and procedures. However, we have limited control over the actions of our independent associates. To aid in our
monitoring efforts, we provide each independent associate with a copy of our policies and procedures prior to or upon
signing up as an independent associate. We also use various media formats to distribute changes to our mandatory policies
and procedures, including our corporate website, conference calls, educational meetings, corporate events, seminars, and
webcasts.
Our legal/compliance department, in cooperation with other departments and associates, periodically evaluates the
conduct of our independent associates and the need for new or revised policies and procedures. Our monitoring efforts
include reviewing associates’ websites, promotional materials, and meetings. Our legal/compliance program assists in
maintaining high ethical standards among our independent associates, which helps our independent associates in their sales
efforts.
To help manage our associates, our legal/compliance department periodically monitors independent associates’
websites for content. In addition, associates may use our anonymous compliance reporting system to report non-compliant
websites to the compliance department, which then further investigates such websites. In an effort to decrease the number of
independent websites owned by our independent associates and to preserve and protect our trademarks, we offer standardized
personal web pages to our associates that help them with their sales efforts and provides consistent, standardized information,
and education. We also offer our independent associates and members a free standardized website through our Navig8
Global Business System service.
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Our legal/compliance program also provides our independent associates with a standardized and anonymous
complaint process. When a complaint is filed against an independent associate, our legal/compliance department conducts a
mandatory investigation of the allegations, if warranted. Depending on the nature of the violation, we may suspend or
terminate the non-compliant associate’s agreement or we may impose various sanctions, including written warnings,
probation, withholding commissions, and termination of associate status. We will terminate any associate’s agreement for
making claims that our products can treat, cure, mitigate or prevent any disease, unless such claim is de minimus and
isolated.
Product Return Policy. We stand behind our packs and products and believe we offer a reasonable and industry-
standard product return policy to all of our customers. We do not resell returned products. Refunds are not processed until
proper approval is obtained. All refunds must be processed and returned in the same form of payment that was originally
used in the sale. Each country in which we operate has specific product return guidelines. However, we allow our
independent associates and members to exchange products as long as the products are unopened and in good condition. Our
return policies for our retail customers and our independent associates and members are as follows:
(cid:2) Retail Customer Product Return Policy. This policy allows a retail customer to return any of our products to
the original independent associate who sold the product and receive a full cash refund by the independent
associate for the first 180 days following the product’s purchase, if located in the United States and Canada,
and for the first 90 days following the product’s purchase in the remaining countries. The independent associate
may then return or exchange the product based on the independent associate product return policy.
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Independent Associate and Member Product Return Policy. This policy allows the independent associate or
member to return an order within one year of the purchase date upon terminating his/her account. If an
independent associate or member returns a product unopened and in good condition, he/she may receive a full
refund minus a 10% fee. We may also allow the independent associate or member to receive a full satisfaction
guarantee refund if they have tried the product and are not satisfied for any reason, excluding promotional
materials. This satisfaction guarantee refund applies in the United States and Canada, only for the first 180 days
following the product’s purchase, and applies in the remaining countries for the first 90 days following the
product’s purchase; however, any commissions earned by an independent associate will be deducted from the
refund. If we discover abuse of the refund policy, we may terminate the independent associate’s or member’s
account.
Information Technology Systems
Our information technology and e-commerce systems include a transaction-processing database, financial systems,
an associate management system, and comprehensive management tools that are designed to:
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provide customized ordering information;
quickly respond to information requests, including providing detailed and accurate information to independent
associates about qualification and downline activity;
provide detailed reports about paid commissions and incentives;
support order processing and customer service departments; and
help monitor, analyze, and report operating and financial results.
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To complement our transaction database, we developed a comprehensive management tool called Success Tracker™
that is used both internally and by our independent associates to manage and optimize their business organizations. With this
tool, independent associates have constant access to graphs, maps, alerts, and reports on the status of their individual
organizations, which helps to optimize their earnings.
We also maintain a written service continuity disaster recovery plan, which was developed using the guidelines
published by the National Institute of Standards of Technology to minimize the risk of loss due to any interruption in
business. Our disaster recovery plan encompasses all critical aspects of our business and identifies contacts and resources.
Additionally, we perform daily backup procedures and proactively monitor various software, hardware, and network
infrastructure systems. We also perform routine maintenance procedures and periodically upgrade our software and hardware
to help ensure that our systems work efficiently and effectively and to minimize the risk of business interruption. Although
we maintain an extensive disaster recovery plan, a long-term failure or impairment of any of our information technology
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systems could adversely affect our ability to conduct day-to-day business. Please see “Risk Factors – If our information
technology system fails, our operations could suffer.”
We continue to enhance our information technology, websites, and e-commerce platforms to remain competitive
and efficient.
Government Regulations
Domestic Regulations. In the United States, governmental regulations, laws, administrative determinations, court
decisions, and similar legal requirements at the federal, state, and local levels regulate companies such as ours and network
marketing activities. Such regulations address, among other things:
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direct selling and network marketing systems;
transfer pricing and similar regulations affecting the amount of foreign taxes and customs duties paid;
taxation of independent associates and requirements to collect taxes and maintain appropriate records;
how a company manufactures, packages, labels, distributes, imports, sells, and stores products;
product ingredients;
product claims;
advertising; and
the extent to which companies may be responsible for claims made by independent associates.
The following governmental agencies regulate various aspects of our business and our products in the United States:
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the Food and Drug Administration (the “FDA”);
the Federal Trade Commission (the “FTC”);
the Consumer Product Safety Commission;
the Department of Agriculture;
the Environmental Protection Agency;
the United States Postal Service;
state attorney general offices; and
various agencies of the states and localities in which our products are sold.
The FDA regulates the formulation, manufacturing, packaging, storage, labeling, promotion, distribution, and sale
of foods, dietary supplements, over-the-counter drugs, medical devices, and pharmaceuticals. In January 2000, the FDA
issued a final rule called “Statements Made for Dietary Supplements Concerning the Effect of the Product on the Structure or
Function of the Body”. In the rule and its preamble, the FDA distinguished between permitted claims under the Federal
Food, Drug and Cosmetic Act (the “Act”) relating to the effect of dietary supplements on the structure or functions of the
body, and impermissible direct or implied claims of the effect of dietary supplements on any disease. In June 2007, the FDA
issued a rule, as authorized under the Act that defined current Good Manufacturing Practices in the manufacture and holding
of dietary supplements. Effective January 1, 2006, legislation required specific disclosures in labeling where a food,
including a dietary supplement, contains an ingredient derived from any of eight named allergens. Legislation passed at the
end of 2006 now requires us to report to the FDA any reports of “serious adverse events” associated with the use of a dietary
supplement or an over-the-counter drug that is not covered by new drug approval reporting. The FDA created the Office of
Dietary Supplements (“ODSP”) on December 21, 2015. The creation of this new office elevates the FDA’s program from its
previous status as a division under the Office of Nutrition and Dietary Supplements. ODSP will continue to monitor the
safety of dietary supplements.
The Dietary Supplement Health and Education Act of 1994, referred to as DSHEA, revised the provisions of the Act
concerning the composition and labeling of dietary supplements and statutorily created a new class entitled “dietary
supplements.” Dietary supplements include vitamins, minerals, herbs, amino acids, and other dietary substances used to
supplement diets. A majority of our products are considered dietary supplements as outlined in the Act, which requires us to
maintain evidence that a dietary supplement is reasonably safe. A manufacturer of dietary supplements may make statements
concerning the effect of a supplement or a dietary ingredient on the structure or any function of the body, in accordance with
the regulations described above. As a result, we make such statements with respect to our products. In some cases, such
statements must be accompanied by a statutory statement that the claim has not been evaluated by the FDA and that the
product is not intended to treat, cure, mitigate, or prevent any disease, and the FDA must be notified of such claim within 30
days of first use.
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The FDA oversees product safety, manufacturing, and product information, such as claims on a product’s label,
package inserts, and accompanying literature. The FDA has promulgated regulations governing the labeling and marketing of
dietary and nutritional supplement products. The regulations include:
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the identification of dietary or nutritional supplements and their nutrition and ingredient labeling;
requirements related to the wording used for claims about nutrients, health claims, and statements of nutritional
support;
labeling requirements for dietary or nutritional supplements for which “high potency,” “antioxidant,” and
“trans-fatty acids” claims are made;
notification procedures for statements on dietary and nutritional supplements; and
pre-market notification procedures for new dietary ingredients in nutritional supplements.
We develop and maintain product substantiation dossiers, which contain the scientific literature pertinent to each
product and its ingredients. An independent scientist reviews these dossiers, which provide the scientific basis for product
claims. We periodically update our substantiation program for evidence for each of our product claims and notify the FDA of
certain types of performance claims made in connection with our products.
In certain markets, including the United States, specific claims made with respect to a product may change the
regulatory status of a product. For example, a product sold as a dietary supplement but marketed as a treatment, prevention,
or cure for a specific disease or condition would likely be considered by the FDA or other regulatory bodies as unapproved
and thus an illegal drug. To maintain the product’s status as a dietary supplement, its labeling and marketing must comply
with the provisions in DSHEA and the FDA’s extensive regulations. As a result, we have procedures in place to promote and
assure compliance by our employees and independent associates related to the requirements of DSHEA, the Act, and various
other regulations.
Dietary supplements are also subject to the Nutrition, Labeling and Education Act and various other acts that
regulate health claims, ingredient labeling, and nutrient content claims that characterize the level of nutrients in a product.
These acts prohibit the use of any specific health claim for dietary supplements unless the health claim is supported by
significant scientific research and is pre-approved by the FDA.
The FTC and other regulators regulate marketing practices and advertising of a company and its products. In the
past several years, regulators have instituted various enforcement actions against numerous dietary supplement companies
for false and/or misleading marketing practices, as well as misleading advertising of products. These enforcement actions
have resulted in consent decrees and significant monetary judgments against the companies and/or individuals involved.
Regulators require a company to convey product claims clearly and accurately and further require marketers to maintain
adequate substantiation for their claims. More specifically, the FTC requires such substantiation to be competent and reliable
scientific evidence and requires a company to have a reasonable basis for the expressed and implied product claim before it
disseminates an advertisement. A reasonable basis is determined based on the claims made, how the claims are presented in
the context of the entire advertisement, and how the claims are qualified. The FTC’s standard for evaluating substantiation is
designed to ensure that consumers are protected from false and/or misleading claims by requiring scientific substantiation of
product claims at the time such claims are first made. The failure to have this substantiation violates the Federal Trade
Commission Act.
Due to the diverse scope of regulations applicable to our products and the various regulators enforcing these
requirements, determining how to conform to all requirements is often open to interpretation and debate. However, our
policy is to fully cooperate with any regulatory agency in connection with any inquiries or other investigations. We can make
no assurances that regulators will not question our actions in the future, even though we continue to make efforts to comply
with all applicable regulations, inquiries, and investigations.
International Regulations. We are also subject to extensive regulations in each country in which we operate.
Currently we sell our products in three regions: (i) North America/South America (the United States, Canada, Colombia and
Mexico); (ii) EMEA (Austria, the Czech Republic, Denmark, Estonia, Finland, Germany, the Republic of Ireland, Namibia,
the Netherlands, Norway, South Africa, Spain, Sweden and the United Kingdom); and (iii) Asia/Pacific (Australia, Japan,
New Zealand, the Republic of Korea, Singapore, Taiwan and Hong Kong). Some of the country-specific regulations include
the following:
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the National Provincial Laws, Natural Health Product Regulations of Canada, and the Federal Competition Act
in Canada;
the Therapeutic Goods Administration and the Trade Practices Act in Australia;
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federal and state regulations in Australia;
national regulations including the Local Trading Standards Offices in the United Kingdom;
regulations from the Ministry of International Trade and Industry in Japan;
regulations from the Commerce Commission and the Fair Trade Act of 1993 in New Zealand;
the Fair Trade Commission, which oversees the Door to Door Sales Act and the Health and Functional Food
Act enforced by the Korea Food and Drug Administration in the Republic of Korea;
the Fair Trade Law, which is enforced by the Taiwan Fair Trade Commission and the Administration of Food
Hygiene, Health Food Products Administration Act enforced by the Taiwan Department of Health;
the Danish Health Board, the Danish Marketing Practice Act, the Danish Consumer Ombudsman, the Danish
Executive Order on Dietary Supplements, the Guidelines for food supplements, and the Danish Act on
Foodstuffs in Denmark;
the German Unfair Competition Act, German Regulation on food supplements, and German Law on food and
feed;
regulations governing business practices in South Africa;
the Consumer Protection Act, the Sale of Food Act, and various regulations that are governed by the Ministry
of Trade and Industry in Singapore;
the Austrian Trade Law (1994), the Food Safety and Consumer Protection Law (2006), and the Food Code in
Austria;
the Food and Consumer Products and the Unfair Trade Practices Act, Door to Door Selling Act and Provisions
of the General Dutch Civil Code relating to terms and conditions and misleading advertising in the Netherlands;
the Consumer Sales Act, Marketing Practices Act, Distance and Doorstep Sales Act, the Product Liability Act,
Product Safety Act, the Companies Act and the Food Act in Sweden;
the Law on Marketing and Contract Conditions, the Law on Repentance Right, the Statutory Order on Self
Inspection of Food Provisions, the Law on Food products and Food Safety, and various guidelines from the
Norwegian Consumers Agency on telephone selling and internet marketing, in Norway;
the Health Law and various Official Mexican Standards, the consumer protection law, the Mexican Corporate
law, the Foreign Investment Law, the Federal Labor law in Mexico, as well as various municipal and state
regulations and codes;
various Business, Civil, and Labor Codes in the Czech Republic as well as the Consumer Protection Act, and
regulations and edicts of various government agencies such as The Ministry of Health, National Institute of
Public Health, State Institute of Drug Control and the Czech Agriculture and Food Inspection Authority;
the Consumer Protection Act in Estonia, and in the area of food supplements the Veterinary and Food Board
also enforces local legislation including Estonia Food Act and Medicine Act;
the Finnish Food Act, the Finnish Food Packaging and Consumer Protection Acts, Act on Unfair Business
Practice Act, Decrees and other regulations in Finland;
the Consumer Protection Act of 2007, the Distance Selling Regulations Act of 2001 in Ireland;
various European Union (“EU”) regulations and pronouncements, subject to local statutes and regulations,
address both our selling activities and the sale of food supplements in EU member nations, including, primarily,
the EU Food Supplement Directive (2002/46/EC) and Nutrition and Health Claims Regulations
(2006/1924/EC);
the Food and Drugs (Composition and Labeling) Regulations, the Pyramid Schemes Prohibition Ordinance, the
Personal Data (Privacy) Ordinance, and the Import and Export Ordinance in Hong Kong;
the Retail Trade Act of January 15, 1996, regulating both multi-level marketing (article 22) and pyramid sales
(article 23), and Spanish Law 1/2007 on Consumer Protection (“Spanish Consumers Act”), regulating
consumer protection, including warranties and product liability, in Spain; and
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the Regulation of Act 1700 of 2013, Article 2.2.50 on December 27, 2013 governs the Activities of Network
Marketing or Multilevel Marketing companies through monitoring compensation plans, contract conditions and
enacting preventive suspension, in Colombia.
Regulations Regarding Network Marketing System and Our Products. Our network marketing system and our
global associate career and compensation plan are also subject to a number of governmental regulations including various
federal and state statutes administered by the FTC, various state authorities, and foreign government agencies. The legal
requirements governing network marketing organizations are directed, in part, to ensure that product sales are ultimately
made to consumers. In addition, earnings within a network marketing company must be based on the sale of products rather
than compensation for (i) the recruitment of distributors or associates, (ii) investments in the organization, or (iii) other non-
retail sales-related criteria. For instance, some countries limit the amount associates may earn from commissions on sales by
other distributors or independent associates that are not directly sponsored by that distributor or independent associate. Prior
to expanding our operations into any foreign jurisdiction, we must first obtain regulatory approval for our network marketing
system in jurisdictions requiring such approval. To help ensure regulatory compliance, we rely on the advice of our outside
legal counsel and regulatory consultants in each specific country.
As a network marketing company, we are also subject to regulatory oversight, including routine inquiries and
enforcement actions, from various United States state attorneys general offices. Each state has specific acts referred to as
Little FTC Acts. Each state act is similar to the federal laws. As a result, each state may perform its own inquiries about our
organization and business practices, including allegations related to distributors or independent associates. To combat such
industry-specific risk, we provide a copy of our published associate policies and procedures to each independent associate,
publish these policies on our corporate website, and provide educational seminars and publications. In addition, we maintain
a legal/compliance department to cooperate with all regulatory agencies and investigate allegations of improper conduct by
our independent associates.
In Canada, our network marketing system is regulated by both national and provincial laws. Under Canada’s
Federal Competition Act, we must make sure that any representations relating to compensation to our independent associates
or made to prospective new independent associates constitute fair, reasonable, and timely disclosure and that such
representations meet other legal requirements of the Federal Competition Act. All Canadian provinces and territories, other
than Ontario, have legislation requiring that we register or become licensed as a direct seller within that province to maintain
the standards of the direct selling industry and to protect consumers. Some other Canadian provinces require that both we and
our independent associates be licensed as direct sellers.
In Colombia, our network marketing system is governed by the Regulation Act of 1700 of 2013 on Activities of
Network Marketing or Multilevel Marketing. It specifies requirements for our compensation plan, contracts, corporate
governance and penalties for violations. Data processing is regulated by Act No. 1581 of 2012 and Regulatory Decree No.
1377 of 2013 which protects personal data and requires that Mannatech to obtain authorization from the owner to collect
personal data. The distribution of nutritional supplement products is governed by Invima, which is in charge of inspecting
and monitoring the marketing and manufacturing of health products.
In Mexico, as in many other markets, there are no specific regulations directly related to the direct selling or
network marketing industry. However, all product sales and business offerings must comply with the Consumer Protection
Law, which is enforced by the Consumer Protection Agency. Food supplements and medicines are subject to the Health Law
and various Official Mexican Standards, which are enforced by the Health Ministry and The Federal Commission for
Protection Against Sanitary Risk. Mexican Customs Law and its regulations govern the general importation of our products
into Mexico. We are subject to the Mexican Corporate Law, which is enforced by the Mexican courts and to the Federal
Labor Law enforced by the Labor Courts. In Mexico, we are also subject to the Foreign Investment Law and its regulations
administered by the Ministry of Economy. We are required to register before the Mexican System for Business Information
at the appropriate Business Chamber under the Organizations Law.
In Australia, our network marketing system is subject to Australia’s federal and local regulations. Our global
associate career and compensation plan is designed to comply with Australian law and the requirements of Australia’s Trade
Practices Act. The Australian Trade Practices Administration and various other governmental entities regulate our business
and trade practices, as well as those of our independent associates. Australia’s Therapeutic Goods Act, together with the
Trade Practices Act, regulates any claims or representations relating to our products and our global associate career and
compensation plan.
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In New Zealand, our network marketing system and our operations are subject to regulations of the Commerce
Commission and the Ministry of Health, New Zealand Medical Devices Safety Authority, the Unsolicited Goods Act of
1975, the Privacy Act of 1993, and the Fair Trading Act of 1993. These regulations enforce specific kinds of business or
trade practices and regulate the general conduct of network marketing companies. The Commerce Commission also enforces
the Consumer Guarantees Act, which establishes specific rights and remedies with respect to transactions involving the
provisions of goods and services to consumers. Finally, the New Zealand Commerce Commission and the Ministry of Health
both enforce the Door-to-Door Sales Act of 1967 and the NZ Medicines Act, which govern the conduct of our independent
associates.
In Japan, our network marketing system, overall business operations, trade practices, global associate career and
compensation plan, and our independent associates are governed by Japan’s Door-to-Door Sales Law as enacted in 1976 by
the Ministry of International Trade and Industry. Our global associate career and compensation plan is designed to meet
Japan’s governmental requirements. Our product claims are subject to the Pharmaceutical Affairs Law, which prohibits the
making and publication of “drug effectiveness” claims regarding products that have not received approval from Japan’s
Ministry of Health, Welfare and Labor.
In Singapore, the network marketing industry is governed by the Multi-Level Marketing and Pyramid Selling
(Prohibition) (Amendment) Act and the accompanying Pyramid Selling (Excluded Schemes and Arrangements) Order 2000
and Order 2001. General business practices and advertising are regulated under the Consumer Protection (Fair Trading) Act
2003, as amended, and its accompanying regulations. The products are classified as food and supplements of a food nature,
which are governed by the Sale of Food Act and the Singapore Food Regulations. Cosmetics and products that rise to the
level of medicinal and other health-related products are regulated under various regulations such as the Medicines Act, the
Poisons Act, the Sale of Drugs Act, the Medicines (Advertisement and Sale) Act and the Misuse of Drug Regulations.
In the Republic of Korea, the primary body of law applicable to our operations is the Door-to-Door Sales Act,
which governs the behavior of network marketing companies and affiliated distributors. The Door-to-Door Sales Act is
enforced by the Fair Trade Commission. In the Republic of Korea, our products are categorized as health and functional
foods and are regulated by the Health and Functional Food Act of 2004, with which the Company complies.
In Taiwan, our network marketing system, overall operations and trade practices are governed by the Fair Trade
Law and the Consumer Protection Law. Such laws contain a wide range of provisions covering trade practices. Our products
are governed by the Taiwan Department of Health and various legislation in Taiwan including the Health Food Control Act
of 1999. This Act was enacted to enhance the management and supervision of matters relating to health, food, protecting the
health of people and safeguarding the rights and interests of consumers.
In the United Kingdom, our network marketing system is subject to national regulations of the United Kingdom.
Our global associate career and compensation plan is designed to comply with the United Kingdom’s national requirements,
the requirements of the Fair Trading Act of 1973, the Data Protection Act of 1998, the Trading Schemes Regulations of
1997, and other similar regulations. The U.K. Code of Advertising and Sales Promotion regulates our business and trade
practices and the activities of our independent associates, while the Trading Standards Office regulates any claims or
representations relating to our operations. Our products are regulated by the Medicines and Healthcare Products Regulatory
Agency.
In Denmark, the notion of door-to-door selling is prohibited. As a result, under Danish law, the trader is not allowed
to contact the consumer at his home, place of work, or other non-public place in order to conclude a contract on certain
subjects. However, the prohibition has an exemption when the consumer asks the trader for a contact in writing or upon
written prior consent. In addition, the Danish Marketing Practices Act, the Guidelines from the Danish Consumerombudsman
and the rules contained in the Danish Consumer Contracts Act govern our network marketing system. There is no
requirement for pre-approval of our products in Denmark; however, our products are subject to a yearly inspection carried
out by the Food authorities. Further, all our activities are subject to Self Inspection, the results of which are also controlled
once a year by the Food authorities. The rules for marketing and sale of dietary supplements are covered by the Danish
Executive Order on Food Supplements, as well as by the Danish Act on Foodstuffs and various EU-regulations. Denmark
also subjects the marketing of a company’s food supplements to a notification procedure (with a pre-market approval process
for certain substances), before a product may be lawfully marketed in Denmark. Full product compliance with all Danish
provisions is reviewed by the Food authorities once a year.
In Germany, there is no specific legal regulation covering network marketing company practices. However, under
certain circumstances network marketing systems may have to follow the German Unfair Competition Act. Our independent
associates’ conduct is subject to the German statute that governs the conduct of a commercial agent. In addition, direct
selling operations are governed by the Industrial Code, which requires direct sellers to hold itinerant trader’s cards. The
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German Regulation on food supplements and the German Law on food and feed govern vitamin and mineral substances and
herbs and other substances, respectively.
In South Africa, the Consumer Affairs Act 1988, the Competition Act 1998, and the Advertising Standards
Authority Code of Advertising Practice (a voluntary code enforced by the media) govern business practices. The products are
classified as complementary medicines for which there are no specific regulations. The Foodstuffs, Cosmetics and
Disinfectants Act 1972, and the Medicines and Related Substances Act 1965 currently apply.
In Austria, the Austrian Trade Law of 1994 (Novelle 2002) prohibits the offer of direct sale to an individual
consumer of food supplement and cosmetic products. The provision, however, has generally not been enforced in recent
years and sales made via the Internet or mail order or made to a non-consumer distributor do not fall under this prohibition.
The Austrian Trade Law is predominantly administered through the National Ministry of Economy and Labor. Our business
operations within Austria are conducted from beyond the borders of Austria, which is the common practice in our industry.
Our distributors qualify as “traders” for purposes of Austrian state and municipal laws. Traders are regulated by the local
chambers of commerce and must obtain licenses from the respective chambers of commerce. Regulation of food supplements
and cosmetics is generally harmonized throughout the EU and must conform to EU standards. Austrian-specific food
regulations include the Food Safety and Consumer Protection Law (2006), supporting ordinances to this law, the Food
Supplement Law, and the Austrian Food Codex, which is primarily administered by the National Ministry of Health, Office
for Health and Food Security, and the Local Health Authority.
In Sweden, various provisions of the Consumer Sales Act (1990), the Marketing Practices Act (2008), the Distance
and Doorstep Sales Act (2005), the Product Liability Act (1992), the Product Safety Act (2004), and the Companies Act
(2005) all serve to govern our multi-level marketing and business activities. The Food Act (2006) provides regulations and
guidelines for the sale of food and food supplements. We are subject to the authority of the Swedish Consumer Office, the
Swedish Companies Registration Office, the Swedish Tax Office, Swedish Customs, Medical Products Agency, and the
National Food Administration. As in all EU countries various EU regulations and guidelines apply.
In the Netherlands, the Food and Consumer Product and the Unfair Trade Practices Act are the most relevant
legislations relating to our business practices. The first is enforced by the Food and Consumer Product Safety Authority and
the latter is enforced by the Consumer Authority. Furthermore, various EU regulations apply as well as the Dutch Door to
Door Selling Act, and all provisions of the Dutch Civil Code with particular emphasis to those regulations dealing with
general terms and conditions, and those regarding misleading advertising.
Norway exercises a border control of products and their composition upon importation. Import products must be
registered in an Import Reporting Registry, and the regulations are enforced by the customs authorities. Our products must be
compliant with Norwegian regulations in order to be admitted for admission through customs into Norway. In Norway Door-
to-Door Selling is allowed, provided the Guidelines from the Norwegian Consumer Agency are followed. Likewise,
telephone-selling is allowed provided the agency’s guidelines are followed. Home-selling in Norway is also allowed. All of
our sales in Norway are subject to a 14-day right to cancel by the consumers.
In the Czech Republic, there are no specific regulations or special legislation that limit the network marketing
industry. Network marketing is considered to be a specific form of general sale and is generally subject to various provisions
of the Business Code (Act. Nr. 513/1992 Coll.), Civil Code (Act. Nr. 40/1964 Coll.), Labor Code (Act. No. 262/2006 Coll.),
Trade License Act (Act. Nr. 455/1991 Coll.), Consumer Protection Act (Act. Nr. 634/1992 Coll.) and related legislation. The
status of independent contractor/sales distributor is primarily regulated by the Trade License Act (Act. Nr. 455/1991 Coll),
which requires sales distributors to maintain a trade license. Additionally, the regulation of food supplements is harmonized
throughout the EU and, therefore, the supplements must conform to the EU standards. Enforcement of Czech-specific
regulations is undertaken by the Ministry of Health, National Institute of Public Health, State Institute of Drug Control and
the Czech Agriculture and Food Inspection Authority.
In Estonia, there are no specific regulations governing the network marketing business, but the business is generally
regulated under the Consumer Protection Act. Also, independent distributors are required to register as sole proprietors with
the Tax and Customs Board before entry into associate agreements. Mannatech must also comply with various EU
regulations. The Veterinary and Food Board also enforces local legislation including Estonia Food Act and Medicine Act.
In Finland, the Finnish Food Act, the Finnish Food Packaging and Consumer Protection Acts, Act on Unfair
Business Practice Act, Decrees and other regulations, as well as applicable EU regulations, regulate Mannatech products,
product information, and the way Mannatech promotes its products. Additionally, certain principals applicable to multi-level
marketing under the Money Collection Act (255/2006) apply to Mannatech’s activities. Lastly, persons engaged in the
manufacture, commission of manufacture or import of food supplements, must submit a written notification to the Finnish
17
Food Safety Authority when marketing and selling in Finland. A notification is also required when the composition of
preparation changes in terms of characteristics of substances or the preparation is withdrawn from the market.
