MANNATECH INC, 10-Q, 1999-08-05

MANNATECH INC
10-Q, 1999-08-05
MEDICINAL CHEMICALS & BOTANICAL PRODUCTS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________

FORM 10-Q

(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _________________

Commission File No. 000-24657

MANNATECH, INCORPORATED
(Exact Name of Registrant as Specified in its Charter)

Texas 75-2508900
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

600 S. Royal Lane, Suite 200
Coppell, Texas
75019
(Address of Principal Executive Offices, including Zip Code)

(972) 471-7400
(Registrant's Telephone Number, including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No _____.
-----

As of August 4, 1999, the number of shares outstanding of the registrant's
sole class of common stock, par value $0.0001 per share, was 24,412,753.
<PAGE>

TABLE OF CONTENTS

Page
----
Part I - FINANCIAL INFORMATION

Item 1. Financial Statements....................................1
Consolidated Balance Sheets..................................1
Consolidated Statements of Income............................2
Consolidated Statement of Changes in Shareholders' Equity....3
Consolidated Statements of Cash Flows........................4
Notes to Consolidated Financial Statements...................5

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................7
Overview.....................................................7
Results of Operations........................................9
Three months ended June 30, 1999 compared with the three
months ended June 30, 1998...................................9
Six months ended June 30, 1999 compared with the six
months ended June 30, 1998..................................10
Liquidity and Capital Resources.............................12
Year 2000...................................................13
Forward-Looking Statements..................................14
Recent Financial Accounting Standards Board Statements......14

Item 3. Quantitative and Qualitative Disclosures About
Market Risk............................................15

Part II - OTHER INFORMATION

Item 1. Legal Proceedings......................................15
Item 2. Changes in Securities and Use of Proceeds..............15
Item 3. Defaults Upon Senior Securities........................16
Item 4. Submission of Matters to a Vote of Security Holders....16
Item 5. Other Information......................................16
Item 6. Exhibits and Reports on Form 8-K.......................16

<PAGE>

PART I FINANCIAL INFORMATION
Item 1. Financial Statements
MANNATECH, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share information)
<TABLE>
<CAPTION>
June 30,
December 31, 1999
1998 (Unaudited)
------------- -----------
<S> <C> <C>
ASSETS

Cash and cash equivalents.................................... $ 763 $14,001
Short-term investments....................................... -- 1,337
Accounts receivable, less allowance for doubtful
accounts of $58,000 in both 1998 and 1999.................. 63 62
Receivable from related parties.............................. 125 125
Current portion of notes receivable-shareholders............. 307 158
Inventories.................................................. 6,875 7,932
Prepaid expenses and other current assets.................... 447 910
Deferred tax assets.......................................... 398 398
------- -------
Total current assets....................................... 8,978 24,923
Property and equipment, net.................................. 14,103 13,247
Notes receivable-shareholders, excluding current portion..... 701 522
Other assets................................................. 948 853
Deferred offering costs...................................... 2,144 --
------- -------
Total assets............................................... $26,874 $39,545
======= =======

LIABILITIES AND SHAREHOLDERS' EQUITY

Current portion of capital leases and notes payable.......... $ 854 $ 800
Accounts payable............................................. 5,480 941
Accrued expenses............................................. 15,063 14,762
------- -------
Total current liabilities.................................. 21,397 16,503
Capital leases and notes payable, excluding current portion.. 1,056 699
Deferred tax liabilities..................................... 1,438 1,438
------- -------
Total liabilities.......................................... 23,891 18,640
------- -------
Commitments and contingencies................................
Redeemable warrants.......................................... 300 --
------- -------

Shareholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, no shares issued and outstanding............... -- --
Common stock, $.0001 par value, 99,000,000 shares
authorized, 22,101,738 and 24,356,753 shares issued and
outstanding in 1998 and 1999, respectively............ 2 3
Additional paid-in capital................................... 2,632 16,461
Notes receivable from shareholders........................... (636) --
Retained earnings............................................ 685 4,441
------- -------
Total shareholders' equity................................. 2,683 20,905
------- -------
Total liabilities, redeemable warrants and shareholders'
equity.................................................... $26,874 $39,545
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.

1
<PAGE>

MANNATECH, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1999
AND THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999
(in thousands, except per share information)

<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
------------------------ -------------------------
1998 1999 1998 1999
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net Sales......................................................... $ 42,637 $ 45,035 $ 83,725 $ 87,651
----------- ----------- ----------- -----------
Cost of Sales..................................................... 7,484 7,167 13,544 14,060
Commissions....................................................... 16,988 18,665 33,872 35,981
----------- ----------- ----------- -----------
24,472 25,832 47,416 50,041
----------- ----------- ----------- -----------
Gross profit.................................................... 18,165 19,203 36,309 37,610
----------- ----------- ----------- -----------
Operating Expenses:
Selling and administrative expenses............................. 7,257 8,888 14,941 17,360
Other operating costs........................................... 5,342 6,774 10,038 12,108
----------- ----------- ----------- -----------
Total operating expenses..................................... 12,599 15,642 24,979 29,468
----------- ----------- ----------- -----------
Income from operations............................................ 5,566 3,761 11,330 8,342
Other (income) expense, net....................................... 41 158 (21) 137
----------- ----------- ----------- -----------
Income before income taxes........................................ 5,525 3,403 11,351 8,005
Income tax expense................................................ 2,161 1,221 4,370 2,922

Net income........................................................ $ 3,364 $ 2,182 $ 6,981 $ 5,083
=========== =========== =========== ===========

Earnings per common share:
Basic........................................................... $ 0.15 $ 0.09 $ 0.31 $ 0.22
=========== =========== =========== ===========
Diluted......................................................... $ 0.14 $ 0.08 $ 0.29 $ 0.20
=========== =========== =========== ===========
Weighted-average per common and common equivalent shares
outstanding
Basic........................................................... 22,101,738 24,160,050 22,101,738 23,639,894
=========== =========== =========== ===========
Diluted......................................................... 23,705,342 25,569,357 23,698,000 25,142,454
=========== =========== =========== ===========
Dividends declared per common share............................... $ 0.18 $ 0.0 $ 0.30 $ 0.06
=========== =========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

2
<PAGE>

MANNATECH, INCORPORATED
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(in thousands)
<TABLE>
<CAPTION>

Additional Notes Retained Total
Common Stock Paid-in receivable from earnings shareholders'
------------
Shares Par Value Capital shareholders (deficit) equity
------------ --------- ---------- ---------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>

Balance at December 31, 1998........... 22,102 $2 $ 2,632 $(636) $ 685 $ 2,683
Dividends declared ($.06
per share)..................... -- -- -- -- (1,327) (1,327)
Repayment of notes receivable -
shareholders................... -- -- -- 636 -- 636
Net proceeds from Offering....... 1,500 0 9,241 -- -- 9,241
Exercise of warrants............. 475 0 941 -- -- 941
Tax benefit from exercise of
warrants and stock options..... -- -- 3,270 -- -- 3,270
Proceeds from stock option
exercises...................... 280 1 377 -- -- 378
Net income....................... -- -- -- -- 5,083 5,083
------ -- ------- --------------- -------- -------

Balance at June 30, 1999............... 24,357 $3 $16,461 $ -- $ 4,441 $20,905
====== == ======= =============== ======== =======

</TABLE>

See accompanying notes to consolidated financial statements.

