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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Texas
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75-2508900
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(State or other Jurisdiction of Incorporation or Organization)
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(I.R.S. Employer Identification No.)
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1410 Lakeside Parkway, Suite 200, Flower Mound, Texas
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75028
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(Address of Principal Executive Offices)
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(Zip Code)
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Title of each class
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Name of each exchange on which registered
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Common Stock, par value $0.0001 per share
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The Nasdaq Stock Market LLC
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
x
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Smaller reporting company
x
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Emerging growth company
o
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Page
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Item 10
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Item 11
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Item 12
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Item 13
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Item 14
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Item 16
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•
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management’s plans and objectives for future operations;
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existing cash flows being adequate to fund future operational needs;
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•
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future plans related to budgets, future capital requirements, market share growth, and anticipated capital projects and obligations;
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•
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the realization of net deferred tax assets;
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•
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the ability to curtail operating expenditures;
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•
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global statutory tax rates remaining unchanged;
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the impact of future market changes due to exposure to foreign currency translations;
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the possibility of certain policies, procedures, and internal processes minimizing exposure to market risk;
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the impact of new accounting pronouncements on financial condition, results of operations, or cash flows;
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the outcome of new or existing litigation matters;
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the outcome of new or existing regulatory inquiries or investigations; and
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•
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other assumptions described in this report underlying such forward-looking statements.
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•
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overall growth or lack of growth in the nutritional supplements industry;
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•
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plans for expected future product development;
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•
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changes in manufacturing costs;
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•
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shifts in the mix of packs and products;
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•
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the future impact of any changes to global associate career and compensation plans or incentives or the regulations governing such plans and incentives;
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•
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the ability to attract and retain independent associates and preferred customers;
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•
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new regulatory changes that may affect operations, products or compensation plans and incentives;
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•
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the competitive nature of our business with respect to products and pricing;
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•
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publicity related to our products or network marketing; and
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the political, social, and economic climate of the countries in which we operate.
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Item 1.
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Business
|
•
|
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 symbiotic 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 D
3
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 Uth® 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 (now known as MannaBoom®), 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.
|
•
|
In 2016, Mannatech rebranded the Company, including all new packaging and labels, introduced a line of Essential Oils, along with an innovative, natural fat-loss system, TruHealth
TM
. Comprised in the system is the TruPLENISH
TM
Nutritional Shake, TruPURE
®
Cleanse Slimsticks and TruSHAPE
TM
Fat-Loss Capsules.
|
•
|
In 2017, Mannatech launched several new products, including: GinMAX
®
, a fast-acting, long-lasting ginseng supplement that utilizes both fermented red and fermented white ginseng, fortified with glyconutrients; GlycoCafé
®
, a glyconutritional coffee made with the whole coffee fruit; and Luminovation, a line of mass-market and premium Korean beauty products.
|
•
|
In 2018, Mannatech launched a unique fitness drink, Empact+®, combining fueling, hydration and recovery in one product. Mannatech also introduced significant enhancements to its signature Ambrotose
®
product with the launch of Ambrotose Life™ , with more than double the Manapol
®
of its Advanced Ambrotose
®
formula along with healthy additions of modified citrus pectin, and stabilized rice bran. Ambrotose Life™ is available in a bulk canister (unflavored), along with flavored single serving sachets.
|
Product Category
|
Representative Products
|
Integrative Health
|
Ambrotose
®
complex, Ambrotose AO
®
, Advanced Ambrotose
®
, Ambrotose Life™
Catalyst
™
, Cognitate
™
, GinMAX
™
, Manapol
®
Powder, MannaBears
™
, Nutriverus
™
,
Optimal Support Packets, PhytoMatrix
®
and PLUS
™
.
|
Targeted Health
|
BounceBack
®
, CardioBALANCE
®
, GI Pro Balance
®
Slimstick, GI-Zyme
®
, GlycoCafe
®
, ImmunoSTART
®
, Manna-C
™
, MannaBOOM
®
Slimsticks, MannaCLEANSE
™
, Omega-3 with Vitamin D
3
and
PhytAloe
®
.
|
Weight and Fitness
|
OsoLean
™
, SPORT
™
, TruHealth Fat Loss System, including: TruPLENISH™, TruPURE®, TruSHAPE™, Tru-C
™
and TruCoffee Americano
™
.
|
Skin Care
|
Emprizone
®
, FIRM with Ambrotose
®
, Uth® Facial Cleanser, Uth® Skin Rejuvenation Crème, Uth® Moisturizer, FreshDen™, Gel Mask, Organt and Luminovation, Uth® Lash Serum.
|
Home Living
|
Serenity Home Diffuser, Essential Oils: Eucalyptus, Fractionated Coconut and Aloe, Frankincense, Lavender, Lemon, No. 1 Protective Blend, Orange, Peppermint, and Sweet Almond and Aloe.
|
|
2018
|
|
2017
|
||||||||||
|
Sales by
product |
|
% of total
net sales |
|
Sales by
product |
|
% of total
net sales |
||||||
Advanced Ambrotose
®
|
$
|
44,054
|
|
|
25.4
|
%
|
|
$
|
52,592
|
|
|
29.8
|
%
|
Ambrotose Life™
|
18,824
|
|
|
10.9
|
%
|
|
—
|
|
|
—
|
%
|
||
TruHealth
™
|
17,537
|
|
|
10.1
|
%
|
|
16,652
|
|
|
9.4
|
%
|
||
Manapol
®
Powder
|
8,636
|
|
|
5.0
|
%
|
|
11,183
|
|
|
6.3
|
%
|
||
Ambrotose
®
|
7,695
|
|
|
4.4
|
%
|
|
8,459
|
|
|
4.8
|
%
|
||
Total
|
$
|
96,746
|
|
|
55.8
|
%
|
|
$
|
88,886
|
|
|
50.3
|
%
|
•
|
marketability and proprietary nature of the product;
|
•
|
demand for the product;
|
•
|
competitors’ products;
|
•
|
regulatory considerations;
|
•
|
availability of ingredients; and
|
•
|
data supporting claims of efficacy and safety.
|
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.
|
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
.
|
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:
|
•
|
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 the South African Health Products Regulatory Authority Board;
|
•
|
the Hong Kong Food and Environmental Hygiene Department and Department of Health Drug Office; and
|
•
|
the China Food and Drug Administration.
|
4.
|
Global Scientific Advisory Board
. A charter for an advisory board has been established and the board is 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") 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. The 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 panels of independent associates in councils based around the world which help identify and effectively relay the needs of our independent business-building associates to us. These advisory councils meet 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 Preferred Customers
.
We are fully committed to providing the highest level of support services to our independent associates and preferred customers and believe that we meet expectations and build customer loyalty through the following:
|
•
|
offering highly-personalized and responsive customer service;
|
•
|
offering a satisfaction guarantee product return policy;
|
•
|
providing comprehensive corporate websites (
www.mannatech.com
,
www.allaboutmannatech.com
,
www.mannatechscience.org
,
www.library.mannatech.com
,
www.events.mannatech.com
,
www.mannafest.com
and
www.system.mannatech.com
) that provide instant access to Internet ordering, marketing, technical and educational information, and unique and innovative marketing tools;
|
•
|
maintaining an extensive web-based downline management system called Success Tracker
™
that provides access to web conferencing and downline organization reporting for our independent associates at minimal costs;
|
•
|
providing Mannatech+, an app and web-based platform to provide personalized web pages, to share videos, digital flyers, and more;
|
•
|
offering, in the United States and Canada, an effective compilation of online marketing and training tools;
|
•
|
offering updated training/orientation and compliance programs for our independent associates;
|
•
|
providing strategically based distribution fulfillment centers to ensure products are shipped on time and at minimal cost; and
|
•
|
sponsoring marketing events, designed to provide information, education, and motivation for our dedicated business-building associates and to help stimulate business development. These events provide an interactive venue for introducing new products and services and allow interaction between our management teams, outside researchers, and independent associates.
|
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, 2018, our Board of Directors is composed of eight directors, including six 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.
|
•
|
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.
|
•
|
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.
|
•
|
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.
|
•
|
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.
|
•
|
Provide Outstanding Product Value and Results to Customers.
We work to ensure that all associates and their customers have a great experience with each of our products that deliver tangible results, are supported by science, and are backed by a powerful satisfaction guarantee.
|
•
|
offering educational meetings and corporate-sponsored events that emphasize business-building and compliance related information;
|
•
|
sponsoring various informative and science-based conference calls, web casts, and seminars;
|
•
|
providing automated services through the Internet and telephone that offer a full spectrum of information and business-building tools;
|
•
|
maintaining an efficient decentralized ordering and distribution system;
|
•
|
providing highly personalized and responsive order processing and customer service support accessible by multiple communication channels including telephone, Internet, or e-mail;
|
•
|
offering 24-hour, seven days a week access to information and ordering through the Internet;
|
•
|
offering Success Tracker
™
, a customized business-building genealogy system, which contains graphs, maps, alerts, reports, and web video conferencing for our independent associates;
|
•
|
offering, in the United States and Canada, a compilation of online marketing and training tools, including personalized web pages; and
|
•
|
providing a wide assortment of business-building and educational materials to help stimulate product sales and simplify enrollment.
|
•
|
generating product sales to preferred customers from an independent associate’s global downline to earn certain achievement levels;
|
•
|
generating product sales from newly enrolled independent associates or preferred customers 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.
|
•
|
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 if located in the United States and Canada, and for the first 90 days following the product’s purchase in other countries where we sell our products. In China, where we sell our products under a cross-border e-commerce model, we have a 14-day return policy. The associate may then return or exchange the product based on the associate product return policy.
|
•
|
Associate and Preferred Customer Product Return Policy.