In the Republic of Ireland, the primarily relevant legislation is the Consumer Protection Act of 2007, the Distance
Selling Regulations Act of 2001, and the codes of practice of the Direct Selling Association of Ireland and the Advertising
Standards Authority for Ireland. There is no equivalent in Irish law to the UK Trading Schemes Regulations, but the Direct
Selling Association of Ireland codes, while not as prescriptive, contain many similar requirements. Lastly, the regulation of
food and food supplements are generally harmonized throughout the EU and must conform to EU standards.
In Hong Kong, our network marketing system, overall operations and trade practices are governed by a number of
Ordinances including the Sale of Goods Ordinance, the Control of Exemption Clauses Ordinance, the Pyramid Schemes
Prohibition Ordinance and the Personal Data (Privacy) Ordinance. Such Ordinances include a number of consumer
protections (including data privacy) and regulate trading practices. Importation and registration of our products permitting
their sale in Hong Kong are controlled by the Import and Export Ordinance and its subsidiary legislation, the Import and
Export (Registration) Regulations.
In Spain, our network marketing system, overall operations, and trade practices are governed by the Retail Trade
Act and the Spanish Consumers Act. Such laws contain a wide range of provisions covering trade practices, including multi-
level marketing, pyramid sales, warranties and product liability. While regulation of food supplements and cosmetics is
generally harmonized throughout the EU and must conform to EU standards, the Spanish Agency for Medicines and Health
Products oversees cosmetics and the Spanish Agency for Consumer Affairs, Food Safety and Nutrition oversees food
supplements.
Other Regulations. Our operations are also subject to a variety of other regulations, including:
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
social security taxes;
value-added taxes;
goods and services taxes;
sales taxes;
consumption taxes;
income taxes;
customs duties;
employee/independent contractor regulations;
employment, service pay, retirement pay, and profit sharing requirements;
import/export regulations;
federal securities laws; and
antitrust laws.
In many markets, we are limited by the types of rules we can impose on our independent associates, including rules
in connection with cooling off periods and termination criteria. If we do not comply with these requirements, we may be
required to pay social security, unemployment benefits, workers’ compensation, or other tax or tax-type assessments on
behalf of our independent associates and may incur severance obligations if we terminate one of our independent associates.
In some countries, including the United States, we are also governed by regulations concerning the activities of our
independent associates. Regulators may find that we are ultimately responsible for the conduct of our independent associates
and may request or require that we take additional steps to ensure that our independent associates comply with these
regulations. The types of conduct governed by these types of regulations may include:
(cid:2)
(cid:2)
(cid:2)
claims made about our products;
promises or claims of income or other promises or claims by our independent associates; and
sales of products in markets where the products have not been approved or licensed.
In some markets, including the United States, improper product claims by independent associates could result in our
products being overly scrutinized by regulatory authorities. This review could result in our products being re-classified as
drugs or classified into another product category that requires stricter regulations or labeling changes.
18
We continuously research and monitor the laws governing the conduct of our independent associates, our
operations, our global associate career and compensation plan, and our products and sales aids within each of the countries in
which we sell our products. We provide education for our independent associates regarding acceptable business conduct in
each market through our policies and procedures, seminars, and other training materials and programs. However, we cannot
guarantee that our independent associates will always abide by our policies and procedures and/or act in a professional and
consistent manner.
Competition
Other Nutritional Supplement Companies. The nutritional supplement industry is steadily gaining momentum and
is intensely competitive. Our current direct competitors selling similar nutritional products include:
(cid:2) AdvoCare International
(cid:2) GNC Holdings, Inc.;
(cid:2) Herbalife Ltd.;
(cid:2) Nature’s Sunshine Products, Inc.;
(cid:2) NOW Foods;
(cid:2) Nu Skin Enterprises, Inc.;
(cid:2) Reliv’ International, Inc;
(cid:2)
(cid:2)
Solgar Vitamin and Herb Company, Inc.;
Swanson Health Products;
(cid:2) Usana Health Sciences, Inc.; and
(cid:2) Vitamin Shoppe Industries, Inc.
Network Marketing. Nutritional supplements are offered for sale in a variety of ways. Network marketing has a
limited number of individuals interested in participating in the industry, and we must compete for those types of individuals.
We believe network marketing is the best sales approach to sell our products for the following reasons:
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
our products can be introduced into the global marketplace at a much lower up-front cost than through
conventional methods;
our key ingredients and differential components found in our proprietary products can be better explained
through network marketing;
the network marketing approach can quickly and easily adapt to changing market conditions;
consumers appreciate the convenience of ordering from home, through a sales person, by telephone, or on the
Internet; and
network marketing enables independent associates to earn financial rewards.
We compete with other direct selling and network marketing companies for new independent associates and for
retention of continuing independent associates. Some of our competitors have longer operating histories, are better known, or
have greater financial resources. These companies include:
(cid:2) Amway Corporation;
(cid:2)
Forever Living Products, Inc.;
(cid:2) Herbalife International, Inc.;
(cid:2) Mary Kay, Inc.;
(cid:2) Nature’s Sunshine Products, Inc.;
(cid:2) Nu Skin Enterprises, Inc.;
(cid:2) Reliv’ International, Inc.;
19
(cid:2)
Shaklee Worldwide; and
(cid:2) Usana Health Sciences, Inc.
The availability of independent associates decreases when other network marketing companies successfully recruit
and retain independent associates for their operations. We believe we can successfully compete for independent associates by
emphasizing the following:
our unique patented, proprietary blend of high-quality products;
our 22 year track record in the business of selling nutritional products;
our model which does not require our independent associates to carry inventory or accounts receivable;
our unique and financially rewarding global associate career and compensation plan;
our innovative marketing and educational tools; and
our easy and convenient delivery system.
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
Employees
At December 31, 2015 and 2014, we employed 287 and 270 people, respectively, as set forth below:
North America
Asia/Pacific
EMEA
Total
2015
2014
181
77
29
287
2015
2014
Full-time employees
Part-time employees
Total
282
5
287
172
74
24
270
265
5
270
These numbers do not include our independent associates, who are independent contractors and are not employees.
20
Item 1A. Risk Factors
In addition to the other risks described in this report, the following risk factors should be considered in evaluating
our business and future prospects:
1. If we are unable to attract and retain independent associates, our business may suffer.
Our future success depends largely upon our ability to attract and retain a large active base of independent
associates and members who purchase our packs and products. We cannot give any assurances that the number of our
independent associates will continue at their current levels or increase in the future. Several factors affect our ability to attract
and retain independent associates and members, including:
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
on-going motivation of our independent associates;
general economic conditions;
significant changes in the amount of commissions paid;
public perception and acceptance of the wellness industry;
public perception and acceptance of network marketing;
public perception and acceptance of our business and our products, including any negative publicity;
the limited number of people interested in pursuing network marketing as a business;
our ability to provide proprietary quality-driven products that the market demands; and
competition in recruiting and retaining independent associates.
2. The loss of key high-level independent associate leaders could negatively impact our associate growth and
our revenue.
As of December 31, 2015, we had approximately 219,000 active independent associates and member positions held
by individuals who purchased our products within the last 12 months, of which 141 occupied the highest associate levels
under our global compensation plan. These independent associate leaders are important in maintaining and growing our
revenue. As a result, the loss of a high-level independent associate or a group of leading associates in the independent
associates’ networks of downlines, whether by their own choice or through disciplinary actions by us for violations of our
policies and procedures, could negatively impact our associate growth and our revenue.
3. Changes to our associate compensation arrangements could be viewed negatively by some independent
associates, could cause failure to achieve desired long-term results and have a negative impact on revenue.
Our associate compensation plan includes components that differ from market to market. We modify components of
our compensation plan from time to time in an attempt to remain competitive and attractive to existing and potential
independent associates including such modifications:
(cid:2)
(cid:2)
(cid:2)
(cid:2)
to address changing market dynamics;
to provide incentives to independent associates that are intended to help grow our business;
to conform to local regulations; and
to address other business needs.
Because of the size of our associate force and the complexity of our compensation plans, it is difficult to predict
how independent associates will view such changes and whether such changes will achieve their desired results.
4. An increase in the amount of commissions and incentives paid to independent associates and members
reduces our profitability.
The payment of commissions and incentives, including bonuses and prizes, is our most significant expense.
Together, our commissions and incentives range approximately from 39% to 43% of our consolidated net sales. We closely
monitor the amount of commissions and incentives as a percentage of net sales, and may periodically adjust our
compensation plan to better manage these costs. There can be no assurance that changes to the compensation plan will be
21
successful in achieving target levels of commissions and incentives as a percentage of net sales and preventing these costs
from having a significant adverse effect on our earnings. Furthermore, such changes may make it difficult to attract and
retain independent associates or cause us to lose some of our existing independent associates.
5. The loss of key management personnel could adversely affect our business.
We depend on the continued services of our executive officers and senior management team as they work closely
with independent associate leaders and are responsible for our day-to-day operations. Our success depends in part on our
ability to retain our executive officers, to compensate our executive officers at attractive levels, and to continue to attract
additional qualified individuals to our management team. Although we have entered into employment agreements with
certain members of our senior management team, and do not believe that any of them are planning to leave or retire in the
near term, we cannot assure you that our senior managers will remain with us. The loss or limitation of the services of any of
our executive officers or members of our senior management team, including our regional and country managers, or the
inability to attract additional qualified management personnel could have a material adverse effect on our business, financial
condition, results of operations, or independent associate relations.
6. If government regulations regarding network marketing change or are interpreted or enforced in a manner
adverse to our business, we may be subject to new enforcement actions and material limitations regarding
our overall business model.
Network marketing is always subject to extensive governmental regulations, including foreign, federal, and state
regulations. Any change in legislation and regulations could affect our business. Furthermore, significant penalties could be
imposed on us for failure to comply with various statutes or regulations. Violations may result from:
(cid:2)
(cid:2)
(cid:2)
(cid:2)
ambiguity in statutes;
regulations and related court decisions;
the discretion afforded to regulatory authorities and courts interpreting and enforcing laws; and
new regulations or interpretations of regulations affecting our business.
7. Independent associates could fail to comply with our associate policies and procedures or make improper
product, compensation, marketing or advertising claims that violate laws or regulations, which could result
in claims against us that could harm our financial condition and operating results.
We sell our products worldwide to a sales force of independent associates. The independent associates are
independent contractors and, accordingly, we are not in a position to provide the same direction, motivation, and oversight as
we would if associates were our own employees. As a result, there can be no assurance that our associates will participate in
our marketing strategies or plans, accept our introduction of new products, or comply with our associate policies and
procedures. All independent associates sign a written contract and agree to adhere to our policies and procedures, which
prohibit associates from making false, misleading or other improper claims regarding products or income potential from the
distribution of the products. However, independent associates may from time to time, without our knowledge and in violation
of our policies, create promotional materials or otherwise provide information that does not accurately describe our
marketing program. There is a possibility that some jurisdictions could seek to hold us responsible for independent associate
activities that violate applicable laws or regulations, which could result in government or third party actions or fines against
us, which could harm our financial condition and operating results.
8. We may be held responsible for certain taxes or assessments relating to the activities of our independent
associates, which could harm our financial condition and operating results.
Our independent associates are subject to taxation and, in some instances, legislation or governmental agencies
impose an obligation on us to collect taxes, such as value added taxes, and to maintain appropriate tax records. In addition,
we are subject to the risk in some jurisdictions of being responsible for social security and similar taxes with respect to our
distributors. In the event that local laws and regulations require us to treat our independent distributors as employees, or if
our distributors are deemed by local regulatory authorities to be our employees, rather than independent contractors, we may
be held responsible for social security and related taxes in those jurisdictions, plus any related assessments and penalties,
which could harm our financial condition and operating results.
22
9. Challenges by private parties to the form of our network marketing system could harm our business.
We may be subject to challenges by private parties, including our independent associates and members, to the form
of our network marketing system or elements of our business. In the United States, the network marketing industry and
regulatory authorities have relied on the implementation of distributor rules and policies designed to promote retail sales to
protect consumers, prevent inappropriate activities, and distinguish between legitimate network marketing distribution plans
and unlawful pyramid schemes. We have adopted rules and policies based on case law, rulings of the FTC, discussions with
regulatory authorities in several states, and domestic and global industry standards. Legal and regulatory requirements
concerning network marketing systems, however, involve a high level of subjectivity, are inherently fact-based, and are
subject to judicial interpretation. Because of this, we can provide no assurance that we would not be harmed by the
application or interpretation of statutes or regulations governing network marketing, particularly in any civil challenge by a
current or former independent associate or member.
10. If our network marketing activities do not comply with government regulations, our business could suffer.
Many governmental agencies regulate our network marketing activities. A government agency’s determination that
our business or our independent associates have significantly violated a law or regulation could adversely affect our business.
The laws and regulations for network marketing intend to prevent fraudulent or deceptive schemes. Our business faces
constant regulatory scrutiny due to the interpretive and enforcement discretion given to regulators, periodic misconduct by
our independent associates, adoption of new laws or regulations, and changes in the interpretation of new or existing laws or
regulations.
In addition, in the past, and because of the industry in which we operate, we have experienced inquiries regarding
specific independent associates. (cid:3)
11. If we violate governmental regulations or fail to obtain necessary regulatory approvals, our operations
could be adversely affected.
Our operation is subject to extensive laws, governmental regulations, administrative determinations, court decisions,
and similar constraints at the federal, state, and local levels in our domestic and foreign markets. These regulations primarily
involve the following:
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
the formulation, manufacturing, packaging, labeling, distribution, importation, sale, and storage of our
products;
the health and safety of dietary supplements, cosmetics and foods;
trade practice laws and network marketing laws;
our product claims and advertising by our independent associates;
our network marketing system;
pricing restrictions regarding transactions with our foreign subsidiaries or other related parties and similar
regulations that affect our level of foreign taxable income;
the assessment of customs duties;
further taxation of our independent associates, which may obligate us to collect additional taxes and maintain
additional records; and
export and import restrictions.
Any unexpected new regulations or changes in existing regulations could significantly restrict our ability to
continue operations, which could adversely affect our business. For example, changes regarding health and safety and food
and drug regulations for our nutritional products could require us to reformulate our products to comply with such
regulations.
In some foreign countries, nutritional products are considered foods, while other countries consider them drugs.
Future health and safety or food and drug regulations could delay or prevent our introduction of new products or suspend or
prohibit the sale of existing products in a given country or marketplace. In addition, if we expand into other foreign markets,
our operations or products could also be affected by the general stability of such foreign governments and the regulatory
environment relating to network marketing and our products. If our products are subject to high customs duties, our sales and
23
competitive position could suffer as compared to locally produced goods. Furthermore, import restrictions in certain
countries and jurisdictions could limit our ability to import products from the United States.
12. Increased regulatory scrutiny of nutritional supplements as well as new regulations that are being adopted
in some of our markets with respect to nutritional supplements could result in more restrictive regulations
and harm our results if our supplements or advertising activities are found to violate existing or new
regulations or if we are not able to effect necessary changes to our products in a timely and efficient
manner to respond to new regulations.
There has been an increasing movement in the United States and other markets to increase the regulation of dietary
supplements, which could impose additional restrictions or requirements on us and increase the cost of doing business. The
FDA created the Office of Dietary Supplements (ODSP) on December 21, 2015. The creation of this new office elevates the
FDA’s program from its previous status as a division under the Office of Nutrition and Dietary Supplements. ODSP will
continue to monitor the safety of dietary supplements.
In several of our markets, new regulations have been adopted, or are likely to be adopted, in the near-term that will
impose new requirements, make changes in some classifications of supplements under the regulations, or limit the claims we
can make. In addition, there has been increased regulatory scrutiny of nutritional supplements and marketing claims under
existing and new regulations. In Europe, for example, we are unable to market supplements that contain ingredients that have
not been previously marketed in Europe without going through an extensive registration and approval process. Europe is also
expected to adopt additional regulations in the future to set new limits on acceptable levels of nutrients. South Africa has also
implemented new “complementary medicine” legislation, which requires a significant dossier in order to register current and
new products. Mannatech is working toward complying with the new legislation and is in contact with the Direct Selling
Association in South Africa. The FDA has implemented Good Manufacturing Practices for the U.S. nutritional supplement
industry. Our operations could be harmed if new regulations require us to reformulate products or effect new registrations, if
regulatory authorities make determinations that any of our products do not comply with applicable regulatory requirements,
if the cost of complying with regulatory requirements increases materially, or if we are not able to effect necessary changes
to our products in a timely and efficient manner to respond to new regulations. In addition, our operations could be harmed if
governmental laws or regulations are enacted that restrict the ability of companies to market or distribute nutritional
supplements or impose additional burdens or requirements on nutritional supplement companies.
13. If we are unable to protect the proprietary rights of our products, our business could suffer.
Our success and competitive position largely depends on our ability to protect the following proprietary rights:
(cid:2)
(cid:2)
(cid:2)
our Ambrotose® complex, a glyconutritional dietary supplement ingredient consisting of a blend of
monosaccharides, or sugar molecules, used in the majority of our products;
the MTech AO Blend® formulation, our proprietary antioxidant technology used in the Ambrotose AO®
complex; and
a compound used in our reformulated Advanced Ambrotose® complex that allows for a more potent
concentration of the full range of mannose-containing polysaccharides occurring naturally in aloe.
We have filed patent applications for the technology relating to our Ambrotose®, Ambrotose AO®, PhytoMatrix® ,
NutriVerus™, PhytoBurst®, and GI-ProBalance®™ products in the United States and certain foreign countries. As of
December 31, 2015, we had received 54 patents for the technology relating to Ambrotose® complex, five of which were
issued in the United States and the remainder of which were issued, granted, and validated in 34 foreign jurisdictions. In
addition, we have entered into confidentiality agreements with our independent associates, suppliers, manufacturers,
directors, officers, and consultants to help protect our proprietary rights. Nevertheless, we continue to face the risk that our
pending patent applications for our products may not issue or that the patent protection granted is more limited than
originally requested. As a precaution, we consult with outside legal counsel and consultants to help ensure that we protect
our proprietary rights. However, our business, profitability, and growth prospects could be adversely affected if we fail to
receive adequate protection of our proprietary rights.
Although there are several patents expiring in late 2017 related to the Ambrotose® technology, Mannatech continues
to actively explore additional patent protection of its technology and pursue expanded patent protection strategies.
Mannatech has a number of pending patent applications for additional protection of Ambrotose®-related technology. Two of
these patents have already issued, and the remaining patent applications are at various stages of processing, depending on the
timeline of each market’s patent offices.
24
Most of our patents for the Ambrotose AO®, GI-ProBalance®™, PhytoMatrix®, NutriVerus™, PhytoBlend and
rapid saccharide and serum formulations do not expire for another nine or more years.
14. Our inability to develop and introduce new products that gain independent associate, member, and market
acceptance could harm our business.
A critical component of our business is our ability to develop new products that create enthusiasm among our
independent associates and members. If we are unable to introduce new products, our independent associate productivity
could be harmed. In addition, if any new products fail to gain market acceptance, are restricted by regulatory requirements or
have quality problems, this would harm our results of operations. Factors that could affect our ability to continue to introduce
new products include, among others, government regulations, the inability to attract and retain qualified research and
development staff, the termination of third-party research and collaborative arrangements, proprietary protections of
competitors that may limit our ability to offer comparable products, and the difficulties in anticipating changes in consumer
tastes and buying preferences.
15. Our failure to appropriately respond to changing consumer preferences and demand for new products or
product enhancements could significantly harm our relationship with independent associates and
members, our product sales, as well as our financial condition and operating results.
Our business is subject to changing consumer trends and preferences, including rapid and frequent changes in
demand for products, new product introductions, and enhancements. Our failure to accurately predict these trends could
negatively impact consumer opinion of our products, which in turn could harm our independent associate and member
relationships and cause the loss of sales. The success of our new product offerings and enhancements depends upon a number
of factors, including our ability to:
(cid:2)
(cid:2)
(cid:2)
(cid:2)
accurately anticipate consumer needs;
innovate and develop new products or product enhancements that meet these needs;
successfully commercialize new products or product enhancements in a timely manner;
price our products competitively;
(cid:2) manufacture and deliver our products in sufficient volumes and in a timely manner; and
(cid:2)
differentiate our product offerings from those of our competitors.
If we do not introduce new products or make enhancements to meet the changing needs of our independent
associates, members and customers in a timely manner, some of our products could be rendered obsolete, which could
negatively impact our revenues, financial condition, and operating results.
16. If our outside suppliers and manufacturers fail to supply products in sufficient quantities and in a timely
fashion, our business could suffer.
Outside manufacturers make all of our products. Our profit margins and timely product delivery are dependent upon
the ability of our outside suppliers and manufacturers to supply us with products in a timely and cost-efficient manner. Our
ability to enter new markets and sustain satisfactory levels of sales in each market depends on the ability of our outside
suppliers and manufacturers to provide required levels of ingredients and products and to comply with all applicable
regulations. As a precaution, we have approved alternate suppliers and manufacturers for our products. However, the failure
of our primary suppliers or manufacturers to supply ingredients or produce our products could adversely affect our business
operations.
We believe we have dependable suppliers for all of our ingredients and we have identified alternative sources for all
of our ingredients, except Arabinogalactan. Due to the unique nature of Arabinogalactan, an important component used in the
formulation of our Ambrotose® complex, we are unable to identify an alternative supplier at this time. If our suppliers are
unable to perform, any delay in replacing or substituting such ingredients could affect our business.
25
17. The loss of suppliers or shortages of raw materials could have an adverse effect on our business, financial
condition, or results of operations.
We depend on outside suppliers for raw materials. Our contract manufacturers acquire all of the raw materials for
manufacturing our products from third-party suppliers. In the event we were to lose any significant suppliers and have
trouble in finding or transitioning to alternative suppliers, it could result in product shortages or product back orders, which
could harm our business. There can be no assurance that suppliers will be able to provide our contract manufacturers the raw
materials in the quantities and at the appropriate level of quality that we request or at a price that we are willing to pay. We
are also subject to delays caused by any interruption in the production of these materials including weather, crop conditions,
climate change, transportation interruptions and natural disasters or other catastrophic events.
18. If we are exposed to product liability claims, we may be liable for damages and expenses, which could
affect our overall financial condition.
We could face financial liability from product liability claims if the use of our products results in significant loss or
injury. We can make no assurances that we will not be exposed to any substantial future product liability claims. Such claims
may include claims that our products contain contaminants, that we provide our independent associates and consumers with
inadequate instructions regarding product use, or that we provide inadequate warnings concerning side effects or interactions
of our products with other substances. We believe that we, our suppliers, and our manufacturers maintain adequate product
liability insurance coverage. However, a substantial future product liability claim could exceed the amount of insurance
coverage or could be excluded under the terms of an existing insurance policy, which could adversely affect our overall
future financial condition.
In recent years a discovery of Bovine Spongiform Encephalopathy, (“BSE”), which is commonly referred to as
“Mad Cow Disease”, has caused concern among the general public. As a result, some countries have banned the importation
or sale of products that contain bovine materials sourced from locations where BSE has been identified. We have changed
the vast majority of our capsules to a vegetable base. However, if a vegetable base is not available or practical for use,
certifications are required to ensure the capsule material is BSE-free. The higher costs could affect our financial condition,
results of operations, and our cash flows.
19. Concentration Risk
A significant portion of our revenue is derived from five products: NutriVerus™, PLUS™, (cid:2)th™ Skin Rejuvenation,
and our core Ambrotose® complex products, which include the Ambrotose® products and Advanced Ambrotose® products. A
decline in sales value of such legacy products could have a material adverse effect on our earnings, cash flows, and financial
position. Revenue from these products were as follows for the years ended December 31, 2015 and 2014 (in thousands,
except percentages):
Advanced Ambrotose®
Ambrotose®
NutriVerus™
PLUS™
(cid:2)th™ Skin Rejuvenation
Total
2015
2014
Sales by
product
% of total
net sales
Sales by
product
% of total
net sales
$
59,026
32.7 % $
9,686
8,541
8,239
5,394
$
90,886
5.4 %
4.7 %
4.6 %
3.0 %
50.4 % $
63,791
10,895
10,530
8,923
13,431
107,571
33.6 %
5.7 %
5.5 %
4.7 %
7.1 %
56.6 %
Our business is not currently exposed to customer concentration risk given that no independent associate has ever
accounted for more than 10% of our consolidated net sales.
20. If we incur substantial liability from litigation, complaints, or enforcement actions or incur liabilities or
penalties resulting from misconduct by our independent associates, our financial condition could suffer.
Routine enforcement actions and complaints are common in our industry. Although we believe we fully cooperate
with regulatory agencies and use various means to address misconduct by our independent associates, including maintaining
policies and procedures to govern the conduct of our independent associates and conducting training seminars, it is still
26
difficult to detect and correct all instances of misconduct. Violations of our policies and procedures by our independent
associates could lead to litigation, formal or informal complaints, enforcement actions, and inquiries by various federal, state,
or foreign regulatory authorities against us and/or our independent associates in each country. Because we have expanded
into foreign countries, our policies and procedures for our independent associates differ depending on the different legal
requirements of each country in which an independent associate does business. Any future litigation, complaints, and
enforcement actions involving us and/or our independent associates could consume considerable amounts of financial and
other corporate resources, which could have a negative impact on our business, profitability, and growth prospects.
21. The global nutrition and skin care industries are intensely competitive and the strengthening of any of our
competitors could harm our business.
The global nutrition and skin care industries are intensely fragmented and competitive. We compete for independent
associates with other network marketing companies outside the global nutrition and skin care industries. Many of our
competitors have greater name recognition and financial resources, which may give them a competitive advantage. Our
competitors may also be able to devote greater resources to marketing, promotional, and pricing campaigns that may
influence our continuing and potential independent associates and members to buy products from competitors rather than
from us. Such competition could adversely affect our business and current market share.
22. A downturn in the economy could affect consumer purchases of discretionary items such as the health and
wellness products that we offer, which could have an adverse effect on our business, financial condition,
profitability, and cash flows.
We appeal to a wide demographic consumer profile and offer a broad selection of health and wellness products. A
downturn in the economy could adversely impact consumer purchases of discretionary items such as health and wellness
products. In past years, the United States and global economies slowed dramatically as a result of a variety of problems,
including turmoil in the credit and financial markets, concerns regarding the stability and viability of major financial
institutions, the state of the housing markets, and volatility in worldwide stock markets. In the event of such economic
downturn, the U.S. and global economies could become significantly challenged in a recessionary state for an indeterminate
period of time. These economic conditions could cause many of our existing and potential associates to delay or reduce
purchases of our products for some time, which in turn could harm our business by adversely affecting our revenues, results
of operations, cash flows and financial condition. We cannot predict these economic conditions or the impact they would
have on our consumers or business.
23. If our international markets are not successful, our business could suffer.
We currently sell our products in the international markets of Canada, Mexico, Colombia, Austria, the Czech
Republic, Denmark, Estonia, Finland, Germany, the Republic of Ireland, Namibia, Netherlands, Norway, South Africa,
Spain, Sweden, the United Kingdom, Australia, Japan, New Zealand, the Republic of Korea, Singapore, Taiwan and Hong
Kong. Our international operations could experience changes in legal and regulatory requirements, as well as difficulties in
adapting to new foreign cultures and business customs. If we do not adequately address such issues, our international markets
may not meet growth expectations. Our international operations and future expansion plans are subject to political,
economic, and social uncertainties, including:
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
inflation;
the renegotiation or modification of various agreements;
increases in custom duties and tariffs;
changes and limits in export controls;
government regulations and laws;
trademark availability and registration issues;
changes in exchange rates;
changes in taxation;
(cid:2) wars and other hostilities; and
(cid:2)
changes in the perception of network marketing.
27
Any negative changes related to these factors could adversely affect our business, profitability, and growth
prospects. Furthermore, any negative changes in our distribution channels may force us to invest significant time and money
related to our distribution and sales to maintain our position in certain international markets.
24. Adverse or negative publicity could cause our business to suffer.
Our business depends, in part, on the public’s perception of our integrity and the safety and quality of our products.