3
<PAGE>

MANNATECH, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999
(in thousands)
<TABLE>
<CAPTION>

Six Months Ended
June 30,
---------------------------
1998 1999
----------------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income........................................................ $ 6,981 $ 5,083
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................................... 959 1,449
Loss on disposal of assets...................................... 67 --
Deferred income tax expense..................................... 702 --
Tax benefit from exercise of warrants and stock options......... -- 3,270
Changes in operating assets and liabilities:
Accounts and notes receivable................................. 463 (10)
Inventories................................................... (386) (1,057)
Prepaid expenses and other current assets..................... (45) (463)
Other assets.................................................. 20 95
Accounts payable.............................................. (1,328) (4,539)
Accrued expenses.............................................. 2,256 (301)
------- -------
Net cash provided by operating activities.................... 9,689 3,527
------- -------

Cash flows from investing activities:
Acquisition of property and equipment and construction
in progress...................................................... (2,359) (592)
Restricted cash................................................... 199 --
Short-term investments............................................ -- (1,337)
(Advance) Repayment of shareholders/related party receivables..... (44) 974
------- -------
Net cash used in investing activities........................ (2,204) (955)
------- -------

Cash flows from financing activities:
Payment of dividends.............................................. (6,622) (1,327)
Repayment of capital lease obligations............................ (73) (312)
Proceeds from the initial public offering......................... -- 12,000
Proceeds from warrants............................................ -- 641
Proceeds from stock option exercises.............................. -- 378
Payment of notes payable.......................................... -- (100)
Deferred offering costs........................................... (782) (615)
------- -------
Net cash provided by (used in) financing activities.......... (7,477) 10,666
------- -------

Net increase in cash and cash equivalents.......................... 8 13,238
Cash and cash equivalents:
Beginning of period............................................... 61 763
------- -------
End of period..................................................... $ 69 $14,001
======= =======
Supplemental disclosure of cash flow information:
Income taxes paid................................................. $ 3,657 $ 3,464
======= =======
Interest paid..................................................... $ 3 $ 78
======= =======
A summary of non-cash investing and financing activities follows:
Assets acquired through capital lease obligations................. $ 1,367 $ -
======= =======
Accrued dividends................................................. $ 1,327 $ -
======= =======

</TABLE>

See accompanying notes to consolidated financial statements.

4
<PAGE>

MANNATECH, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Mannatech, Incorporated (the "Company") was incorporated in the State of
Texas on November 4, 1993, as Emprise International, Inc. Effective October 25,
1995, the Company changed its name to Mannatech, Incorporated. The Company,
located in Coppell, Texas, develops and sells proprietary nutritional
supplements and topical products through a network marketing system. The Company
currently sells its products in the United States, Canada and Australia.
Independent associates ("Associates") purchase products, at wholesale, for the
primary purpose of selling to retail consumers or for personal consumption. In
addition, Associates earn commissions under the Company's compensation plan.

On April 22, 1998, the Company formed a wholly owned subsidiary, Mannatech
Australia Pty Limited, for the purpose of conducting business in Australia. The
Australian subsidiary, located in St. Leonards, began operations on October 1,
1998.

In April 1999, the Company formed a wholly owned subsidiary, Mannatech
Ltd., for the purpose of conducting business in the United Kingdom as a limited
service provider. The United Kingdom subsidiary will be located in Basingstoke,
Hampshire. The entity is currently dormant, pending start up operations in the
United Kingdom on November 15, 1999.

On May 1, 1999, the Company formed a wholly owned subsidiary, Mannatech
Foreign Sales Corporation, under the laws of Barbados to act as a "foreign sales
corporation" as defined in the United States Internal Revenue Code.

On May 7, 1999, the Company formed a wholly owned subsidiary, Internet
Health Group, Inc., a Texas corporation, for marketing its proprietary products,
specially-developed nutritional supplements and sports nutrition products over
the Internet. The subsidiary will be located in Dallas, Texas and is currently
dormant, pending start up operations in late 1999.

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments, consisting of normal
recurring adjustments, considered necessary for a fair statement of the
Company's financial information as of June 30, 1998 and 1999. In preparing
consolidated financial statements in conformity with generally accepted
accounting principles, management is required to make certain estimates and
assumptions that may affect the reported amounts of assets, liabilities,
revenues and expenses during the reporting periods. Actual results may differ
from such estimates. The consolidated results of operations of any interim
period are not necessarily indicative of the consolidated results of operations
to be expected for the fiscal year. For further information, refer to the
consolidated financial statements and accompanying footnotes included in the
Company's annual report on Form 10-K for the year ended December 31, 1998.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.

Earnings per Share

The Company calculates earnings per share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("FAS 128"). FAS
128 requires dual presentation of basic and diluted earnings per share on the
face of the consolidated statement of income for all entities with complex
capital structures and requires a

5
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reconciliation of the numerator and denominator of the basic earnings per share
computation to the numerator and denominator of the diluted earnings per share
computation. Basic earnings per share calculations are based on the weighted-
average number of common shares outstanding during the period, while diluted
earnings per share calculations are based on the weighted-average common shares
and dilutive common share equivalents outstanding during each period.

The following data show the unaudited amounts used in computing earnings
per share and the effect on the weighted-average number of shares of dilutive
common stock for the six months ended June 30, 1998 and 1999.
<TABLE>
<CAPTION>

1998 1999
------------------------------------- -------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net income available to
to common shareholders $6,981,306 22,101,738 $0.31 $5,082,945 23,639,894 $0.22

Effect of dilutive securities:
Stock options -- 1,332,737 -- 1,432,300
Stock warrants -- 270,867 -- 70,260
---------- ---------- ---------- ------------

Diluted EPS:
Net income available to
common shareholders plus
assumed conversions $6,981,306 23,705,342 $0.29 $5,082,945 25,142,454 $0.20
========== ========== ========= ========== ============ =========
</TABLE>

NOTE 2 INVENTORIES

On the following dates, inventories consisted of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
------------ ----------
<S> <C> <C>

Raw materials........................................................ $3,054,317 $4,350,062
Work-in-progress..................................................... -- --
Finished goods....................................................... 3,820,727 3,582,078
---------- ----------
$6,875,044 $7,932,140
========== ==========
</TABLE>

NOTE 3 SHAREHOLDERS' EQUITY

In February 1999, the Company received approximately $9.2 million in net
proceeds from the sale of common stock in the Company's initial public offering
(the "IPO"). In the IPO, the Company sold 1,500,000 shares of its common stock
and existing shareholders sold 1,556,016 shares of their common stock at $8.00
per share. The Company intends to use approximately $6.3 million of the proceeds
of the IPO for international expansion, primarily for product registration,
initial inventory requirements and similar items. The remaining $2.9 million
was used to fund working capital and for general corporate purposes.

In February 1999, the Company received $641,271 from the exercise of
475,015 outstanding warrants at $1.35 per share. In May 1999, the Company
received $378,000 from the exercise of 280,000 stock options at $1.35 per share.

On May 13, 1999, the Company filed a Registration Statement on Form S-1
registering 1,519,542 shares of the Company's common stock offered by certain
shareholders. On April 28, 1999, the Company filed a Registration Statement on
Form S-8 registering 642,000 shares of common stock.

NOTE 4 TRANSACTIONS WITH RELATED PARTIES

On June 2, 1999, the Company agreed to pay Ray Robbins, an associate and
a shareholder of the Company, $750,000 to cancel his remaining incentive
compensation agreement. The Company paid $500,000 upon the execution

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of the agreement and will pay the remaining $250,000 in monthly installments of
$10,000 with the final payment due in July 2001. The $750,000 was classified as
other operating expenses in the consolidated statement of income.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

The following discussion and analysis is intended to assist you in
understanding our financial condition and results of operations for the three-
and six-month periods ended June 30, 1999 as compared to the same periods in
1998. The consolidated financial statements and related notes beginning on page
1 should be referred to in conjunction with this discussion. Unless we state
otherwise, all financial information presented below and in the consolidated
financial statements and related notes includes Mannatech and all of our
subsidiaries on a consolidated basis.