This policy allows the associate or preferred customer to return an order within one year of the purchase date upon terminating his/her account. If an associate or preferred customer returns a product unopened and in good condition, he/she may receive a full refund minus a 10% restocking fee. We may also allow the associate or preferred customer 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 other countries where we sell our products 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 may terminate the associate's or preferred customer’s account.
|
•
|
minimize the time required to process orders and distribute products;
|
•
|
provide customized ordering information;
|
•
|
quickly respond to information requests, including providing detailed and accurate information to independent associates about qualification and downline activity;
|
•
|
provide detailed reports about paid commissions and incentives;
|
•
|
support order processing and customer service departments; and
|
•
|
help monitor, analyze, and report operating and financial results.
|
•
|
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;
|
•
|
marketing and advertising; and
|
•
|
the extent to which companies may be responsible for claims made by independent associates.
|
•
|
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 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.
|
•
|
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;
|
•
|
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;
|
•
|
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; and
|
•
|
the Regulation on the Prohibition of Pyramid Selling, the Regulation on Administration of Direct Sales, the Law on Protection of Consumer Rights, the Food Safety Law, and the Anti-Unfair Competition Law in China.
|
•
|
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.
|
•
|
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.
|
•
|
AdvoCare International
|
•
|
GNC Holdings, Inc.;
|
•
|
Herbalife Nutrition Ltd.;
|
•
|
Nature’s Sunshine Products, Inc.;
|
•
|
NOW Foods;
|
•
|
Nu Skin Enterprises, Inc.;
|
•
|
Reliv’ International, Inc;
|
•
|
Solgar Vitamin and Herb Company, Inc.;
|
•
|
Swanson Health Products;
|
•
|
Usana Health Sciences, Inc.; and
|
•
|
Vitamin Shoppe Industries, Inc.
|
•
|
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.
|
•
|
Amway Corporation;
|
•
|
Forever Living Products, Inc.;
|
•
|
Herbalife Nutrition Ltd.;
|
•
|
Mary Kay, Inc.;
|
•
|
Nature’s Sunshine Products, Inc.;
|
•
|
Nu Skin Enterprises, Inc.;
|
•
|
Shaklee Worldwide; and
|
•
|
Usana Health Sciences, Inc.
|
•
|
our exclusive, proprietary blend of high-quality products;
|
•
|
our 25 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.
|
|
2018
|
|
2017
|
||
Americas
|
159
|
|
|
162
|
|
Asia/Pacific
|
75
|
|
|
79
|
|
EMEA
|
14
|
|
|
11
|
|
Total
|
248
|
|
|
252
|
|
|
2018
|
|
2017
|
||
Full-time employees
|
247
|
|
|
250
|
|
Part-time employees
|
1
|
|
|
2
|
|
Total
|
248
|
|
|
252
|
|
Item 1A.
|
Risk Factors
|
1.
|
If we are unable to attract and retain independent associates, our business may suffer.
|
•
|
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.
|
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.
|
•
|
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.
|
4.
|
An increase in the amount of commissions and incentives paid to independent associates reduces our profitability.
|
5.
|
The loss of key management personnel could adversely affect our business.
|
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.
|
•
|
ambiguity in statutes;
|
•
|
regulations and related court decisions;
|
•
|
the discretion afforded to regulatory authorities and courts interpreting and enforcing laws;
|
•
|
new regulations affecting our business; and
|
•
|
changes to, or interpretations of, existing 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.
|
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.
|
9.
|
Challenges by private parties to the form of our network marketing system could harm our business.
|
10.
|
If our network marketing activities do not comply with government regulations, our business could suffer.
|
11.
|
If we violate governmental regulations or fail to obtain necessary regulatory approvals, our operations could be adversely affected.
|
•
|
the formulation, manufacturing, packaging, labeling, distribution, importation, sale, and storage of our products;
|
•
|
the health and safety of dietary supplements, cosmetics and foods;
|
•
|
trade practice laws and network marketing laws (e.g., licensing and registration requirements; regulations pertaining to commission payments);
|
•
|
our product claims and advertising by our independent associates;
|
•
|
our network marketing system;
|
•
|
pricing restrictions regarding transactions with our foreign subsidiaries or other related parties and similar regulations that affect our level of foreign taxable income;
|
•
|
the assessment of customs duties;
|
•
|
further taxation of our independent associates, which may obligate us to collect additional taxes and maintain additional records; and
|
•
|
export and import restrictions.
|
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.
|
13.
|
If we are unable to protect the proprietary rights of our products, our business could suffer.
|
•
|
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.
|
14.
|
Our inability to develop and introduce new products that gain independent associate, preferred customer, and market acceptance could harm our business.
|
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 preferred customers, our product sales, as well as our financial condition and operating results.
|
•
|
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;
|
•
|
manufacture and deliver our products in sufficient volumes and in a timely manner; and
|
•
|
differentiate our product offerings from those of our competitors.
|
16.
|
If our outside suppliers and manufacturers fail to supply products in sufficient quantities and in a timely fashion, our business could suffer.
|
17.
|
The loss of suppliers or shortages of raw materials could have an adverse effect on our business, financial condition, or results of operations.
|
18.
|
If we are exposed to product liability claims, we may be liable for damages and expenses, which could affect our overall financial condition.
|
19.
|
Concentration Risk
|
|
2018
|
|
2017
|
||||||||||
|
Sales by
product |
|
% of total
net sales |
|
Sales by
product |
|
% of total
net sales |
||||||
Advanced Ambrotose
®
|
$
|
44,054
|
|
|
25.4
|
%
|
|
$
|
52,592
|
|
|
29.8
|
%
|
Ambrotose Life™
|
18,824
|
|
|
10.9
|
%
|
|
—
|
|
|
—
|
%
|
||
TruHealth
™
|
17,537
|
|
|
10.1
|
%
|
|
16,652
|
|
|
9.4
|
%
|
||
Manapol
®
Powder
|
8,636
|
|
|
5.0
|
%
|
|
11,183
|
|
|
6.3
|
%
|
||
Ambrotose
®
|
7,695
|
|
|
4.4
|
%
|
|
8,459
|
|
|
4.8
|
%
|
||
Total
|
$
|
96,746
|
|
|
55.8
|
%
|
|
$
|
88,886
|
|
|
50.3
|
%
|
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.
|
21.
|
The global nutrition and skin care industries are intensely competitive and the strengthening of any of our competitors could harm our business.
|
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.
|
23.
|
If our international markets are not successful, our business could suffer.
|
•
|
inflation;
|
•
|
the renegotiation or modification of various agreements;
|
•
|
increases in custom duties and tariffs;
|
•
|
changes and limits in export controls;
|
•
|
complex U.S. and foreign laws, treaties and regulations, including without limitation, tax laws, the U.S. Foreign Corrupt Practices Act (“FCPA”), and similar anti-bribery and corruption acts and regulations in many of the markets in which we operate;
|
•
|
trademark availability and registration issues;
|
•
|
changes in exchange rates;
|
•
|
changes in taxation;
|
•
|
wars, civil unrest, acts of terrorism and other hostilities;
|
•
|
political, economic, and social conditions;
|
•
|
changes to trade practice laws or regulations governing direct selling and network marketing;
|
•
|
increased government scrutiny surrounding direct selling and network marketing;
|
•
|
changes in the perception of network marketing; and
|
•
|
risk of our independent associates offering business opportunities in China.
|
24.
|
Adverse or negative publicity could cause our business to suffer.
|
•
|
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.
|
•
|
order processing;
|
•
|
supply chain management;
|
•
|
customer service;
|
•
|
product distribution;
|
•
|
commission processing;
|
•
|
cash receipts and payments; and
|
•
|
financial reporting.
|
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.
|
27.
|
Currency exchange rate fluctuations could reduce our overall profits.
|
28.
|
Our stock price is volatile and may fluctuate significantly.
|
•
|
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 demand and daily trading volume of our shares;
|
•
|
the general condition of the industry; and
|
•
|
the sale of large amounts of stock by insiders.
|
29.
|
Certain shareholders, directors, and officers own a significant amount of our stock, which could allow them to influence corporate transactions and other matters.
|
30.
|
We have implemented anti-takeover provisions that may help discourage a change of control.
|
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.
|
32.
|
We are not required to pay dividends, and our Board of Directors may decide not to declare dividends in the future.
|
33.
|
We rely upon our existing cash balances and cash flow from operations to fund our business and meet our contractual obligations. 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.
|
34.
|
The reduced disclosure requirements applicable to us as a "smaller reporting company" may make our common stock less attractive to investors.
|
Item 1B.
|
Unresolved Staff Comments
|
Item 2.
|
Properties
|
Location
|
|
Size
|
|
Expiration date
|
|
|
|
|
|
Flower Mound, Texas (corporate headquarters)
|
|
52,992 sq. feet
|
|
May 2028
|
St. Leonards, Australia (Australian headquarters)
|
|
850 sq. meters
(1)
|
|
December 2020
|
Shibuya-ku, Tokyo, Japan (Japanese headquarters)
|
|
150 Tsubos
(2)
|
|
September 2019
|
Chuo-ku, Osaka, Japan (Japanese training center)
|
|
73 Tsubos
(3)
|
|
August 2020
|
Gangnam-gu, Seoul, Korea (Republic of Korea headquarters)
|
|
298 Pyong
(4)
|
|
June 2020
|
Gangnam-gu, Seoul, Korea (Seoul training center)
|
|
519 Pyong
(4)
|
|
June 2020
|
Seo-gu, Daejun, Korea (Regional center)
|
|
113 Pyong
(5)
|
|
June 2019
|
Haewoondae-gu, Busan, Korea (Pusan training center)
|
|
191 Pyong
(6)
|
|
March 2019
|
Incheon, South Korea (Incheon training center)
|
|
218 Pyong
(7)
|
|
April 2019
|
Taipei, Taiwan (Taiwan headquarters)
|
|
172 Pings
(8)
|
|
February 2020
|
Zug, Switzerland (Switzerland headquarters)
|
|
680 sq. meters
(9)
|
|
—
(17)
|
Tsim Sha Tsui, Kowloon, Hong Kong (office)
|
|
4,334 sq. feet
|
|
June 2019
|
Hengqin, Zhuhai, China (office)
|
|
677 sq. feet
|
|
November 2019
|
Tianhe, Guangzhou, China (office)
|
|
129 sq. feet
|
|
July 2019
|
Richmond, BC (Canada training center)
|
|
1,963 sq. feet
|
|
September 2022
|
Markham, ON (office)
|
|
1,714 sq. feet
|
|
September 2019
|
Bedfordview, South Africa (office)
|
|
383 sq. meters
(10)
|
|
—
(18)
|
Guadalajara, Mexico (customer service center)
|
|
389 sq. meters
(11)
|
|
—
(19)
|
Mexico City, 1st flr Mexico (customer service center)
|
|
123 sq. meters
(12)
|
|
August 2019
|
Mexico City, 3rd flr Mexico
|
|
123 sq. meters
(13)
|
|
June 2019
|
Monterrey, Mexico (office)
|
|
149.16 sq. meters
(14)
|
|
June 2019
|
Colima, Mexico (office)
|
|
68 sq. meters
(15)
|
|
December 2019
|
Bogota, Columbia (office)
|
|
19.2 sq. meters
(16)
|
|
April 2019
|
|
(1)
Approximately 9,150 square feet & subleases 2,153 sq. ft. to Morrison Design Partnership.