Any adverse publicity could negatively affect the public’s perception about our industry, our products, or our reputation and
could result in a significant decline in our operations and/or the number of our independent associates. Specifically, we are
susceptible to adverse or negative publicity regarding:
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
the nutritional supplements industry;
skeptical consumers;
competitors;
the safety and quality of our products and/or our ingredients;
regulatory investigations of our products or our competitors’ products;
the actions of our independent associates;
the direct selling/network marketing industry; and
scandals within the industries in which we operate.
25. If our information technology system fails or if the implementation of new information technology systems
is not executed efficiently and effectively, our business, financial position, and our operating results could
be adversely affected.
Like many companies, our business is heavily dependent upon our information technology infrastructure to
effectively manage and operate many of our key business functions, including:
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
order processing;
supply chain management;
customer service;
product distribution;
commission processing;
cash receipts and payments; and
financial reporting.
These systems and operations are vulnerable
fires, earthquakes,
telecommunications failures, and other events. They are also subject to break-ins, sabotage, intentional acts of vandalism and
similar misconduct. Although we maintain an extensive security system and disaster recovery program that was developed
under the guidelines published by the National Institute of Standards of Technology, a long-term failure or impairment of
any of our information technology systems could adversely affect our ability to conduct day-to-day business.
to damage and
interruption
from
Occasionally information technology systems must be upgraded or replaced and if this system implementation is not
executed efficiently and effectively, the implementation may cause interruptions in our primary management information
systems, which may make our website or services unavailable thereby preventing us from processing transactions, which
would adversely affect our financial position or operating results.
With increased frequency in recent years, cyber-attacks against companies have resulted in breaches of data
security. Our business requires the storage and transmission of suppliers’ data and our independent associates’ personal,
credit card, and other confidential information. Our information technology systems are susceptible to a growing and
evolving threat of cybersecurity risk. Any substantial compromise of our data security, whether externally or internally, or
misuse of associate data, could cause considerable damage to our reputation, cause the public disclosure of confidential
information, and result in lost sales, significant costs, and litigation, which would negatively affect our financial position and
results of operations.
28
26. Taxation and transfer pricing affect our operations and we could be subjected to additional taxes, duties,
interest, and penalties in material amounts, which could harm our business.
As a multinational corporation, in many countries, including the United States, we are subject to transfer pricing and
other tax regulations designed to ensure that our intercompany transactions are consummated at prices that have not been
manipulated to produce a desired tax result, that appropriate levels of income are reported as earned by the local entities, and
that we are taxed appropriately on such transactions. Regulators closely monitor our corporate structure, intercompany
transactions, and how we effectuate intercompany fund transfers. If regulators challenge our corporate structure, transfer
pricing methodologies or intercompany transfers, our operations may be harmed and our effective tax rate may increase.
A change in applicable tax laws or regulations or their interpretation could result in a higher effective tax rate on our
worldwide earnings and such change could be significant to our financial results. In the event any audit or assessments are
concluded adversely to us, these matters could have a material impact on our financial condition.
27. Currency exchange rate fluctuations could reduce our overall profits.
For the year ended December 31, 2015, we recognized 68.2% of net sales in markets outside of the United States
and 59.3% in markets outside of North America. For the year ended December 31, 2014, we recognized 66.8% of net sales in
markets outside of the United States and 57.5% in markets outside of North America. In preparing our consolidated financial
statements, we are required to translate certain financial information from foreign currencies to the United States dollar using
either the spot rate or the weighted-average exchange rate. If the United States dollar changes relative to applicable local
currencies, there is a risk our reported sales, operating expenses, and net income could significantly fluctuate. For example,
while our 2015 net sales grew 1.1% on a Constant dollar basis (see Item 7, Non-GAAP Financial Measures), unfavorable
foreign exchange caused a $11.8 million decline in GAAP net sales as compared to 2014. In other words, sales would have
been $11.8 million higher, except for the unfavorable impact of foreign exchange. There can be no assurance that foreign
currency fluctuations will not have a material adverse effect on our business, assets, financial condition, liquidity, results of
operations or cash flows. We are not able to predict the degree of exchange rate fluctuations, nor can we estimate the effect
any future fluctuations may have upon our future operations. To date, we have not entered into any hedging contracts or
participated in any hedging or derivative activities.
28. Our stock price is volatile and may fluctuate significantly.
The price of our common stock is subject to sudden and material increases and decreases. Decreases could
adversely affect investments in our common stock. The price of our common stock and the price at which we could sell
securities in the future could significantly fluctuate in response to:
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
broad market fluctuations and general economic conditions;
fluctuations in our financial results;
future securities offerings;
changes in the market’s perception of our products or our business, including false or negative publicity;
governmental regulatory actions;
the outcome of any lawsuits;
financial and business announcements made by us or our competitors;
the general condition of the industry; and
the sale of large amounts of stock by insiders.
In addition, the stock market has experienced extreme price and volume fluctuations in recent years that have
significantly affected the quoted prices of the securities of many companies. The changes sometimes appear to occur without
regard to specific operating performance. The price of our common stock in the open market could fluctuate based on factors
that have little or nothing to do with us or that are outside of our control.
29. Certain shareholders, directors, and officers own a significant amount of our stock, which could allow
them to influence corporate transactions and other matters.
As of December 31, 2015, our directors and executive officers collectively with their families and affiliates,
beneficially owned approximately 19.4% of our total outstanding common stock. As a result, if two or more of these
shareholders choose to act together based on their current share ownership, they may be able to control a significant
29
percentage of the total outstanding shares of our common stock, which could affect the outcome of a shareholder vote on the
election of directors, the adoption of stock option plans, the adoption or amendment of provisions in our articles of
incorporation and bylaws, or the approval of mergers and other significant corporate transactions.
30. We have implemented anti-takeover provisions that may help discourage a change of control.
Certain provisions in our articles of incorporation, bylaws, and the Texas Business Organizations Code help
discourage unsolicited proposals to acquire our Company, even if the proposal may benefit our shareholders. Our articles of
incorporation authorize the issuance of preferred stock without shareholder approval. Our Board of Directors has the power
to determine the price and terms of any preferred stock. The ability of our Board of Directors to issue one or more series of
preferred stock without shareholders’ approval could deter or delay unsolicited changes of control by discouraging open
market purchases of our common stock or a non-negotiated tender or exchange offer for our common stock. Discouraging
open market purchases may be disadvantageous to our shareholders who may otherwise desire to participate in a transaction
in which they would receive a premium for their shares.
In addition, other provisions may also discourage a change of control by means of a tender offer, open market
purchase, proxy contest or otherwise. Our charter documents provide for three classes of directors on our Board of Directors
with members of each class serving staggered three year terms. Our bylaws provide that directors are elected by a plurality
vote and that directors can only be removed for cause upon the affirmative vote of the holders of a majority of the issued and
outstanding shares entitled to be cast for the election of such directors. Furthermore, our bylaws establish advance notice
requirements for nominations for election to our board of directors or for proposing matters that can be acted on by
shareholders at shareholder meetings. In addition, the Texas Business Organization Code restricts, subject to exceptions,
business combinations with any “affiliated shareholder.” Any or all of these provisions could delay, deter or help prevent a
takeover of our Company and could limit the price investors are willing to pay for our common stock.
31. Our failure to comply with the NASDAQ Global Select Market continued listing standards may adversely
affect the price and liquidity of our shares of common stock as well as our ability to raise capital in the
future.
Our common stock is currently listed on the NASDAQ Global Select Market. Continued listing of a security on
Nasdaq is conditioned upon compliance with various continued listing standards. There can be no assurance that we will
continue to satisfy the requirements for maintaining listing on Nasdaq. If we are unsuccessful in maintaining compliance
with the continued listing requirements of Nasdaq, then our common stock could be delisted. If our common stock is delisted
and we cannot obtain listing on another major market or exchange, our common stock’s liquidity would suffer, and we would
likely experience reduced investor interest. Such factors may result in a decrease in our common stock’s trading price.
Delisting may also restrict us from issuing additional securities or securing financing.
As of the date of issuance of this report, we were in compliance with the continued listing requirements. However,
we cannot assure you that we will be successful in continuing to meet all requisite continued listing criteria.
32. We are not required to pay dividends, and our Board of Directors may decide not to declare dividends in
the future.
The declaration of dividends on our common stock is solely within the discretion of our Board of Directors, subject
to limitations under Texas law stipulating that dividends may not be paid if payment therefore would cause the corporation to
be insolvent or if the amount of the dividend would exceed the surplus of the corporation. Our Board of Directors may decide
not to declare dividends or we could be prevented from declaring a dividend because of legal or contractual restrictions. The
failure to pay dividends could reduce our stock price. Our Board of Directors suspended dividends in August 2009. We may
not resume payment of dividends in the future.
33. We rely upon our existing cash balances and cash flow from operations to fund our business. In the event
that we do not generate adequate cash flow from operations, we will need to raise money through a debt or
equity financing, if available, or curtail operations.
The adequacy of our cash resources to continue to meet our future operational needs depends, in large part, on our
ability to increase product sales and/or reduce operating costs. If we are unsuccessful in generating positive cash flow from
operations, we could exhaust our available cash resources and be required to secure additional funding through a debt or
30
equity financing, significantly scale back our operations, and/or discontinue many of our activities, which could negatively
affect our business and prospects. Additional funding may not be available or may only be available on unfavorable terms.
34. The reduced disclosure requirements applicable to us as a "smaller reporting company" may make our
common stock less attractive to investors.
We are a "smaller reporting company" as defined in Rule 12b-2 of the Exchange Act. As a smaller reporting
company we prepare and file SEC forms similar to other SEC reporting companies; however, the information disclosed may
differ and be less comprehensive. If some investors find our common stock less attractive as a result of less comprehensive
information we may disclose pursuant to the exemptions available to us as a smaller reporting company, there may be a less
active trading market for our common stock and our stock price may be more volatile than that of an otherwise comparable
company that does not avail itself of the same or similar exemptions.
Circumstances and conditions may change. Accordingly, additional risks and uncertainties not currently known, or
that we currently deem not material, may also adversely affect our business operations.
31
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We lease property at several locations for our headquarters and distribution facilities, including:
Location
Size
Expiration date
Coppell, Texas (corporate headquarters)
Coppell, Texas (distribution center)
St. Leonards, Australia (Australian headquarters)
Milton Park, Oxfordshire (U.K. headquarters)
Minato-ku, Tokyo, Japan (Japanese headquarters)
Chuo-ku, Osaka, Japan (Japanese training center)
Gangnam-gu, Seoul, Korea (Republic of Korea headquarters)
Seo-gu, Daejun, Korea (Regional center)
Haewoondae-gu, Busan, Korea (Pusan training center)
Incheon, South Korea (Incheon training center)
Seoul, South Korea (office)
Taipei, Taiwan (Taiwan headquarters)
Kaohsiung, Taiwan (Taiwan training center)
Zug, Switzerland (Switzerland headquarters)
Tsim Sha Tsui, Kowloon, Hong Kong (office)
Richmond, BC (Canada training center)
Markham, ON (office)
Bedfordview, South Africa (office)
Guadalajara, Mexico (customer service center)
Mexico City, Mexico (customer service center)
Monterrey, Mexico (office)
Tuxtla, Mexico (office)
Singapore (meeting center)
Bogota, Columbia (office)
______________________
.
110,000 sq. feet
75,000 sq. feet(1)
850 sq. meters(2)
3,240 sq. feet
161 Tsubos(3)
73 Tsubos(4)
718 Pyong(5)
113 Pyong(6)
191 Pyong(7)
218 Pyong(8)
99 Pyong(9)
172 Pings(10)
102 Pings(11)
680 sq. meters(12)
170 sq. feet
1,963 sq. feet
1,714 sq. feet
383 sq. meters(13)
389 sq. meters(14)
123 sq. meters(15)
149.16 sq. meters(16)
23.76 sq. meters(17)
1,098 sq. feet
700 sq. feet
March 2018
March 2018
December 2018
August 2017
November 2016
August 2020
June 2016
June 2016
March 2017
April 2017
June 2016
February 2020
June 2020
— (18)
— (18)
September 2017
September 2019
— (19)
March 2017
August 2016
June 2016
October 2016
August 2016
May 2016
(1) The Company subleases a majority of this space to Integrated Distribution and Logistics Direct, LLC, which provides warehousing and distribution
services.
(2) Approximately 9,150 square feet & subleases 2,153 sq.ft to
Morrison Design Partnership
(3) Approximately 5,729 square feet.
(4) Approximately 2,598 square feet.
(5) Approximately 25,549 square feet.
(6) Approximately 4,021 square feet.
(7) Approximately 6,796 square feet.
(8) Approximately 7,757 square feet.
(9) Approximately 3,523 square feet.
(10) Approximately 6,119 square feet.
(11) Approximately 3,629 square feet.
(12) Approximately 7,320 square feet.
(13) Approximately 4,123 square feet.
(14) Approximately 4,187 square feet.
(15) Approximately 1,324 square feet.
(16) Approximately 1,606 square feet.
(17) Approximately 256 square feet.
(18). Renewable annually.
(19). Renewable monthly.
To maximize our operating strategy and minimize costs, we contract with third-party distribution and fulfillment
facilities in our three regions: (i) North America, (ii) EMEA and (iii) Asia/Pacific. By entering into these third-party
distribution facility agreements, our offices maintain flexible operating capacity, minimize shipping costs, and are able to
process an order within 24-hours after order placement and receipt of payment.
32
Item 3. Legal Proceedings
See Note 13 to our Consolidated Financial Statement, Litigation, which is incorporated herein by reference.
Item 4. Mine Safety Disclosures
Not Applicable.
33
PART II
Item 5.(cid:2) Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer
Purchases of Equity Securities
Market for Our Common Stock. On February 12, 1999, we completed our initial public offering. Our common stock is
currently trading on Nasdaq under the symbol “MTEX.” As of February 29, 2016, we had an aggregate of 2,696,986 shares
of our common stock outstanding and the closing price on such date was $18.16. Below are the high and low closing prices
of our common stock as reported on the Nasdaq for each quarter of the fiscal years ended December 31, 2015 and 2014:
2015:
2014:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Low
17.12
18.00
16.91
18.55
Low
12.64
12.14
11.77
12.66
$
$
$
$
$
$
$
$
High
28.49
21.04
21.00
28.06
High
19.96
18.49
17.32
30.65
$
$
$
$
$
$
$
$
Holders. As of February 29, 2016, there were 1,507 shareholders of record.
Dividends. None. See “Risk Factors—We are not required to pay dividends, and our Board of Directors may decide not to
declare dividends in the future” in Item 1A of this Form 10-K for further discussion related to future payment of dividends.
Recent Sales of Unregistered Securities.None.
Uses of Proceeds from Registered Securities.None.
Issuer Purchases of Equity Securities.None.
Item 6. Selected Financial Data
Not applicable for a Smaller Reporting Company
34
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion is intended to assist in the understanding of our consolidated financial position and our
results of operations for each of the two years ended December 31, 2015 and 2014. This discussion should be read in
conjunction with “Item 15. – Consolidated Financial Statements and related notes,” beginning on page F-1 of this report and
with other financial information included elsewhere in this report. Unless stated otherwise, all financial information
presented below, throughout this report, and in the consolidated financial statements and related notes includes Mannatech
and all of our subsidiaries on a consolidated basis. Refer to the Non-GAAP Financial Measure section herein for a
description of how Constant dollar (“Constant dollar”) growth rate (a Non-GAAP financial metric) is determined.
COMPANY OVERVIEW
Since November 1993, we have continued to develop innovative, high quality, proprietary nutritional supplements,
topical and skin care and anti-aging products, and weight-management products that are sold through a global network
marketing system. We operate in three regions: (i) North America/South America (the United States, Canada, Colombia and
Mexico); (ii) EMEA (Austria, the Czech Republic, Denmark, Estonia, Finland, Germany, the Republic of Ireland, Namibia,
the Netherlands, Norway, South Africa, Spain, Sweden and the United Kingdom); and (iii) Asia/Pacific (Australia, Japan,
New Zealand, the Republic of Korea, Singapore, Taiwan and Hong Kong). In the first quarter of 2016, we launched
operations in Colombia.
We conduct our business as a single operating segment and primarily sell our products through a network of
approximately 219,000 active independent associates and member positions held by individuals that had purchased our
products and/or packs during the last 12 months, who we refer to as current independent associates and members. New pack
sales and positions in our network are leading indicators for the long-term success of our business. New associate or member
positions are created in our network when our packs and products are purchased for the first time under a new account. We
operate as a seller of nutritional supplements, topical and skin care and anti-aging products, and weight-management
products through our network marketing distribution channels operating in twenty-five countries. We review and analyze net
sales by geographical location and by packs and products on a consolidated basis. Each of our subsidiaries sells similar
products and exhibits similar economic characteristics, such as selling prices and gross margins.
Because we sell our products through network marketing distribution channels, the opportunities and challenges that
affect us most are: recruitment of new and retention of current independent associates and members that occupy sales or
purchasing positions in our network; entry into new markets and growth of existing markets; niche market development; new
product introduction; and investment in our infrastructure.
Current Economic Conditions and Recent Developments
Overall net sales for 2015 decreased $9.8 million, or 5.2%, compared to 2014. Our operations outside of North
America accounted for approximately 59.3% of our consolidated net sales.
The net sales comparisons were affected by the normalization during 2015 of sales of the (cid:2)th™ skin care and anti-
aging product that launched in all of our operating markets during 2014 and the normalization of our loyalty program during
2015. These items affected net sales comparability as follows:
(cid:2) Net sales attributable to our (cid:2)th™ skin care product were $6.3 million and $13.8 million for 2015 and 2014,
respectively, a decrease of $7.5 million.
(cid:2)
In connection with our loyalty program, we recognize the dollar equivalent in revenue of loyalty points as the
points are applied or forfeited. During 2015 we recognized $23.8 million in revenue and deferred $22.2 million
in revenue, resulting in a net recognition of revenue of $1.6 million. During 2014, we recognized $17.0 million
in revenue and deferred $21.2 million in revenue, resulting in a net deferral of revenue of $4.2 million. During
2015, $5.8 million more in revenue was recognized in connection with our loyalty program as compared to
2014.
Excluding the effects on net sales of the items listed above, net sales for 2015 would have decreased by $8.1 million
as compared to 2014. During 2015, fluctuations in foreign currency exchange rates had an overall $11.8 million unfavorable
impact on our net sales.
35
RESULTS OF OPERATIONS
Year Ended December 31, 2015 compared to Year Ended December 31, 2014
The tables below summarize our consolidated operating results in dollars and as a percentage of net sales for the
years ended December 31, 2015 and 2014 (in thousands, except percentages).
2015
2014
Change
Total
Dollars
$ 180,267
34,102
146,165
% of
net sales
100.0%
18.9%
81.1%
Total
dollars
$ 190,081
38,350
151,731
% of
net sales
100.0 %
20.2 %
79.8 %
$
Dollar
(9,814)
(4,248)
(5,566)
Percentage
(5.2)%
(11.1)%
(3.7)%
72,956
34,458
1,793
24,814
134,021
12,144
210
(4,155)
8,199
(2,360)
5,839
$
40.5 %
19.1 %
1.0 %
13.8 %
74.3 %
6.7%
0.1 %
(2.3)%
4.5%
(1.3)%
3.2%
75,240
36,193
1,608
25,948
138,989
12,742
121
(3,042)
9,821
(3,325)
6,496
39.6 %
19.0 %
0.8 %
13.7 %
73.1 %
6.7 %
0.1 %
(1.6 )%
5.2 %
(1.7 )%
3.4 %
$
(2,284)
(1,735)
185
(1,134)
(4,968)
(598)
89
(1,113)
(1,622)
965
(657)
(3.0)%
(4.8)%
11.5 %
(4.4)%
(3.6)%
(4.7)%
73.6 %
36.6 %
(16.5)%
29.0 %
(10.1)%
$
Net sales
Cost of sales
Gross profit
Operating expenses:
Commissions and incentives
Selling and administrative expenses
Depreciation and amortization
Other operating costs
Total operating expenses
Income from operations
Interest income
Other expense, net
Income before income taxes
Income tax provision
Net income
Non-GAAP Financial Measures
To supplement our financial results presented in accordance with generally accepted accounting principles in the
United States ("GAAP"), we disclose operating results that have been adjusted to exclude the impact of changes due to the
translation of foreign currencies into U.S. dollars, including changes in: Net Sales, Deferred Revenue, Gross Profit, and
Income from Operations. We refer to these adjusted financial measures as Constant dollar items, which are Non-GAAP
financial measures. We believe these measures provide investors an additional perspective on trends. To exclude the impact
of changes due to the translation of foreign currencies into U.S. dollars, we calculate current year results and prior year
results at a constant exchange rate, which is the prior year’s rate. Currency impact is determined as the difference between
actual growth rates and constant currency growth rates.
Net sales
Product
Pack
Other
Gross profit
Income from operations
2015
GAAP
Measure:
Total $
Non-GAAP
Measure:
Constant $
2014
GAAP
Measure:
Total $
180.3
143.1
31.7
5.5
146.2
12.1
192.1
152.2
34.1
5.8
155.5
13.6
$ 190.1
155.3
27.8
7.0
151.7
12.7
Reconciliation –
Constant $
Dollar
Percent
2.0
(3.1 )
6.3
(1.2 )
3.8
0.9
1.1 %
(2.0 ) %
22.7 %
(17.1 ) %
2.5 %
7.1 %
36
Net Sales in Dollars and as a Percentage of Consolidated Net Sales
Consolidated net sales by region for the years ended December 31, 2015 and 2014 were as follows (in millions,
except percentages):
North America
Asia/Pacific
EMEA
Total
Net Sales
2015
2014
$
$
73.3
91.4
15.6
180.3
40.7 %
50.7 %
8.6 %
100.0 %
$
$
80.8
92.4
16.9
190.1
42.5 %
48.6 %
8.9 %
100.0 %
For the year ended December 31, 2015, our operations outside of North America accounted for approximately
59.3% of our consolidated net sales, whereas in the same period in 2014, our operations outside of North America accounted
for approximately 57.5% of our consolidated net sales.
Consolidated net sales for the year ended December 31, 2015 decreased by $9.8 million, or 5.2%, to $180.3 million,
as compared to $190.1 million for the same period in 2014. North America sales decreased by $7.5 million, or 9.3%, to $73.3
million as compared to $80.8 million for the same period in 2014. Asia/Pacific sales decreased by $1.0 million, or 1.1%, to
$91.4 million as compared to $92.4 million for the same period in 2014. EMEA sales decreased by $1.3 million, or 7.7%, to
$15.6 million as compared to $16.9 million for the same period in 2014.
During 2015, fluctuations in foreign currency exchange rates had an overall unfavorable impact on our net sales. In
Constant Dollars net sales for the year ending December 31, 2015 grew by $2.0 million, compared to 2014. The net sales
impact is calculated as the difference between (1) the current period’s net sales in USD and (2) the current period’s net sales
in local currencies converted to USD by applying average exchange rates for the year ended December 31, 2014.
Our total sales and sales mix could be influenced by any of the following:
•
•
•
•
•
•
•
•
•
•
•
•
•
changes in our sales prices;
changes in consumer demand;
changes in the number of independent associates and members;
changes in competitors’ products;
changes in economic conditions;
changes in regulations;
announcements of new scientific studies and breakthroughs;
introduction of new products;
discontinuation of existing products;
adverse publicity;
changes in our commissions and incentives programs;
direct competition; and
fluctuations in foreign currency exchange rates.
Our sales mix for the years ended December 31, was as follows (in millions, except percentages):
Consolidated product sales
Consolidated pack sales
Consolidated other, including freight
Total consolidated net sales
Change
2015
2014
Dollar
$
$
143.1 $
31.7
5.5
180.3 $
155.3
27.8
7.0
190.1
$
$
(12.2 )
3.9
(1.5 )
(9.8 )
Percentage
(7.9 )%
14.0 %
(21.4 )%
(5.2 )%
37
Pack sales correlate to new associate positions held by individuals in our network when a starter pack is purchased
and to continuing associate positions held by individuals in our network when an upgrade or renewal pack is purchased.
However, there is no direct correlation between product sales and the number of new and continuing associate positions and
member positions held by individuals in our network because associates and members utilize products at different volumes.
Product Sales
Substantially all of our product sales are to independent associates at published wholesale prices. We also sell our
products to members at discounted published retail prices.
Product sales for the year ended December 31, 2015 decreased by $12.2 million, or 7.9%, to $143.1 million, as
compared to $155.3 million for the same period in 2014 due primarily to a 3.7% decrease in the number of orders and a 6.6%
decrease in average order size. Average order value in 2015 was $155, as compared to $166 for the same period in 2014.
Pack Sales
Packs may be purchased by our independent associates who wish to build a Mannatech business. These packs
contain product that is discounted from both the published retail and associate price. There are several pack options available
to our independent associates. In certain markets, pack sales are completed during the final stages of the registration process
and can provide new independent associates with valuable training and promotional materials, as well as products for resale
to retail customers, demonstration purposes, and personal consumption. Business-building independent associates can also
purchase an upgrade pack, which provides the associate with additional promotional materials, additional products, and
eligibility for additional commissions and incentives. Many of our business-building independent associates also choose to
purchase renewal packs to satisfy annual renewal requirements to continue to earn various commissions.
The dollar amount of pack sales associated with new and continuing independent associate positions held by
individuals in our network was as follows, for the years ended December 31 (in millions, except percentages):
New
Continuing
Total
2015
2014
Dollar
$
$
8.7 $
23.0
31.7 $
8.7
19.1
27.8
$
$
Change
Percentage
— %
20.4 %
14.0 %
—
3.9
3.9
Total pack sales for the year ended December 31, 2015 increased by $3.9 million, or 14.0%, to $31.7 million, as
compared to $27.8 million for the same period in 2014 as the number of packs sold increased 9.9%. Average pack value for
the year ended December 31, 2015 was $235, as compared to $227 for the same period in 2014.
The approximate number of active new and continuing independent associate positions and member positions held
by individuals in our network associated with the purchase of our packs or products during the twelve months ended
December 31 was as follows:
New
Continuing
Total
2015
2014
96,000
123,000
219,000
43.8 %
56.2 %
100.0 %
108,000
122,000
230,000
47.0 %
53.0 %
100.0 %
During 2015 and 2014, we took the following actions to help increase the number of independent associates and
members:
•
•
•
•
•
•
•
registered our most popular products with the appropriate regulatory agencies in all countries of operations;
explored new international markets;
continued to strengthen compliance initiatives;
concentrated on publishing results of research studies and clinical trials related to our products;
initiated additional incentives;
explored new advertising and educational tools to broaden name recognition; and
implemented changes to our global associate career and compensation plan.
38
Other Sales
Other sales consisted of: (i) freight revenue charged to our independent associates and members; (ii) sales of
promotional materials; (iii) monthly fees collected for Success Tracker™ and Navig8™ customized electronic business-
building and educational materials, databases and applications; (iv) training and event registration fees; and (v) a reserve for
estimated sales refunds and returns. Promotional materials, training, database applications and business management tools
support our independent associates, which in turn helps stimulate product sales.
For the year ended December 31, 2015, other sales decreased by $1.5 million, or 21.4%, to $5.5 million, as
compared to $7.0 million for the same period in 2014. The decrease was primarily due to a decrease in freight fees for
product and pack shipments, a cessation of sales to MannaRelief, a decrease in sales aids, and a decrease in event fees.
Gross Profit
For the year ended December 31, 2015, gross profit decreased by $5.6 million, or 3.7%, to $146.2 million, as
compared to $151.7 million for the same period in 2014 as a result of weakened sales. Gross profit as a percentage of net
sales was 81.1% and 79.8% for 2015 and 2014, respectively.
Commission and Incentives
Commission expenses decreased for the year ended December 31, 2015, by 2.9%, or $2.1 million, to $70.2 million,
as compared to $72.3 million for the same period in 2014. The decrease in commissions was due to the decrease in
commissionable net sales. Commissions as a percentage of net sales were 39.0% for the year ending December 31, 2015 and
38.0% for the same period in the prior year.
Incentive costs decreased for the year ended December 31, 2015 by 6.9%, or $0.2 million, to $2.7 million, as
compared to $2.9 million for the same period in 2014. The costs of incentives, as a percentage of net sales decreased to 1.5%
for the year ended December 31, 2015, as compared to 1.6% for the same period in 2014. These decreases are attributed to
the United States, where fewer associates qualified for incentives.