Overview

Mannatech develops and sells proprietary nutritional supplements and
topical products through a network marketing system. We sell our products in the
United States, Canada and Australia, through a network of approximately 246,000
active associates as of June 30, 1999, compared to approximately 231,000 active
associates as of June 30, 1998. We plan to start up operations in the United
Kingdom on November 15, 1999. We plan to expand into Japan in 2000, while
continuing to assess the potential of other foreign markets. We have formed
another wholly-owned subsidiary, Internet Health Group, Inc., a Texas
corporation, which will begin operations in late 1999 and which will market our
proprietary products, specially-developed supplements and sports nutrition
products over the Internet.

Since beginning operations in November 1993, we have achieved year-to-
year growth in net sales. Our growth is mainly attributable to increases in new
product sales, growth in the number of associates and expansion into new
geographic markets in the United States, Canada and, beginning in October 1998,
Australia. In 1998, the growth rate of net sales generated in the United States
was lower than prior periods, while the growth rate of net sales generated in
Canada and Australia was higher than prior periods. The earnings per share for
the second quarter of 1999 was below the comparable period in 1998 due to an
increase in wages, the introduction of a new bonus program for our associates,
the buyout of the remaining incentive compensation contract, expenses incurred
related to the secondary offering and our international expansion.

We receive revenues primarily from sales of our products and sales of
associate starter and renewal packs, which include some combination of products,
promotional materials and free admission to our national events. Some of the
packs offer our associates a choice of different combinations of products and
promotional materials to be included in the purchased pack. To become an
associate, a person may enroll as a preferred customer and later execute an
associate application, sponsor new associates or purchase an associate starter
pack. Each pack also allows the associate to purchase products at wholesale
prices. We will offer a comparable associate starter pack in each country in
which we do business. All pack prices are stated in United States currency.

In May 1998, we introduced a new starter and renewal pack for associates
in the United States and Canada, priced at $29.00. Historically, the starter
packs for associates in the United States and Canada could be purchased at
$49.00, $229.00, $339.00, $568.00 and $1,000.00 levels. Beginning in June 1998,
starter packs for associates in the United States and Canada could be purchased
at $29.00, $49.00, $289.00, $664.00 and $1,000.00 levels. The average wholesale
value of the starter packs for associates in the United States and Canada are
approximately $16.12, $44.62, $322.81, $817.32 and $1,138.83, respectively.
Beginning in April 1999, the average wholesale value of the starter packs in the
United States and Canada were approximately $15.05, $43.25, $319.50, $814.95 and
$1,153.95. In Australia, only one associate starter pack is available, is priced
at approximately $31.00, and has an approximate wholesale value of $19.06.

We also require associates to renew their status each year by either (1)
renewing as a preferred customer and continuing to sponsor new associates; (2)
purchasing a renewal pack; or (3) earning enough personal points volume from
product sales to automatically renew their associate status for one year. Prior
to June 1998, associates in the United States and Canada could renew their
associate status for $49.00, $229.00 or $568.00. Since the introduction of the
$29.00 preferred customer pack in May 1998, associates in the United States and
Canada have been able to renew their associate status for $29.00, $200.00 or
$350.00. Associates who do not renew their associate status may continue

7
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to purchase our products at the wholesale price and resell the products;
however, they would not earn commissions under our compensation plan.

Associates are also eligible to purchase upgrade packs. Historically,
associates in the United States and Canada could purchase upgrade packs at
approximately $229.00, $339.00, $568.00 and $1,000.00 levels. Beginning in June
1998, upgrade packs for associates in the United States and Canada could be
purchased at $289.00, $375.00, $664.00 and $1,000.00 levels. Historically,
Australian associates could purchase upgrade packs at $262.00, $358.00 and
$620.00 levels. Beginning in April 1999, Australian associates can purchase
upgrade packs at $289.00, $375.00 and $664.00 levels. Upgrade packs are
accounted for as renewal packs, as they renew an associate's membership for one
year from the time of upgrade.

We generally recognize revenues when products or promotional materials
are shipped. Our revenues are based primarily on the wholesale prices of the
products sold. We defer revenue received from the sale of promotional packs to
the extent that it is greater than the wholesale value of the individual items
included in such packs. Revenues from promotional packs are allocated between
products and admission to events based on the proportionate fair value of these
items. Allocated event revenues are also deferred. All deferred revenue is
amortized over a 12-month period. Total deferred revenue was approximately
$695,000, $662,000 and $778,000 at June 30, 1998, December 31, 1998 and June 30,
1999, respectively.

Associates are compensated by commissions, which are directly related to
their placement and position within our compensation plan, volume of direct
sales and number of new enrolled associates. In October 1998, we revised
portions of our compensation plan to perfect the global seamless downline
compensation concept and ensure compliance with common international standards
of paying commissions. The commission pool, as a whole, remains unchanged under
our existing and revised compensation plan and commissions should not exceed 42%
of commissionable net sales.

Our United States federal statutory tax rate is 35%. We pay taxes in
Australia at a statutory tax rate of 36%. We pay taxes in various state
jurisdictions at an approximate average statutory tax rate of 3%. As our
international expansion continues, a portion of our income will be subject to
taxation in the countries in which we operate. We may receive foreign tax
credits that would reduce the amount of United States taxes we owe, based upon
the amount of foreign taxes paid. We may not be able to use all of such foreign
tax credits in the United States. The use of the foreign tax credits is based
upon the proportionate amount of net sales in each country. Because many of
the countries that we may expand to during 1999 and beyond have maximum
statutory tax rates higher than the United States tax rate, we could end up
paying a higher overall effective tax rate on our consolidated operations.

8
<PAGE>

Results of Operations

The following table summarizes our operating results as a percentage of net
sales for each of the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------- ------------------
1998 1999 1998 1999
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Net sales........................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales....................................... 17.6 15.9 16.2 16.0
Commissions......................................... 39.8 41.5 40.5 41.1
------ ------ ------ ------
Gross profit...................................... 42.6 42.6 43.3 42.9
Operating expenses:
Selling and administrative expenses............... 17.0 19.7 17.8 19.8
Other operating costs............................. 12.5 14.9 12.0 13.8
------ ------ ------ ------

Income from operations.............................. 13.1 8.0 13.5 9.3
Other (income) expense, net......................... 0.1 0.4 (0.0) 0.2
------ ------ ------ ------
Income before income taxes.......................... 13.0 7.6 13.5 9.1
Income tax expense.................................. 5.0 2.7 5.2 3.3
------ ------ ------ ------
Net income.......................................... 8.0% 4.9% 8.3% 5.8%
====== ====== ====== ======

Number of starter packs sold........................ 29,176 33,279 59,437 65,809
Number of renewal packs sold........................ 8,636 13,189 22,528 27,793
------ ------ ------ ------
Total number of packs sold.......................... 37,812 46,468 81,965 93,602
====== ====== ====== ======
Total associates cancelling associate status........ 1,597 1,336 2,973 2,784
====== ====== ====== ======
</TABLE>

Three months ended June 30, 1999 compared with the three months ended June 30,
1998

Net Sales. Net sales increased 5.6% to $45.0 million for the three months
ended June 30, 1999 from $42.6 million for the comparable period in 1998. This
increase was primarily composed of the following:

. A $4.6 million increase from the sale of several new products introduced
after June 30, 1998, and from existing products which were not available
for sale in Canada and Australia prior to April 1, 1999.

. A decrease of ($3.3 million) in existing product sales, which primarily
resulted from decreases in the volume of existing products sold as
associates are buying new products and products which historically were
not available in Canada and Australia.

. An increase of $1.1 million due to a change in the mix of associate packs
sold. Of this $1.1 million increase, approximately $200,000 resulted from
a change in the mix of associate packs sold to new associates and $900,000
resulted from an increase in the number of associate renewal packs sold.
We changed the contents of some of our associate packs during this period
and are continuing to explore new strategies to increase associate pack
sales and renewal pack sales.