(2)
Approximately 5,338 square feet.
(3)
Approximately 2,598 square feet.
(4)
Approximately 29,071 square feet.
(5)
Approximately 4,021 square feet.
(6)
Approximately 6,796 square feet.
(7)
Approximately 7,757 square feet.
(8)
Approximately 6,118 square feet.
(9)
Approximately 7,319 square feet.
|
(10)
Approximately 4,122 square feet.
(11)
Approximately 4,187 square feet.
(12)
Approximately 1,324 square feet.
(13)
Approximately 1,324 square feet.
(14)
Approximately 1,606 square feet.
(15)
Approximately 732 square feet.
(16)
Approximately 207 square feet.
(17)
Renewable annually.
(18)
Renewable annually.
(19)
Renewable monthly.
|
Item 3.
|
Legal Proceedings
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
|
Period
|
|
Total number
of shares
purchased
|
|
Average
price
paid per share
|
|
Total number of shares purchased as part of publicly announced programs
(a)
|
|
Dollar value of
shares that may yet
be purchased
(b)
(in thousands)
|
||||||
October 1, 2018 - October 31, 2018
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
November 1, 2018 - November 30, 2018
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
December 1, 2018 - December 31, 2018
|
|
5,095
|
|
|
$
|
19.63
|
|
|
5,095
|
|
|
18,902
|
|
|
Total
|
|
5,095
|
|
|
|
|
|
5,095
|
|
|
|
|
Item 6.
|
Selected Financial Data
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
2018
|
|
2017
|
|
Constant $ Change |
|||||||||||||
|
GAAP
Measure: Total $ |
|
Non-GAAP Measure:
Constant $ |
|
GAAP
Measure: Total $ |
|
Dollar
|
|
Percent
|
|||||||||
Net sales
|
$
|
173.6
|
|
|
$
|
171.9
|
|
|
$
|
176.7
|
|
|
$
|
(4.8
|
)
|
|
(2.7
|
)%
|
Product
|
$
|
170.2
|
|
|
$
|
168.6
|
|
|
$
|
157.9
|
|
|
$
|
10.7
|
|
|
6.8
|
%
|
Pack and associate fees
(a)
|
$
|
2.5
|
|
|
$
|
2.4
|
|
|
$
|
14.2
|
|
|
$
|
(11.8
|
)
|
|
(83.1
|
)%
|
Other
|
$
|
0.9
|
|
|
$
|
0.9
|
|
|
$
|
4.6
|
|
|
$
|
(3.7
|
)
|
|
(80.4
|
)%
|
Gross profit
|
$
|
139.1
|
|
|
$
|
137.7
|
|
|
$
|
141.0
|
|
|
$
|
(3.3
|
)
|
|
(2.3
|
)%
|
Income (loss) from operations
|
$
|
(0.1
|
)
|
|
$
|
(0.5
|
)
|
|
$
|
2.5
|
|
|
$
|
(3.0
|
)
|
|
(120.0
|
)%
|
|
2018
|
|
2017
|
||||||||||
Americas
|
$
|
58.7
|
|
|
33.8
|
%
|
|
$
|
64.2
|
|
|
36.3
|
%
|
Asia/Pacific
|
101.7
|
|
|
58.6
|
%
|
|
98.8
|
|
|
55.9
|
%
|
||
EMEA
|
13.2
|
|
|
7.6
|
%
|
|
13.7
|
|
|
7.8
|
%
|
||
Total
|
$
|
173.6
|
|
|
100.0
|
%
|
|
$
|
176.7
|
|
|
100.0
|
%
|
•
|
changes in our sales prices;
|
•
|
changes in consumer demand;
|
•
|
changes in the number of independent associates and preferred customers;
|
•
|
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.
|
|
|
Change
|
||||||||||||
|
2018
|
|
2017
|
|
Dollar
|
|
Percentage
|
|||||||
Consolidated product sales
|
$
|
170.2
|
|
|
$
|
157.9
|
|
|
$
|
12.3
|
|
|
7.8
|
%
|
Consolidated pack sales and associate fees
(a)
|
2.5
|
|
|
14.2
|
|
|
(11.7
|
)
|
|
(82.4
|
)%
|
|||
Consolidated other, including freight
|
0.9
|
|
|
4.6
|
|
|
(3.7
|
)
|
|
(80.4
|
)%
|
|||
Total consolidated net sales
|
$
|
173.6
|
|
|
$
|
176.7
|
|
|
$
|
(3.1
|
)
|
|
(1.8
|
)%
|
|
|
|
Change
|
|||||||||||
|
2018
|
|
2017
|
|
Dollar
|
|
Percentage
|
|||||||
New
|
$
|
0.7
|
|
|
$
|
6.7
|
|
|
$
|
(6.0
|
)
|
|
(89.6
|
)%
|
Continuing
|
1.8
|
|
|
7.5
|
|
|
(5.7
|
)
|
|
(76.0
|
)%
|
|||
Total
|
$
|
2.5
|
|
|
$
|
14.2
|
|
|
$
|
(11.7
|
)
|
|
(82.4
|
)%
|
•
|
registered our most popular products with the appropriate regulatory agencies in all countries of operations;
|
•
|
rolled out new products;
|
•
|
launched an aggressive marketing and educational campaign;
|
•
|
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.
|
|
2018
|
|
2017
|
||||||||
New
|
86,000
|
|
|
43.0
|
%
|
|
96,000
|
|
|
44.7
|
%
|
Continuing
|
114,000
|
|
|
57.0
|
%
|
|
119,000
|
|
|
55.3
|
%
|
Total
|
200,000
|
|
|
100.0
|
%
|
|
215,000
|
|
|
100.0
|
%
|
Country
|
2018
|
|
2017
|
||
Australia
|
30.0
|
%
|
|
30.0
|
%
|
Canada
|
26.5
|
%
|
|
26.5
|
%
|
Denmark
|
22.0
|
%
|
|
22.0
|
%
|
Japan
|
30.2
|
%
|
|
34.8
|
%
|
Mexico
|
30.0
|
%
|
|
30.0
|
%
|
Norway
|
23.0
|
%
|
|
24.0
|
%
|
Republic of Korea
|
22.0
|
%
|
|
22.0
|
%
|
Singapore
|
17.0
|
%
|
|
17.0
|
%
|
South Africa
|
28.0
|
%
|
|
28.0
|
%
|
Sweden
|
22.0
|
%
|
|
22.0
|
%
|
Switzerland
|
9.2
|
%
|
|
16.2
|
%
|
Taiwan
|
20.0
|
%
|
|
17.0
|
%
|
United Kingdom
|
19.0
|
%
|
|
19.3
|
%
|
United States
|
21.0
|
%
|
|
35.0
|
%
|
Cyprus
|
12.5
|
%
|
|
12.5
|
%
|
Hong Kong
|
16.5
|
%
|
|
16.5
|
%
|
Ukraine
(1)
|
18.0
|
%
|
|
18.0
|
%
|
Gibraltar
|
10.0
|
%
|
|
10.0
|
%
|
Colombia
|
33.0
|
%
|
|
34.0
|
%
|
China
|
25.0
|
%
|
|
25.0
|
%
|
Russia
(2)
|
20.0
|
%
|
|
20.0
|
%
|
Country
|
2018
|
|
2017
|
||||
Australia
|
$
|
0.3
|
|
|
$
|
—
|
|
China
|
0.3
|
|
|
—
|
|
||
Colombia
|
0.6
|
|
|
0.6
|
|
||
Hong Kong
|
0.1
|
|
|
—
|
|
||
Mexico
|
3.1
|
|
|
2.8
|
|
||
Norway
|
0.1
|
|
|
—
|
|
||
South Africa
|
0.2
|
|
|
0.1
|
|
||
Sweden
|
0.1
|
|
|
0.1
|
|
||
Taiwan
|
0.9
|
|
|
0.8
|
|
||
Ukraine
|
0.1
|
|
|
0.1
|
|
||
United Kingdom
|
0.1
|
|
|
0.1
|
|
||
United States
|
6.9
|
|
|
6.8
|
|
||
Other Jurisdictions
|
—
|
|
|
—
|
|
||
Total
|
$
|
12.8
|
|
|
$
|
11.4
|
|
•
|
the timing of the introduction of new products and incentives;
|
•
|
our ability to attract and retain associates and preferred customers;
|
•
|
the timing of our incentives and contests;
|
•
|
the general overall economic outlook;
|
•
|
government regulations;
|
•
|
the outcome of certain lawsuits;
|
•
|
the perception and acceptance of network marketing; and
|
•
|
the consumer perception of our products and overall operations.
|
Provided by / (used in):
|
2018
|
|
2017
|
||||
Operating activities
|
$
|
(0.2
|
)
|
|
$
|
10.3
|
|
Investing activities
|
$
|
(2.3
|
)
|
|
$
|
(1.3
|
)
|
Financing activities
|
$
|
(12.1
|
)
|
|
$
|
(3.1
|
)
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
Thereafter
|
|
Total
|
||||||||||||||
Capital lease obligations
|
$
|
81
|
|
|
$
|
40
|
|
|
$
|
28
|
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
156
|
|
Purchase obligations
(1)(2)
|
5,169
|
|
|
4,675
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,844
|
|
|||||||
Operating leases
|
1,850
|
|
|
977
|
|
|
583
|
|
|
586
|
|
|
586
|
|
|
2,737
|
|
|
7,319
|
|
|||||||
Note payable and other financing arrangements
|
767
|
|
|
555
|
|
|
370
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,692
|
|
|||||||
Employment agreements
|
420
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
420
|
|
|||||||
Royalty agreement
|
59
|
|
|
59
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
124
|
|
|||||||
Tax liability
(3)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
177
|
|
|
177
|
|
|||||||
Other obligations
(4)
|
215
|
|
|
27
|
|
|
143
|
|
|
84
|
|
|
59
|
|
|
613
|
|
|
1,141
|
|
|||||||
Total commitments and obligations
|
$
|
8,561
|
|
|
$
|
6,333
|
|
|
$
|
1,130
|
|
|
$
|
677
|
|
|
$
|
645
|
|
|
$
|
3,527
|
|
|
$
|
20,873
|
|
|
Estimated useful life
|
Net carrying value at December 31, 2018
|
Office furniture and equipment
|
5 to 7 years
|
$0.8 million
|
Computer hardware and software
|
3 to 5 years
|
3.1 million
|
Automobiles
|
3 to 5 years
|
0.1 million
|
Leasehold improvements
(1)
|
2 to 10 years
|
1.9 million
|
Total net carrying value at December 31, 2018
|
|
$5.9 million
|
Loyalty program
|
(in thousands)
|
|
|
Loyalty deferred revenue as of January 1, 2017
|
$
|
7,033
|
|
Loyalty points forfeited or expired
|
(5,895
|
)
|
|
Loyalty points used
|
(14,316
|
)
|
|
Loyalty points vested
|
17,836
|
|
|
Loyalty points unvested
|
1,748
|
|
|
Loyalty deferred revenue as of December 31, 2017
|
$
|
6,406
|
|
Loyalty deferred revenue as of January 1, 2018
|
$
|
6,406
|
|
Loyalty points forfeited or expired
|
(4,332
|
)
|
|
Loyalty points used
|
(11,398
|
)
|
|
Loyalty points vested
|
12,469
|
|
|
Loyalty points unvested
|
1,086
|
|
|
Loyalty deferred revenue as of December 31, 2018
|
$
|
4,231
|
|
•
|
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 if located in the United States and Canada, and for the first 90 days following the product’s purchase in other countries where we sell our products. In China, where we sell our products under a cross-border e-commerce model, we have a 14-day return policy. The associate may then return or exchange the product based on the associate product return policy.
|
•
|
Associate and Preferred Customer Product Return Policy.