Selling and Administrative Expenses
Selling and administrative expenses include a combination of both fixed and variable expenses. These expenses
consist of compensation and benefits for employees, temporary and contract labor and marketing-related expenses, such as
monthly magazine development costs and costs related to hosting our corporate-sponsored events.
For the year ended December 31, 2015, overall selling and administrative expenses decreased by $1.7 million, or
4.7%, to $34.5 million, as compared to $36.2 million for the same period in 2014 due to decreases in payroll expense offset
by increases in marketing expense. Selling and administrative expenses, as a percentage of net sales were 19.1% and 19.0%
during 2015 and 2014, respectively.
Other Operating Costs
Other operating costs include travel, accounting/legal/consulting fees, credit card processing fees, banking fees, off-
site storage fees, utilities, and other miscellaneous operating expenses. Changes in other operating costs are associated with
the changes in our net sales.
For the year ended December 31, 2015, other operating costs decreased by $1.1 million, or 4.4%, to $24.8 million,
as compared to $25.9 million for the same period in 2014. For the year ended December 31, 2015, other operating costs, as a
percentage of net sales, were 13.8%, as compared to 13.7% for the same period in 2014. The decrease in other operating
costs was primarily due to a $0.4 million decrease in credit card fees, a $0.4 million decrease in facility costs, a $0.2 million
decrease in travel and entertainment expenses, a $0.2 million decrease in bad debt expense, offset by a $0.2 million increase
in repairs and maintenance expenses.
Depreciation and Amortization Expense
For the year ended December 31, 2015, depreciation and amortization expense was $1.8 million, as compared to
$1.6 million for the same period in 2014.
39
Other Expense, net
For the year ending December 31, 2015 and 2014, other income (expense), net was ($3.9) million and ($2.9)
million, respectively. During 2015, the other income (expense) included $0.2 million of interest income and ($4.2) of foreign
exchange loss. During 2014, the other income (expense) included $0.1 million of interest income and ($3.0) of foreign
exchange loss.
Provision for Income Taxes
Provision for income taxes include current and deferred income taxes for both our domestic and foreign operations.
Our statutory income tax rates by jurisdiction are as follows, for the years ended December 31:
Country
Australia
Canada
Denmark
Japan
Mexico
Norway
Republic of Korea
Singapore
South Africa
Sweden
Switzerland
Taiwan
United Kingdom
United States
Cyprus
Hong Kong
Ukraine(1)
Gibraltar
(1) On March 21, 2014, the Company suspended operations in the Ukraine.
2015
30.0 %
26.5 %
23.5 %
37.1 %
30.0 %
27.0 %
22.0 %
17.0 %
28.0 %
22.0 %
16.2 %
17.0 %
20.3 %
37.5 %
12.5 %
16.5 %
18.0 %
10.0 %
2014
30.0 %
26.5 %
23.5 %
37.1 %
30.0 %
27.0 %
22.0 %
17.0 %
28.0 %
22.0 %
16.2 %
17.0 %
21.0 %
37.5 %
12.5 %
16.5 %
18.0 %
10.0 %
Income from our international operations is subject to taxation in the countries in which we operate. We are also
eligible to claim foreign income tax credits that would reduce the total amount of income taxes owed in the United States
when the conditions to claim foreign tax credits are met based on IRS codes and regulations.
We use the recognition and measurement provisions of Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 740, Income Taxes (“Topic 740”), to account for income taxes. The
provisions of Topic 740 require a company to record a valuation allowance when the “more likely than not” criterion for
realizing net deferred tax assets cannot be met. Furthermore, the weight given to the potential effect of such evidence should
be commensurate with the extent to which it can be objectively verified. As a result, we reviewed the operating results, as
well as all of the positive and negative evidence related to realization of such deferred tax assets to evaluate the need for a
valuation allowance in each tax jurisdiction.
40
As of December 31, 2015 and 2014, we maintained or decreased our valuation allowance for deferred tax assets in
the following table (in millions), as we believe the “more likely than not” criterion for recognition and realization purposes,
as defined in Topic 740, cannot be met. The U.S. valuation allowance decreased due to the usage of foreign tax credits.
Country
Mexico
Norway
Sweden
Switzerland
Taiwan
Ukraine
United States
Other Jurisdictions
Total
2015
2.5
—
0.1
1.0
1.2
0.1
4.0
0.1
9.0
$
$
2014
2.7
0.1
0.1
1.2
1.2
0.1
4.3
—
9.7
$
$
The dollar amount of the provisions for income taxes is directly related to our profitability and changes in the
taxable income among countries. For the years ended December 31, 2015 and 2014, our effective tax rate was 28.9% and
33.9%(cid:3)respectively. For 2015, the effective tax rate was close to what would have been expected if the federal statutory rate
was applied to income before taxes. Items decreasing the effective income tax rate included the lower statutory tax rates in
foreign jurisdictions compared to the U.S. and a larger mix of foreign income over U.S. income than in prior years. In
addition, the rate decreased for an overall reduction in the valuation allowances associated with certain deferred tax assets.
For 2014, the effective income tax rate was close to what would have been expected if the federal statutory income tax rate
was applied to income before taxes. Items increasing the effective income tax rate included the change in the valuation
allowances associated with certain deferred tax assets, U.S. federal tax on deemed foreign dividend distribution, and “subpart
F income” resulting from controlled foreign corporation operations. Items decreasing the effective income tax rate included
the foreign tax credits.
SEASONALITY
We believe the impact of seasonality on our consolidated results of operations is minimal. We have experienced and
believe we will continue to experience variations on our quarterly results of operations in response to, among other things:
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
the timing of the introduction of new products and incentives;
our ability to attract and retain associates and members;
the timing of our incentives and contests;
the general overall economic outlook;
government regulations;
the outcome of certain lawsuits;
the perception and acceptance of network marketing; and
the consumer perception of our products and overall operations.
As a result of these and other factors, our quarterly results may vary significantly in the future. Period-to-period
comparisons should not be relied upon as an indication of future performance since we can give no assurances that revenue
trends in new markets, as well as in existing markets, will follow our historical patterns. The market price of our common
stock may also be adversely affected by the above factors.
41
LIQUIDITY AND CAPITAL RESOURCES
Cash and Cash Equivalents
As of December 31, 2015, our cash and cash equivalents increased by 14.3%, or $4.0 million, to $32.0 million from
$28.0 million as of December 31, 2014. The Company is required to restrict cash for direct selling insurance premiums and
credit card sales in the Republic of Korea, and, as the value of the Korean Won declined, our restricted cash balances
decreased during the period ending December 31, 2015 by $0.4 million. Finally, fluctuations in currency rates produced an
increase of $1.4 million in cash and cash equivalents in 2015 as compared to an increase of $1.1 million in 2014.
Our principal use of cash is to pay for operating expenses, including commissions and incentives, capital assets,
inventory purchases, and international expansion. We fund our business objectives, operations, and expansion of our
operations through net cash flows from operations rather than incurring long-term debt.
Working Capital
Working capital represents total current assets less total current liabilities. At December 31, 2015, our working
capital increased by $7.2 million, or 43.9%, to $23.6 million from $16.4 million at December 31, 2014. The increase in
working capital is primarily due to an increase in cash, decreases in taxes payable, deferred revenue, commissions payable
and accounts payable, offset by decreases in inventory, deferred commissions and deferred tax assets. Deferred commissions
and deferred revenue decreased during 2015 due to the loyalty program (see Note 1 to our Consolidated Financial
Statements, Organization and Summary of Significant Accounting Policies).
Net Cash Flows
Our net consolidated cash flows consisted of the following, for the years ended December 31 (in millions):
Provided by / (used in):
Operating activities
Investing activities
Financing activities
2015 2014
$ 4.4 $ 9.4
$ (2.0) $ (1.5)
$ 0.1 $ (1.4)
Operating Activities
Cash provided by operating activities was $4.4 million for the year ended December 31, 2015 compared to cash
provided by operating activities of $9.4 million for the same period in 2014.
Investing Activities
For the year ended December 31, 2015, our investing activities used cash of $2.0 million compared to cash used of
$1.5 million for the same period of 2014. During the year ended December 31, 2015, we invested $1.3 million in computer
hardware and software and $0.7 million for leasehold improvements in various international offices and training centers as
compared to $0.8 million for computer hardware and software and $0.7 million in leasehold improvements in our Korean
offices and training centers for the same period in 2014.
Financing Activities
For the year ended December 31, 2015, we used cash of $1.5 million to repay capital lease obligations and received
$1.6 million in funding from a capital financing agreement which matures in December of 2018 related to our investment in
computer hardware and software. For the year ended December 31, 2014, we used cash of $1.5 million to repay capital lease
obligations and received approximately $0.1 million in proceeds from stock options exercised.
General Liquidity and Cash Flows
Short Term Liquidity
We believe our existing liquidity and cash flows from operations are adequate to fund our normal expected future
business operations for the next 12 months. As our primary source of liquidity is our cash flows from operations, this will be
dependent on our ability to maintain and/or continue to improve revenue as compared to our operational expenses. However,
if our existing capital resources or cash flows become insufficient to meet current business plans, projections, and existing
capital requirements, we may be required to raise additional funds, which may not be available on favorable terms, if at all.
42
We are engaged in ongoing audits in various tax jurisdictions and other disputes in the normal course of business. It is
impossible at this time to predict whether we will incur any liability, or to estimate the ranges of damages, if any, in connection
with these matters. Adverse outcomes on these uncertainties may lead to substantial liability or enforcement actions that could
adversely affect our cash position. For more information, see Note 8 Income Taxes and Note 13 Litigation to our Consolidated
Financial Statements.
Long Term Liquidity
We believe our cash flows from operations should be adequate to fund our normal expected future business
operations and possible international expansion costs for the long term. As our primary source of liquidity is from our cash
flows from operations, this will be dependent on our ability to maintain and and/or improve revenue as compared to
operational expenses.
However, if our existing capital resources or cash flows become insufficient to meet anticipated business plans and
existing capital requirements, we may be required to raise additional funds, which may not be available on favorable terms, if
at all.
Our future access to the capital markets may be adversely impacted if we fail to maintain compliance with the
Nasdaq Marketplace Rules for the continued listing of our stock. We continuously monitor our compliance with the Nasdaq
continued listing rules.
CONTRACTUAL OBLIGATIONS
The following summarizes our future commitments and obligations associated with various agreements and
contracts as of December 31, 2015, for the years ending December 31 (in thousands):
Capital lease obligations
Purchase obligations(1)(2)
Operating leases
Note Payable and other
financing arrangements
Employment agreements
Royalty agreement
Tax liability (3)
Other obligations(4)
Total commitments and
obligations
__________
2016
2017
2018
2019
2020
Thereafter
Total
$
492 $
5,019
1,729
370 $
—
1,430
766
1,503
52
110
314
579
—
59
522
164
205 $
—
787
530
—
59
—
49
52 $
—
297
—
—
59
—
49
13 $
—
112
—
—
59
—
97
— $
—
—
—
—
7
83
769
1,132
5,019
4,355
1,875
1,503
295
715
1,442
$
9,985 $
3,124 $
1,630 $
457 $
281 $
859 $ 16,336
(1)
(2)
(3)
(4)
For purposes of the table, a purchase obligation is defined as an agreement to purchase goods or services that is non-cancelable,
enforceable and legally binding on the Company that specifies all significant terms, including: fixed or minimum quantities to be
purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction.
Excludes approximately $9.9 million of finished product purchase orders that may be cancelled or with delivery dates that have
changed as of December 31, 2015.
Represents the tax liability associated with uncertain tax positions, see Note 8 to our Consolidated Financial Statements, Income
Taxes to our consolidated financial statements.
Other obligations are composed of pension obligations related to the Company's international operations (approximately $1.0
million) and lease restoration obligations (approximately $0.4 million).
We have maintained purchase commitments with certain raw material suppliers to purchase minimum quantities and
to ensure exclusivity of our raw materials and the proprietary nature of our products. Currently, we have one supply
agreement that requires minimum purchase commitments. We also maintain other supply agreements and manufacturing
agreements to protect our products, regulate product costs, and help ensure quality control standards. These agreements do
not require us to purchase any set minimums. We have no present commitments or agreements with respect to acquisitions or
purchases of any manufacturing facilities; however, management from time to time explores the possibility of the benefits of
purchasing a raw material manufacturing facility to help control costs of our raw materials and help ensure quality control
standards.
43
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any special-purpose entity arrangements, nor do we have any off-balance sheet arrangements.
MARKET RISKS
Please see “Quantitative and Qualitative Disclosure about Market Risk” under Item 7A of this Form 10-K for
additional information about our Market Risks.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in
the United States of America (“GAAP”). The application of GAAP requires us to make estimates and assumptions that affect
the reported values of assets and liabilities at the date of our financial statements, the reported amounts of revenues and
expenses during the reporting period, and the related disclosures of contingent assets and liabilities. We use estimates
throughout our financial statements, which are influenced by management’s judgment and uncertainties. Our estimates are
based on historical trends, industry standards, and various other assumptions that we believe are applicable and reasonable
under the circumstances at the time the consolidated financial statements are prepared. Our Audit Committee reviews our
critical accounting policies and estimates. We continually evaluate and review our policies related to the portrayal of our
consolidated financial position and consolidated results of operations that require the application of significant judgment by
our management. We also analyze the need for certain estimates, including the need for such items as allowance for doubtful
accounts, inventory reserves, long-lived fixed assets and capitalization of internal-use software development costs, reserve
for uncertain income tax positions and tax valuation allowances, revenue recognition, sales returns, and deferred revenues,
accounting for stock-based compensation, and contingencies and litigation. Historically, actual results have not materially
deviated from our estimates. However, we caution readers that actual results could differ from our estimates and assumptions
applied in the preparation of our consolidated financial statements. If circumstances change relating to the various
assumptions or conditions used in our estimates, we could experience an adverse effect on our financial position, results of
operations, and cash flows. We have identified the following applicable critical accounting policies and estimates as of
December 31, 2015:
Inventory Reserves
Inventory consists of raw materials, finished goods, and promotional materials that are stated at the lower of cost
(using standard costs that approximate average costs) or market. We record the amounts charged by the vendors as the costs
of inventory. Typically, the net realizable value of our inventory is higher than the aggregate cost. Determination of net
realizable value can be complex and, therefore, requires a high degree of judgment. In order for management to make the
appropriate determination of net realizable value, the following items are considered: inventory turnover statistics, current
selling prices, seasonality factors, consumer demand, regulatory changes, competitive pricing, and performance of similar
products. If we determine the carrying value of inventory is in excess of estimated net realizable value, we write down the
value of inventory to the estimated net realizable value.
We also review inventory for obsolescence in a similar manner and any inventory identified as obsolete is reserved
or written off. Our determination of obsolescence is based on assumptions about the demand for our products, product
expiration dates, estimated future sales, and general future plans. We monitor actual sales compared to original projections,
and if actual sales are less favorable than those originally projected by us, we record an additional inventory reserve or write-
down. Historically, our estimates have been close to our actual reported amounts. However, if our estimates regarding
inventory obsolescence are inaccurate or consumer demand for our products changes in an unforeseen manner, we may be
exposed to additional material losses or gains in excess of our established estimated inventory reserves. At December 31,
2015 and 2014, our inventory reserves were $1.3 million and $2.1 million, respectively.
Long Lived Fixed Assets and Capitalization of Software Development Costs
In addition to capitalizing long-lived fixed asset costs, we also capitalize costs associated with internally developed
software projects (collectively “fixed assets”) and amortize such costs over the estimated useful lives of such fixed assets.
Fixed assets are carried at cost less accumulated depreciation computed using the straight-line method over the assets’
estimated useful lives. Leasehold improvements are amortized over the shorter of the remaining lease terms or the estimated
useful lives of the improvements. Expenditures for maintenance and repairs are charged to operations as incurred. If a fixed
asset is sold or otherwise retired or disposed of, the cost of the fixed asset and the related accumulated depreciation or
amortization is written off and any resulting gain or loss is recorded in other operating costs in our consolidated statement of
operations.
44
We review our fixed assets for impairment whenever an event or change in circumstances indicates the carrying
amount of an asset or group of assets may not be recoverable, such as plans to dispose of an asset before the end of its
previously estimated useful life. Our impairment review includes a comparison of future projected cash flows generated by
the asset, or group of assets, with its associated net carrying value. If the net carrying value of the asset or group of assets
exceeds expected cash flows (undiscounted and without interest charges), an impairment loss is recognized to the extent the
carrying amount exceeds the fair value. The fair value is determined by calculating the discounted expected future cash flows
using an estimated risk-free rate of interest. Any identified impairment losses are recorded in the period in which the
impairment occurs. The carrying value of the fixed asset is adjusted to the new carrying value and any subsequent increases
in fair value of the fixed asset are not recorded. In addition, if we determine the estimated remaining useful life of the asset
should be reduced from our original estimate, the periodic depreciation expense is adjusted prospectively, based on the new
remaining useful life of the fixed asset.
The impairment calculation requires us to apply judgment and estimates concerning future cash flows, strategic
plans, useful lives, and discount rates. If actual results are not consistent with our estimates and assumptions, we may be
exposed to an additional impairment charge, which could be material to our results of operations. In addition, if accounting
standards change, or if fixed assets become obsolete, we may be required to write off any unamortized costs of fixed assets;
or if estimated useful lives change, we would be required to accelerate depreciation or amortization periods and recognize
additional depreciation expense in our consolidated statement of operations.
Historically, our estimates and assumptions related to the carrying value and the estimated useful lives of our fixed
assets have not materially deviated from actual results. As of December 31, 2015, the estimated useful lives and net carrying
values of fixed assets are as follows:
Office furniture and equipment
Computer hardware and software
Automobiles
Leasehold improvements
Total net carrying value at December 31, 2015
Estimated useful life
5 to 7 years
3 to 5 years
3 to 5 years
2 to 10 years(1)
Net carrying value at
December 31, 2015
$
0.5 million
2.1 million
— million
1.2 million
3.8 million
$
_____________________________
(1)
We amortize leasehold improvements over the shorter of the useful estimated life of the leased asset or the lease term.
The net carrying costs of fixed assets and construction in progress are exposed to impairment losses if our
assumptions and estimates of their carrying values change, there is a change in estimated future cash flow, or there is a
change in the estimated useful life of the fixed asset. Based on management’s analysis, no impairment existed during the
years ended December 31, 2015 and 2014.
Uncertain Income Tax Positions and Tax Valuation Allowances
As of December 31, 2015, we recorded $0.7 million in other long-term liabilities and $0.1 million in taxes payable
on our consolidated balance sheet related to uncertain income tax positions. As required by FASB ASC Topic 740, Income
Taxes, we use judgments and make estimates and assumptions related to evaluating the probability of uncertain income tax
positions. We base our estimates and assumptions on the potential liability related to an assessment of whether the income
tax position will “more likely than not” be sustained in an income tax audit. We are also subject to periodic audits from
multiple domestic and foreign tax authorities related to income tax and other forms of taxation. These audits examine our tax
positions, timing of income and deductions, and allocation procedures across multiple jurisdictions. As part of our evaluation
of these tax issues, we establish reserves in our consolidated financial statements based on our estimate of current probable
tax exposures. Depending on the nature of the tax issue, we could be subject to audit over several years. Therefore, our
estimated reserve balances and liability related to uncertain income tax positions may exist for multiple years before the
applicable statute of limitations expires or before an issue is resolved by the taxing authority. Additionally, we may be
requested to extend the statute of limitations for tax years under audit. It is reasonably possible the tax jurisdiction may
request that the statute of limitations be extended, which may cause the classification between current and long-term to
change. We believe our tax liabilities related to uncertain tax positions are based upon reasonable judgment and estimates;
however, if actual results materially differ, our effective income tax rate and cash flows could be affected in the period of
discovery or resolution. There are ongoing income tax audits in various international jurisdictions that we believe are not
material to our financial statements.
45
We also review the estimates and assumptions used in evaluating the probability of realizing the future benefits of
our deferred tax assets and record a valuation allowance when we believe that a portion or all of the deferred tax assets may
not be realized. If we are unable to realize the expected future benefits of our deferred tax assets, we are required to provide a
valuation allowance. We use our past history and experience, overall profitability, future management plans, and current
economic information to evaluate the amount of valuation allowance to record. As of December 31, 2015, we maintained a
valuation allowance for deferred tax assets arising from our operations of $9.0 million because they did not meet the “more
likely than not” criteria as defined by the recognition and measurement provisions of FASB ASC Topic 740, Income Taxes.
In addition, as of December 31, 2015, we had non-current deferred tax assets, after valuation allowance, totaling $3.7
million, which may not be realized if our assumptions and estimates change, which would affect our effective income tax
rate and cash flows in the period of discovery or resolution
Revenue Recognition and Deferred Commissions
Our revenue is derived from sales of individual products, sales of starter and renewal packs, and shipping fees.
Substantially all of our product and pack sales are to associates at published wholesale prices and to members at discounted
published retail prices. We record revenue net of any sales taxes and record a reserve for expected sales returns based on
historical experience.
We recognize revenue from shipped packs and products upon receipt by the customer. Corporate-sponsored event
revenue is recognized when the event is held. We defer certain components of revenue. At December 31, 2015 and
December 31, 2014, deferred revenue was $8.7 million and $10.9 million, respectively. During the third quarter of 2013, we
started a loyalty program through which customers earn loyalty points from qualified automatic orders, which can be applied
to future purchases. We defer the dollar equivalent in revenue of these points until the points are applied or forfeited, which
includes an estimate of the percentage of the unvested loyalty points that are expected to be forfeited. During the third
quarter 2014, we modified the program to allow loyalty points to vest more quickly. The deferred revenue associated with
the loyalty program at December 31, 2015 and December 31, 2014 was $8.1 million and $9.7 million, respectively. Deferred
revenue consisted primarily of: (i) sales of packs and products shipped but not received by the customers by the end of the
respective period; (ii) revenue from the loyalty program; and (iii) prepaid registration fees from customers planning to attend
a future corporate-sponsored event. In total current assets, the Company defers commissions on (i) the sales of packs and
products shipped but not received by the customers by the end of the respective period and (ii) the loyalty program. Deferred
commissions were $3.4 million and $4.5 million at December 31, 2015 and December 31, 2014, respectively.
Loyalty program
Loyalty deferred revenue as of January 1, 2014
Loyalty points forfeited
Loyalty points used
Loyalty points vested
Loyalty points unvested
Loyalty deferred revenue as of December 31, 2014
Loyalty deferred revenue as of January 1, 2015
Loyalty points forfeited
Loyalty points used
Loyalty points vested
Loyalty points unvested
Loyalty deferred revenue as of December 31, 2015
(in thousands)
5,456
(4,664)
(12,348)
19,580
1,679
9,703
9,703
(8,801)
(15,077)
20,403
1,845
8,073
$
$
$
$
Product Return Policy
We stand behind our packs and products and believe we offer a reasonable, industry-standard product return policy
to all of our customers. We do not resell returned products. Refunds are not processed until proper approval is obtained. All
refunds must be processed and returned in the same form of payment that was originally used in the sale. We have specific
product return guidelines for each country in which we operate. However, we allow our associates and members to exchange
products as long as the products are unopened and in good condition. Our return policies for our retail customers and our
associates and members are as follows:
•
Retail Customer Product Return Policy. This policy allows a retail customer to return any of our products to the
original associate who sold the product and receive a full cash refund from the associate for the first 180 days
following the product’s purchase in the United States and Canada, and for the first 90 days following the product’s
46
purchase in our remaining countries. The associate may then return or exchange the product based on the associate
position product return policy.
•
Associate and Member Product Return Policy. This policy allows the associate or member to return an order
within one year of the purchase date upon terminating his/her account. If an associate or member returns a product
unopened and in good condition, he/she may receive a full refund minus a 10% restocking fee. We may also allow
the associate or member to receive a full satisfaction guarantee refund, excluding promotional materials, if they
have tried the product and are not satisfied for any reason. This satisfaction guarantee refund applies in the United
States and Canada, only for the first 180 days following the product’s purchase, and applies in our remaining
countries for the first 90 days following the product’s purchase; however, any commissions earned by an associate
will be deducted from the refund. If we discover abuse of the refund policy, we have the right to terminate the
associate’s or member’s account.
We estimate a sales return reserve for expected sales refunds based on historical experience over a rolling six-month
period. If actual results differ from our estimated sales return reserve due to various factors, the amount of revenue recorded
each period could be materially affected. Historically, sales returns have not materially changed through the years, as the
majority of our customers who return their merchandise do so within the first 90 days after the original sale. Sales returns
have averaged 1.5% or less of our gross sales. For the year ended December 31, 2015 our sales return reserve was composed
of the following (in thousands):
Sales reserve as of January 1, 2015
Provision related to sales made in current period
Adjustment related to sales made in prior periods
Actual returns or credits related to current period
Actual returns or credits related to prior periods
Sales reserve as of December 31, 2015
Accounting for Stock-Based Compensation
December 31, 2015
207
$
1,456
(10)
(1,319)
(187)
147
$
We grant stock options to our employees, board members, and consultants. At the date of grant, we determine the
fair value of a stock option award and recognize compensation expense over the requisite service period, or the vesting
period of such stock option award, which is two to four years. The fair value of the stock option award is calculated using the
Black-Scholes option-pricing model (the “calculated fair value”). The Black-Scholes option-pricing model requires us to
apply judgment and use highly subjective assumptions, including expected stock option life, expected volatility, expected
average risk-free interest rates, and expected forfeiture rates. For the year ended December 31, 2015, our assumptions and
estimates used for the calculated fair value of stock options granted in 2015 were as follows:
2015 Grants
Estimated fair value per share of options granted:
Assumptions:
April
May
August
November
$ 11.34
$ 12.80
$ 10.36
$ 12.31
Annualized dividend yield
Risk-free rate of return
Common stock price volatility
Expected average life of stock options (in years)
— %
1.2 %
79.4 %
4.5
— %
1.4 %
79.1 %
4.5
— %
1.4 %
79.2 %
4.5
— %
1.6 %
80.1 %
4.5
Historically, our estimates and underlying assumptions have not materially deviated from our actual reported results
and rates. However, we base assumptions we use on our best estimates, which involves inherent uncertainties based on
market conditions that are outside of our control. If actual results are not consistent with the assumptions we use, the stock-
based compensation expense reported in our consolidated financial statements may not be representative of the actual
economic cost of stock-based compensation. For example, if actual employee forfeitures significantly differ from our
estimated forfeitures, we may be required to adjust our consolidated financial statements in future periods. As of December
31, 2015, using our current assumptions and estimates, we anticipate recognizing $0.6 million in gross compensation expense
through 2016 related to unvested stock options outstanding.
If we grant additional stock options in the future, we would be required to recognize additional compensation
expense over the vesting period of such stock options in our consolidated statement of operations. As of December 31, 2015,
we had 127,124 shares available for grant in the future.
47
Contingencies and Litigation
Each quarter, we evaluate the need to establish a reserve for any legal claims or assessments. We base our
evaluation on our best estimates of the potential liability in such matters. The legal reserve includes an estimated amount for
any damages and the probability of losing any threatened legal claims or assessments. The legal reserve is developed in
consultation with our general and outside counsel and is based upon a combination of litigation and settlement strategies.
Although we believe that our legal reserves and accruals are based on reasonable judgments and estimates, actual results
could differ, which may expose us to material gains or losses in future periods. If actual results differ, if circumstances
change, or if we experience an unanticipated adverse outcome of any legal action, including any claim or assessment, we
would be required to recognize the estimated amount that could reduce net income, earnings per share, and cash flows.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 2 to our Consolidated Financial Statements, Recent Accounting Pronouncements, which is incorporated
herein by reference.
48
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We do not engage in trading market risk sensitive instruments and do not purchase investments as hedges or for
purposes “other than trading” that are likely to expose us to certain types of market risk, including interest rate, commodity
price, or equity price risk. Although we have investments, we believe there has been no material change in our exposure to
interest rate risk. We have not issued any debt instruments, entered into any forward or futures contracts, purchased any
options, or entered into any swap agreements.