Cost of Sales. Cost of sales decreased (4.0%) to $7.2 million for the three
months ended June 30, 1999 from $7.5 million for the comparable period in 1998.
As a percentage of net sales, cost of sales decreased to 15.9% for the three
months ended June 30, 1999 from 17.6% for the comparable period in 1998. The
dollar amount of the decrease in cost of sales was due to a net decrease of
($94,000) related to the decreased volume and the product mix of finished goods
sold, a net decrease of ($109,000) in the normal costs of spoilage and shrinkage
of inventory and a net decrease of ($124,000) in freight costs due to switching
vendors.

Commissions. Commissions consist of payments to associates for sales
activity and downline growth. Commissions increased 10.0% to $18.7 million for
the three months ended June 30, 1999 from $17.0 million for the comparable
period in 1998. As a percentage of net sales, commissions increased to 41.5% for
the three months ended

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<PAGE>

June 30, 1999 from 39.8% for the comparable period in 1998. The increase as a
percentage of net sales was the direct result of an increase in commissionable
sales as a percentage of total revenue. This increase was due to an increase in
revenue from associate packs sold and the start up of our operations in
Australia in October 1998.

Gross Profit. Gross profit increased 5.5% to $19.2 million for the three
months ended June 30, 1999 from $18.2 million for the comparable period in 1998.
As a percentage of net sales, gross profit remained at 42.6% for the three
months ended June 30, 1999.

Selling and Administrative Expenses. Selling and administrative expenses
consist of human resource expenses, including wages, bonuses and marketing
expenses, and are a mixture of both fixed and variable expenses. Selling and
administrative expenses increased 21.9% to $8.9 million for the three months
ended June 30, 1999 from $7.3 million for the comparable period in 1998. As a
percentage of net sales, selling and administrative expenses increased to 19.7%
for the three months ended June 30, 1999 from 17.0% for the comparable period in
1998. The dollar amount increase was due primarily to a $1.1 million increase in
wages and contract labor expenses resulting from pay raises for corporate
officers and the hiring of personnel for the Australian operations. The
remaining increase was due to incurring $500,000 in expenses related to a new
bonus program for associates and an increase in freight out expense related to
the start up of Australian operations in October 1998.

Other Operating Costs. Other operating costs include utilities,
depreciation, travel, office supplies and printing expenses. Other operating
costs increased 28.3% to $6.8 million for the three months ended June 30, 1999
from $5.3 million for the comparable period in 1998. As a percentage of net
sales, other operating costs increased to 14.9% for the three months ended June
30, 1999 from 12.5% for the comparable period in 1998. The dollar amount
increase was primarily due to a $750,000 charge for the agreement to cancel the
remaining incentive compensation contract as described in the notes to the
consolidated financial statements, $400,000 for consulting services related to
our international expansion, $200,000 for settlement of a lawsuit and $100,000
for additional research and developments costs related to the opening of our new
laboratory facility.

Other (Income) Expense, Net. Other (income) expense, net, primarily
consists of interest income, interest expense and royalties from vendors. Other
(income) expense, net, increased to $158,000 for the three months ended June 30,
1999 from $41,000 for the comparable period in 1998. As a percentage of net
sales, other (income) expense, net, increased to 0.4% for the three months ended
June 30, 1999 from 0.1% for the comparable period in 1998. For the three months
ended June 30, 1999, other (income) expense, net, consisted of ($80,000) of
interest income and $29,000 of interest expense compared to ($6,000) of interest
income and $3,000 of interest expense for the three months ended June 30, 1998.
The primary reason for the increase was the recording of income tax penalties of
$70,000, a decrease in royalties and an increase in miscellaneous expenses,
offset by an increase in interest income.

Income Tax Expense. Income tax expense decreased (45.5%) to $1.2 million
for the three months ended June 30, 1999 from $2.2 million for the comparable
period in 1998. Our effective tax rate decreased to 35.9% for the three months
ended June 30, 1999 from 39.1% for the comparable period in 1998. Our effective
tax rate decreased because of an increase in our international sales, which are
not subject to state income taxes averaging 3%.

Net Income. Net income decreased (35.3%) to $2.2 million for the three
months ended June 30, 1999 from $3.4 million for the comparable period in 1998.
As a percentage of net sales, net income decreased to 4.9% for the three months
ended June 30, 1999 from 8.0% for the comparable period in 1998. This decrease
occurred because the amounts we spent on our international expansion and the
cancellation of the remaining incentive compensation contract were only
partially offset by the increase in net sales and the decrease in income tax
expense, in addition to the other factors described above.

Six months ended June 30, 1999 compared with the six months ended June 30, 1998

Net Sales. Net sales increased 4.8% to $87.7 million for the six months
ended June 30, 1999 from $83.7 million for the comparable period in 1998. This
increase was primarily composed of the following:

. A $7.8 million increase from the sale of several new products introduced
after June 30, 1998, and from existing products which were not available
for sale in Canada and Australia prior to January 1, 1999.

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. A decrease of ($4.3 million) in existing product sales, which primarily
resulted from decreases in the volume of existing products sold as
associates are buying new products and products which historically were not
available in Canada and Australia.

. An increase of $500,000 from associate pack sales. Of this $500,000
increase, approximately ($300,000) resulted from a change in the mix of
associate packs sold to new associates and $800,000 resulted from an
increase in associate renewal packs sold. We changed the contents of some
of our associate packs during this period and are continuing to explore new
strategies to increase associate pack sales and renewal pack sales.

Cost of Sales. Cost of sales increased 4.4% to $14.1 million for the six
months ended June 30, 1999 from $13.5 million for the comparable period in 1998.
As a percentage of net sales, cost of sales decreased to 16.0% for the six
months ended June 30, 1999 from 16.2% for the comparable period in 1998. The
dollar amount of the increase in cost of sales was due to a net decrease of
($45,000) related to the decreased volume and the product mix of finished goods
sold, a net increase of $120,000 in freight costs. For the first six months of
1998, we recorded $160,000 for recovery of inventory which was written off in
December 1997 after we discovered that the manufacturer had improperly converted
some of our inventory held by the manufacturer for another customer.

Commissions. Commissions consist of payments to associates for sales activity
and downline growth. Commissions increased 6.2% to $36.0 million for the six
months ended June 30, 1999 from $33.9 million for the comparable period in 1998.
As a percentage of net sales, commissions increased to 41.1% for the six months
ended June 30, 1999 from 40.5% for the comparable period in 1998. The slight
increase as a percentage of net sales was the direct result of an increase in
revenue from associate packs sold and the start up of our operations in
Australia in October 1998.

Gross Profit. Gross profit increased 3.6% to $37.6 million for the six months
ended June 30, 1999 from $36.3 million for the comparable period in 1998. As a
percentage of net sales, gross profit decreased to 42.9% for the six months
ended June 30, 1999 from 43.3% for the comparable period in 1998. These changes
resulted from the factors described above.

Selling and Administrative Expenses. Selling and administrative expenses
consist of human resource expenses, including wages, bonuses and marketing
expenses, and are a mixture of both fixed and variable expenses. Selling and
administrative expenses increased 16.8% to $17.4 million for the six months
ended June 30, 1999 from $14.9 million for the comparable period in 1998. As a
percentage of net sales, selling and administrative expenses increased to 19.8%
for the six months ended June 30, 1999 from 17.8% for the comparable period in
1998. The dollar amount increase was due primarily to a $2.3 million increase in
wages and contract labor expenses resulting from pay raises for corporate
officers and the hiring of personnel for the Australian operations, expenses of
$300,000 related to the Bali incentive program for associates and $700,000 in
freight out for the Australian operations which began in October 1998. This $3.2
million increase was partially offset by a ($900,000) decrease in expenses
related to a reduction in freight out expense for United States and our national
associate events.