This policy allows the associate or preferred customer to return an order within one year of the purchase date upon terminating his/her account. If an associate or preferred customer returns a product unopened and in good condition, he/she may receive a full refund minus a 10% restocking fee. We may also allow the associate or preferred customer 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 other countries where we sell our products 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 may terminate the associate's or preferred customer’s account.
|
Sales reserve as of January 1, 2017
|
$
|
129
|
|
Provision related to sales made in current period
|
1,274
|
|
|
Adjustment related to sales made in prior periods
|
3
|
|
|
Actual returns or credits related to current period
|
(1,156
|
)
|
|
Actual returns or credits related to prior periods
|
(133
|
)
|
|
Sales reserve as of December 31, 2017
|
$
|
117
|
|
|
|
||
Sales reserve as of January 1, 2018
|
$
|
117
|
|
Provision related to sales made in current period
|
1,198
|
|
|
Adjustment related to sales made in prior periods
|
(10
|
)
|
|
Actual returns or credits related to current period
|
(1,125
|
)
|
|
Actual returns or credits related to prior periods
|
(104
|
)
|
|
Sales reserve as of December 31, 2018
|
$
|
76
|
|
2018 Grants
|
April
|
|
June
|
||||
Estimated fair value per share of options granted:
|
$
|
7.17
|
|
|
$
|
8.59
|
|
Assumptions:
|
|
|
|
|
|||
Dividend yield
|
2.9
|
%
|
|
2.4
|
%
|
||
Risk-free rate of return
|
2.5
|
%
|
|
2.8
|
%
|
||
Common stock price volatility
|
55.6
|
%
|
|
56.4
|
%
|
||
Expected average life of stock options (in years)
|
4.5
|
|
|
4.5
|
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
|
Year ended December 31, 2018
|
|
As of December 31, 2018
|
||||||||
Country (foreign currency name)
|
Low
|
|
High
|
|
Average
|
|
Spot
|
||||
Australia (Australian Dollar)
|
0.70413
|
|
|
0.81136
|
|
|
0.74791
|
|
|
0.70461
|
|
Canada (Canadian Dollar)
|
0.73347
|
|
|
0.81321
|
|
|
0.77216
|
|
|
0.73349
|
|
China (Renminbi)
|
0.14348
|
|
|
0.15963
|
|
|
0.15143
|
|
|
0.14543
|
|
Columbia (Peso)
|
0.00030
|
|
|
0.00037
|
|
|
0.00034
|
|
|
0.00031
|
|
Czech Republic (Koruna)
|
0.04338
|
|
|
0.04953
|
|
|
0.04608
|
|
|
0.04436
|
|
Denmark (Kroner)
|
0.15091
|
|
|
0.16766
|
|
|
0.15851
|
|
|
0.15335
|
|
Hong Kong (Hong Kong Dollar)
|
0.12739
|
|
|
0.12810
|
|
|
0.12760
|
|
|
0.12772
|
|
Japan (Yen)
|
0.00876
|
|
|
0.00955
|
|
|
0.00906
|
|
|
0.00907
|
|
Mexico (Peso)
|
0.04815
|
|
|
0.05555
|
|
|
0.05210
|
|
|
0.05090
|
|
New Zealand (New Zealand Dollar)
|
0.64419
|
|
|
0.74054
|
|
|
0.69270
|
|
|
0.67168
|
|
Norway (Krone)
|
0.11399
|
|
|
0.13033
|
|
|
0.12307
|
|
|
0.11508
|
|
Republic of Korea (Won)
|
0.00088
|
|
|
0.00095
|
|
|
0.00091
|
|
|
0.00090
|
|
Singapore (Singapore Dollar)
|
0.72164
|
|
|
0.76541
|
|
|
0.74163
|
|
|
0.73231
|
|
South Africa (Rand)
|
0.06483
|
|
|
0.08675
|
|
|
0.07608
|
|
|
0.06939
|
|
Sweden (Krona)
|
0.10881
|
|
|
0.12733
|
|
|
0.11529
|
|
|
0.11171
|
|
Switzerland (Franc)
|
0.99073
|
|
|
1.08306
|
|
|
1.02274
|
|
|
1.01693
|
|
Taiwan (New Taiwan Dollar)
|
0.03220
|
|
|
0.03448
|
|
|
0.03321
|
|
|
0.03272
|
|
United Kingdom (British Pound)
|
1.25629
|
|
|
1.43218
|
|
|
1.33541
|
|
|
1.27047
|
|
Various countries
(1)
(Euro)
|
1.12584
|
|
|
1.24812
|
|
|
1.18127
|
|
|
1.14474
|
|
Item 8.
|
Financial Statements and Supplementary Data
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
Item 9A.
|
Controls and Procedures
|
Item 9B.
|
Other Information
|
Item 15.
|
Exhibits and Financial Statement Schedule
|
Consolidated Balance Sheets as of December 31, 2018 and 2017
|
|
Consolidated Statements of Operations for the years ended December 31, 2018 and 2017
|
|
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2018 and 2017
|
|
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2018 and 2017
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2018 and 2017
|
|
Item 16.
|
Form 10-K Summary
|
|
|
Incorporated by Reference
|
||||||
Exhibit
Number
|
Exhibit Description
|
Form
|
|
File No.
|
|
Exhibit (s)
|
|
Filing Date
|
3.1
|
S-1
|
|
333-63133
|
|
3.1
|
|
October 28, 1998
|
|
3.2
|
8-K
|
|
000-24657
|
|
3.1
|
|
January 17, 2012
|
|
3.3
|
8-K
|
|
000-24657
|
|
3.1
|
|
August 27, 2014
|
|
4.1
|
S-1
|
|
333-63133
|
|
4.1
|
|
October 28, 1998
|
|
10.1
|
10-Q
|
|
000-24657
|
|
10.1
|
|
August 8, 2017
|
|
10.2
|
10-Q
|
|
000-24657
|
|
10.2
|
|
August 8, 2017
|
|
10.3
|
10-Q
|
|
000-24657
|
|
10.3
|
|
August 8, 2017
|
|
10.4
|
10-Q
|
|
000-24657
|
|
10.4
|
|
August 8, 2017
|
|
10.5
|
10-Q
|
|
000-24657
|
|
10.5
|
|
August 8, 2017
|
|
10.6
|
10-Q
|
|
000-24657
|
|
10.6
|
|
August 8, 2017
|
|
10.7
|
10-Q
|
|
000-24657
|
|
10.7
|
|
August 8, 2017
|
|
10.8
|
10-K
|
|
000-24657
|
|
10.1
|
|
March 15, 2004
|
|
10.9
|
10-K
|
|
000-24657
|
|
10.1
|
|
March 15, 2004
|
|
10.10
|
10-Q
|
|
000-24657
|
|
10.2
|
|
August 9, 2004
|
|
10.11
|
10-Q
|
|
000-24657
|
|
10.4
|
|
November 4, 2010
|
|
10.12
|
10-K
|
|
000-24657
|
|
10.12
|
|
March 26, 2018
|
|
10.13
|
8-K
|
|
000-24657
|
|
10.1
|
|
September 24, 2007
|
|
10.14
|
10-Q
|
|
000-24657
|
|
10.1
|
|
May 12, 2015
|
|
10.15
|
10-K
|
|
00-24657
|
|
10.61
|
|
March 14, 2017
|
|
14.1
|
10-K
|
|
000-24657
|
|
14.1
|
|
March 16, 2007
|
|
21*
|
*
|
|
*
|
|
*
|
|
*
|
|
23.1*
|
*
|
|
*
|
|
*
|
|
*
|
|
24*
|
*
|
|
*
|
|
*
|
|
*
|
|
31.1*
|
*
|
|
*
|
|
*
|
|
*
|
|
|
Incorporated by Reference
|
||||||
Exhibit
Number
|
Exhibit Description
|
Form
|
|
File No.