We are exposed, however, to other market risks, including changes in currency exchange rates as measured against
the United States dollar. Because the change in value of the United States dollar measured against foreign currency may
affect our consolidated financial results, changes in foreign currency exchange rates could positively or negatively affect our
results as expressed in the United States dollars. For example, when the United States dollar strengthens against foreign
currencies in which our products are sold or weakens against foreign currencies in which we may incur costs, our
consolidated net sales or related costs and expenses could be adversely affected. We translate our revenues and expenses in
foreign markets using an average rate. We believe inflation has not had a material impact on our consolidated operations or
profitability.
We maintain policies, procedures, and internal processes in an effort to help monitor any significant market risks
and we do not use any financial instruments to manage our exposure to such risks. We assess the anticipated foreign currency
working capital requirements of our foreign operations and maintain a portion of our cash and cash equivalents denominated
in foreign currencies sufficient to satisfy most of these anticipated requirements.
We caution that we cannot predict with any certainty our future exposure to such currency exchange rate
fluctuations or the impact, if any, such fluctuations may have on our future business, product pricing, operating expenses,
and on our consolidated financial position, results of operations, or cash flows. However, to combat such market risk, we
closely monitor our exposure to currency fluctuations. The regions and countries in which we currently have exposure to
foreign currency exchange rate risk include (i) North America/South America (Canada, Colombia and Mexico); (ii) EMEA
(Austria, the Czech Republic, Denmark, Estonia, Finland, Germany, the Republic of Ireland, the Netherlands, Norway, South
Africa, Spain, Sweden, Switzerland and the United Kingdom); (iii) Asia/Pacific (Australia, Japan, New Zealand, the
Republic of Korea, Singapore, Taiwan and Hong Kong). The current (spot) rate, average currency exchange rates, and the
low and high of such currency exchange rates as compared to the United States dollar, for each of these countries as of and
for the year ended December 31, 2015 were as follows:
Country (foreign currency name)
Australia (Australian Dollar)
Canada (Canadian Dollar)
Czech Republic (Koruna)
Denmark (Kroner)
Hong Kong (Hong Kong Dollar)
Japan (Yen)
Mexico (Peso)
New Zealand (New Zealand Dollar)
Norway (Krone)
Republic of Korea (Won)
Singapore (Singapore Dollar)
South Africa (Rand)
Sweden (Krona)
Switzerland (Franc)
Taiwan (New Taiwan Dollar)
United Kingdom (British Pound)
Various countries (1) (Euro)
Year ended December 31, 2015
High
0.82330
0.86220
0.04380
0.16310
0.12904
0.00857
0.06885
0.78430
0.13702
0.00094
0.75781
0.08805
0.12900
1.17090
0.03298
1.58880
1.21430
Low
0.69196
0.71659
0.03840
0.14069
0.12875
0.00797
0.05751
0.62709
0.11406
0.00083
0.69785
0.06302
0.11330
0.97107
0.03005
1.46339
1.04993
Average
0.75291
0.78398
0.04073
0.14891
0.12900
0.00827
0.06322
0.70104
0.12444
0.00089
0.72818
0.07896
0.11873
1.04072
0.03155
1.52916
1.11076
As of
December 31, 2015
Spot
0.72892
0.72132
0.04050
0.14644
0.12903
0.00830
0.05785
0.68529
0.11432
0.00085
0.70729
0.06494
0.11920
1.00928
0.03040
1.48259
1.09270
(1) Austria, Germany, the Netherlands, Estonia, Finland, the Republic of Ireland and Spain
49
Item 8. Financial Statements and Supplementary Data
Our Consolidated Financial Statements and Supplementary Data required by this Item 8 are set forth in Item 15 of
this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (principal executive officer) and our Chief
Accounting Officer (principal financial officer), have concluded, based on their evaluation as of the end of the period
covered by this report, that our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d – 15(e) under
the Exchange Act) are effective to ensure that information required to be disclosed by us in reports filed or submitted under
the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and
forms and include controls and procedures designed to ensure that information required to be disclosed by us in such reports
is accumulated and communicated to our management, including our principal executive and financial officers, as
appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the quarter ended December 31, 2015, there were no changes in our internal control over our financial
reporting that we believe materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
50
REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting
(as defined in Rule 13a – 13(f) or Rule 15d-15(f) under the Exchange Act) for the Company. Internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting for external
purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over
financial reporting includes: maintaining records that in reasonable detail accurately and fairly reflect our transactions;
providing reasonable assurance that transactions are recorded as necessary for preparation of our consolidated financial
statements; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with
management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of company
assets that could have a material effect on our consolidated financial statements would be prevented or detected on a timely
basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute
assurance that a misstatement of our consolidated financial statements would be prevented or detected.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on
the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013). Based on this evaluation, management concluded that the Company’s internal control over
financial reporting was effective as of December 31, 2015.
51
Item 9B. Other Information
The Company inadvertently failed to furnish under Item 2.02 of Form 8-K its earnings release for the third quarter
of 2015, which was timely disseminated by Business Wire on November 10, 2015. A copy of the earnings release is
furnished herewith as Exhibit 99.2. The information contained in Exhibit 99.2 shall not be deemed "filed" for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor
shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as expressly
set forth by specific reference in such a filing.
Documents Incorporated by Reference
PART III
The information required by Items 10, 11, 12, 13 and 14 of Part III of Form 10-K is incorporated by reference to the
definitive proxy statement for our annual meeting to be filed with the SEC within 120 days after December 31, 2015.
PART IV
Item 15. Exhibits and Financial Statement Schedule
(a) Documents filed as a part of the report:
1.(cid:2)Consolidated Financial Statements
The following financial statements and Report of Independent Registered Public Accounting Firm are filed
as a part of this report on the pages indicated:
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2015 and 2014
Consolidated Statements of Operations for the years ended December 31, 2015 and 2014
Consolidated Statements of Comprehensive Income for the years ended December 31, 2015 and 2014
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2015 and 2014
Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014
Notes to Consolidated Financial Statements
F-1
F-2
F-3
F-4
F-4
F-5
F-6
F-7
2. Financial Statement Schedule
The financial statement schedule required by this item is included as an Exhibit to this Annual Report on
Form 10-K.
Report of Independent Registered Public Accounting Firm on Financial Statement Schedule.
3. Exhibit List
See Index to Exhibits following our Consolidated Financial Statements contained in this Annual Report on
Form 10-K.
52
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Dated: March 15, 2016
Dated: March 15, 2016
MANNATECH, INCORPORATED
By:
/s/ Alfredo Bala
Alfredo Bala
Chief Executive Officer
(principal executive officer)
By:
/s/ David A. Johnson
David A. Johnson
Chief Accounting Officer
(principal financial officer)
53
POWER OF ATTORNEY
The undersigned directors and officers of Mannatech, Incorporated hereby constitute and appoint Larry A. Jobe and
David A. Johnson, and each of them, with the power to act without the other and with full power of substitution and
resubstitution, our true and lawful attorneys-in fact and agents with full power to execute in our name and behalf in the
capacities indicated below any and all amendments to this report and to file the same, with all exhibits and other documents
relating thereto and hereby ratify and confirm all that such attorneys-in-fact, or either of them, or their substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following
persons on behalf of the registrant and in the capacities indicated:
Signature
Title
Date
/s/ Alfredo Bala
Alfredo Bala
Chief Executive Officer
(principal executive officer)
/s/ David A. Johnson
David A. Johnson
Chief Accounting Officer
(principal financial officer)
/s/ J. Stanley Fredrick
J. Stanley Fredrick
/s/ Robert A. Toth
Robert A. Toth
/s/ Gerald E. Gilbert
Gerald E. Gilbert
/s/ Marlin Ray Robbins
Marlin Ray Robbins
/s/ Larry A. Jobe
Larry A. Jobe
/s/ Linda K. Ferrell
Linda K. Ferrell
/s/ Eric W. Schrier
Eric W. Schrier
Chairman of the Board
Director
Director
Director
Director
Director
Director
March 15, 2016
March 15, 2016
March 15, 2016
March 15, 2016
March 15, 2016
March 15, 2016
March 15, 2016
March 15, 2016
March 15, 2016
54
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2015 and 2014
Consolidated Statements of Operations for the years ended December 31, 2015 and 2014
Consolidated Statements of Comprehensive Income for the years ended December 31, 2015 and 2014
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2015 and 2014
Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014
Notes to Consolidated Financial Statements
Page
F-2
F-3
F-4
F-4
F-5
F-6
F-7
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Mannatech, Incorporated
Coppell, Texas
We have audited the accompanying consolidated balance sheets of Mannatech, Incorporated and Subsidiaries
(“the Company”) as of December 31, 2015 and 2014, and the related consolidated statements of operations and
comprehensive income, shareholders’ equity, and cash flows for each of the two years in the period ended December 31,
2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company at December 31, 2015 and 2014, and the results of its operations and its cash flows for
each of the two years in the period ended December 31, 2015, in conformity with accounting principles generally accepted
in the United States of America.
/s/ BDO USA, LLP
Dallas, Texas
March 15, 2016
F-2
MANNATECH, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
December 31,
2015
December 31,
2014
ASSETS
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowance of $261 and $213 in 2015 and
$
2014, respectively
Income tax receivable
Inventories, net
Prepaid expenses and other current assets
Deferred commissions
Deferred tax assets, net
Total current assets
Property and equipment, net
Construction in progress
Long-term restricted cash
Other assets
Long-term deferred tax assets, net
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current portion of capital leases
Accounts payable
Accrued expenses
Commissions and incentives payable
Taxes payable
Current deferred tax liability
Current notes payable
Deferred revenue
Total current liabilities
Capital leases, excluding current portion
Long-term deferred tax liabilities
Long-term notes payable
Other long-term liabilities
Total liabilities
Commitments and contingencies
$
$
$
$
$
31,994
1,511
369
4
9,199
2,905
3,443
460
49,885
3,848
839
6,586
3,759
3,725
68,642
447
2,683
6,221
6,818
736
84
713
8,677
26,379
612
24
1,069
1,994
30,078
27,999
1,511
504
4
10,591
3,069
4,544
1,141
49,363
2,481
1,622
7,045
3,567
3,320
67,398
901
4,252
6,356
7,908
2,578
123
—
10,890
33,008
852
26
—
2,136
36,022
Shareholders’ equity:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, no shares
issued or outstanding
Common stock, $0.0001 par value, 99,000,000 shares authorized,
2,773,972 shares issued and 2,682,078 shares outstanding as of
December 31, 2015 and 2,773,972 shares issued and 2,676,077 shares
outstanding as of December 31, 2014
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Treasury stock, at average cost, 91,894 shares as of December 31, 2015
and 97,895 shares as of December 31, 2014, respectively
Total shareholders’ equity
Total liabilities and shareholders’ equity
$
—
—
—
40,494
8,589
686
(11,205 )
38,564
68,642
$
—
40,672
2,750
(109 )
(11,937 )
31,376
67,398
See accompanying notes to consolidated financial statements.
F-3
MANNATECH, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share information)
Net sales
Cost of sales
Gross profit
Operating expenses:
Commissions and incentives
Selling and administrative expenses
Depreciation and amortization
Other operating costs
Total operating expenses
Income from operations
Interest income
Other expense, net
Income before income taxes
Income tax provision
Net income
Earnings per common share:
Basic
Diluted
Weighted-average common shares outstanding:
Basic
Diluted
$
For the years ended December 31,
2015
180,267
34,102
146,165
$
2014
190,081
38,350
151,731
72,956
34,458
1,793
24,814
134,021
12,144
210
(4,155 )
8,199
(2,360 )
5,839
2.18
2.14
2,680
2,728
75,240
36,193
1,608
25,948
138,989
12,742
121
(3,042 )
9,821
(3,325 )
6,496
2.44
2.40
2,663
2,706
$
$
$
$
$
$
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net income
Foreign currency translations gain
Pension obligations, net of tax provision of $11 and $11 in 2015 and 2014,
respectively
Comprehensive income
2015
2014
5,839
815
$
6,496
653
(20 )
6,634
(19 )
$
7,130
$
$
See accompanying notes to consolidated financial statements.
F-4
MANNATECH, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’EQUITY
(in thousands)
Common
stock
Additional
paid in
capital
Retained
earnings
(deficit)
Accumulated
other
comprehensive
loss
Treasury
stock
Total
shareholders’
equity
Balance at December 31, 2013
$
Charge related to stock-based compensation
Stock option exercises
Tax benefit from exercise of stock options
Foreign currency translation
Pension obligations, net of tax of $11
Net income
— $ 42,592 $
—
—
—
—
—
—
678
(2,630 )
32
—
—
—
(3,746 ) $
—
—
—
—
—
6,496
(743 ) $ (14,651 ) $
—
—
—
653
(19 )
—
—
2,714
—
—
—
—
23,452
678
84
32
653
(19 )
6,496
Balance at December 31, 2014
$
— $ 40,672 $
2,750 $
(109 ) $ (11,937 ) $
31,376
Charge related to stock-based compensation
Stock option exercises
Tax effect from exercise of stock options
Foreign currency translation
Pension obligations, net of tax of $11
Net income
—
—
—
—
—
—
592
(704 )
(66 )
—
—
—
—
—
—
—
—
5,839
—
—
—
815
(20 )
—
—
732
—
—
—
—
592
28
(66 )
815
(20 )
5,839
Balance at December 31, 2015
$
— $ 40,494 $
8,589 $
686 $ (11,205 ) $
38,564
See accompanying notes to consolidated financial statements.
F-5
MANNATECH, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
$
5,839
$
6,496
For the years ended December 31,
2015
2014
Depreciation and amortization
Provision for inventory losses
Provision for doubtful accounts
(Gain) loss on disposal of assets
Stock-based compensation expense
Deferred income taxes
Tax expense (benefit) from exercise of stock options
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses and other current assets
Other assets
Deferred commissions
Accounts payable
Accrued expenses and other liabilities
Taxes payable
Commissions and incentives payable
Deferred revenue
Change in restricted cash
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment
Proceeds from sale of assets
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock options exercised
Tax benefit (expense) from exercise of stock options
Proceeds from note payable
Repayment of capital lease obligations
Net cash provided (used) in financing activities
Effect of currency exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid, net
Interest paid on capital leases
Summary of non-cash investing and financing activities:
Assets acquired through financing arrangements
$
$
$
$
1,793
480
369
28
592
88
66
(266 )
605
462
86
1,031
(1,562 )
(392 )
(1,819 )
(969 )
(2,063 )
18
4,386
(1,979 )
—
(1,979 )
28
—
1,640
(1,526 )
142
1,446
3,995
27,999
31,994
1,608
2,124
579
(9 )
678
(1,627 )
(32 )
(713 )
970
945
(170 )
(1,943 )
(709 )
854
803
(2,102 )
4,749
(3,081 )
9,420
(1,534 )
9
(1,525 )
84
32
—
(1,540 )
(1,424 )
1,133
7,604
20,395
$
27,999
4,659
89
670
$
$
$
4,253
119
2,141
See accompanying notes to consolidated financial statements.
F-6
MANNATECH, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Mannatech, Incorporated (together with its subsidiaries, the “Company”), located in Coppell, Texas, was
incorporated in the state of Texas on November 4, 1993 and is listed on the NASDAQ Global Select Market under the
symbol “MTEX”. The Company develops, markets, and sells high-quality, proprietary nutritional supplements, topical and
skin care and anti-aging products, and weight-management products. We currently sell our products into three regions: (i)
North America/South America (the United States, Canada, Colombia and Mexico); (ii) EMEA (Austria, the Czech
Republic, Denmark, Estonia, Finland, Germany, the Republic of Ireland, Namibia, the Netherlands, Norway, South Africa,
Spain, Sweden and the United Kingdom); and (iii) Asia/Pacific (Australia, Japan, New Zealand, the Republic of Korea,
Singapore, Taiwan and Hong Kong).
Independent associates (“associates”) purchase the Company’s products at published wholesale prices to either sell
to retail customers or for personal use. Members purchase the Company’s products at a discount from published retail prices
primarily for personal use. The Company cannot distinguish products sold for personal use from other sales because it is not
involved with the products after delivery, other than usual and customary product warranties and returns. Only independent
associates are eligible to earn commissions and incentives.
Principles of Consolidation
The consolidated financial statements and footnotes include the accounts of the Company and its wholly-owned
subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the Company’s consolidated financial statements in accordance with generally accepted
accounting principles requires the use of estimates that affect the reported value of assets, liabilities, revenues and
expenses. These estimates are based on historical experience and various other factors. The Company continually
evaluates the information used to make these estimates as the business and economic environment changes. Historically,
actual results have not varied materially from the Company’s estimates and the Company does not currently anticipate a
significant change in its assumptions related to these estimates. However, actual results may differ from these estimates
under different assumptions or conditions.
The use of estimates is pervasive throughout the consolidated financial statements, but the accounting policies
and estimates considered the most significant are described in this note to the consolidated financial statements,
Organization and Summary of Significant Accounting Policies.
Foreign Currency Translation
The United States dollar is the functional currency for the majority of the Company’s foreign subsidiaries. As a
result, nonmonetary assets and liabilities are translated at their approximate historical rates, monetary assets and liabilities
are translated at exchange rates in effect at the end of the year, and revenues and expenses are translated at weighted-
average exchange rates for the year. The local currency is the functional currency of our subsidiaries in Japan, Republic of
Korea, Taiwan, Norway, Sweden, and Mexico. These subsidiaries’ assets and liabilities are translated into the United
States dollars at exchange rates existing at the balance sheet dates, revenues and expenses are translated at weighted-
average exchange rates, and shareholders’ equity and intercompany balances are translated at historical exchange rates.
The foreign currency translation adjustment is recorded as a separate component of shareholders’ equity and is included in
accumulated other comprehensive loss.
Transaction losses totaled approximately $4.2 million and $3.0 million, for the years ended December 31, 2015
and 2014, respectively, and are included in other expense, net in the Company’s Consolidated Statements of Operations.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less to be cash
equivalents. The Company includes in its cash and cash equivalents credit card receivables due from its credit card
processor, as the cash proceeds from credit card receivables are received within 24 to 72 hours. As of December 31, 2015
F-7
and 2014, credit card receivables were $0.4 million and $1.2 million, respectively, and cash and cash equivalents held in
bank accounts in foreign countries totaled $31.3 million and $24.8 million, respectively. The Company invests cash in
liquid instruments, such as money market funds and interest bearing deposits. The Company also holds cash in high
quality financial institutions and does not believe it has an excessive exposure to credit concentration risk.
Restricted Cash
The Company is required to restrict cash for: (i) direct selling insurance premiums and credit card sales in the
Republic of Korea; (ii) reserve on credit card sales in the United States and Canada; and (iii) Australia building lease
collateral. As of December 31, 2015 and 2014, our total restricted cash was $8.1 million and $8.6 million, respectively.
Accounts Receivable
Accounts receivable are carried at their estimated collectible amounts. Receivables are created upon shipment of
an order if the credit card payment is rejected or does not match the order total. As of December 31, 2015 and 2014,
receivables consisted primarily of amounts due from members and associates. The Company periodically evaluates its
receivables for collectability based on historical experience, recent account activities, and the length of time receivables
are past due and writes-off receivables when they become uncollectible. At December 31, 2015 and 2014, the Company
held an allowance for doubtful accounts of $0.3 million and $0.2 million, respectively.
Inventories
Inventories consist of raw materials, finished goods, and promotional materials that are stated at the lower of cost
(using standard costs that approximate average costs) or market. The Company periodically reviews inventories for
obsolescence and any inventories identified as obsolete are reserved or written off.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and amortization computed using the
straight-line method over the estimated useful life of each asset. Leasehold improvements are amortized over the shorter of
the lease term or the estimated useful life of the improvements. Expenditures for maintenance and repairs are charged to
expense as incurred. The cost of property and equipment sold or otherwise retired and the related accumulated
depreciation are removed from the accounts and any resulting gain or loss is included in other operating costs in the
accompanying Consolidated Statements of Operations. The estimated useful lives of fixed assets are as follows:
Office furniture and equipment
Computer hardware and software
Automobiles
Leasehold improvements(1)
___________________
(1) The Company amortizes leasehold improvements over the shorter of the useful estimated life of the leased asset or the lease term.
Estimated useful life
5 to 7 years
3 to 5 years
3 to 5 years
2 to 10 years
Property and equipment are reviewed for impairment whenever an event or change in circumstances indicates
that the carrying amount of an asset or group of assets may not be recoverable. The impairment review includes a
comparison of future projected cash flows generated by the asset or group of assets with its associated net carrying value.
If the net carrying value of the asset or group of assets exceeds expected cash flows (undiscounted and without interest
charges), an impairment loss is recognized to the extent the carrying amount of the asset exceeds its fair value. We
determined that no impairment indicators existed during the years ended December 31, 2015 and 2014.
Other Assets
At December 31, 2015 and 2014, other assets were $3.8 million and $3.6 million, respectively. Included in the
December 31, 2015 and 2014 balances were deposits for building leases in various locations of $1.9 million and $1.5
million, respectively. Also included in the December 31, 2015 and 2014 balances were $1.6 million and $1.7 million,
respectively, representing a deposit with Mutual Aid Cooperative and Consumer in the Republic of Korea, an organization
established by the Republic of Korea’s Fair Trade Commission’s approval to compensate and protect consumers who
participate in network marketing activities from damages. Other assets at each of December 31, 2015 and 2014 also
include $0.2 million of indefinite lived intangible assets relating to the Manapol® powder trademark.
F-8
Notes Payable
Notes payable were $1.8 million at December 31, 2015 as a result of funding from a capital financing agreement
related to our investment in computer hardware and software and other financing arrangements. At December 31, 2015,
the current portion was $0.7 million and the long-term portion was $1.1 million.
Other Long-Term Liabilities
Other long-term liabilities were $2.0 million and $2.1 million for the years ending December 31, 2015 and 2014.
At December 31, 2015 and 2014, we recorded $0.7 million and $0.8 million, respectively, in other long-term liabilities
related to uncertain income tax positions (see Note 8, Income Taxes). Certain operating leases for the Company’s regional
office facilities contain a restoration clause that requires the Company to restore the premises to its original condition. At
each of December 31, 2015 and 2014, accrued restoration costs related to these leases amounted to $0.4 million. At
December 31, 2015 and 2014, the Company also recorded a long-term liability for an estimated defined benefit obligation
related to a non-U.S. defined benefit plan for its Japan operations of $0.5 million and $0.6 million, respectively (See Note
10, Employee Benefit Plans).
Revenue Recognition and Deferred Commissions
The Company’s revenue is derived from sales of individual products, sales of its starter and renewal packs, and
shipping fees. Substantially all of the Company’s product and pack sales are made to associates at published wholesale
prices and to members at discounted published retail prices. The Company records revenue net of any sales taxes and
records a reserve for expected sales returns based on its historical experience.
The Company recognizes revenue from shipped packs and products upon receipt by the customer. Corporate-
sponsored event revenue is recognized when the event is held. The Company defers certain components of its revenue. At
December 31, 2015 and December 31, 2014, the Company’s deferred revenue was $8.7 million and $10.9 million,
respectively. During the third quarter of 2013, the Company started a loyalty program through which customers earn
loyalty points from qualified automatic orders, which can be applied to future purchases. The Company defers the dollar
equivalent in revenue of these points until the points are applied or forfeited, which includes an estimate of the percentage
of the unvested loyalty points that are expected to be forfeited. During the third quarter 2014, the Company modified the
program to allow loyalty points to vest more quickly. The deferred revenue associated with the loyalty program at
December 31, 2015 and December 31, 2014 was $8.1 million and $9.7 million, respectively. Deferred revenue consisted
primarily of: (i) sales of packs and products shipped but not received by the customers by the end of the respective period;
(ii) revenue from the loyalty program; and (iii) prepaid registration fees from customers planning to attend a future
corporate-sponsored event. In total current assets, the Company defers commissions on (i) the sales of packs and products
shipped but not received by the customers by the end of the respective period and (ii) the loyalty program. Deferred
commissions were $3.4 million and $4.5 million at December 31, 2015 and December 31, 2014, respectively.
Loyalty program
Loyalty deferred revenue as of January 1, 2014
Loyalty points forfeited
Loyalty points used
Loyalty points vested
Loyalty points unvested
Loyalty deferred revenue as of December 31, 2014
Loyalty deferred revenue as of January 1, 2015
Loyalty points forfeited
Loyalty points used
Loyalty points vested
Loyalty points unvested
Loyalty deferred revenue as of December 31, 2015
F-9
(in thousands)
5,456
(4,664)
(12,348)
19,580
1,679
9,703
9,703
(8,801)
(15,077)
20,403
1,845
8,073
$
$
$
$
We estimate a sales return reserve for expected sales refunds based on our historical experience over a rolling six-
month period. If actual results differ from our estimated sales return reserve due to various factors, the amount of revenue
recorded for each period could be materially affected. Historically, our sales returns have not materially changed through
the years, as the majority of our customers who return their merchandise do so within the first 90 days after the original
sale. Sales returns have historically averaged 1.5% or less of our gross sales. For the year ended December 31, 2015 our
sales return reserve consisted of the following (in thousands):
Sales reserve as of January 1, 2015
Provision related to sales made in current period
Adjustment related to sales made in prior periods
Actual returns or credits related to current period
Actual returns or credits related to prior periods
Sales reserve as of December 31, 2015
Shipping and Handling Costs
December 31, 2015
$
$
207
1,456
(10)
(1,319)
(187)
147
The Company records freight and shipping fees collected from its customers as revenue. The Company records
inbound freight as a component of inventory and cost of sales.
Commission and Incentive Expenses
Associates earn commissions and incentives based on their direct and indirect commissionable net sales over 13
business periods. Each business period equals 28 days. The Company accrues commissions and incentives when earned by
associates and pays commissions on product sales three weeks following the business period end and pays commissions on
its pack sales five weeks following the business period end.
Advertising Expenses
The Company expenses advertising and promotions in selling and administrative expenses when incurred.
Advertising and promotional expenses were approximately $5.5 million and $4.9 million, for the years ended December
31, 2015 and 2014, respectively. Educational and promotional items, called sales aids, are sold to associates to assist in
their sales efforts and are included in inventories and charged to cost of sales when sold.
Research and Development Expenses
The Company expenses research and development expenses as incurred. Research and development expenses
related to new product development, enhancement of existing products, clinical studies and trials, Food and Drug
Administration compliance studies, general supplies, internal salaries, third-party contractors, and consulting fees were
approximately $1.7 million and $1.6 million, respectively, for the years ended December 31, 2015 and 2014. Salaries and
contract labor are included in selling and administrative expenses and all other research and development costs are
included in other operating costs.
Stock-Based Compensation
The Company currently has one active stock-based compensation plan, which was approved by its shareholders
at its 2008 Annual Shareholder’s meeting and amended at the 2010, 2012, and 2014 Annual Shareholder meetings. The
Company grants stock options to its employees, consultants, and board members with an exercise price equal to the
closing price of its common stock on the date of grant with a term no greater than 10 years. The majority of stock options
vest over two or three years. Incentive stock options granted to shareholders who own 10% or more of the Company’s
outstanding stock are granted at an exercise price that may not be less than 110% of the closing price of the Company’s
common stock on the date of grant and have a term no greater than five years. At the date of grant, the Company
determines the fair value of the stock option award and recognizes compensation expense over the requisite service period,
or the vesting period of the award. The fair value of the stock option award is calculated using the Black-Scholes option-
pricing model. The Company records stock-based compensation expense in selling and administrative expenses.
F-10
Software Development Costs
The Company capitalizes qualifying internal payroll and external contracting and consulting costs related to the
development of internal use software that are incurred during the application development stage, which includes design of
the software configuration and interfaces, coding, installation, and testing. Costs incurred during the preliminary project
along with post-implementation stages of internal use software are expensed as incurred. The Company amortizes such
costs over the estimated useful life of the software, which is three to five years once the software is placed in service.
Other Operating Costs
Other operating costs include travel, accounting/legal/consulting fees, credit card processing fees, banking fees,
off-site storage fees, utilities, and other miscellaneous operating expenses.