Other Operating Costs. Other operating costs include utilities, depreciation,
travel, office supplies and printing expenses. Other operating costs increased
19.0% to $11.9 million for the six months ended June 30, 1999 from $10.0 million
for the comparable period in 1998. As a percentage of net sales, other operating
costs increased to 13.6% for the six months ended June 30, 1999 from 12.0% for
the comparable period in 1998. The dollar amount increase was primarily due to a
$750,000 charge for the agreement to cancel the remaining incentive compensation
contract as described in the notes to the consolidated financial statements,
$900,000 for consulting services related to our international expansion,
$200,000 for settlement of a lawsuit and $200,000 for additional research and
development costs related to the opening of our new laboratory facility.

Other (Income) Expense, Net. Other (income) expense, net, primarily consists
of interest income, interest expense and royalties from vendors. Other (income)
expense, net, increased to $137,000 for the six months ended June 30, 1999 from
($21,000) for the comparable period in 1998. As a percentage of net sales, other
(income) expense, net, increased to 0.2% for the six months ended June 30, 1999
from (0.0%) for the comparable period in 1998. For the six months ended June 30,
1999, other (income) expense, net, consisted primarily of ($173,000) of interest
income and $78,000 of interest expense compared to ($50,000) of interest income
and $3,000 of interest expense for the six months ended June 30, 1998. The
increase in other (income) expense related primarily to an increase in income
tax penalties of

11
<PAGE>

$70,000, a decrease in royalty income of approximately $50,000 and an increase
in miscellaneous expenses, offset by an increase in interest income.

Income Tax Expense. Income tax expense decreased (34.1%) to $2.9 million for
the six months ended June 30, 1999 from $4.4 million for the comparable period
in 1998. Our effective tax rate decreased to 36.5% for the six months ended June
30, 1999 from 38.5% for the comparable period in 1998. Our effective tax rate
decreased as our international sales, which are not subject to state income
taxes averaging 3%, increased.

Net Income. Net income decreased (27.1%) to $5.1 million for the six months
ended June 30, 1999 from $7.0 million for the comparable period in 1998. As a
percentage of net sales, net income decreased to 5.8% for the six months ended
June 30, 1999 from 8.3% for the comparable period in 1998. This decrease
occurred because the amounts we spent on our international expansion and
cancellation of the remaining incentive compensation contract were only
partially offset by the increase in net sales and the decrease in income tax
expense, in addition to the other factors described above.

Liquidity and Capital Resources

In February 1999, we received approximately $9.2 million in net proceeds from
the sale of our common stock in our initial public offering. In the initial
public offering, we sold 1,500,000 shares of our common stock and existing
shareholders sold 1,556,016 shares of their common stock at $8.00 per share. We
intend to use approximately $6.3 million of the proceeds of the initial public
offering for international expansion, primarily for product registration,
initial inventory requirements and similar items. The remaining $2.9 million was
used to fund working capital and for general corporate purposes. In February
1999, we received $641,271 from the exercise of 475,015 outstanding warrants at
$1.35 per share. In May 1999, we received $378,000 from the exercise of 280,000
stock options at $1.35 per share.

Our primary capital requirement is to fund working capital to support our
growth. In the past, we financed our operations mostly through cash flows from
operating activities and capital leases. As a result of our expenditures on the
facilities, equipment and personnel necessary to support our growth and
international expansion, we had a working capital deficiency of $12.4 million as
of December 31, 1998 compared to working capital of $8.5 million at June 30,
1999. We invested approximately $3.7 million and $600,000 during the first six
months of 1998 and 1999, respectively, in our furniture, equipment and leased
properties. These projects were funded primarily through operating cash flow and
capital leases for the six months ended June 30, 1998 and primarily from
operating cash flow in the comparable period in 1999.

We paid approximately $6.6 million and $1.3 million in dividends to our
shareholders for the six months ended June 30, 1998 and 1999, respectively. For
the six months ended June 30, 1999, current liabilities decreased due to the
reduction in accounts payable and accrued expenses and an income tax benefit
related to the exercise of the warrants and stock options. These decreases are
primarily related to the receipt of proceeds from the initial public offering
and increases in sales volume. We believe our current facilities are sufficient
to support our near-term growth.

In March and August 1998, we entered into two capital leases with principal
amounts of $631,000 and $841,000, respectively. These capital leases bear
interest at 9.3%, are collateralized by the leased assets and are payable in
thirty-six monthly installments. In July 1998, we entered into a thirty-six
month, unsecured note payable with a finance company to finance our three-year
product liability insurance premium. The initial principal amount of this note
was $435,670, the interest rate is 8.0% and monthly installments are due through
December 2000.

Net cash provided by operating activities was $9.7 million and $3.5 million
for the six months ended June 30, 1998 and 1999, respectively. Throughout these
periods, we increased net sales, which were partially offset by increases in
inventories, expenses from international expansion and a decrease in income tax
payable of approximately $3.0 million from the compensation expense related to
the exercise of the warrants and options. In 1999, we expect to spend up to $4.5
million for start-up costs and $2.6 million for initial inventory for our
planned expansion into the United Kingdom on November 15, 1999 and Japan in
2000.

Net cash (used in) investing activities was ($2.2 million) and ($1.0 million)
for the six months ended June 30, 1998 and 1999, respectively. In 1998, these
activities consisted primarily of the relocation of our Texas distribution

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center, the build-out of our research and development facility and the
development and implementation of our proprietary software program. The new
facilities and software program should be sufficient for our immediate needs.
However, in the near future, we intend to spend up to an estimated $3.8 million
for additional modifications to the software program for international
expansion, Internet access and additional purchases of equipment and build-out
of leased facilities for our planned international expansion into the United
Kingdom in the fourth quarter of 1999 and Japan in 2000. In February 1999,
certain shareholders repaid notes receivable due to us of approximately
$974,000.

Net cash provided by (used in) financing activities totaled ($7.5 million)
and $10.7 million for the six months ended June 30, 1998 and 1999, respectively.
We paid dividends on a monthly basis to our shareholders in the amount of
$0.02-$0.06 per share each month until the completion of the initial public
offering on February 12, 1999. Our board of directors intends, from time-to-
time, to reevaluate this policy after considering relevant factors, including
the level of our net income and alternative uses of retained earnings. In
February 1999, the gross initial public offering proceeds of approximately $12.0
million were received.

Our existing capital resources, including cash provided by operating
activities, bank borrowings, together with the proceeds from the initial public
offering and suspension of dividend payments to shareholders, should be adequate
to fund our operations for at least the next 12 months. We have no present
commitments or agreements with respect to any acquisitions or purchases of
manufacturing facilities or new technologies. Changes could occur that would
consume available capital resources faster than anticipated. Our capital
requirements depend on numerous factors, including:

. the timing and pace of our entry into international markets;
. growth in the number of associates; and
. our research and development efforts.

If our existing capital resources, together with the net proceeds of the
initial public offering, are insufficient to meet our capital requirements, we
will be required to raise additional funds. We cannot assure you that additional
funding, if necessary, will be available on favorable terms, if at all.

Year 2000

We recognize the need to ensure that our operations and relationships with
vendors, associates and other third parties will not be adversely impacted by
software processing errors arising from calculations using the Year 2000 and
beyond. Many existing computer programs and databases use only two digits to
identify a year in the date field (i.e., 01 would represent 1901, not 2001). If
not corrected, many computer systems could fail or create erroneous results
before, during and after the Year 2000. We believe all of our internal
information systems currently in use will be Year 2000 ready, largely due to our
short operating history. The majority of our critical business applications
have been developed internally, in the past two years, with Year 2000 ready
tools. We have formalized, structured activities in progress to test for and
ensure compliance of all hardware and software used. With respect to non-
information technology systems issues, we are in the process of identifying,
assessing and remediating, if necessary, our building and utility systems for
any Year 2000 issues relating to the functionality of our facilities. We are
evaluating the Year 2000 readiness of vendors and third parties whose system
failures could have an impact on our operations. The potential materiality of
any such impact is not known at this time and we cannot determine the extent to
which such failures would impact us.