|
|
Exhibit (s)
|
|
Filing Date
|
31.2*
|
*
|
|
*
|
|
*
|
|
*
|
|
32.1*
|
*
|
|
*
|
|
*
|
|
*
|
|
32.2*
|
*
|
|
*
|
|
*
|
|
*
|
|
99.1*
|
*
|
|
*
|
|
*
|
|
*
|
|
101.INS*
|
XBRL Instance Document
|
*
|
|
*
|
|
*
|
|
*
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document
|
*
|
|
*
|
|
*
|
|
*
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
*
|
|
*
|
|
*
|
|
*
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document
|
*
|
|
*
|
|
*
|
|
*
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
*
|
|
*
|
|
*
|
|
*
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document
|
*
|
|
*
|
|
*
|
|
*
|
|
|
MANNATECH, INCORPORATED
|
|
|
|
|
Dated: March 11, 2019
|
By:
|
/s/ Alfredo Bala
|
|
|
Alfredo Bala
|
|
|
Chief Executive Officer
|
|
|
(principal executive officer)
|
Dated: March 11, 2019
|
By:
|
/s/ David A. Johnson
|
|
|
David A. Johnson
|
|
|
Chief Financial Officer
|
|
|
(principal financial officer)
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Alfredo Bala
|
|
Chief Executive Officer
(principal executive officer)
|
|
March 11, 2019
|
Alfredo Bala
|
||||
|
|
|
|
|
/s/ David A. Johnson
|
|
Chief Financial Officer
(principal financial officer)
|
|
March 11, 2019
|
David A. Johnson
|
||||
|
|
|
|
|
/s/ J. Stanley Fredrick
|
|
Chairman of the Board
|
|
March 11, 2019
|
J. Stanley Fredrick
|
||||
|
|
|
|
|
/s/ Robert A. Toth
|
|
Director
|
|
March 11, 2019
|
Robert A. Toth
|
||||
|
|
|
|
|
/s/ Gerald E. Gilbert
|
|
Director
|
|
March 11, 2019
|
Gerald E. Gilbert
|
||||
|
|
|
|
|
/s/ Kevin Andrew Robbins
|
|
Director
|
|
March 11, 2019
|
Kevin Andrew Robbins
|
||||
|
|
|
|
|
/s/ Larry A. Jobe
|
|
Director
|
|
March 11, 2019
|
Larry A. Jobe
|
||||
|
|
|
|
|
/s/ Linda K. Ferrell
|
|
Director
|
|
March 11, 2019
|
Linda K. Ferrell
|
||||
|
|
|
|
|
/s/ Eric W. Schrier
|
|
Director
|
|
March 11, 2019
|
Eric W. Schrier
|
||||
|
|
|
|
|
/s/ Tyler Rameson
|
|
Director
|
|
March 11, 2019
|
Tyler Rameson
|
|
|
|
Page
|
Consolidated Balance Sheets as of December 31, 2018 and 2017
|
|
Consolidated Statements of Operations for the years ended December 31, 2018 and 2017
|
|
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2018 and 2017
|
|
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2018 and 2017
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2018 and 2017
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
ASSETS
|
|
|
|
||||
Cash and cash equivalents
|
$
|
21,845
|
|
|
$
|
37,682
|
|
Restricted cash
|
1,514
|
|
|
1,514
|
|
||
Accounts receivable, net of allowance of $770 and $582 in 2018 and 2017, respectively
|
106
|
|
|
273
|
|
||
Income tax receivable
|
291
|
|
|
907
|
|
||
Inventories, net
|
12,821
|
|
|
9,385
|
|
||
Prepaid expenses and other current assets
|
3,361
|
|
|
2,607
|
|
||
Deferred commissions
|
2,449
|
|
|
3,880
|
|
||
Total current assets
|
42,387
|
|
|
56,248
|
|
||
Property and equipment, net
|
5,860
|
|
|
3,537
|
|
||
Construction in progress
|
904
|
|
|
777
|
|
||
Long-term restricted cash
|
7,225
|
|
|
7,565
|
|
||
Other assets
|
3,894
|
|
|
3,876
|
|
||
Deferred tax assets, net
|
1,928
|
|
|
4,239
|
|
||
Total assets
|
$
|
62,198
|
|
|
$
|
76,242
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
||
Current portion of capital leases
|
$
|
75
|
|
|
$
|
228
|
|
Accounts payable
|
6,724
|
|
|
6,008
|
|
||
Accrued expenses
|
5,995
|
|
|
5,771
|
|
||
Commissions and incentives payable
|
12,189
|
|
|
9,658
|
|
||
Taxes payable
|
2,655
|
|
|
2,404
|
|
||
Current notes payable
|
702
|
|
|
815
|
|
||
Deferred revenue
|
5,274
|
|
|
8,561
|
|
||
Total current liabilities
|
33,614
|
|
|
33,445
|
|
||
Capital leases, excluding current portion
|
72
|
|
|
144
|
|
||
Deferred tax liabilities
|
3
|
|
|
1,147
|
|
||
Long-term notes payable
|
883
|
|
|
—
|
|
||
Other long-term liabilities
|
2,302
|
|
|
1,265
|
|
||
Total liabilities
|
36,874
|
|
|
36,001
|
|
||
Commitments and contingencies (Note 11)
|
|
|
|
|
|
||
Shareholders’ equity:
|
|
|
|
|
|
||
Preferred stock, $0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding
|
—
|
|
|
—
|
|
||
Common stock, $0.0001 par value, 99,000,000 shares authorized, 2,742,857 shares issued and 2,381,149 shares outstanding as of December 31, 2018 and 2,742,857 shares issued and 2,702,940 shares outstanding as of December 31, 2017
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
33,939
|
|
|
34,928
|
|
||
Retained earnings (deficit)
|
(2,782
|
)
|
|
4,190
|
|
||
Accumulated other comprehensive income
|
4,337
|
|
|
5,984
|
|
||
Treasury stock, at average cost, 361,708 shares as of December 31, 2018 and 39,917 shares as of December 31, 2017, respectively
|
(10,170
|
)
|
|
(4,861
|
)
|
||
Total shareholders’ equity
|
25,324
|
|
|
40,241
|
|
||
Total liabilities and shareholders’ equity
|
$
|
62,198
|
|
|
$
|
76,242
|
|
|
For the years ended December 31,
|
||||||
|
2018
|
|
2017
|
||||
Net sales
|
$
|
173,558
|
|
|
$
|
176,696
|
|
Cost of sales
|
34,476
|
|
|
35,667
|
|
||
Gross profit
|
139,082
|
|
|
141,029
|
|
||
Operating expenses:
|
|
|
|
|
|
||
Commissions and incentives
|
73,514
|
|
|
74,550
|
|
||
Selling and administrative expenses
|
34,156
|
|
|
35,470
|
|
||
Depreciation and amortization
|
2,064
|
|
|
1,864
|
|
||
Other operating costs
|
29,438
|
|
|
26,626
|
|
||
Total operating expenses
|
139,172
|
|
|
138,510
|
|
||
Income (loss) from operations
|
(90
|
)
|
|
2,519
|
|
||
Interest income
|
288
|
|
|
274
|
|
||
Other expense (income), net
|
291
|
|
|
(333
|
)
|
||
Income before income taxes
|
489
|
|
|
2,460
|
|
||
Income tax provision
|
(4,375
|
)
|
|
(4,247
|
)
|
||
Net loss
|
$
|
(3,886
|
)
|
|
$
|
(1,787
|
)
|
Loss per common share:
|
|
|
|
|
|
||
Basic
|
$
|
(1.53
|
)
|
|
$
|
(0.66
|
)
|
Diluted
|
$
|
(1.53
|
)
|
|
$
|
(0.66
|
)
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
||
Basic
|
2,541
|
|
|
2,708
|
|
||
Diluted
|
2,541
|
|
|
2,708
|
|
|
2018
|
|
2017
|
||||
Net loss
|
$
|
(3,886
|
)
|
|
$
|
(1,787
|
)
|
Foreign currency translations gain (loss)
|
(1,661
|
)
|
|
4,169
|
|
||
Pension obligations, net of tax provision of $8 and $10 in 2018 and 2017, respectively
|
14
|
|
|
(19
|
)
|
||
Comprehensive income (loss)
|
$
|
(5,533
|
)
|
|
$
|
2,363
|
|
|
Common
stock |
|
Additional
paid in capital |
|
Retained
earnings (deficit) |
|
Accumulated
other comprehensive income |
|
Treasury
stock |
|
Total
shareholders’ equity |
||||||||||||
Balance at December 31, 2016
|
$
|
—
|
|
|
$
|
38,190
|
|
|
$
|
7,331
|
|
|
$
|
1,834
|
|
|
$
|
(8,470
|
)
|
|
$
|
38,885
|
|
Charge related to stock-based compensation
|
—
|
|
|
246
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
246
|
|
||||||
Issuance of unrestricted shares
|
—
|
|
|
(1,228
|
)
|
|
—
|
|
|
—
|
|
|
1,472
|
|
|
244
|
|
||||||
Release of restricted stock
|
—
|
|
|
(306
|
)
|
|
—
|
|
|
—
|
|
|
306
|
|
|
—
|
|
||||||
Stock option exercises
|
—
|
|
|
(1,748
|
)
|
|
—
|
|
|
—
|
|
|
1,831
|
|
|
83
|
|
||||||
Foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
4,169
|
|
|
—
|
|
|
4,169
|
|
||||||
Pension obligations, net of tax of $10
|
—
|
|
|
—
|
|
|
—
|
|
|
(19
|
)
|
|
—
|
|
|
(19
|
)
|
||||||
Repurchase of common stock
|
—
|
|
|
(226
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(226
|
)
|
||||||
Declared and paid dividends
|
—
|
|
|
—
|
|
|
(1,354
|
)
|
|
—
|
|
|
—
|
|
|
(1,354
|
)
|
||||||
Net loss
|
—
|
|
|
—
|
|
|