Income Taxes
The Company determines the provision for income taxes using the asset and liability method. Deferred tax assets
and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized as income in the period that includes the enactment date. The
Company evaluates the probability of realizing the future benefits of its deferred tax assets and provides a valuation
allowance for the portion of any deferred tax assets where the likelihood of realizing an income tax benefit in the future
does not meet the more likely than not criterion for recognition. The Company recognizes the effect of income tax
positions only if those positions are more likely than not of being sustained. Recognized income tax positions are
measured at the largest amount that is greater than 50% likely of being recognized. Changes in recognition or
measurement are reflected in the period in which the change in judgment occurs. The Company recognizes both interest
and penalties related to uncertain tax positions as part of the income tax provision.
Comprehensive Income and Accumulated Other Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from
transactions and other events and circumstances from non-owner sources and includes all changes in equity during a period
except those resulting from investments by owners and distributions to owners. The Company’s comprehensive income
consists of the Company’s net income, foreign currency translation adjustments from its Japan, Republic of Korea, Taiwan,
Norway, Sweden and Mexico operations, and changes in the pension obligation for its Japanese employees.
Concentration Risk
A significant portion of our revenue is derived from five products: NutriVerus™, PLUS™, (cid:2)th™ Skin
Rejuvenation, and our core Ambrotose® complex products, which include the Ambrotose® products and Advanced
Ambrotose® products. A decline in sales value of such products could have a material adverse effect on our earnings, cash
flows, and financial position. Revenue from these products were as follows for the years ended December 31, 2015 and
2014 (in thousands, except percentages):
Advanced Ambrotose®
Ambrotose®
NutriVerus™
PLUS™
(cid:2)th™ Skin Rejuvenation
Total
2015
2014
Sales by
product
% of total
net sales
Sales by
product
% of total
net sales
$
59,026
32.7 % $
9,686
8,541
8,239
5,394
$
90,886
5.4 %
4.7 %
4.6 %
3.0 %
50.4 % $
63,791
10,895
10,530
8,923
13,431
107,571
33.6 %
5.7 %
5.5 %
4.7 %
7.1 %
56.6 %
Our business is not currently exposed to customer concentration risk given that no independent associate has ever
accounted for more than 10% of our consolidated net sales.
F-11
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally
of cash and cash equivalents, investments, receivables, and restricted cash. The Company utilizes financial institutions that
the Company considers to be of high credit quality and periodically evaluates the credit rating of such institutions and the
allocation of their investments to minimize exposure to credit concentration risk.
Fair Value of Financial Instruments
The fair value of the Company’s financial instruments, including cash and cash equivalents, restricted cash, time
deposits, money market investments, receivables, payables, and accrued expenses, approximate their carrying values due
to their relatively short maturities. See Note 3 to our Consolidated Financial Statements, Fair Value, for more information.
NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition
requirements in Topic 605, Revenue Recognition. In August, 2015 the FASB issued ASU No. 2015-14, Revenue from
Contracts with Customers (Topic 606): Deferral of the Effective Date which amended ASU No. 2014-09, Revenue from
Contracts with Customers (Topic 606) to defer the effective date of ASU No. 2014-09 for all entities by one year. The core
principle of the guidance is that an entity should recognize revenue to depict the transfer of goods to customers in an
amount that reflects the consideration to which the entity expects in exchange for those goods. To achieve that core
principle, an entity should apply the following steps:
-Step 1: Identify the contract(s) with a customer.
-Step 2: Identify the performance obligations in the contract.
-Step 3: Determine the transaction price.
-Step 4: Allocate the transaction price to the performance obligations in the contract.
-Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
The standard is effective for the Company for annual reporting periods beginning after December 15, 2017,
including interim periods within that reporting period, using either of the following transition methods: (i) a full
retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect
certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09
recognized at the date of adoption (which includes additional footnote disclosures). Early application is permitted for
annual reporting periods beginning after December 15, 2016. Management is currently evaluating the impact of the
Company’s pending adoption of ASU 2014-09 on the Company’s consolidated financial statements and has not yet
determined the method by which the Company will adopt the standard in 2018.
In January 2015, the FASB issued ASU No. 2015-01, Income Statement—Extraordinary and Unusual Items,
which eliminates from GAAP the concept of extraordinary items. The update is effective for fiscal years, and interim
periods within those fiscal years, beginning after December 15, 2015. Because this standard only impacts presentation and
disclosure requirements, its adoption is not expected to have a material impact on the Company’s consolidated results of
operations or financial condition.
In April 2015, the FASB issued ASU No. 2015-05, Intangibles – Goodwill and Other – Internal-Use Software
(Subtopic 350-40), which adds guidance to Subtopic 350-40, Intangibles – Goodwill and Other – Internal-Use Software.
The amendments in this update provide guidance to customers about whether a cloud computing arrangement includes a
software license. The update is effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2015 and early adoption is permitted. Management is currently evaluating the impact of this standard on
the Company’s consolidated results of operations and financial condition.
In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of
Inventory, which provides guidance to more closely align the measurement of inventory in GAAP with the measurement
of inventory in International Financial Reporting Standards (IFRS). For Mannatech, the amendments are effective for
fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Management is
currently evaluating the impact of this standard on the Company’s consolidated results of operations and financial
condition.
F-12
In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification
of Deferred Taxes, which changes how deferred taxes are classified on organizations’ balance sheets. The update
eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent
in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as
noncurrent. The update is effective for annual periods beginning after December 15, 2016 and interim periods within those
annual periods. Management is currently evaluating the impact of this standard on the Company’s consolidated results of
operations and financial condition.
In February of 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02"). Under ASU
2016-02, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose
key information about leasing arrangements. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and
sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about
leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash
flows arising from leases. For public companies, ASU 2016-02 is effective for annual reporting periods beginning after
December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption,
with early adoption permitted. Management is currently evaluating the future impact of ASU 2016-02 on its consolidated
financial position, results of operations and cash flows.
Other recently issued accounting pronouncements did not or are not believed by management to have a material
impact on the Company’s present or future financial statements.
NOTE 3: FAIR VALUE
The Company utilizes fair value measurements to record fair value adjustments to certain financial assets and to
determine fair value disclosures.
Fair Value Measurements (Topic 820) of the FASB establishes a fair value hierarchy that requires the use of
observable market data, when available, and prioritizes the inputs to valuation techniques used to measure fair value in the
following categories:
(cid:2) Level 1—Quoted unadjusted prices for identical instruments in active markets.
(cid:2) Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar
instruments in markets that are not active and model-derived valuations in which all observable inputs and
significant value drivers are observable in active markets.
(cid:2) Level 3—Model derived valuations in which one or more significant inputs or significant value drivers are
unobservable, including assumptions developed by the Company.
The primary objective of the Company’s investment activities is to preserve principal while maximizing yields
without significantly increasing risk. The investment instruments held by the Company are money market funds and interest
bearing deposits for which quoted market prices are readily available. The Company considers these highly liquid
investments to be cash equivalents. These investments are classified within Level 1 of the fair value hierarchy because they
are valued based on quoted market prices in active markets.
F-13
The tables below present the recorded amount of financial assets measured at fair value (in thousands) on a
recurring basis as of December 31, 2015 and 2014. The Company did not have any material financial liabilities that were
required to be measured at fair value on a recurring basis at December 31, 2015 and 2014.
2015
Assets
Money Market Funds – Fidelity, US
Interest bearing deposits – various banks
Total
Amounts included in:
Cash and cash equivalents
Restricted cash
Long-term restricted cash
Total
2014
Assets
Money Market Funds – Fidelity, US
Interest bearing deposits – various banks
Total
Amounts included in:
Cash and cash equivalents
Restricted cash
Long-term restricted cash
Total
NOTE 4: INVENTORIES
Level 1
Level 2
Level 3
Total
319
14,134
14,453
8,281
737
5,435
14,453
$
$
$
$
— $
—
— $
— $
—
—
— $
—
—
—
—
—
—
—
$
$
$
$
319
14,134
14,453
8,281
737
5,435
14,453
Level 1
Level 2
Level 3
Total
392
12,322
12,714
6,159
738
5,817
12,714
$
$
$
$
— $
—
— $
— $
—
—
— $
—
—
—
—
—
—
—
$
$
$
$
392
12,322
12,714
6,159
738
5,817
12,714
$
$
$
$
$
$
$
$
Inventories consist of raw materials, finished goods, and promotional materials. The Company provides an
allowance for any slow-moving or obsolete inventories. Inventories as of December 31, 2015 and 2014, consisted of the
following (in thousands):
Raw materials
Finished goods
Inventory reserves for obsolescence
Total
2015
2014
1,187 $
9,277
(1,265)
9,199 $
2,118
10,615
(2,142)
10,591
$
$
NOTE 5: PROPERTY AND EQUIPMENT
As of December 31, 2015 and 2014, property and equipment consisted of the following (in thousands):
Office furniture and equipment
Computer hardware
Computer software
Automobiles
Leasehold improvements
Less accumulated depreciation and amortization
Property and equipment, net
Construction in progress
Total
F-14
2015
8,576
7,747
47,724
81
12,393
76,521
(72,673 )
3,848
839
4,687
2014
8,666
7,738
46,791
81
12,270
75,546
(73,065 )
2,481
1,622
4,103
$
$
$
$
NOTE 6: CAPITAL LEASE OBLIGATIONS
As of December 31, 2015 and 2014, the net book value of leased assets was $1.1 million and $1.3 million,
respectively for leased equipment, purchased licenses, and corporate insurance. The future minimum lease payments (in
thousands) are as follows:
2016
2017
2018
2019
2020
Total future minimum lease payments
Less: Amounts representing interest (effective interest rate 4.74%)
Present value of minimum lease payments
Current portion of capital lease obligations
Long-term portion of capital lease obligations
NOTE 7: ACCRUED EXPENSES
$
$
492
370
205
52
13
1,132
(73 )
1,059
447
612
As of December 31, 2015 and 2014, accrued expenses consisted of the following (in thousands):
Accrued asset purchases
Accrued compensation
Accrued royalties
Accrued sales and other taxes
Other accrued operating expenses
Customer deposits and sales returns
Accrued travel expenses related to corporate events
Accrued shipping and handling costs
Rent expense
Accrued legal and accounting fees
2015
2014
277
1,620
68
2,323
562
153
271
257
76
614
6,221
$
$
291
2,180
105
1,193
786
211
107
344
147
992
6,356
$
$
NOTE 8: INCOME TAXES
The components of the Company’s income before income taxes are attributable to the following jurisdictions for
the years ended December 31 (in thousands):
United States
Foreign
2015
2014
$
$
769
7,430
8,199
$
$
2,044
7,777
9,821
F-15
The components of the Company’s income tax provision for the years ended December 31 are as follows (in
thousands):
Current provision (benefit):
Federal
State
Foreign
Deferred provision (benefit):
Federal
State
Foreign
2015
(336 )
21
2,518
2,203
191
72
(106 )
157
2,360
$
$
2014
2,433
43
2,547
5,023
(1,792 )
349
(255 )
(1,698 )
3,325
$
$
A reconciliation of the Company’s effective income tax rate and the United States federal statutory income tax
rate is summarized as follows, for the years ended December 31:
Federal statutory income taxes
State income taxes, net of federal benefit
Difference in foreign and United States tax on foreign operations
Effect of changes in valuation allowance for net operating loss
carryforwards
Effect of change in uncertain tax positions (net)
Federal Sub-Part F Income from foreign operations
Foreign exchange
Other
2015
2014
35.0 %
1.0
(14.8 )
(8.7 )
(0.2 )
5.1
5.3
6.2
28.9 %
35.0 %
3.5
(16.1 )
14.3
0.5
2.9
(0.3 )
(5.9 )
33.9 %
For the years ended December 31, 2015 and 2014, the Company’s effective tax rate was 28.9% and 33.9%
respectively. For 2015, the effective tax rate was less than what would have been expected if the federal statutory rate was
applied to income before taxes. Items decreasing the effective income tax rate included the lower statutory tax rates in
foreign jurisdictions compared to the U.S. and a larger mix of foreign income over U.S. income than in prior years. In
addition, the rate decreased for an overall reduction in the valuation allowances associated with certain deferred tax assets.
For 2014, the effective tax rate was close to what would have been expected if the federal statutory rate was applied to
income before taxes. Items increasing the effective income tax rate included the change in the valuation allowances
associated with certain deferred tax assets, U.S. federal tax on deemed foreign dividend distribution, and “subpart F
income” resulting from controlled foreign corporation operations. Items decreasing the effective income tax rate included
the foreign tax credits.
F-16
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of
the Company’s deferred tax assets and liabilities consisted of the following at December 31 (in thousands):
Deferred tax assets:
Current:
Deferred revenue
Inventory capitalization
Inventory reserves
Accrued expenses
Other
Total current deferred tax assets
Noncurrent:
Depreciation and amortization
Net operating loss(1)
Deferred royalty
Non-cash accounting charges related to stock options and warrants
Accrued expenses
Foreign tax credit carryover
Other
Total noncurrent deferred tax assets
Total deferred tax assets
Valuation allowance
Total deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Current:
Prepaid expenses
Deferred commissions
Other
Total current deferred tax liabilities
Noncurrent:
Internally-developed software
Depreciation and amortization
Sub-Part F income deferred
Other
Total noncurrent deferred tax liabilities
Total deferred tax liabilities
__________________________________________
(1) The Company’s net operating loss will expire as follows (dollar amounts in thousands):
2015
2014
$
567 $
209
376
974
205
2,331
453
171
762
697
127
2,210
1,788
5,378
16
684
239
3,568
620
12,293
14,624
(9,028 )
$ 5,596
1,867
5,842
28
628
350
3,855
506
13,076
15,286
(9,745 )
$ 5,541
$
406
846
—
1,252
$
413
769
10
1,192
266
1
—
—
267
11
2
—
24
37
$ 1,519 $ 1,229
Jurisdiction
Gross
NOL
$
Colombia
Mexico
Norway
Singapore
Sweden
Switzerland
Taiwan
Ukraine(1)
United States (states)
64
8,482
249
131
513
11,371
7,133
581
11,079
(1) On March 21, 2014, the Company suspended operations in the Ukraine.
$
Tax
Effected
NOL
22
2,545
67
22
113
1,028
1,213
105
277
Expiration Years
2019
2020-2024
Indefinite
Indefinite
Indefinite
2016-2020
2016-2024
Indefinite
2016-2032
In addition to net operating loss attributes, the Company has recorded a foreign tax credit carryforward of $3.1
million, which will begin to expire in 2019 and a charitable contribution carryforward of $0.5 million which will expire
F-17
between years 2016 through 2020. The Company maintains a full valuation against both the foreign tax credits and the
charitable contribution carryforward.
At December 31, 2015 and 2014, the Company’s valuation allowance was $9.0 million and $9.7 million,
respectively. The provisions of ASC Topic 740 require a company to record a valuation allowance when the “more likely
than not” criterion for realizing a deferred tax asset cannot be met. A company is to use judgment in reviewing both
positive and negative evidence of realizing a deferred tax asset. Furthermore, the weight given to the potential effect of
such evidence is commensurate with the extent the evidence can be objectively verified.
The valuation allowances presented below (in millions) at December 31, 2015 and 2014, represented a reserve
against the Company’s net deferred tax asset the Company believed the “more likely than not” criterion for recognition
purposes could not be met. The U.S. valuation allowance decreased due to the usage of foreign tax credits.
Country
Mexico
Norway
Sweden
Switzerland
Taiwan
Ukraine(1)
United States
Other Jurisdictions
Total
(1) On March 21, 2014, the Company suspended operations in the Ukraine.
2015
2014
2.5
—
0.1
1.0
1.2
0.1
4.0
0.1
9.0
$
$
2.7
0.1
0.1
1.2
1.2
0.1
4.3
—
9.7
$
$
At December 31, 2015 and 2014, the Company did not record a provision for any United States or foreign
withholding taxes on its undistributed earnings related to its foreign subsidiaries because it is the intention of the Company
to reinvest its undistributed earnings indefinitely in its foreign operations. Generally, such earnings become subject to
United States income tax upon the remittance of dividends and under certain other circumstances. At December 31, 2015,
it is not practicable to estimate the amount of deferred tax liability on such undistributed earnings.
Deferred tax assets (liabilities) are classified in the accompanying Consolidated Balance Sheets of December 31
as follows (in thousands):
Current deferred tax assets
Noncurrent deferred tax assets
Current deferred tax liabilities
Other long-term liabilities
Net deferred tax assets
2015
2014
$
$
460
3,725
(84)
(24)
4,077
$
$
1,141
3,320
(123)
(26)
4,312
F-18
On January 1, 2007, the Company adopted FIN 48, which was codified into Topic 740, which prescribes a
comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements,
uncertain tax positions that it has taken or expects to take on a tax return. Topic 740 requires that a company recognize in
its financial statements the impact of tax positions that meet a “more likely than not” threshold, based on the technical
merits of the position. The tax benefits recognized in the financial statements from such a position should be measured
based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. As of
December 31, 2015, the Company recorded $0.1 million in current liabilities and $0.7 million in other long-term liabilities
related to uncertain income tax positions and income tax reserves associated with various audits. At December 31, 2015,
the Company had gross tax-affected unrecognized tax benefits of $0.6 million that, if recognized, would impact the
effective tax rate. The Company recognizes penalties and interest charges related to unrecognized tax benefits in current
tax expense. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows, for the years
ended December 31, 2015 and 2014 (in thousands):
Balance as of January 1
Additions for tax positions related to the current year
Additions for tax positions of prior years
Reductions of tax positions of prior years
Settlements
Balance as of December 31
2015
2014
803
—
—
(71)
(17)
715
$
$
738
1
111
(47)
—
803
$
$
The Company recognizes interest and/or penalties related to uncertain tax positions in current income tax
expense. As of December 31, 2015 and December 31, 2014, the Company had accrued interest and penalties of $0.2
million and $0.1 million in the consolidated balance sheet, of which $26 thousand and $56 thousand were accrued in the
consolidated statement of operations. Although it is not reasonably possible to estimate the amount by which unrecognized
tax benefits may increase or decrease within the next twelve months due to uncertainties regarding the timing of any
examinations, the Company expects its unrecognized tax benefits to decrease by $0.1 million due to the lapse of statutes of
limitations during the next twelve months.
The Company files income tax returns in the United States federal jurisdiction and various state and foreign
jurisdictions. As of December 31, 2015, the tax years that remained subject to examination by a major tax jurisdiction for
the Company’s most significant subsidiaries were as follows:
Jurisdiction
Australia
Canada
Denmark
Japan
Mexico
Norway
Republic of Korea
Singapore
South Africa
Sweden
Switzerland
Taiwan
United Kingdom
United States
Open Years
2011-2015
2011-2015
2012-2015
2012-2015
2011-2015
2009-2015
2010-2015
2011-2015
2012-2015
2010-2015
2010-2015
2010-2015
2009-2015
2012-2015
F-19
NOTE 9: TRANSACTIONS WITH RELATED PARTIES AND AFFILIATES
For the year ended December 31, 2015, the Company made cash donations of $0.9 million, $0.5 million of which
was accrued at December 31, 2014, to the M5M Foundation, a 501(c)(3) charitable organization that works to combat the
epidemic of childhood malnutrition on a global scale. Several of the Company’s directors and officers and their family
members serve on the board of the M5M Foundation, including:
(cid:2) Al Bala, the Company’s President;
(cid:2) Chris Simons, the Company’s Regional Vice President EMEA/North America;
(cid:2) Landen Fredrick, son of J. Stanley Fredrick, the Company’s Chairman of the Board and a major shareholder;
and
(cid:2) Lorrie Fry, the daughter of Larry Jobe (a member of our Board).
During 2015, we paid employment compensation of approximately $251,000 in salary, bonus, auto allowance,
and other compensation to Landen Fredrick, son of J. Stanley Fredrick, the Company’s Chairman of the Board and a major
shareholder. In addition, Landen Fredrick participated in the employee health care benefit plans available to all employees
of the Company. Landen Fredrick has served as Senior Vice President, Supply Chain and IT since August of 2015. Prior to
that, Mr. Fredrick served as Vice President, Global Operations since May of 2013, Vice President, North American Sales
and Operations since January of 2011, as Vice President, North American Sales since February of 2010 and as Senior
Director of Tools and Training since his hire in May of 2006. Landen Fredrick also serves on the Board of the M5M
Foundation.
Mr. Ray Robbins is a member of the Company’s Board of Directors and a major shareholder. Mr. Robbins holds
positions in the Company’s associate global downline network marketing system. In addition, several of Mr. Robbins’
family members are independent associates. The Company pays commissions and incentives to its independent associates
and during 2015 and 2014, the Company paid aggregate commissions and incentives to Mr. Robbins and his family of
approximately $3.2 million and $2.9 million, respectively. The aggregate amount of commission and incentives paid to
Mr. Robbins was approximately $2.9 million and $2.6 million in 2015 and 2014, respectively. The aggregate amount of
commission and incentives paid to family members was approximately $0.3 million in each of 2015 and 2014, of which
$0.2 million was paid each year to his son, Kevin Robbins, and $0.1 million was paid each year to his daughter, Marla
Finley, and daughter-in-law, Demra Robbins, who both share an account. All commissions and incentives paid to
Mr. Robbins and his family members are in accordance with the Company’s global associate career and compensation
plan. The Company has also contracted with a software development firm owned by Ryan Robbins, the son of Mr. Ray
Robbins. The value of services performed during 2015 were less than $0.1 million.
Johanna Bala, the wife of Al Bala, the Company’s Chief Executive Officer and President, is an independent
associate who earns commissions and incentives. The aggregate amount of commission and incentives paid to Johanna
Bala was approximately $0.2 million in each of 2015 and 2014.
Mr. Samuel Caster is the Company’s founder and former Chairman of the Board. Prior to January 2014, Mr.
Caster’s beneficial ownership of the Company was approximately 18%, but in January 2014 fell below 5%.
Mr. Caster founded MannaRelief in 1999 and served as its Chairman from 1999 through August 2007.
MannaRelief employs William A. Mullens, Mr. Caster’s brother-in-law, as its Executive Director. Mr. Caster’s wife,
Linda Caster, serves as MannaRelief’s Chairman of the Board. MannaRelief is a 501(c)(3) charitable organization that
provides charitable services for children. MannaRelief is not owned or operated by the Company. The Company
discontinued supporting MannaRelief in the second quarter of 2014.
Historically, the Company made cash donations to MannaRelief, sold products to MannaRelief at cost plus
shipping and handling charges, and shipped products purchased by MannaRelief to its chosen recipients.
The Company made cash donations and sold products to MannaRelief as follows:
Sold Products
Contributed Cash Donations
2015
$ — million
$ — million
2014
$ 0.3 million
$ 0.3 million
Beginning on December 1, 2011, the Company entered into a series of successive Consulting Agreements with
F-20
WonderEnterprises, LLC (f/k/a Salinda Enterprises, LLC; hereinafter “Wonder”), where the Company paid Wonder for
consulting services performed by Mr. Caster plus reimbursable expenses. Mr. Caster is the owner and an employee of
Wonder. For the year ended December 31, 2014, Mr. Caster received $0.1 million for consulting services under these
Consulting Agreements. Pursuant to the termination of the final Consulting Agreement according to its terms on February
28, 2014, Mr. Caster is no longer serving as a consultant for the Company.
NOTE 10: EMPLOYEE BENEFIT PLANS
Employee Retirement Plan
Effective May 9, 1997, the Company adopted a Defined Contribution 401(k) and Profit Sharing Plan (the “401(k)
Plan”) for its United States and Canada employees. The 401(k) Plan covers all regular full-time and part-time employees
who have completed three months of service and attained the age of twenty-one. United States employees can contribute
up to 100 percent of their annual compensation but are limited to the maximum annual dollar amount allowable under the
Internal Revenue Code. The 401(k) plan permits matching and discretionary employer contributions. The Company’s
matching contributions for its United States and Canada employees vest ratably over a five-year period. During each of the
years ended December 31, 2015 and 2014, the Company contributed approximately $0.2 million to the 401(k) Plan for
matching contributions.
The Company also sponsors a non-U.S. defined benefit plan covering its employees in its Japan subsidiary (the
“Benefit Plan”). Benefits under the Benefit Plan are based on a point system for position grade and years of service. The
Company utilizes actuarial methods. Inherent in the application of these actuarial methods are key assumptions, including,
but not limited to, discount rates and expected long-term rates of return on plan assets. Changes in the related Benefit Plan
costs may occur in the future due to changes in the underlying assumptions, changes in the number and composition of
plan participants, and changes in the level of benefits provided. The Company uses a measurement date of December 31 to
evaluate and record any post-retirement benefits related to the Benefit Plan.
Projected Benefit Obligation and Fair Value of Plan Assets
The Benefit Plan’s projected benefit obligation and valuation of plan assets were as follows for the years ended
December 31 (in thousands):
Projected benefit obligation:
Balance, beginning of year
Service cost
Interest cost
Liability losses
Benefits paid to participants
Special termination benefit
Foreign currency
Balance, end of year
Plan assets:
Fair value, beginning of year
Company contributions
Benefits paid to participants
Fair value, end of year
$
$
$
$
F-21
2015
2014
$
549
75
3
(4 )
(141 )
—
(3 )
479
$
629
88
3
(6 )
(122 )
34
(77 )
549
2015
2014
—
141
(141 )
—
$
$
—
122
(122 )
—
Funded status of the Benefit Plan as of December 31 (in thousands):
2015
2014
Benefit obligation
Fair value of plan assets
Excess of benefit obligation over fair value of plan assets
Amounts recognized in the accompanying Consolidated Balance Sheets consist
of, as of December 31 (in thousands):
Accrued benefit liability
Transition obligation and unrealized gain
Net amount recognized in the consolidated balance sheets
Other changes recognized in comprehensive income (loss) (in
thousands):
Net periodic cost
Current year gain
Amortization of transition obligation
Total recognized in other comprehensive income (loss)
Total recognized in comprehensive income (loss)
$
$
$
$
(479 ) $
—
(479 ) $
(549 )
—
(549 )
2015
2014
(479 ) $
(339 )
(818 ) $
(549 )
(372 )
(921 )
Years Ended December 31,
2015
2014
$
$
43
(4 )
(4 )
(8 )
35
$
$
85
(6 )
(4 )
(10 )
75
Amounts not yet reflected in net periodic benefit cost and included in accumulated
other comprehensive gain (loss) (in thousands):
Transition obligation
Prior service cost
Net actuarial gain
Total recognized in accumulated other comprehensive gain (loss)
As of December 31,
$
2015
22
313
4
$ 339
$
2014
13
353
6
$ 372
2016 estimated amounts of amortized transition obligation (in thousands):
Transition obligation
2016
$
(4 )
Aggregate Benefit Plan information and accumulated benefit obligation in excess
of plan assets (in thousands):
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
As of December 31,
2015
$ 479
479
—
2014
$ 549
549
—
The weighted-average assumptions to determine the benefit obligation and net cost are as follows:
Discount rate
Rate of increase in compensation levels
2015
0.40 %
— %
2014
0.50 %
— %
F-22
Components of Expense
Pension expense for the Benefit Plan is included in selling, general and administrative expenses in the
Consolidated Statements of Operations and is comprised of the following for the years ended December 31 (in thousands):
Service cost
Interest cost
Amortization of transition obligation
Gain
Special termination
Prior service cost
Benefit adjustment
Total pension expense
2015
75 $
3
4
—
—
(39 )
—
43 $
$
$
2014
88
3
4
—
34
(44 )
—
85
Estimated Benefits and Contributions
The Company expects to contribute approximately $53,000 to the Benefit Plan in 2016. As of December 31,
2015, benefits expected to be paid by the Benefit Plan for the next ten years is approximately as follows (in thousands):
2016
2017
2018
2019
2020
Next five years
Total expected benefits to be paid
$ 53
52
49
49
43
368
$ 614
NOTE 11: STOCK OPTION PLAN
Summary of Stock Plan
The Company currently has one active stock-based compensation plan, which was approved by shareholders. The
Company grants stock options to employees, consultants, and board members at the fair value of its common stock on the
date of grant, with a term no greater than ten years. The majority of stock options vest over two or three years.
Shareholders who own 10% or more of the Company’s outstanding stock are granted incentive stock options at an exercise
price that may not be less than 110% of the fair market value of the Company’s common stock on the date of grant and
have a term no greater than five years.