Management expects the total cost associated with Year 2000 identification,
remediation and testing to be between $100,000 and $250,000. We believe that we
have allocated adequate resources for this purpose and expect our Year 2000 date
compliance program to be completed before December 1999. Based on current
estimates, costs of addressing these issues, which are expensed as they occur,
are not expected to have a material impact on our results of operations,
financial condition or cash flows. This expectation is subject to uncertainties
that could cause actual results to differ materially. Should any of the
applications fail to perform properly on January 1, 2000, we will resort to
temporary manual processing, which is not expected to have a material adverse
impact on our short-term operations.

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<PAGE>

All remaining remediation and testing of non-information technology systems is
expected to be performed and completed by December 1999. Failure to achieve
Year 2000 readiness by any of our vendors, while expected to cause some
disruption to operations in the short-term, is not expected to have a material
impact on our operations.

Forward-Looking Statements

Some of the statements in this report, under "Management's Discussion and
Analysis of Financial Condition and Results of Operations, "Quantitative and
Qualitative Disclosures About Market Risk," "Consolidated Financial Statements
and the Notes to Consolidated Financial Statements" and "Part II-Other
Information," are "forward-looking statements," within the meaning of Section
21E of the Securities Exchange Act of 1934, that are subject to certain events,
risk and uncertainties that may be outside our control. These forward-looking
statements include statements of:

. management's plans, objectives, expectations, intentions and beliefs for
our future operations and future economic performance;
. our capital budget and future capital requirements;
. meeting our future capital needs;
. realization of our deferred tax assets;
. the level of future expenditures; and
. the outcome of regulatory and litigation matters, and the assumptions
described in this report underlying such forward-looking statements.

Actual results and developments could differ materially from those expressed
in or implied by such statements due to a number of factors, including, without
limitation:

. those described in the context of such forward-looking statements;
. future product development and manufacturing costs;
. timely development and acceptance of new products;
. our entry into new countries and markets;
. the impact of competitive products and pricing;
. the political and economic climate in which we conduct operations; and
. the risk factors described from time to time in our other documents and
reports filed with the Securities and Exchange Commission.

In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "could," "expects," "plans," "intends,"
"anticipates," "believes," "estimates," "predicts," "potential," "continue" or
the negative of such terms and other comparable terminology.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor anyone else
assumes responsibility for the accuracy and completeness of such statements. We
are under no duty to update any of the forward-looking statements after the date
of this report.

Recent Financial Accounting Standards Board Statements

In June 1998, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 133 ("FAS 133"), "Accounting for Derivatives,
Investments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative financial instruments, including certain
derivative financial instruments imbedded in other contracts and for hedging
activities. FAS 133 is effective for fiscal years beginning after June 15, 1999.
During 1999, the Financing Accounting Standards Board defined the effective date
of FAS 133 to fiscal years beginning after June 15, 2000. As we do not have any
derivative financial instruments, this pronouncement does not have an impact on
us.

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<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We do not engage in trading market risk sensitive instruments and do not
purchase as investments, as hedges, or for purposes "other than trading,"
instruments that are likely to expose us to certain types of market risk,
including interest rate, commodity price or equity price risk. We have not
issued any debt instruments, entered into any forward or futures contracts,
purchased any options or entered into any swaps.

However, we are exposed to certain other market risks, including changes
in currency exchange rates as measured against the United States dollar. The
value of the United States dollar affects our financial results. Changes in
currency exchange rates may positively or negatively affect our sales (as
expressed in United States dollars), gross margins, operating expenses and
retained earnings. When the United States dollar sustains a strengthening
position against currencies in which we sell our products or a weakening
currency exchange rate against currencies in which we incur costs, our net sales
or costs may be adversely affected. We have established policies, procedures and
internal processes governing the management of market risk and the use of any
financial instruments to manage our exposure to such risks. The sensitivity of
earnings and cash flows to changes in the currency exchange rate is assessed by
applying an appropriate range of potential currency rate fluctuations of our
assets, obligations and projected transactions denominated in foreign currency.
Based upon our overall currency exchange rate exposure at June 30, 1999, we do
not believe that our exposure to currency exchange rate fluctuations will have a
material impact on our consolidated financial position or consolidated results
of operations. All statements other than historical information incorporated in
this Item 3 are forward-looking statements. The actual impact of future market
changes could differ materially due to, among other things, factors discussed in
this report.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Except as set forth below, there have not been any material changes in,
or additions to, the legal proceedings previously reported in our 1998 Annual
Report on Form 10-K as filed with the Commission on March 31, 1999:

. Dr. Joe Glickman, Jr. Phyto Trust d/b/a Alotek and Mannatech have
agreed to settle Dr. Glickman's lawsuit. We believe that the
settlement of this lawsuit will not have a material effect on our
business, results of operations or financial condition.

. The American Arbitration Association has set arbitration for the Mr.
Johnnie Hill d/b/a Taylor Enterprises case for November 1999.

Item 2. Changes in Securities and Use of Proceeds

(a) Not applicable.

(b) Not applicable.

(d) Uses of Proceeds from Registered Securities. On January 5, 1999,
our Registration Statement on Form S-1 (File No. 333-63133) became
effective. The subscription period terminated on February 11, 1999
and, on February 12, 1999, the closing took place. The total number
of shares of our common stock subscribed for and sold in the
initial public offering was 3,056,016, of which 1,500,000 shares
were sold by us and 1,556,016 shares were sold by the selling
shareholders. The aggregate price of the shares sold by us was
$12,000,000 and the net proceeds to us were $9,240,958. Net
proceeds included the aggregate proceeds less payments for:

. the placement agent engaged by us to manage the receipt of
subscription funds of a fee of $389,226, net of a reimbursement of
$90,774 in expenses by the placement agent;
. actual expenses of the initial public offering of $406,385; and

15
<PAGE>

. $1,963,431 of deferred offering costs.

The aggregate price of the shares sold for the account of the
selling shareholders was $12,448,128. After payment of $497,925 to the
placement agent, net proceeds to the selling shareholders were
$11,950,203. None of such payments were direct or indirect payments to
directors, officers, affiliates or 10% beneficial owners of Mannatech.
No underwriter was involved in the initial public offering.

The net proceeds of the initial public offering were intended to
be used by us to begin our international expansion and fund current
working capital needs. We have used $800,463 of the net proceeds from
the initial public offering to pay for our expansion into the United
Kingdom and Japan and $5,125,614 of such net proceeds for our current
working capital needs. The $5,125,614 includes $1,963,431 for the
deferred offering costs incurred by us in consummating the initial
public offering. None of such payments were direct or indirect payments
to directors, officers, affiliates or 10% beneficial owners of
Mannatech.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

None.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits required by Item 601 of Regulation S-K

3.1 Amended and Restated Articles of Incorporation of the Company,
incorporated herein by reference to Exhibit 3.1 to the Company's
Form S-1 (File No. 333-63133) filed with the Commission on
September 10, 1998.

3.2 Second Amended and Restated Bylaws of the Company, incorporated
herein by reference to Exhibit 4.3 to the Company's Form S-8 (File
No. 333-77227) filed with the Commission on April 28, 1999.

4.1 Specimen Certificate representing the common stock, par value
$0.0001 per share, of the Company, incorporated herein by reference
to Exhibit 4.1 to the Company's Amendment No. 1 to Form S-1 (File
No. 333-63133) filed with the Commission on October 28, 1998.