(1,787
|
)
|
|
—
|
|
|
—
|
|
|
(1,787
|
)
|
||||||
Balance at December 31, 2017
|
$
|
—
|
|
|
$
|
34,928
|
|
|
$
|
4,190
|
|
|
$
|
5,984
|
|
|
$
|
(4,861
|
)
|
|
$
|
40,241
|
|
Charge related to stock-based compensation
|
—
|
|
|
888
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
888
|
|
||||||
Issuance of unrestricted shares
|
—
|
|
|
(1,748
|
)
|
|
—
|
|
|
—
|
|
|
1,993
|
|
|
245
|
|
||||||
Release of restricted stock
|
—
|
|
|
(73
|
)
|
|
—
|
|
|
—
|
|
|
71
|
|
|
(2
|
)
|
||||||
Stock option exercises
|
—
|
|
|
(56
|
)
|
|
—
|
|
|
—
|
|
|
170
|
|
|
114
|
|
||||||
Foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,661
|
)
|
|
—
|
|
|
(1,661
|
)
|
||||||
Pension obligations, net of tax of $8
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
14
|
|
||||||
Repurchase of common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,543
|
)
|
|
(7,543
|
)
|
||||||
Declared and paid dividends
|
—
|
|
|
—
|
|
|
(3,086
|
)
|
|
—
|
|
|
—
|
|
|
(3,086
|
)
|
||||||
Net loss
|
—
|
|
|
—
|
|
|
(3,886
|
)
|
|
—
|
|
|
—
|
|
|
(3,886
|
)
|
||||||
Balance at December 31, 2018
|
$
|
—
|
|
|
$
|
33,939
|
|
|
$
|
(2,782
|
)
|
|
$
|
4,337
|
|
|
$
|
(10,170
|
)
|
|
$
|
25,324
|
|
|
For the years ended December 31,
|
||||||
|
2018
|
|
2017
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net loss
|
$
|
(3,886
|
)
|
|
$
|
(1,787
|
)
|
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
:
|
|
|
|
|
|
||
Depreciation and amortization
|
2,064
|
|
|
1,864
|
|
||
Provision for inventory losses
|
710
|
|
|
714
|
|
||
Provision for doubtful accounts
|
543
|
|
|
351
|
|
||
Loss on disposal of assets
|
4
|
|
|
1
|
|
||
Stock-based compensation expense
|
1,145
|
|
|
490
|
|
||
Deferred income taxes
|
1,167
|
|
|
2,143
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||
Accounts receivable
|
(376
|
)
|
|
(308
|
)
|
||
Income tax receivable
|
616
|
|
|
686
|
|
||
Inventories
|
(4,145
|
)
|
|
2,379
|
|
||
Prepaid expenses and other current assets
|
407
|
|
|
1,540
|
|
||
Other assets
|
(17
|
)
|
|
477
|
|
||
Deferred commissions
|
1,431
|
|
|
(549
|
)
|
||
Accounts payable
|
716
|
|
|
710
|
|
||
Accrued expenses and other liabilities
|
(96
|
)
|
|
(315
|
)
|
||
Taxes payable
|
251
|
|
|
1,226
|
|
||
Commissions and incentives payable
|
2,531
|
|
|
518
|
|
||
Deferred revenue
|
(3,287
|
)
|
|
184
|
|
||
Net cash (used in) provided by operating activities
|
(222
|
)
|
|
10,324
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
||
Acquisition of property and equipment
|
(2,338
|
)
|
|
(1,340
|
)
|
||
Proceeds from sale of assets
|
62
|
|
|
1
|
|
||
Net cash used in investing activities
|
(2,276
|
)
|
|
(1,339
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
||
Proceeds from stock options exercised
|
114
|
|
|
83
|
|
||
Repurchase of common stock
|
(7,543
|
)
|
|
(226
|
)
|
||
Payment of cash dividends
|
(3,086
|
)
|
|
(1,354
|
)
|
||
Repayment of capital lease obligations
|
(1,540
|
)
|
|
(1,567
|
)
|
||
Net cash used in financing activities
|
(12,055
|
)
|
|
(3,064
|
)
|
||
Effect of currency exchange rate changes on cash, cash equivalents and restricted cash
|
(1,624
|
)
|
|
4,214
|
|
||
Net (decrease) increase in cash, cash equivalents and restricted cash
|
(16,177
|
)
|
|
10,135
|
|
||
Cash, cash equivalents and restricted cash at the beginning of the year
|
46,761
|
|
|
36,626
|
|
||
Cash, cash equivalents and restricted cash at the end of the year
|
$
|
30,584
|
|
|
$
|
46,761
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
||
Income taxes paid, net
|
$
|
800
|
|
|
$
|
1,694
|
|
Interest paid on capital leases
|
$
|
64
|
|
|
$
|
68
|
|
Accrued asset purchases
|
$
|
261
|
|
|
$
|
238
|
|
Assets acquired through financing arrangements
|
$
|
2,281
|
|
|
$
|
130
|
|
|
December 31, 2018
|
December 31, 2017
|
|
|||
Cash and cash equivalents at beginning of period
|
$
|
37,682
|
|
$
|
28,687
|
|
Current restricted cash at beginning of period
|
1,514
|
|
1,510
|
|
||
Long-term restricted cash at beginning of period
|
7,565
|
|
6,429
|
|
||
Cash, cash equivalents, and restricted cash at beginning of period
|
$
|
46,761
|
|
$
|
36,626
|
|
|
|
|
||||
Cash and cash equivalents at end of period
|
$
|
21,845
|
|
$
|
37,682
|
|
Current restricted cash at end of period
|
1,514
|
|
1,514
|
|
||
Long-term restricted cash at end of period
|
7,225
|
|
7,565
|
|
||
Cash, cash equivalents, and restricted cash at end of period
|
$
|
30,584
|
|
$
|
46,761
|
|
|
Estimated useful life
|
Office furniture and equipment
|
5 to 7 years
|
Computer hardware and software
|
3 to 5 years
|
Automobiles
|
3 to 5 years
|
Leasehold improvements
(1)
|
2 to 10 years
|
|
2018
|
|
Percentage
|
|
2017
|
|
Percentage
|
||||||
Consolidated product sales
|
$
|
170.2
|
|
|
98.0
|
%
|
|
$
|
157.9
|
|
|
89.4
|
%
|
Consolidated pack sales and associate fees
(a)
|
2.5
|
|
|
1.5
|
%
|
|
14.2
|
|
|
8.0
|
%
|
||
Consolidated other, including freight
|
0.9
|
|
|
0.5
|
%
|
|
4.6
|
|
|
2.6
|
%
|
||
Total consolidated net sales
|
$
|
173.6
|
|
|
100.0
|
%
|
|
$
|
176.7
|
|
|
100.0
|
%
|
Loyalty program
|
(in thousands)
|
|
|
Loyalty deferred revenue as of January 1, 2017
|
$
|
7,033
|
|
Loyalty points forfeited or expired
|
(5,895
|
)
|
|
Loyalty points used
|
(14,316
|
)
|
|
Loyalty points vested
|
17,836
|
|
|
Loyalty points unvested
|
1,748
|
|
|
Loyalty deferred revenue as of December 31, 2017
|
$
|
6,406
|
|
Loyalty deferred revenue as of January 1, 2018
|
$
|
6,406
|
|
Loyalty points forfeited or expired
|
(4,332
|
)
|
|
Loyalty points used
|
(11,398
|
)
|
|
Loyalty points vested
|
12,469
|
|
|
Loyalty points unvested
|
1,086
|
|
|
Loyalty deferred revenue as of December 31, 2018
|
$
|
4,231
|
|
Sales reserve as of January 1, 2017
|
$
|
129
|
|
Provision related to sales made in current period
|
1,274
|
|
|
Adjustment related to sales made in prior periods
|
3
|
|
|
Actual returns or credits related to current period
|
(1,156
|
)
|
|
Actual returns or credits related to prior periods
|
(133
|
)
|
|
Sales reserve as of December 31, 2017
|
$
|
117
|
|
|
|
||
Sales reserve as of January 1, 2018
|
$
|
117
|
|
Provision related to sales made in current period
|
1,198
|
|
|
Adjustment related to sales made in prior periods
|
(10
|
)
|
|
Actual returns or credits related to current period
|
(1,125
|
)
|
|
Actual returns or credits related to prior periods
|
(104
|
)
|
|
Sales reserve as of December 31, 2018
|
$
|
76
|
|
|
2018
|
|
2017
|
||||||||||
|
Sales by
product |
|
% of total
net sales |
|
Sales by
product |
|
% of total
net sales |
||||||
Advanced Ambrotose
®
|
$
|
44,054
|
|
|
25.4
|
%
|
|
$
|
52,592
|
|
|
29.8
|
%
|
Ambrotose Life™
|
18,824
|
|
|
10.9
|
%
|
|
—
|
|
|
—
|
%
|
||
TruHealth
™
|
17,537
|
|
|
10.1
|
%
|
|
16,652
|
|
|
9.4
|
%
|
||
Manapol
®
Powder
|
8,636
|
|
|
5.0
|
%
|
|
11,183
|
|
|
6.3
|
%
|
||
Ambrotose
®
|
7,695
|
|
|
4.4
|
%
|
|
8,459
|
|
|
4.8
|
%
|
||
Total
|
$
|
96,746
|
|
|
55.8
|
%
|
|
$
|
88,886
|
|
|
50.3
|
%
|
•
|
Level 1—Quoted unadjusted prices for identical instruments in active markets.
|
•
|
Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all observable inputs and significant value drivers are observable in active markets.
|
•
|
Level 3—Model derived valuations in which one or more significant inputs or significant value drivers are unobservable, including assumptions developed by the Company.