In February 2008, the Company’s Board of Directors approved the Mannatech, Incorporated 2008 Stock
Incentive Plan (as amended, the “2008 Plan”), which reserved up to 100,000 (as adjusted for a 1-for-10 reverse stock split)
shares of common stock for issuance of stock options and restricted stock to our employees, board members, and
consultants, plus any shares reserved under the Company’s then-existing, unexpired stock plans for which options had not
yet been issued, and any shares underlying outstanding options under the then-existing stock option plans that terminate
without having been exercised in full. The 2008 Plan was approved by the Company’s shareholders at the 2008 Annual
Shareholders’ Meeting and was amended at the 2012 Annual Shareholders’ Meeting to increase the number of shares of
common stock subject to the plan by 100,000 and amended again at the 2014 Annual Shareholder Meeting to increase the
number of shares of common stock subject to the plan by an additional 130,000. As of December 31, 2015, the 2008 Plan
had 127,124 stock options available for grant before the plan expires on February 20, 2018.
F-23
A summary of changes in stock options outstanding during the year ended December 31, 2015, is as follows:
Outstanding at beginning of year
Granted
Exercised
Forfeited or expired
Outstanding at end of year
Options exercisable at year end
2015
Number of
Options
(in
thousands)
Weighted
average
exercise
price
Weighted
average
remaining
contractual
life
(in years)
Aggregate
intrinsic
value (in
thousands)
249
37
(5 )
(55 )
226
148
16.71
19.18
5.72
19.78
16.61
16.95
7.09
6.34
505
282
During 2015, the Company issued 5,001 new shares upon the exercise of options, and the Company granted
1,000 new shares to a member of the Board. Options exercised during the year ending December 31, 2015 had a total
intrinsic value, calculated as the difference between the exercise date stock price and the exercise price of less than $0.1
million. Options exercised during the year ending December 31, 2014 had a total intrinsic value of less than $0.2 million.
Non-vested shares at December 31, 2015 and 2014 were 77,000 and 121,000, respectively.
Valuation and Expense Information Under FASB ASC Topic 718 Compensation – Stock Compensation
Under the provisions of FASB ASC Topic 718, the Company is required to measure and recognize compensation
expense related to any outstanding and unvested stock options previously granted, and thereafter recognize, in its
consolidated financial statements, compensation expense related to any new stock options granted after implementation
using a calculated fair-value based option-pricing model.
The Company uses the Black-Scholes option-pricing model to calculate the fair value of all of its stock options
and its assumptions are based on historical information. The following assumptions were used to calculate the
compensation expense and the calculated fair value of stock options granted each year:
2015
2014
Dividend yield:
Risk-free interest rate:
Expected market price volatility:
—
(1)
(1)
1.2 – 1.6 %
1.3 - 1.5 %
79.1 – 80.1 % 77.1 – 80.5 %
—
Average expected life of stock options:
4.5 years
4.5 years
_________________________
(1) The Company declared no dividends in 2015 or 2014.
The computation of the expected volatility assumption used in the Black-Scholes calculations for new grants is
based on historical volatilities of the Company’s stock. The expected life assumptions are based on the Company’s
historical employee exercise and forfeiture behavior.
The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2015
and 2014 was $11.90 and $11.25 per share, respectively. The total fair value of shares vested during the years ended
December 31, 2015 and 2014 was $0.6 million and $0.1 million, respectively.
F-24
The Company recorded the following amounts related to the expense of the fair values of options during the years
ended December 31, 2015 and 2014 (in thousands):
2015
2014
Selling, general and administrative expenses and income from operations before income taxes
$
575
$
512
Benefit for income taxes
Effect on net income
(137 )
(137 )
$
438
$
375
As of December 31, 2015, the Company had approximately $0.6 million of total unrecognized compensation
expense related to stock options currently outstanding, to be recognized in future years, ending December 31,
as follows (in thousands):
2016
2017
2018
Total gross
unrecognized
compensation expense
Total tax benefit associated
with unrecognized
compensation expense
Total net
unrecognized
compensation expense
$
352
176
99
$
627
$
$
54
18
—
72
$ 298
158
99
$ 555
NOTE 12: COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases certain office space, automobiles, computer hardware, and warehouse equipment under
various non-cancelable operating leases. Some of these leases have renewal options. All of the Company’s leases expire at
various times through August 2023. The Company also leases equipment under various month-to-month cancelable
operating leases. For the years ended December 31, 2015 and 2014, total rent expense was approximately $3.6 million and
$3.9 million, respectively.
Approximate future minimum rental commitments for non-cancelable operating leases (in thousands) are as
follows:
Years ending December 31,
2016
2017
2018
2019
2020
Thereafter
$ 1,729
1,430
787
297
112
—
$ 4,355
Purchase Commitments
The Company maintains supply agreements with its suppliers and manufacturers. Some of the supply agreements
contain exclusivity clauses and/or minimum annual purchase requirements. In March 2006, the Company entered into a
ten-year supply agreement to purchase plant-derived mineral nutrition products from IHT Health Products, Inc. (f.k.a.
InB:Biotechnologies, Inc.). As of December 31, 2015, the Company is required to purchase an aggregate of $5.0 million
through 2016.
Royalty and Consulting Agreements
The Company utilizes royalty agreements with individuals and entities to provide compensation for items relating
to developed products, websites and email provided to our associates. The Company paid royalties of $0.2 million and
$0.3 million in 2015 and 2014, respectively.
F-25
Employment Agreements
The Company has non-cancellable employment agreements with certain executives. If the employment
relationships with these executives were terminated, as of December 31, 2015, the Company would continue to be
indebted to the executives for $1.5 million, payable through 2016.
NOTE 13: LITIGATION
Pending Litigation
Diana Anselmo and New Day Today Corporation v. Mannatech, Incorporated, Case No. DC-15-01904, Judicial
District Court, Dallas County, Texas
On February 18, 2015 Ms. Diana Anselmo and New Day Today Corporation (collectively, the “Plaintiffs”) filed
suit against Mannatech alleging breach of contract pertaining to a portion of proceeds from a Mannatech Associate
position once held by Ms. Anselmo’s former husband, Ray Gebauer. Plaintiffs are seeking damages in excess of
$1,000,000 plus legal fees and expenses and a declaration that the Company continue to pay Plaintiffs proceeds from Mr.
Gebauer’s former account.
The Company retained counsel and Company filed its answer on March 23, 2015 denying Plaintiff’s allegations.
The trial was scheduled for March 7, 2016; however, on December 7, 2015 the Court granted the parties Agreed Motion
for Continuation and reset the trial for July 11, 2016. The Court issued a mediation order on April 20, 2015. Mediation
must be conducted no later than June 17, 2016. The parties remain engaged in the discovery process. It is not possible at
this time to predict whether the Company will incur any liability, or to estimate the ranges of damages, if any, which may
be incurred in connection with this matter. However, the Company believes it has a valid defense and will vigorously
defend this claim. This matter remains open.
Mannatech Korea, Ltd. v. Busan Custom Office, Busan District Court, Korea
On or before April 12, 2015, Mannatech Korea, Ltd. filed a suit against the Busan Custom Office (“BCO”) to
challenge BCO’s method of calculation regarding its assessment notice issued on July 11, 2013. The assessment notice
included an audit of the Company’s imported goods covering fiscal years 2008 through 2012 and required the Company to
pay $1.0 million for this assessment, all of which has been accrued to date. The Court ordered both parties to submit a
response to its inquiry by January 15, 2016, and upon the response by both parties, the Court will determine whether to
issue a decision without additional hearing or conduct additional hearing. This matter remains open.
Patent Litigation
Mannatech, Incorporated v. Wellness Quest, LLC and Harley Reginald McDaniel, Case No. 3:14-cv-2497, U.S.
District Court, for the Northern District of Texas, Dallas Division
On July 11, 2014 the Company filed a patent infringement lawsuit against Wellness Quest, LLC and Dr. H.
Reginald McDaniel (“Defendants”) alleging the Defendants infringe United States Patent Nos. 7,157,431 and 7,202,220,
both entitled “Compositions of Plant Carbohydrates as Dietary Supplements,” (the “Patents”) and seeking to stop their
manufacture, offer, and sale of infringing glyconutritional dietary supplement products. On July 16, 2014, the Company
filed a Motion for Preliminary Injunction preventing Defendants from infringing the Patents pending a final decision on
the merits. On August 29, 2014, the Defendants filed their Response to Plaintiff’s Motion for Preliminary Injunction and
Brief in Support along with their Answer and Affirmative Defenses. On November 4, 2014, the Court denied the
Company’s Motion for Preliminary Injunction and Motion to Expedite Discovery. On December 15, 2014, the Company
deposed Dr. Reginald McDaniel. Each party submitted its list of claim constructions/definitions and a list of the supporting
authority. Each party filed its opening brief and their respective responsive briefs. Defendants have designated an expert
and the Company deposed the expert on January 27, 2015 regarding his claim construction opinions while reserving the
right to examine him later regarding other matters. The parties remain engaged in the claim construction process.
Mediation on this matter was held on April 24, 2015 and a settlement was not reached.
On May 12, 2015 the Company received notice of an Order of Transfer advising that the case had been
reassigned from Judge Ed Kinkeade to Judge David C. Godbey for all further proceedings. On July 20, 2015, the Court
F-26
issued its Markman ruling adopting the Company’s proposed claim construction for all disputed terms except for “dietary
supplement composition” which it found needed no construction. On August 20, 2015, Defendants filed a request for an
interlocutory appeal, and the Company filed a reply on October 6, 2015. The Company also filed a separate motion
requesting entry of a final judgment and permanent injunction on September 8, 2015.
On November 5, 2015 the Court issued an Order accepting Defendant’s stipulation of infringement under the
Court’s claim interpretation and granted the Company’s partial motion for summary judgment and issued a permanent
injunction against Defendants’ infringement of the Patents. The Court stayed the permanent injunction until the conclusion
of Defendants’ appeal to the U.S. Court of Appeals for the Federal Circuit (the “Court of Appeals”). On December 3,
2015, Defendants filed their Notice of Appeal which was docketed by the Court of Appeals on December 8, 2015. This
matter remains open.
Mannatech, Incorporated v. RBC Life Sciences, Inc. and RBC Life Sciences USA, Inc,. Case No. 3:15-cv-01321-N,
U.S. District Court, for the Northern District of Texas, Dallas Division
On April 28, 2015 the Company filed a patent infringement lawsuit against RBC Life Sciences, Inc. and RBC
Life Sciences USA, Inc. (“Defendants”) alleging the Defendants infringe upon the Patents and seeking to stop their
manufacture, offer, and sale of infringing glyconutritional dietary supplement products. The Defendants asserted
counterclaims alleging, among other things, invalidity and non-infringement. On May 12, 2015 the Company received
notice of an Order of Transfer advising that the case had been reassigned from Judge Ed Kinkeade to Judge David C.
Godbey for all further proceedings. The parties filed the Case Management Report with the Court on June 24, 2015. The
Company filed its answer to Defendants’ counterclaims on June 29, 2015. Defendants also asserted that they plan to seek
re-examination of the Patents with United States Patent and Trademark Office (“USPTO”). The parties reached a
settlement on July 28, 2015, and the final judgment and permanent injunction was entered on August 5, 2015. This matter
is closed.
These lawsuits continue the Company’s enforcement of its patent rights, and the Company intends to vigorously
prosecute these matters. Based on the previous successful patent infringement lawsuits against Country Life, LLC,
Glycobiotics International, Inc., Techmedica Health, Inc., IonX Holdings, Inc., Boston Mountain Laboratories, Inc., Green
Life, LLC, and Xiong Lo and the recent success against RBC Life Sciences, Inc. and RBC Life Sciences USA, Inc.
described above, the Company believes there is a strong likelihood that it will obtain permanent injunctions against the
manufacture and sale of any infringing products for the duration of the Company’s patents.
Investigation of Potential Claims
In re: Mannatech, Inc., Case No. DC-15-01784, 116-th Judicial District Court, Dallas County, Texas
The Company engaged outside counsel to initiate an investigation regarding certain activities conducted by
Samuel L. Caster. On February 12, 2015, the Company petitioned the Court pursuant to Texas Rule of Civil Procedure 202
to depose Mr. Caster to investigate potential claims the Company may have against him. A hearing on the petition was
held on March 17, 2015. The Court granted the Company the opportunity to depose Mr. Caster. An Agreed Order was
filed with the Court on April 1, 2015. The Company deposed Mr. Caster on April 29, 2015. Following the deposition, the
Company moved forward with exercising its rights under the consulting agreement between the Company and Mr.
Caster’s company, Wonder, and initiated arbitration proceedings, which are described below.
Arbitration Proceeding
Mannatech v. Samuel L. Caster and Wonder Enterprises, LLC, Demand for Arbitration, Case No. 01-15-0003-6812
On May 29, 2015 the Company initiated arbitration proceedings against Samuel L. Caster and Wonder
(“Respondents”) alleging breach of contract by Mr. Caster and his company, Wonder, in a series of consulting agreements
entered into by the parties. Mannatech seeks to recover actual damages, costs of court and prejudgment interest together
with disgorgement of all benefits received by Caster and Wonder. The Company estimates its damages to be between
$500,000.00 and $3,500,000.00. On June 12, 2015 Respondents contacted the Company’s counsel to request mediation. The
parties have agreed to mediate this dispute; mediation was held on August 17, 2015, and a settlement was not reached. A
preliminary hearing for arbitration was held on September 18, 2015, and a final hearing will commence on April 25, 2016. A
Scheduling Order has been entered and depositions and discovery must be completed by March 25, 2016. The parties are
currently engaged in the discovery process. This matter remains open.
F-27
Trademark Opposition – U.S. Patent and Trademark Office
United States Trademark Opposition No. 91221493, Shaklee Corporation v. Mannatech, Incorporated re: UTH
On April 15, 2015 the Company received notice that Shaklee Corporation (“Shaklee”) filed a Notice of
Opposition to the Company’s trademark application for UTH (stylized as (cid:2)th) with the USPTO. On May 19, 2015, the
Company filed an answer to the opposition and also filed a counterclaim seeking to cancel Shaklee’s registration of its
YOUTH mark. Shaklee filed an extension to oppose the UTH mark on June 18, 2015, and the request to extend time to
oppose was granted until July 18, 2015. Shaklee filed a second extension on July 17, 2015, and the request to extend time
to oppose was granted until September 16, 2015. Shaklee filed motions to strike the Company’s Affirmative Defenses to
the Opposition and Counterclaim to cancel their registrations. The Company filed responses and the Trademark Trial and
Appeal Board ruled in Shaklee’s favor. The Company filed an amended Answer to the Opposition and Amended
Counterclaim on November 18, 2015. Shaklee then filed an answer to the Company’s Counterclaim on December 30,
2015.
On September 15, 2015, Shaklee filed two more Notices of Opposition for the UTH & Design and (cid:2)TH
applications. The Company filed Answers and Counterclaims on November 20, 2015. This matter remains ongoing.
It is not possible at this time to predict the outcome of this office action or whether the Company will incur any
liability, or to estimate the ranges of damages, if any, which may be incurred in connection with this matter. However, the
Company believes it has a valid defense and will vigorously defend this claim. This matter will remain open until it is
resolved.
Litigation in General
The Company has incurred several claims in the normal course of business. The Company believes such claims
can be resolved without any material adverse effect on its consolidated financial position, results of operations, or cash
flows.
The Company maintains certain liability insurance; however, certain costs of defending lawsuits are not covered
by or only partially covered by its insurance policies, including claims that are below insurance deductibles. Additionally,
insurance carriers could refuse to cover certain claims, in whole or in part. The Company accrues costs to defend itself
from litigation as they are incurred or as they become determinable.
The outcome of litigation is uncertain, and despite management’s views of the merits of any litigation, or the
reasonableness of the Company’s estimates and reserves, the Company’s financial statements could nonetheless be
materially affected by an adverse judgment. The Company believes it has adequately reserved for the contingencies arising
from current legal matters where an outcome was deemed to be probable, and the loss amount could be reasonably
estimated.
NOTE 14: SHAREHOLDERS’ EQUITY
Preferred Stock
On May 19, 1998, the Company amended its Amended and Restated Articles of Incorporation to reduce the
number of authorized shares of common stock from 100.0 million to 99.0 million and the Company authorized 1.0 million
shares of preferred stock with a par value of $0.01 per share. No shares of preferred stock have ever been issued or
outstanding.
Treasury Stock
On June 30, 2004, the Company’s Board of Directors authorized the Company to repurchase, in the open market,
the lesser of (i) 131,756 shares of its common stock and (ii) $1.3 million of its shares, (the “June 2004 Plan”). On August
28, 2006, a second program permitting the Company to purchase, in the open market, up to $20 million of its outstanding
shares was approved by our Board of Directors (the “August 2006 Plan”). On July 14, 2011, the Company’s Board of
Directors authorized the Company to reactivate the June 2004 Plan. As of March 10, 2016, the maximum number of
shares available for repurchase under the June 2004 Plan was 19,084, and the total number of shares purchased in the open
F-28
market under the June 2004 Plan was 112,672. No shares have ever been purchased under the August 2006 Plan. The
Company does not have any stock repurchase plans or programs other than the June 2004 Plan and the August 2006 Plan.
Equity-Based Compensation
During 2015, 5,001 shares were issued for stock option exercises and 1,000 shares were issued when the Board
granted those shares to a member of the Board as compensation for their work on the Board.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive income (loss) displayed in the Consolidated Statements of Shareholders’
Equity represents the results of certain shareholders’ equity changes not reflected in the consolidated statements of
operations, such as foreign currency translation and certain pension and postretirement benefit obligations.
The after-tax components of accumulated other comprehensive income (loss), are as follows (in thousands):
Foreign
Currency
Translation
Pension
Postretirement
Benefit
Obligation
Accumulated
Other
Comprehensive
Loss, Net
Balance as of December 31, 2014
$
(457 ) $
348 $
(109 )
Current-period change before
reclassifications
Amounts reclassified from accumulated
other comprehensive income (loss)
Income tax provision
Balance as of December 31, 2015
$
815
—
—
358
$
—
(31 )
11
328 $
815
(31 )
11
686
NOTE 15: EARNINGS PER SHARE
The Company calculates basic Earnings per Share (EPS) by dividing net income by the weighted-average number
of common shares outstanding for the period. The diluted EPS also reflects the potential dilution that could occur if
common stock were issued for awards under the 2008 Stock Incentive Plan. In determining potential dilution effect of
outstanding stock options during 2015 and 2014, the Company used average common stock close price of $20.17 and
$16.66, per share, respectively. Approximately 0.1 million of the Company’s stock options were excluded from the diluted
EPS calculation for each of 2015 and 2014 as the effect would have been antidilutive.
NOTE 16: SEGMENT INFORMATION
The Company conducts its business as a single operating segment, consolidating all of its business units into a
single reportable entity, as a seller of proprietary nutritional supplements, skin care and anti-aging products, and weight-
management and fitness products through its network marketing distribution channels operating in twenty-five countries.
Each of the Company’s business units sells similar packs and products and possesses similar economic characteristics,
such as selling prices and gross margins. In each country, the Company markets its products and pays commissions and
incentives in similar market environments. The Company’s management reviews its financial information by country and
focuses its internal reporting and analysis of revenues by packs and product sales. The Company sells its products through
its independent associates who occupy positions in our network and distribute products through similar distribution
channels in each country. No single independent associate has ever accounted for more than 10% of the Company’s
consolidated net sales.
The Company operates facilities in thirteen countries and sells product in twenty-five countries around the world.
These facilities are located in the United States, Canada, Switzerland, Australia, the United Kingdom, Japan, the Republic
of Korea (South Korea), Taiwan, South Africa, Mexico, Hong Kong, Singapore and Colombia. Each facility services
F-29
different geographic areas. We currently sell our products in three regions: (i) North America/South America (the United
States, Canada, Colombia and Mexico); (ii) EMEA (Austria, the Czech Republic, Denmark, Estonia, Finland, Germany,
the Republic of Ireland, Namibia, the Netherlands, Norway, South Africa, Spain, Sweden and the United Kingdom); (iii)
Asia/Pacific (Australia, Japan, New Zealand, the Republic of Korea, Singapore, Taiwan and Hong Kong).(cid:3)
Consolidated net sales shipped to customers in these regions, along with pack and product information for the
years ended December 31, are as follows (in millions, except percentages):
Region
North America
Asia/Pacific
EMEA
Total
2015
$
$
73.3
91.4
15.6
180.3
40.7 %
50.7 %
8.6 %
100.0 %
$
$
2014
80.8
92.4
16.9
190.1
42.5 %
48.6 %
8.9 %
100.0 %
Consolidated product sales
Consolidated pack sales
Consolidated other, including freight
Total
2015
$ 143.1
31.7
5.5
$ 180.3
2014
$ 155.3
27.8
7.0
$ 190.1
Long-lived assets by region, which include property and equipment and construction in progress for the Company
and its subsidiaries, as of December 31, reside in the following regions, as follows (in millions):
Region
North America
Asia/Pacific
EMEA
Total
2015
2014
$
$
3.5 $
1.1
0.1
4.7 $
3.1
0.8
0.2
4.1
Inventory balances by region, which consist of raw materials, and finished goods, including promotional
materials, and offset by obsolete inventories, for the Company and its subsidiaries, reside in the following regions as of
December 31, as follows (in millions):
Region
North America
Asia/Pacific
EMEA
Total
2015
2014
$
$
4.0
3.4 $
4.3
4.3
1.5
2.3
9.2 $ 10.6
F-30
Exhibit
Number
3.1
3.2
3.3
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
INDEX TO EXHIBITS
Exhibit Description
Form
File No.
Exhibit (s)
Filing Date
Incorporated by Reference
Amended and Restated Articles of Incorporation of Mannatech, dated May
19, 1998.
Amendment to the Amended and Restated Articles of Incorporation of
Mannatech, dated January 13, 2012.
Fifth Amended and Restated Bylaws of Mannatech, effective August 25,
2014.
Specimen Certificate representing Mannatech’s common stock, par value
$0.0001 per share.
Amended and Restated 1997 Stock Option Plan, dated August 7, 2004.
2008 Stock Incentive Plan, as amended.
Investment Agreement by and between Mannatech and Dutchess
Opportunity Fund, II, LP dated September 16, 2010.
S-1
8-K
8-K
S-1
10-K
S-8
8-K
333-63133
000-24657
000-24657
333-63133
000-24657
333-197400
000-24657
3.1
3.1
3.1
4.1
10.1
4.4
10.1
October 28, 1998
January 17, 2012
August 27, 2014
October 28, 1998
March 15, 2004
July 14, 2014
September 21, 2010
Amendment to Investment Agreement, dated as of October 4, 2010, by and
8-K
000-24657
10.1
October 5, 2010
between Mannatech and Dutchess Opportunity Fund, II, LP.
Amended and Restated 1998 Incentive Stock Option Plan, dated
August 7, 2004.
10-K
000-24657
10.1
March 15, 2004
Registration Rights Agreement by and between Mannatech and Dutchess
8-K
000-24657
10.2
September 21, 2010
Opportunity Fund, II, LP dated September 16, 2010.
Amended and Restated 2000 Option Plan, dated August 7, 2004.
Form of Indemnification Agreement between Mannatech and each member
of the Board of Directors of Mannatech Korea Ltd., dated March 3, 2004.
10-K
10-Q
000-24657
000-24657
10.1
10.2
March 15, 2004
August 9, 2004
Form of Indemnification Agreement between Mannatech and each of the
10-Q
000-24657
10.4
November 4, 2010
following directors: J. Stanley Fredrick, Patricia Wier, Alan D. Kennedy,
Gerald E. Gilbert, Marlin Ray Robbins, Larry A. Jobe, and Robert A.
Toth.
Commercial Lease Agreement between Mannatech and MEPC Quorum
Properties II Inc., dated November 7, 1996, as amended by the First
Amendment thereto dated May 29, 1997 and the Second Amendment
thereto dated November 13, 1997.
S-1
333-63133
10.13
September 10, 1998
10.11
Second Amendment to the Commercial Lease Agreement between
10-Q
000-24657
10.1
November 9, 2005
Mannatech and Texas Dugan Limited Partnership, dated September 22,
2005.
10.12
Commercial Lease Agreement between Mannatech and MEPC Quorum
S-1
333-63133
10.14
September 10, 1998
Properties II Inc., dated May 29, 1997 as amended by the First
Amendment thereto dated November 6, 1997.
10.13
Third Amendment to the Commercial Lease Agreement between
10-Q
000-24657
10.2
November 9, 2005
Mannatech and Texas Dugan Limited Partnership, dated September 22,
2005.
10.14
Trademark License and Supply Agreement between Mannatech and
8-K
000-24657
10.1
January 31, 2007
Carrington Laboratories, Inc., dated January 25, 2007. (Portions of this
exhibit were omitted pursuant to a confidential treatment request
submitted pursuant to Rule 24b-2 of the Exchange Act.)
10.15
Supply Agreement between Mannatech and Natural Aloe de Costa Rica,
8-K
000-24657
10.1
May 3, 2011
S.A. dated April 1, 2012 (Portions of this exhibit were omitted pursuant
to a confidential treatment request submitted pursuant to Rule 24b-2 of
the Exchange Act.)
10.16
Supply Agreement between Mannatech (International) Limited and
10-Q
000-24657
10.3
May 10, 2007
Marinova Pty. Limited, effective August 9, 2007 and dated May 7, 2007.
(Portions of this exhibit were omitted pursuant to a
confidential treatment request submitted pursuant to Rule 24b-2 of the
Exchange Act.)
Exhibit
Number
10.17
10.18
10.19
10.20
Exhibit Description
Amendment to Purchase Agreement between Mannatech and Marinova
PTY, Limited, dated May 6, 2008. (Portions of this exhibit were
omitted pursuant to a confidential treatment request submitted pursuant
to Rule 24b-2 of the Exchange Act.)
Form
Incorporated by Reference
File No.
Exhibit (s)
Filing Date
10-Q
000-24657
10.4
August 11, 2008
Purchase Agreement between Mannatech and Larex, Inc., dated January
10-K
000-24657
10.18
March 16, 2006
1, 2006. (Portions of this exhibit were omitted pursuant to a
confidential treatment request submitted pursuant to Rule 24b-2 of the
Exchange Act.)
Purchase Agreement between Mannatech and Wellness Enterprises, LLC,
dated February 1, 2006. (Portions of this exhibit were omitted pursuant
to a confidential treatment request submitted pursuant to Rule 24b-2 of
the Exchange Act.)
Supply Agreement between Mannatech and Coradji PTY. Limited, dated
March 29, 2004. (Portions of this exhibit were omitted pursuant to a
confidential treatment request submitted pursuant to Rule 24b-2 of the
Exchange Act.)
10-K
000-24657
10.19
March 16, 2006
10-Q/A
000-24657
10.1
March 29, 2005
10.21
Supply License Agreement between Mannatech and InB:Biotechnologies,
10-Q
000-24657
10.2
May 10, 2006
Inc., dated March 22, 2006. (Portions of this exhibit were omitted
pursuant to a confidential treatment request submitted pursuant to Rule
24b-2 of the Exchange Act.)
10.22
Initial Commercial Supply and Manufacturing Agreement between
10-Q
000-24657
10.3
May 10, 2006
10.23
10.24
10.25
Mannatech and Fine Chemetics, Inc., dated March 29, 2006. (Portions
of this exhibit were omitted pursuant to a confidential treatment request
submitted pursuant to Rule 24b-2 of the Exchange Act.)
Supply Agreement between Mannatech, Incorporated, and Improve
U.S.A., Inc., effective June 1, 2008, and executed May 2, 2008.
(Portions of this exhibit were omitted pursuant to a confidential
treatment request submitted pursuant to Rule 24b-2 of the Exchange
Act.)
Amendment to Supply Agreement between Mannatech and Improve
U.S.A., dated June 1, 2011. (Portions of this exhibit were omitted
pursuant to a confidential treatment request submitted pursuant to Rule
24b-2 of the Exchange Act.)
Services Agreement by and between Integrated Distribution and Logistics
Direct, LLC and Mannatech dated July 2, 2012 (Portions of this exhibit
were omitted pursuant to a confidential treatment request submitted
pursuant to Rule 24b-2 of the Exchange Act.)