4.2* Settlement Agreement dated July 2, 1999, entered into by and
between Robert B. Hydeman, Ray Robbins and Robbins Enterprises,
Inc., and the Company.

10.1 1997 Stock Option Plan dated May 20, 1997, incorporated herein by
reference to Exhibit 10.1 to the Company's Form S-1 (File No. 333-
63133) filed with the Commission on September 10, 1998.

10.2 1998 Incentive Stock Option Plan dated April 8, 1998, incorporated
herein by reference to Exhibit 10.2 to the Company's Form S-1 (File
No. 333-63133) filed with the Commission on September 10, 1998.

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<PAGE>

10.3 Form of Indemnification Agreement with a schedule of director
signatures, incorporated herein by reference to Exhibit 10.8 to
the Company's Form S-1 (File No. 333-63133) filed with the
Commission on September 10, 1998.

10.4 Letter of Understanding Regarding Development of Proprietary
Information for the Company effective as of August 1, 1997, as
amended, by and between Bill H. McAnalley, Ph.D. and the Company,
incorporated herein by reference to Exhibit 10.12 to the Company's
Form S-1 (File No. 333-63133) filed with the Commission on
September 10, 1998.

10.5 Commercial Lease Agreement dated November 7, 1996 between MEPC
Quorum Properties II Inc. and the Company, as amended by the First
Amendment thereto dated May 29, 1997 and the Second Amendment
thereto dated November 13, 1997, incorporated herein by reference
to Exhibit 10.13 to the Company's Form S-1 (File No. 333-63133)
filed with the Commission on September 10, 1998.

10.6 Commercial Lease Agreement dated May 29, 1997 between MEPC Quorum
Properties II Inc. and the Company, as amended by the First
Amendment thereto dated November 6, 1997, incorporated herein by
reference to Exhibit 10.14 to the Company's Form S-1 (File No.
333-63133) filed with the Commission on September 10, 1998.

10.7 Assignment of Patent Rights dated October 30, 1997 by and among
Bill H. McAnalley, Ph.D., H. Reginald McDaniel, D. Eric Moore,
Eileen P. Vennum and William C. Fioretti and the Company,
incorporated herein by reference to Exhibit 10.15 to the Company's
Form S-1 (File No. 333-63133) filed with the Commission on
September 10, 1998.

10.8 Supply Agreement effective as of August 14, 1997 by and between
the Company and Caraloe, Inc., incorporated herein by reference to
Exhibit 10.17 to the Company's Form S-1 (File No. 333-63133) filed
with the Commission on September 10, 1998.

10.9 Trademark License Agreement effective as of August 14, 1997 by and
between the Company and Caraloe, Inc., incorporated herein by
reference to Exhibit 10.19 to the Company's Form S-1 (File No.
333-63133) filed with the Commission on September 10, 1998.

10.10 Letter of Agreement from the Company to Michael L. Finney of
LAREX, Incorporated dated December 23, 1997, incorporated herein
by reference to Exhibit 10.20 to the Company's Form S-1 (File No.
333-63133) filed with the Commission on September 10, 1998.

10.11 Product Development and Distribution Agreement effective as of
September 15, 1997 between New Era Nutrition Inc. and the Company,
incorporated herein by reference to Exhibit 10.21 to the Company's
Form S-1 (File No. 333-63133) filed with the Commission on
September 10, 1998.

10.12 Summary of Management Bonus Plan, incorporated herein by reference
to Exhibit 10.23 to the Company's Form S-1 (File No. 333-63133)
filed with the Commission on September 10, 1998.

10.13 Individual Guaranty of Samuel L. Caster dated January 5, 1998,
incorporated herein by reference to Exhibit 10.27 to the Company's
Form S-1 (File No. 333-63133) filed with the Commission on
September 10, 1998.

10.14 Individual Guaranty of Charles E. Fioretti dated January 5, 1998,
incorporated herein by reference to Exhibit 10.28 to the Company's
Form S-1 (File No. 333-63133) filed with the Commission on
September 10, 1998.

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<PAGE>

10.15 Lease dated September 1, 1998 between Mannatech Australia Pty
Limited and Legal & General Properties No. 1 Pty Limited,
incorporated herein by reference to Exhibit 10.29 to the Company's
Form S-1 (File No. 333-63133) filed with the Commission on
September 10, 1998.

10.16 Form of Employment Agreement entered into between the Company and
each of Charles E. Fioretti, Patrick D. Cobb, Anthony E. Canale,
Bill H. McAnalley and Deanne Varner, incorporated herein by
reference to Exhibit 10.30 to the Company's Amendment No. 1 to
Form S-1 (File No. 333-63133) filed with the Commission on October
28, 1998.

10.17 Renewal and Extension Promissory Note dated February 17, 1999 in
the amount of $33,316.02 made by Patrick D. Cobb, incorporated
herein by reference to Exhibit 10.25 to the Company's 1998 Form
10-K (File No. 000-24657) filed with the Commission on March 31,
1999.

10.18 Renewal and Extension Promissory Note dated February 17, 1999 in
the amount of $199,896.10 made by Samuel L. Caster, incorporated
herein by reference to Exhibit 10.26 to the Company's 1998 Form
10-K (File No. 000-24657) filed with the Commission on March 31,
1999.

10.19 Renewal and Extension Promissory Note dated February 17, 1999 in
the amount of $199,896.09 made by Charles E. Fioretti,
incorporated herein by reference to Exhibit 10.27 to the Company's
1998 Form 10-K (File No. 000-24657) filed with the Commission on
March 31, 1999.

10.20* Lease dated April 7, 1999 between the Company and Regus (UK) Ltd.

27* Financial Data Schedule.

- --------------
* Filed herewith.

(b) Reports on Form 8-K.

None.

18
<PAGE>

SIGNATURES

Pursuant to the requirements of Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

MANNATECH, INCORPORATED

August 5, 1999 /S/ CHARLES E. FIORETTI
-----------------------------------------
Charles E. Fioretti
Chairman of the Board and Chief Executive
Officer

August 5, 1999 /S/ PATRICK D. COBB
-----------------------------------------
Patrick D. Cobb
Vice President, Chief Financial Officer and
Director (principal financial officer)

August 5, 1999 /S/ STEPHEN D. FENSTERMACHER
-----------------------------------------
Stephen D. Fenstermacher
Vice President of Accounting and Controller
(principal accounting officer)

S-1
<PAGE>

INDEX TO EXHIBITS

3.2 Second Amended and Restated Bylaws of the Company, incorporated
herein by reference to Exhibit 4.3 to the Company's Form S-8 (File
No. 333-77227) filed with the Commission on April 28, 1999.

4.1 Specimen Certificate representing the common stock, par value
$0.0001 per share, of the Company, incorporated herein by
reference to Exhibit 4.1 to the Company's Amendment No. 1 to Form
S-1 (File No. 333-63133) filed with the Commission on October 28,
1998.

4.2* Settlement Agreement dated July 2, 1999, entered into by and
between Robert B. Hydeman, Ray Robbins and Robbins Enterprises,
Inc., and the Company.

10.1 1997 Stock Option Plan dated May 20, 1997, incorporated herein by
reference to Exhibit 10.1 to the Company's Form S-1 (File No. 333-
63133) filed with the Commission on September 10, 1998.

10.2 1998 Incentive Stock Option Plan dated April 8, 1998, incorporated
herein by reference to Exhibit 10.2 to the Company's Form S-1
(File No. 333-63133) filed with the Commission on September 10,
1998.

10.12 Summary of Management Bonus Plan, incorporated herein by reference
to Exhibit 10.23 to the Company's Form S-1 (File No. 333-63133)
filed with the Commission on September 10, 1998.