|
2018
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Interest bearing deposits – various banks
|
$
|
11,391
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,391
|
|
Total assets
|
$
|
11,391
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,391
|
|
Amounts included in:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents
|
$
|
4,633
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,633
|
|
Restricted cash
|
741
|
|
|
—
|
|
|
—
|
|
|
741
|
|
||||
Long-term restricted cash
|
6,017
|
|
|
—
|
|
|
—
|
|
|
6,017
|
|
||||
Total
|
$
|
11,391
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,391
|
|
2017
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Interest bearing deposits – various banks
|
$
|
23,695
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
23,695
|
|
Total assets
|
$
|
23,695
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
23,695
|
|
Amounts included in:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents
|
$
|
16,651
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16,651
|
|
Restricted cash
|
741
|
|
|
—
|
|
|
—
|
|
|
741
|
|
||||
Long-term restricted cash
|
6,303
|
|
|
—
|
|
|
—
|
|
|
6,303
|
|
||||
Total
|
$
|
23,695
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
23,695
|
|
|
2018
|
|
2017
|
||||
Raw materials
|
$
|
803
|
|
|
$
|
879
|
|
Finished goods
|
12,542
|
|
|
9,072
|
|
||
Inventory reserves for obsolescence
|
(524
|
)
|
|
(566
|
)
|
||
Total
|
$
|
12,821
|
|
|
$
|
9,385
|
|
|
2018
|
|
2017
|
||||
Office furniture and equipment
|
$
|
3,441
|
|
|
$
|
7,648
|
|
Computer hardware
|
4,239
|
|
|
5,209
|
|
||
Computer software
|
43,416
|
|
|
49,687
|
|
||
Automobiles
|
81
|
|
|
81
|
|
||
Leasehold improvements
|
4,812
|
|
|
11,530
|
|
||
|
55,989
|
|
|
74,155
|
|
||
Less accumulated depreciation and amortization
|
(50,129
|
)
|
|
(70,618
|
)
|
||
Property and equipment, net
|
5,860
|
|
|
3,537
|
|
||
Construction in progress
|
904
|
|
|
777
|
|
||
Total
|
$
|
6,764
|
|
|
$
|
4,314
|
|
2019
|
$
|
81
|
|
2020
|
40
|
|
|
2021
|
28
|
|
|
2022
|
7
|
|
|
Total future minimum lease payments
|
156
|
|
|
Less: Amounts representing interest (effective interest rate 5.61%)
|
(9
|
)
|
|
Present value of minimum lease payments
|
147
|
|
|
Current portion of capital lease obligations
|
75
|
|
|
Long-term portion of capital lease obligations
|
$
|
72
|
|
|
2018
|
|
2017
|
||||
Accrued asset purchases
|
$
|
261
|
|
|
$
|
238
|
|
Accrued compensation
|
1,912
|
|
|
1,685
|
|
||
Accrued royalties
|
59
|
|
|
55
|
|
||
Accrued sales and other taxes
|
344
|
|
|
260
|
|
||
Other accrued operating expenses
|
677
|
|
|
785
|
|
||
Customer deposits and sales returns
|
425
|
|
|
153
|
|
||
Accrued travel expenses related to corporate events
|
411
|
|
|
1,156
|
|
||
Accrued shipping and handling costs
|
755
|
|
|
691
|
|
||
Rent expense
|
442
|
|
|
211
|
|
||
Accrued legal and accounting fees
|
709
|
|
|
537
|
|
||
|
$
|
5,995
|
|
|
$
|
5,771
|
|
|
2018
|
|
2017
|
||||
United States
|
$
|
(11,762
|
)
|
|
$
|
(6,911
|
)
|
Foreign
|
12,251
|
|
|
9,371
|
|
||
Income before income taxes
|
$
|
489
|
|
|
$
|
2,460
|
|
Current provision (benefit):
|
2018
|
|
2017
|
||||
Federal
|
$
|
13
|
|
|
$
|
(1,157
|
)
|
State
|
(25
|
)
|
|
75
|
|
||
Foreign
|
3,220
|
|
|
3,186
|
|
||
|
3,208
|
|
|
2,104
|
|
||
Deferred provision (benefit):
|
|
|
|
||||
Federal
|
1,074
|
|
|
1,185
|
|
||
State
|
1,027
|
|
|
(425
|
)
|
||
Foreign
|
(934
|
)
|
|
1,383
|
|
||
|
1,167
|
|
|
2,143
|
|
||
|
$
|
4,375
|
|
|
$
|
4,247
|
|
|
2018
|
|
2017
|
||
Federal statutory income taxes
|
21.0
|
%
|
|
35.0
|
%
|
State income taxes, net of federal benefit
|
(40.3
|
)
|
|
(8.0
|
)
|
Difference in foreign and United States tax on foreign operations
|
(75.6
|
)
|
|
(68.6
|
)
|
Effect of changes in valuation allowance
|
920.1
|
|
|
121.1
|
|
Effect of change in uncertain tax positions (net)
|
(0.5
|
)
|
|
(22.6
|
)
|
Federal Sub-Part F Income from foreign operations
|
0.4
|
|
|
6.6
|
|
Global Intangible Low Taxed Income (GILTI)
|
43.2
|
|
|
—
|
|
Federal Transition Tax (net of deduction)
|
—
|
|
|
191.4
|
|
Effect of changes in tax rates
|
(23.6
|
)
|
|
32.5
|
|
Foreign Exchange
|
(8.4
|
)
|
|
9.4
|
|
Prior year adjustments
|
(4.1
|
)
|
|
17.4
|
|
Other deferred - NOL expiration
|
—
|
|
|
26.0
|
|
Foreign tax credits and withholding tax
|
6.3
|
|
|
(180.8
|
)
|
Meals and entertainment
|
11.9
|
|
|
5.5
|
|
Stock Option Expense
|
25.8
|
|
|
—
|
|
Other permanent items
|
14.4
|
|
|
4.4
|
|
Other
|
4.1
|
|
|
3.4
|
|
|
894.7
|
%
|
|
172.7
|
%
|
Deferred tax assets:
|
2018
|
|
2017
|
||||
Deferred Revenue
|
$
|
277
|
|
|
$
|
353
|
|
Inventory capitalization
|
109
|
|
|
147
|
|
||
Inventory reserves
|
141
|
|
|
112
|
|
||
Accrued expenses
|
804
|
|
|
917
|
|
||
Disallowed Interest Expense
|
123
|
|
|
—
|
|
||
Depreciation and amortization
|
—
|
|
|
1,506
|
|
||
Net operating loss
(1)
|
9,293
|
|
|
6,549
|
|
||
Non-cash accounting charges related to stock options and warrants
|
584
|
|
|
464
|
|
||
Foreign tax credit carryover
|
3,621
|
|
|
5,544
|
|
||
Other
|
876
|
|
|
365
|
|
||
Total deferred tax assets
|
$
|
15,828
|
|
|
$
|
15,957
|
|
Valuation allowance
|
(12,793
|
)
|
|
(11,436
|
)
|
||
Total deferred tax assets, net of valuation allowance
|
$
|
3,035
|
|
|
$
|
4,521
|
|
Deferred tax liabilities:
|
|
|
|
|
|
||
Prepaid expenses
|
$
|
262
|
|
|
$
|
239
|
|
Deferred commissions
|
255
|
|
|
543
|
|
||
Internally-developed software
|
326
|
|
|
381
|
|
||
Fixed assets
|
267
|
|
|
266
|
|
||
Total deferred tax liabilities
|
$
|
1,110
|
|
|
$
|
1,429
|
|
|
|
|
|
||||
Total net deferred tax asset
|
$
|
1,925
|
|
|
$
|
3,092
|
|
Jurisdiction
|
Gross NOL
|
|
Tax Effected NOL
|
|
Expiration Years
|
||||
Australia
|
$
|
597
|
|
|
$
|
179
|
|
|
Indefinite
|
Bermuda
|
$
|
32
|
|
|
$
|
—
|
|
|
N/A
|
Canada
|
$
|
40
|
|
|
$
|
10
|
|
|
2026
|
China
|
$
|
278
|
|
|
$
|
70
|
|
|
2024
|
Colombia
|
$
|
1,857
|
|
|
$
|
613
|
|
|
Indefinite
|
Gibraltar
|
$
|
116
|
|
|
$
|
—
|
|
|
Indefinite
|
Hong Kong
|
$
|
323
|
|
|
$
|
53
|
|
|
Indefinite
|
Japan
|
$
|
203
|
|
|
$
|
70
|
|
|
Indefinite
|
Mexico
|
$
|
10,195
|
|
|
$
|
3,059
|
|
|
2020-2028
|
Norway
|
$
|
287
|
|
|
$
|
66
|
|
|
Indefinite
|
Russia
(1)
|
$
|
43
|
|
|
$
|
9
|
|
|
Indefinite
|
Singapore
|
$
|
127
|
|
|
$
|
22
|
|
|
Indefinite
|
South Africa
|
$
|
687
|
|
|
$
|
192
|
|
|
Indefinite
|
Sweden
|
$
|
490
|
|
|
$
|
108
|
|
|
Indefinite
|
Switzerland
|
$
|
9,249
|
|
|
$
|
850
|
|
|
2019-2025
|
Taiwan
|
$
|
4,901
|
|
|
$
|
980
|
|
|
2019-2028
|
Ukraine
(2)
|
$
|
568
|
|
|
$
|
102
|
|
|
Indefinite
|
United States - Federal
|
$
|
9,091
|
|
|
$
|
1,878
|
|
|
Indefinite
|
United Kingdom
|
$
|
415
|
|
|
$
|
79
|
|
|
Indefinite
|
(1)
|
On August 1, 2016, the Company established a legal entity in Russia.
|
(2)
|
On March 21, 2014, the Company suspended operations in the Ukraine, but maintains the legal entity.
|
Country
|
2018
|
|
2017
|
||||
Australia
|
$
|
0.3
|
|
|
$
|
—
|
|
China
|
0.3
|
|
|
—
|
|
||
Colombia
|
0.6
|
|
|
0.6
|
|
||
Hong Kong
|
0.1
|
|
|
—
|
|
||
Mexico
|
3.1
|
|
|
2.8
|
|
||
Norway
|
0.1
|
|
|
—
|
|
||
South Africa
|
0.2
|
|
|
0.1
|
|
||
Sweden
|
0.1
|
|
|
0.1
|
|
||
Taiwan
|
0.9
|
|
|
0.8
|
|
||
Ukraine
|
0.1
|
|
|
0.1
|
|
||
United Kingdom
|
0.1
|
|
|
0.1
|
|
||
United States
|
6.9
|
|
|
6.8
|
|
||
Other Jurisdictions
|
—
|
|
|
—
|
|
||
Total
|
$
|
12.8
|
|
|
$
|
11.4
|
|
|
2018
|
|
2017
|
||||
Deferred tax assets
|
$
|
1,928
|
|
|
$
|
4,239
|
|
Deferred tax liabilities
|
(3
|
)
|
|
(1,147
|
)
|
||
Net deferred tax assets
|
$
|
1,925
|
|
|
$
|
3,092
|
|
|
2018
|
|
2017
|
||||
Balance as of January 1
|
$
|
79
|
|
|
$
|
515
|
|
Additions for tax positions related to the current year
|
—
|
|
|
—
|
|
||
Additions for tax positions of prior years
|
—
|
|
|
—
|
|
||
Reductions of tax positions of prior years
|
—
|
|
|
(436
|
)
|
||
Balance as of December 31
|
$
|
79
|
|
|
$
|
79
|
|
Jurisdiction
|
Open Years
|
Australia
|
2014-2018
|
Canada
|
2014-2018
|
China
|
2016-2018
|
Denmark
|
2015-2018
|
Japan
|
2015-2018
|
Mexico
|
2014-2018
|
Norway
|
2011-2018
|
Republic of Korea
|
2012-2018
|
Singapore
|
2014-2018
|
South Africa
|
2015-2018
|
Sweden
|
2013-2018
|
Switzerland
|
2014-2018
|
Taiwan
|
2013-2018
|
United Kingdom
|
2015-2018
|
United States
|
2015-2018
|
•
|
Al Bala, the Company’s CEO and President;
|
•
|
Chris Simons, the Company’s Regional Vice President EMEA; and
|
•
|
Landen Fredrick, the Company's Chief Global Sales Officer and President, North America and son of J. Stanley Fredrick, the Company’s Chairman of the Board and a major shareholder.