8-K
000-24657
10.1
May 8, 2008
8-K
000-24657
10.1
August 22, 2011
8-K
000-24657
10.1
July 9, 2012
10.26
Sublease by and between Integrated Distribution and Logistics Direct,
8-K
000-24657
10.2
July 9, 2012
LLC and Mannatech, dated July 2, 2012. (Portions of this exhibit were
omitted pursuant to a confidential treatment request submitted pursuant
to Rule 24b-2 of the Exchange Act.)
10.27
Amended and Restated Employment Agreement between Terry L.
Persinger and Mannatech, dated June 16, 2008.
10.28
Employment Agreement between Robert A. Sinnott, Ph.D. and
8-K
8-K
000-24657
10.1
June 20, 2008
000-24657
10.3
October 11, 2007
Mannatech, dated October 5, 2007.
10.29
Employment Agreement between Mannatech and Mr. Samuel L. Caster,
10-K
000-24657
10.32
March 16, 2006
dated January 23, 2006.
10.30
Employment Agreement between Stephen D. Fenstermacher and
8-K
000-24657
10.2
October 11, 2007
Mannatech, dated October 5, 2007.
10.31
First Amendment to Employment Agreement between Stephen D.
Fenstermacher and Mannatech, dated December 18, 2008.
10.32
Mutual Severance and Release Agreement by and between Stephen D.
10-K
10-Q
Fenstermacher and Mannatech, dated March 12, 2012
000-24657
10.24
March 12, 2009
000-24657
10.1
May 10, 2012
10.33
Employment Agreement between Terence L. O’Day and Mannatech,
8-K
000-24657
10.1
October 11, 2007
dated October 5, 2007.
Exhibit
Number
10.34
Exhibit Description
Employment Agreement between B. Keith Clark and Mannatech, dated
October 5, 2007.
10.35
Employment Agreement between Wayne L. Badovinus and
Mannatech, dated June 4, 2008.
10.36
Employment Agreement between Terri F. Maxwell
and Mannatech, dated August 28, 2008.
Form
8-K
8-K
8-K
Incorporated by Reference
File No.
Exhibit (s)
Filing Date
000-24657
10.4
October 11, 2007
000-24657
10.1
June 9, 2008
000-24657
10.1
September 2, 2008
10.37
Lock-up Agreement between Mannatech and J. Stanley Fredrick, dated
10-K
000-24657
10.36
March 15, 2004
November 6, 2003.
10.38
Termination of Lock-up Agreement between Mannatech and J. Stanley
8-K
000-24657
10.1
March 10, 2009
Fredrick, dated March 6, 2009.
10.39
Follow-Up Agreement to Letter of Intent Agreement between Mannatech
10-Q
000-24657
10.4
November 14, 2001
and Jett, dated September 10, 2001.
10.40
Letter of Understanding between Mannatech and Dr. John Axford, dated
April 19, 2006.
10.41
Extension of the Letter of Spokesperson Arrangement between
Mannatech and Dr. John Axford, dated February 18, 2007.
10.42
Employment Agreement between Alfredo Bala and Mannatech, effective
October 1, 2007, dated September 18, 2007.
10.43
Amendment to Employment Agreement between Alfredo Bala and
Mannatech, dated October 11, 2007.
10.44
Clinical Research Agreement dated January 3, 2007 by and between St.
George’s Hospital Medical School (trading as St George’s, University
of London), and Mannatech, Inc.
10.45
Employment Agreement, effective March 2, 2009, by and between
Mannatech and Randy S. Bancino.
10.46
First Amendment to Employment Agreement, dated as of December 16,
2009, by and between Mannatech and Randy S. Bancino.
10.47
Consulting Agreement, dated March 17, 2009, between Mannatech and
Salinda Enterprises, LLC and Samuel L. Caster.
8-K
8-K
8-K
8-K
000-24657
99.1
April 21, 2006
000-24657
99.1
February 21, 2007
000-24657
10.1
September 24, 2007
000-24657
10.1
October 17, 2007
10-K
000-24657
10.39
March 17,2008
8-K
8-K
8-K
000-24657
10.1
March 6, 2009
000-24657
10.4
December 18, 2009
000-24657
10.1
March 19, 2009
10.48
Consulting Agreement, dated December 1, 2011, by and between
10-K
000-24657
10.46
March 29, 2012
Mannatech and WonderEnterprises, LLC (f/k/a Salinda Enterprises,
LLC) and Samuel L. Caster.
10.49
Consulting Agreement, effective January 1, 2013, by and between
10-K
000-24657
10.51
March 28, 2013
Mannatech and WonderEnterprises, LLC and Samuel L. Caster, dated
March 6, 2013.
10.50
Consulting Agreement, effective June 1, 2013, by and between
8-K
000-24657
10.1
June 4, 2013
Mannatech and WonderEnterprises, LLC and Samuel L. Caster, dated
June 3, 2013.
10.51
Consulting Agreement, effective as of December 1, 2013, by and between
Mannatech and WonderEnterprises, LLC.
10.52
Separation and Release Agreement, dated July 17, 2009 between
10.53
10.54
10.55
Mannatech and Terri F. Maxwell.
Second Amendment to Employment Agreement, dated as of December
16, 2009, by and between Mannatech and Stephen D. Fenstermacher.
Second Amendment to Employment Agreement, dated as of December
16, 2009, by and between Mannatech and Robert A. Sinnott, Ph.D.
Second Amendment to Employment Agreement, dated as of December
16, 2009, by and between Mannatech and B. Keith Clark.
10.56
Separation Agreement and Release, dated March 20, 2013, by and
between Mannatech and B. Keith Clark.
10.57
Employment Agreement, dated March 4, 2013, by and between
Mannatech and Roy Truett.
10.58
Separation Agreement and General Release, dated January 30, 2014, by
and between Mannatech and Roy Truett.
10.59
Executive Service Agreement between Mannatech Korea, Ltd. and Yong
Jae (Patrick) Park, dated October 1, 2009.
10.60
First Amendment to Employment Agreement between Mannatech
Incorporated and Robert A. Sinnott, MNS, PhD, dated December 18,
2008.
14.1
21*
23.1*
23.2*
Code of Ethics.
List of Subsidiaries.
Consent of BDO USA, LLP.
Report of Independent Registered Public Accounting Firm on
Financial Statement Schedule.
24*
Power of Attorney, which is included on the signature page of this annual
report on Form 10-K.
31.1*
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
of the Chief Executive Officer of Mannatech.
8-K
8-K
8-K
8-K
8-K
8-K
8-K
10-K
10-Q
10-Q
10-K
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
000-24657
10.1
December 1, 2013
000-24657
10.1
July 21, 2009
000-24657
10.1
December 18, 2009
000-24657
10.2
December 18, 2009
000-24657
10.3
December 18, 2009
000-24657
10.1
March 25, 2013
000-24657
10.1
March 6, 2013
000-24657
10.60
March 18, 2014
000-24657
10.1
May 12, 2015
000-24657
10.2
May 12, 2015
000-24657
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
14.1
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
March 16, 2007
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
Exhibit Description
Form
Incorporated by Reference
File No.
Exhibit (s)
Filing Date
Exhibit
Number
31.2*
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
of the Chief Financial Officer of Mannatech.
32.1*
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
of the Chief Executive Officer of Mannatech.
32.2*
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
of the Chief Financial Officer of Mannatech.
99.1*
Financial Statement Schedule Regarding Valuation and Qualifying
Accounts.
99.2*
Press release, dated November 10, 2015, entitled “Mannatech Reports
Third Quarter 2015 Results”.
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
**
**
**
**
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
101.INS** XBRL Instance Document
101.SCH*
*
101.CAL*
*
101.LAB*
*
101.PRE*
*
101.DEF*
*
_____________
* Filed herewith.
** Furnished herewith. In accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be “filed” for purposes
of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to liability under that section, and shall not be incorporated by reference into
any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in
such filing.
XBRL Taxonomy Extension Definition Linkbase Document
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
The Company has these wholly-owned subsidiaries located throughout the world, as follows:
List of Subsidiaries
Exhibit 21
1. Mannatech Australia Pty Limited
2. Mannatech Japan, G.K.
3. Mannatech Korea, Ltd.
4. Mannatech Limited (a New Zealand Company)
5. Mannatech Limited (a UK Company)
6. Mannatech Taiwan Corporation
7. Mannatech Payment Services Incorporated
8. Mannatech Products Company Inc.
9. Internet Health Group, Inc.
10. Mannatech (International) Limited
11. Mannatech, Incorporated Malaysia Sdn. Bhd.
12. Mannatech Singapore Pte. Ltd.
13. Mannatech Canada Corporation
14. Mannatech South Africa (Pty) Ltd
15. Mannatech Bermuda Holdings Limited
16. Mannatech Denmark ApS
17. Mannatech (Gibraltar) Holdings Limited
18. Mannatech Swiss Holdings GmbH
19. Mannatech Swiss International GmbH
20. Mannatech Malaysia Trading Co. Sdn. Bhd.
21. Mannatech Norge A/S
22. Mannatech Sverige AB
23. MTEX Mexico SRL CV
24.MTEX Mexico Services SRL CV
25.Mannatech Cyprus Limited
Mannatech Ukraine LLC
26.
MTEX Hong Kong Limited
27.
Mannatech Colombia SAS
28.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.1
The Board of Directors and Shareholders
Mannatech, Incorporated
We hereby consent to the incorporation by reference in the Registration Statements on Forms S-8 (File Nos. 333-
72767, 333-77227, 333-94519, 333-47752, 333-113975, 333-153199, 333-182676 and 333-197400) and Form S-3 (File
No. 333-169774) of Mannatech, Incorporated and Subsidiaries of our reports dated March 15, 2016, relating to the
consolidated financial statements and financial statement schedule, which appear in this Form 10-K.
/s/ BDO USA, LLP
Dallas, Texas
March 15, 2016
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENT
SCHEDULE
Exhibit 23.2
Board of Directors and Shareholders
Mannatech, Incorporated
Coppell, Texas
The audits referred to in our report dated March 15, 2016 relating to the consolidated financial statements of
Mannatech, Incorporated and Subsidiaries, which is contained in Item 15(a)(1) of this Form 10-K also included the audit
of the financial statement schedule listed in Item 15(a)(2) of this Form 10-K. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement
schedule based on our audits.
In our opinion such financial statement schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
/s/ BDO USA, LLP
Dallas, Texas
March 15, 2016
Exhibit 31.1
CERTIFICATION
PURSUANT TO 17 CFR 240.13a-14
PROMULGATED UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Alfredo Bala, certify that:
1. I have reviewed this annual report on Form 10-K of Mannatech, Incorporated;
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 the statements 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 the financial 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 and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange 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 ensure that 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 our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes 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 effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (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;
and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’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 reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: March 15, 2016
/s/ Alfredo Bala
Alfredo Bala
Chief Executive Officer
(principal executive officer)
Exhibit 31.2
CERTIFICATION
PURSUANT TO 17 CFR 240.13a-14
PROMULGATED UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David A. Johnson, certify that:
1. I have reviewed this annual report on Form 10-K of Mannatech, Incorporated;
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 the statements 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 the financial 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 and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange 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 ensure that 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 our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes 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 effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (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;
and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’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 reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: March 15, 2016
/s/ David A. Johnson
David A. Johnson
Chief Accounting Officer
(principal financial officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of Mannatech, Incorporated (the “Company”) on Form 10-K for the period
ending December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I,
Alfredo Bala, Chief Executive Officer of the Company, hereby 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;
and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Date: March 15, 2016
/s/ Alfredo Bala
Alfredo Bala
Chief Executive Officer
(principal executive officer)
A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN PROVIDED
TO MANNATECH, INCORPORATED AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION
OR ITS STAFF UPON REQUEST.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of Mannatech, Incorporated (the “Company”) on Form 10-K for the period
ending December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I,
David A. Johnson, Chief Accounting Officer of the Company, hereby 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;
and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Date: March 15, 2016
/s/ David A. Johnson
David A. Johnson
Chief Accounting Officer
(principal financial officer)
A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN PROVIDED
TO MANNATECH, INCORPORATED AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION
OR ITS STAFF UPON REQUEST.
MANNATECH, INCORPORATED AND SUBSIDIARIES
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Exhibit 99.1
Additions
Balance at
Beginning of
Year
Charged to
Costs and
Expenses
Charged to
other
Accounts
Deductions
Balance at
End of Year
Year Ended December 31, 2014
Deducted from asset accounts:
Allowance for doubtful accounts
Allowance for obsolete inventories
Valuation allowance for deferred tax assets
Included in accrued expenses:
Reserve for sales returns
Year Ended December 31, 2015
Deducted from asset accounts:
Allowance for doubtful accounts
Allowance for obsolete inventories
Valuation allowance for deferred tax assets
Included in accrued expenses:
Reserve for sales returns
$
$
$
$
$
$
$
$
142
2,009
5,264
579
2,124
5,344
238
1,628
213
2,142
9,745
369
480
180
207
1,446
—
—
—
—
—
—
—
—
(508 ) $
(1,991 ) $
(863 ) $
213
2,142
9,745
(1,659 ) $
207
(321 ) $
(1,357 ) $
(897 ) $
261
1,265
9,028
(1,506 ) $
147
Exhibit 99.2
Mannatech Reports Third Quarter 2015 Financial Results
(COPPELL, Texas) November 10, 2015 — Mannatech, Incorporated (NASDAQ: MTEX), the pioneer of nutritional
glycobiology, leading innovator of naturally-sourced supplements based on Real Food Technology® solutions, and creator
of the M5MSM (Mission 5 MillionSM) social entrepreneurial movement, today announced financial results for its third
quarter 2015.
Third quarter net sales for 2015 were $43.9 million, a decrease of 21.2% as compared to $55.6 million in the third quarter
of 2014. The net sales comparison for the quarter was affected by the launch of the Uth skin care product in our
international markets in 2014 and by foreign exchange rates. Net sales attributable to our Uth skin care product were $1.0
million for the three months ended September 30, 2015, as compared to $7.2 million in the same period in 2014. Our net
sales would have been $48.2 million in Constant dollars, which is a non-GAAP financial measure that excludes the impact
of fluctuations in foreign currency exchange rates.
Income from operations declined to $2.2 million for the third quarter, from $8.2 million in the same period in 2014. Net
income was $0.1 million, or $0.03 per diluted share, for the third quarter 2015, as compared to $5.1 million, or $1.89 per
diluted share, for the third quarter 2014.
The approximate number of new and continuing independent associate and member positions held by individuals in our
network and associated with purchases of our packs or products during the twelve months ended September 30, 2015 and
2014 were approximately 221,000 and 234,000, respectively. Recruiting decreased 18.8% in the third quarter of 2015 as
compared to the third quarter of 2014. The number of new independent associate and member positions in our network for
the third quarter of 2015 was approximately 23,600, as compared to 29,000 in 2014.
For the three months ended September 30, 2015, our operations outside of North America accounted for approximately
59.4% of our consolidated net sales.
For the three months ended September 30, 2015, Asia/Pacific net sales decreased by $8.3 million, or 27.4%, to $22.0
million, as compared to $30.3 million for the same period in 2014. Net sales comparisons for the third quarter were
affected by the launch of our Uth skin care product in 2014 in Asia/Pacific and the impact of fluctuations in foreign
currency exchange rates. Asia/Pacific net sales attributable to our Uth skin care product were $0.4 million for the three
months ended September 30, 2015 as compared to $6.0 million for the same period in 2014. In Constant dollars (a non-
GAAP financial measure), net sales would have been $3.4 million higher, or $25.4 million. The currency impact was
primarily due to depreciation of the Korean Won, the Japanese Yen and the Australian Dollar.
For the three months ended September 30, 2015, EMEA net sales decreased by $0.8 million, or 16.3%, to $4.1 million, as
compared to $4.9 million for the same period in 2014, although in Constant dollars (a non-GAAP financial measure), net
sales for the three months ended September 30, 2015 would have been $4.9 million. The currently impact was primarily
due to [the depreciation of the South African Rand and the Euro]. The launch of our Uth skin care product in 2014 in
EMEA did not have a material effect on net sales comparisons.
North American net sales decreased by $2.6 million, or 12.7%, to $17.8 million, as compared to $20.4 million for the same
period in 2014 due to a decline in associates and members that have active positions in our network.
Our cash and cash equivalents increased by approximately $7.3 million to a balance of $35.3 million at September 30,
2015 as compared to $28.0 million at December 31, 2014. Also, total shareholder’s equity increased by $5.2 million to a
balance of $36.6 million as compared to $31.4 million at December 31, 2014.
Non-GAAP Measures
In addition to results presented in accordance with GAAP, this press release and related tables include certain non-GAAP
financial measures, including a presentation of constant currency measures. We disclose operating results that have been
adjusted to exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, including changes
in: Net Sales, Gross Profit, and Income from Operations.
We believe that these non-GAAP financial measures provide useful information to investors because they are an indicator
of the strength and performance of ongoing business operations. The constant currency figures are financial measures
used by management to provide investors an additional perspective on trends. Although we believe the non-GAAP
financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial
measures should not be considered an exclusive alternative to accompanying GAAP financial measures.
Conference Call
Mannatech will host a conference call to discuss the quarter’s results with investors on Wednesday, November 11, 2015 at
9 a.m. CDT, 10 a.m. EDT. The live call will be webcast and can be accessed on Mannatech’s website at
http://ir.mannatech.com.
For those unable to listen to the live broadcast, a replay will be available shortly after the call. The toll-free replay number
is (855) 859-2056 (International (404) 537-3406); the Conference ID to access the call is 65672031.
Individuals interested in Mannatech’s products or in exploring its business opportunity can learn more at Mannatech.com.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
ASSETS
Cash and cash equivalents
Restricted cash
Accounts receivable, net
Income tax receivable
Inventories, net
Prepaid expenses and other current assets
Deferred commissions
Deferred tax assets, net
Total current assets
Property and equipment, net
Construction in progress
Long-term restricted cash
Other assets
Long-term deferred tax assets, net
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current portion of capital leases
Accounts payable
Accrued expenses
Commissions and incentives payable
Taxes payable
Current deferred tax liability
Deferred revenue
Total current liabilities
Capital leases, excluding current portion
Long-term deferred tax liabilities
Other long-term liabilities
Total liabilities
Shareholders’ equity:
Preferred stock
Common stock
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Treasury stock
Total shareholders’ equity
Total liabilities and shareholders’ equity
September 30,
2015
(unaudited)
December 31,
2014
35,292
1,512
272
20
11,398
2,981
4,210
1,026
56,711
4,092
660
6,459
3,943
3,468
75,333
446
4,339
7,804
9,840
1,822
119
10,459
34,829
699
64
3,127
38,719
—
—
40,435
7,060
323
(11,204 )
36,614
75,333
$
$
$
$
27,999
1,511
504
4
10,591
3,069
4,544
1,141
49,363
2,481
1,622
7,045
3,567
3,320
67,398
901
4,252
6,356
7,908
2,578
123
10,890
33,008
852
26
2,136
36,022
—
—
40,672
2,750
(109 )
(11,937 )
31,376
67,398
$
$
$
$
CONSOLIDATED STATEMENTS OF OPERATIONS – (UNAUDITED)
(in thousands, except per share information)
Three months ended
September 30,
Nine months ended
September 30,
2014
2015
2014
55,635 $ 134,956 $
10,304
45,331
25,076
109,880
144,900
29,440
115,460
Net sales
Cost of sales
Gross profit
Operating expenses:
Commissions and incentives
Selling and administrative
Depreciation and amortization
Other operating costs
Total operating expenses
Income from operations
Interest income
Other expense, net
Income (loss) before income taxes
2015
$ 43,860 $
8,253
35,607
17,867
9,001
433
6,072
33,373
2,234
93
(2,418 )
(91 )
20,977
9,567
441
6,149
37,134
8,197
25
(1,167 )
7,055
54,296
26,412
1,324
18,493
100,525
9,355
154
(3,802 )
5,707
(Provision) benefit for income taxes
159
(1,947 )
(1,397 )
Net income
$
68 $
5,108 $
4,310 $
Earnings per common share:
Basic
Diluted
$
$
0.03 $
0.03 $
1.92 $
1.89 $
1.61 $
1.58 $
Weighted-average common shares outstanding:
Basic
Diluted
2,681
2,721
2,667
2,701
2,679
2,727
57,727
26,389
1,248
19,920
105,284
10,176
61
(1,311 )
8,926
(4,282 )
4,644
1.75
1.71
2,661
2,701
Non-GAAP Financial Measures
To supplement our financial results presented in accordance with generally accepted accounting principles in the United
States (“GAAP”), we disclose operating results that have been adjusted to exclude the impact of changes due to the
translation of foreign currencies into U.S. dollars, including changes in: Net Sales, Gross Profit, and Income from
Operations. We refer to these adjusted financial measures as constant dollar items, which are non-GAAP financial
measures. We believe these measures provide investors an additional perspective on trends. To exclude the impact of
changes due to the translation of foreign currencies into U.S. dollars, we calculate current year results and prior year
results at a constant exchange rate, which is the prior year’s rate. Currency impact is determined as the difference between
actual growth rates and constant currency growth rates.
Three month period ended
Net Sales
Product
Pack
Other
Gross Profit
Income from Operations
Nine month period ended
Net Sales
Product
Pack
Other
Gross Profit
Income from Operations
September 30,
2015
GAAP
Measure:
Total $
$43.9
Non-GAAP
Measure:
Constant $
$48.2
September
30, 2014
GAAP
Measure:
Total $
$55.6
35.3
7.1
1.5
35.6
2.2
38.7
8.0
1.5
39.1
2.8
45.9
7.8
1.9
45.3
8.2
September 30,
2015
GAAP
Measure:
Total $
$135.0
Non-GAAP
Measure:
Constant $
$144.2
September
30, 2014
GAAP
Measure:
Total $
$144.9
105.8
24.9
4.3
109.9
9.4
112.9
26.9
4.4
117.2
10.5
117.7
21.7
5.5
115.5
10.2
Change
Dollar
Percent
$(7.4 )
(13.3 ) %
(7.2 )
(15.7 ) %
0.2
2.6 %
(0.4 )
(6.2 )
(5.4 )
(21.1 ) %
(13.7 ) %
(65.9 ) %
Change
Dollar
Percent
$(0.7 )
(4.8 )
(0.5 ) %
(4.1 ) %
5.2
24.0 %
(1.1 )
(20.0 ) %
1.7
0.3
1.5 %
2.9 %
The approximate number of new and continuing positions held by independent associates and members who purchased
our packs or products during the twelve months ended September 30 was as follows:
New
Continuing
Total
2015
97,000
124,000
221,000
43.9 %
56.1 %
100.0 %
2014
113,000
121,000
234,000
48.3 %
51.7 %
100.0 %
(cid:3)
About Mannatech
Mannatech, Incorporated, develops high-quality health, weight and fitness, and skin care products that are based on the solid foundation
of nutritional science and development standards. Mannatech is dedicated to its platform of Social Entrepreneurship based on the
foundation of promoting, aiding and optimizing nutrition where it is needed most around the world. Mannatech’s proprietary products
are available through independent sales associates around the globe including North America (United States, Canada, and Mexico),
Asia/Pacific (Australia, New Zealand, Japan, Taiwan, Singapore, the Republic of Korea, and Hong Kong), and EMEA (Austria,
Denmark, Germany, Norway, Sweden, the Netherlands, the United Kingdom, Estonia, Finland, the Republic of Ireland, Czech
Republic, South Africa, and the Republic of Namibia). For more information, visit Mannatech.com.
Please Note: This release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995.
These forward-looking statements generally can be identified by use of phrases or terminology such as “anticipate,” “believe,” “will,”
“intend” or other similar words or the negative of such terminology. Similarly, descriptions of Mannatech’s objectives, strategies, plans,
goals or targets contained herein are also considered forward-looking statements. Mannatech believes this release should be read in
conjunction with all of its filings with the United States Securities and Exchange Commission and cautions its readers that these forward-
looking statements are subject to certain events, risks, uncertainties, and other factors. Some of these factors include, among others,
Mannatech’s inability to attract and retain associates and members, increases in competition, litigation, regulatory changes, and its planned
growth into new international markets. Although Mannatech believes that the expectations, statements, and assumptions reflected in these
forward-looking statements are reasonable, it cautions readers to always consider all of the risk factors and any other cautionary
statements carefully in evaluating each forward-looking statement in this release, as well as those set forth in its latest Annual Report on
Form 10-K, and other filings filed with the United States Securities and Exchange Commission, including its current reports on Form 8-K.
All of the forward-looking statements contained herein speak only as of the date of this release.
###
Contact Information:
Donna Giordano
Manager, Executive Office Administration
972-471-6512
ir@mannatech.com
www.mannatech.com
Independent Board
of Directors
J. Stanley Fredrick
Chairman of the Board
Owner, Fredrick Consulting Services
Robert A.Toth
Vice Chairman of the Board
Retired President, Avon International
Gerald E. Gilbert
Retired Partner of Hogan and Hartson,
now known as Hogan Lovells, LLP
Larry A. Jobe
Founder and Chairman of the Board,
Legal Network, Ltd.
President and Founder, P 1 Resources, LLC
Marlin Ray Robbins
Independent Associate
Mannatech, Incorporated
Eric W. Schrier
Retired CEO and President,
The Reader’s Digest Association
Linda K. Ferrell, PhD
Leadership and Business Ethics
Belmont University
(cid:2)(cid:3)(cid:4)(cid:5)(cid:6)(cid:7)(cid:8)(cid:9)(cid:4)(cid:10)(cid:11)(cid:12)(cid:13)(cid:5)(cid:4)(cid:14)(cid:15)
Alfredo Bala
CEO and President
Landen Fredrick
Senior Vice President, Supply Chain and IT
Joel R. Bikman
Senior Vice President, Sales and Marketing
Christopher J. Simons
Regional President of EMEAA and North America
Russ Wood
Regional President, Greater China
Yong Jae (Patrick) Park
Regional President, Asia
David Johnson
(cid:16)(cid:17)(cid:8)(cid:4)(cid:12)(cid:10)(cid:18)(cid:5)(cid:5)(cid:19)(cid:6)(cid:20)(cid:7)(cid:8)(cid:20)(cid:21)(cid:10)(cid:11)(cid:12)(cid:13)(cid:5)(cid:4)(cid:14)
Ronald D. Norman
Treasurer
Erin Barta
General Counsel and Secretary
Independent Public Accountant
BDO USA, LLP
Dallas, Texas
Legal Counsel
Akin Gump Strauss Hauer & Feld LLP
Dallas, Texas
Annual Meeting
Thursday, June 2, 2016 at 9:00 am Central Time
Grapevine Convention Center
1209 S. Main Street
Grapevine, Texas 76051
Record Date
Monday, Aprill 11, 2016
(determination of shareholders entitled to
receive notice of and to vote at the 2016 Annual
Shareholders Meeting)
Shareholders
There were 1,518 shareholders of record, as of
April 11, 2016
Transfer Agent and Registrar
Computershare Investor Services
Shareholder Communications Department
2 LaSalle Street, 3rd Floor
Chicago, Illinois 60602
877-498-8861
www.computershare.com
Market Information
Our common stock trades on the NASDAQ
Global Select Market under the symbol “MTEX.”
The following table contains the reported high
and low closing sales prices for our common
stock as reported on the NASDAQ Global Select
Market for the periods indicated:
2015
2014
HIGH
LOW
HIGH
LOW
1st Quarter
$28.49 $17.12
$19.96 $12.64
2nd Quarter $21.04 $18.00
$18.49 $12.14
3rd Quarter $21.00 $16.91
$17.32 $11.77
4th Quarter $28.06 $18.55
$30.65 $12.66
Changing the lives of those around the globe
means everything to us. Through our products,
business and culture of social responsibility, we
are transforming the world. At the forefront is
the M5MSM Foundation, through which we aim to
enrich the lives of malnourished children with our
real-food supplements. Every time a Mannatech
Associate or customer purchases a product, a
donation is made that allows the M5M Foundation
to provide essential nutrients to malnourished
children across the world. With this endeavor,
we can transform the life of every child we serve.
Mannatech, Incorporated
600 S. Royal Lane, Suite 200
Coppell, TX 75019
mannatech.com
19496.0416