|
Projected benefit obligation:
|
2018
|
|
2017
|
||||
Balance, beginning of year
|
$
|
367
|
|
|
$
|
451
|
|
Service cost
|
61
|
|
|
76
|
|
||
Interest cost
|
1
|
|
|
2
|
|
||
Liability (gain) loss
|
(18
|
)
|
|
(9
|
)
|
||
Benefits paid to participants
|
(31
|
)
|
|
(170
|
)
|
||
Foreign currency
|
8
|
|
|
17
|
|
||
Balance, end of year
|
$
|
388
|
|
|
$
|
367
|
|
|
|
|
|
||||
Plan assets:
|
2018
|
|
2017
|
||||
Fair value, beginning of year
|
$
|
—
|
|
|
$
|
—
|
|
Company contributions
|
31
|
|
|
170
|
|
||
Benefits paid to participants
|
(31
|
)
|
|
(170
|
)
|
||
Fair value, end of year
|
$
|
—
|
|
|
$
|
—
|
|
Funded status of the Benefit Plan as of December 31
(in thousands)
:
|
2018
|
|
2017
|
||||
Benefit obligation
|
$
|
(388
|
)
|
|
$
|
(367
|
)
|
Fair value of plan assets
|
—
|
|
|
—
|
|
||
Excess of benefit obligation over fair value of plan assets
|
$
|
(388
|
)
|
|
$
|
(367
|
)
|
Amounts recognized in the accompanying Consolidated Balance Sheets consist of, as of December 31
(in thousands)
:
|
2018
|
|
2017
|
||||
Accrued benefit liability
|
$
|
(388
|
)
|
|
$
|
(367
|
)
|
Transition obligation and unrealized gain
|
(273
|
)
|
|
(289
|
)
|
||
Net amount recognized in the consolidated balance sheets
|
$
|
(661
|
)
|
|
$
|
(656
|
)
|
|
Years Ended December 31,
|
||||||
Other changes recognized in comprehensive income
(in thousands):
|
2018
|
|
2017
|
||||
Net periodic cost
|
$
|
21
|
|
|
$
|
40
|
|
Current year actuarial (gain) loss
|
(18
|
)
|
|
(9
|
)
|
||
Amortization of transition obligation
|
(4
|
)
|
|
(4
|
)
|
||
Total recognized in other comprehensive income (loss)
|
(22
|
)
|
|
(13
|
)
|
||
Total recognized in comprehensive income
|
$
|
(1
|
)
|
|
$
|
27
|
|
|
As of December 31,
|
||||||
Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive gain
(in thousands)
:
|
2018
|
|
2017
|
||||
Transition obligation
|
$
|
40
|
|
|
$
|
28
|
|
Prior service cost
|
215
|
|
|
252
|
|
||
Net actuarial gain (loss)
|
18
|
|
|
9
|
|
||
Total recognized in accumulated other comprehensive gain
|
$
|
273
|
|
|
$
|
289
|
|
2017 estimated amounts of amortized transition obligation
(in thousands):
|
2018
|
||
Transition obligation
|
$
|
(4
|
)
|
|
2018
|
|
2017
|
||
Discount rate
|
0.30
|
%
|
|
0.30
|
%
|
Rate of increase in compensation levels
|
—
|
|
|
—
|
|
|
2018
|
|
2017
|
||||
Service cost
|
$
|
61
|
|
|
$
|
76
|
|
Interest cost
|
1
|
|
|
2
|
|
||
Amortization of transition obligation
|
4
|
|
|
4
|
|
||
Gain (loss)
|
(3
|
)
|
|
—
|
|
||
Prior service cost
|
(42
|
)
|
|
(42
|
)
|
||
Total pension expense
|
$
|
21
|
|
|
$
|
40
|
|
2019
|
$
|
26
|
|
2020
|
28
|
|
|
2021
|
25
|
|
|
2022
|
61
|
|
|
2023
|
26
|
|
|
Next five years
|
286
|
|
|
Total expected benefits to be paid
|
$
|
452
|
|
|
2018
|
|||||||||||
|
Number of
Options
(in thousands)
|
|
Weighted
average
exercise
price
|
|
Weighted
average
remaining
contractual
life
(in years)
|
|
Aggregate
intrinsic
value (in
thousands)
|
|||||
Outstanding at beginning of year
|
247
|
|
|
$
|
17.23
|
|
|
|
|
|
||
Granted
|
185
|
|
|
16.18
|
|
|
|
|
|
|||
Exercised
|
(6
|
)
|
|
18.95
|
|
|
|
|
|
|||
Expired
|
(5
|
)
|
|
25.62
|
|
|
|
|
|
|||
Outstanding at end of year
|
421
|
|
|
$
|
16.64
|
|
|
6.65
|
|
$
|
909
|
|
Options exercisable at year end
|
295
|
|
|
$
|
16.87
|
|
|
5.55
|
|
$
|
570
|
|
|
2018
|
|
2017
|
|
Dividend yield:
|
2.4 - 2.9
|
%
|
3.5
|
%
|
Risk-free interest rate:
|
2.5 - 2.8
|
%
|
1.7
|
%
|
Expected market price volatility:
|
55.6 - 56.4
|
%
|
64.4
|
%
|
Average expected life of stock options:
|
4.5 years
|
|
4.5 years
|
|
|
2018
|
|
2017
|
||||
Selling, general and administrative expenses and income from operations before income taxes
|
$
|
888
|
|
|
$
|
246
|
|
Benefit for income taxes
|
(50
|
)
|
|
(45
|
)
|
||
Effect on net income
|
$
|
838
|
|
|
$
|
201
|
|
|
Total gross unrecognized
compensation expense
|
|
Total tax benefit associated
with unrecognized
compensation expense
|
|
Total net
unrecognized
compensation expense
|
||||||
2019
|
$
|
481
|
|
|
$
|
19
|
|
|
$
|
462
|
|
2020
|
137
|
|
|
7
|
|
|
130
|
|
|||
|
$
|
618
|
|
|
$
|
26
|
|
|
$
|
592
|
|
|
Foreign
Currency
Translation
|
|
Pension
Postretirement
Benefit
Obligation
|
|
Accumulated
Other
Comprehensive
Income, Net
|
||||||
Balance as of December 31, 2016
|
$
|
1,534
|
|
|
$
|
300
|
|
|
$
|
1,834
|
|
Current-period change before reclassifications
|
4,169
|
|
|
—
|
|
|
4,169
|
|
|||
Amounts reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
(29
|
)
|
|
(29
|
)
|
|||
Income tax provision
|
—
|
|
|
10
|
|
|
10
|
|
|||
Balance as of December 31, 2017
|
$
|
5,703
|
|
|
$
|
281
|
|
|
$
|
5,984
|
|
Current-period change before reclassifications
|
(1,661
|
)
|
|
—
|
|
|
(1,661
|
)
|
|||
Amounts reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
4
|
|
|
4
|
|
|||
Income tax provision
|
—
|
|
|
10
|
|
|
10
|
|
|||
Balance as of December 31, 2018
|
$
|
4,042
|
|
|
$
|
295
|
|
|
$
|
4,337
|
|
Region
|
2018
|
|
2017
|
||||||||||
Americas
|
$
|
58.7
|
|
|
33.8
|
%
|
|
$
|
64.2
|
|
|
36.3
|
%
|
Asia/Pacific
|
101.7
|
|
|
58.6
|
%
|
|
98.8
|
|
|
55.9
|
%
|
||
EMEA
|
13.2
|
|
|
7.6
|
%
|
|
13.7
|
|
|
7.8
|
%
|
||
Total
|
$
|
173.6
|
|
|
100.0
|
%
|
|
$
|
176.7
|
|
|
100.0
|
%
|
|
2018
|
|
2017
|
||||
Consolidated product sales
|
$
|
170.2
|
|
|
$
|
157.9
|
|
Consolidated pack sales and associate fees
(a)
|
2.5
|
|
|
14.2
|
|
||
Consolidated other, including freight
|
0.9
|
|
|
4.6
|
|
||
Total
|
$
|
173.6
|
|
|
$
|
176.7
|
|
Region
|
2018
|
|
2017
|
||||
Americas
|
$
|
5.5
|
|
|
$
|
2.9
|
|
Asia/Pacific
|
1.3
|
|
|
1.3
|
|
||
EMEA
|
—
|
|
|
0.1
|
|
||
Total
|
$
|
6.8
|
|
|
$
|
4.3
|
|
Region
|
2018
|
|
2017
|
||||
Americas
|
$
|
4.5
|
|
|
$
|
3.5
|
|
Asia/Pacific
|
6.3
|
|
|
4.5
|
|
||
EMEA
|
2.0
|
|
|
1.4
|
|
||
Total
|
$
|
12.8
|
|
|
$
|
9.4
|
|
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.
|
/s/ Alfredo Bala
|
Alfredo Bala
|
Chief Executive Officer
|
(principal executive officer)
|
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.
|
/s/ David A. Johnson
|
David A. Johnson
|
Chief Financial Officer
|
(principal financial officer)
|
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.
|
/s/ Alfredo Bala
|
Alfredo Bala
|
Chief Executive Officer
|
(principal executive officer)
|
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.
|
/s/ David A. Johnson
|
David A. Johnson
|
Chief Financial Officer
|
(principal financial officer)
|
|
|
|
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, 2016
|
|
|
|
|
|
|
|
|
|
|||||||
Deducted from asset accounts:
|
|
|
|
|
|
|
|
|
|
|||||||
Allowance for doubtful accounts
|
$
|
463
|
|
|
351
|
|
|
—
|
|
|
(232
|
)
|
|
$
|
582
|
|
Allowance for obsolete inventories
|
$
|
381
|
|
|
714
|
|
|
—
|
|
|
(529
|
)
|
|
$
|
566
|
|
Valuation allowance for deferred tax assets
|
$
|
8,458
|
|
|
3,549
|
|
|
—
|
|
|
(571
|
)
|
|
$
|
11,436
|
|
Included in accrued expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Reserve for sales returns
|
$
|
129
|
|
|
1,277
|
|
|
—
|
|
|
(1,289
|
)
|
|
$
|
117
|
|
Year Ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Deducted from asset accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Allowance for doubtful accounts
|
$
|
582
|
|
|
543
|
|
|
—
|
|
|
(355
|
)
|
|
$
|
770
|
|
Allowance for obsolete inventories
|
$
|
566
|
|
|
710
|
|
|
—
|
|
|
(752
|
)
|
|
$
|
524
|
|
Valuation allowance for deferred tax assets
|
$
|
11,436
|
|
|
1,357
|
|
|
—
|
|
|
—
|
|
|
$
|
12,793
|
|
Included in accrued expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Reserve for sales returns
|
$
|
117
|
|
|
1,188
|
|
|
—
|
|
|
(1,229
|
)
|
|
$
|
76
|
|