10.20* Lease dated April 7, 1999 between the Company and Regus (UK) Ltd.

27* Financial Data Schedule.

- --------------
* Filed herewith.

<PAGE>

Exhibit 4.2

SETTLEMENT AGREEMENT
--------------------

THIS SETTLEMENT AGREEMENT (the "Agreement") is entered into by and
between Robert B. Hydeman ("Hydeman"); Ray Robbins ("Robbins") and Robbins
Enterprises, Inc. ("REI") (collectively, the "Robbins Respondents"); and
Mannatech Incorporated ("Mannatech"), (collectively, the "Parties"):

WHEREAS, early in Mannatech's existence (Mannatech was formerly known as
Emprise International, Inc.), Robbins and Hydeman had a certain working
relationship involving the development of Mannatech's business;

WHEREAS, early in Mannatech's formation, Mannatech had separately
entered into compensation agreements with Robbins to devote his efforts in the
marketing and development of Mannatech's sales and distribution network ("the
Compensation Agreements");

WHEREAS, disputes have arisen between Hydeman, on the one hand, and the
Robbins Respondents, on the other hand, concerning various issues including the
following: the type, nature, and scope of the working relationship between
Robbins and Hydeman and their relationship to Mannatech; the allocation of
commission income from and ownership interests in three specific associate
positions, namely, Top Gun, Control #727, Rowboat & Battleship, Control #741,
and Bob & Ratio, Control #947 (the "Three Positions"); Robbins' Compensation
Agreements with Mannatech; and other related issues;

WHEREAS, Hydeman filed suit against the Robbins Respondents and
Mannatech in Cause No. 98-5161E in the County Court of Law No. 5 of Dallas

SETTLEMENT AGREEMENT - Page 1
<PAGE>

County, Texas (the "State Court Lawsuit"), which was subsequently compelled by
that court to be arbitrated by the American Arbitration Association as Cause No.
71-181-00497-98 (the "Arbitration Proceeding") pursuant to the arbitration
provision of the Mannatech Associate Application;

WHEREAS, in addition to the claims stated in Hydeman's Petition and in
his Statement of Claims submitted in the State Court Lawsuit and the Arbitration
Proceeding, the Robbins Respondents and Mannatech asserted counterclaims against
Hydeman;

WHEREAS, the Robbins Respondents and Mannatech deny all claims made
against them by Hydeman, and Hydeman denies all claims made against him by the
Robbins Respondents and Mannatech;

WHEREAS, there are bona fide disputes among the parties with respect to
the claims made by or against such parties;

WHEREAS, each of the parties to this Agreement has made their own
respective determination that it is in their best interest to settle all
disputes and controversies among and between them as set forth in this
Agreement.

NOW THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is admitted, the signatories to this Agreement agree as follows:

1. This Agreement shall be effective (the "Effective Date") as
signed and executed by the parties on July 2, 1999.

SETTLEMENT AGREEMENT - Page 2
<PAGE>

2. On the Effective Date, the Robbins Respondents shall pay to
Hydeman the total sum of Six Hundred Seventy-Five Thousand Dollars ($675,000.00)
(the "Settlement Payment"), plus an additional sum in the amount of $13,106.00.
The Settlement Payment shall be made payable jointly to Hydeman and his
attorneys, Beckham & Thomas.

3. Hydeman will continue to receive a 1/3 allocation of the
commission income generated by the Three Positions until the Settlement Payment
described in paragraph 2 is delivered to Hydeman's counsel, after which time
such payments and any rights to such payments of this commission income will
terminate, and Hydeman shall no longer receive or have any rights to receive any
payments of income from Mannatech relating to the Three Positions, regardless of
when such income arguably accrued or arose, whether in arrears or otherwise. As
of the date of the Settlement Payment, the Rule 11 Agreement dated on or about
June 19, 1998, and the letter of settlement in principle dated on or about June
17, 1999, shall no longer be in effect and are otherwise superseded by this
Agreement.

4. Subject to the agreement of Robbins and Hydeman to all
requirements of them set forth herein as to the assignment of Mannatech stock,
Robbins Respondents and Mannatech will deliver at closing the letter signed by
Ray Robbins and Mannatech to the transfer agent for assignment of Mannatech
stock in the amount of 40,000 shares from Robbins to Hydeman, which Hydeman
acknowledges as a sufficient assignment of the stock. The transfer agent shall
process the reissuance of such stock in its ordinary course of business.

SETTLEMENT AGREEMENT - Page 3
<PAGE>

5. In consideration of the payment of $675,000 and the assignment of
40,000 shares of Mannatech common stock by Robbins to Hydeman, Hydeman agrees to
relinquish to Robbins any and all perceived or true rights in the three
below-listed Mannatech positions, including the business books and records for
each of the positions, the associate base or "downline," and all of the
information base previously used or associated with each of the positions, and
the right to receive any benefits or cash flow from Mannatech for each of the
positions, the positions being Top Gun, Control No. 727; Rowboat & Battleship,
Control No. 741; and Bob & Ratio, Control No. 947, to the effect that Robbins
Respondents will be the sole person(s) currently entitled to income from such
positions. Nothing herein shall be construed to affect the Robert B. Hydeman
personal position Control No. 747, or its associate base or "downline."
6. Mannatech shall undertake all commercially reasonable steps to
register the 40,000 Mannatech shares assigned to Hydeman under its currently
pending S-1 Registration Statement (which is subject to the approval of the
Securities and Exchange Commission and which may be delayed or otherwise
adversely affected by future events) upon the following further agreements of
the parties hereto:
a) Hydeman hereby agrees that any Mannatech shares he receives
pursuant to the settlement with Robbins are subject to the agreement ("Lock
Up Agreement") between Robbins and Mannatech, which prohibits any transfer
of any such shares prior to August 11, 1999, and remain subject

SETTLEMENT AGREEMENT - PAGE 4

<PAGE>

thereto in Hydeman's hands, and are not registered under the Securities
Act of 1933. Hydeman has been furnished a copy of the Lock Up Agreement
and agrees hereby to be bound by all terms of the Lock Up as to the
40,000 shares. Any shares received by Hydeman from Robbins shall bear
appropriate restrictive legends as to both unregistered stock and the
Lock Up Agreement.

b) Robbins and Hydeman hereby agree to take all reasonable
steps necessary or requested by Mannatech, its securities counsel or its
certified public accountants, in connection with and to facilitate the
assignment, reissuance and/or registration of such 40,000 shares.

c) Mannatech agrees to take all commercially reasonable
steps to see that such shares are included for registration in an S-1
Registration Statement being filed on behalf of certain Mannatech
shareholders. In order to register the 40,000 shares that Robbins is
assigning to Hydeman and in consideration of a strictly limited release
of the Lock Up Agreement to which such shares are subject to effect
the proposed assignment to Hydeman only, Hydeman agrees to be bound by
an agreement, which is subject to the approval to Mannatech's outside
securities counsel and independent certified public accountants, to be
entered into among certain of the shareholders ("Agreeing Shareholders")
whose shares are intended to be registered (or in the case of Hydeman,
may be registered) in the pending S-1 Registration Statement, to the
effect that a designated representative of such Agreeing

SETTLEMENT AGREEMENT - Page 5

<PAGE>

Shareholders shall trade the shares of all of the Agreeing Shareholders in
a manner so as to maintain the market price and stability of Mannatech
stock in the marketplace, with the proceeds of such sales being divided
ratably among such Agreeing Shareholders. Under such an agreement, such
Agreeing Shareholders are expected to use the same broker, with each
Agreeing Shareholder bearing the costs of disposition and brokerage
associated with the disposition and sale of his shares and any applicable
taxes. Should Mannatech's securities counsel or certified public
accountants not approve such agreement, it will not be required;

d) Hydeman and Robbins agree that approval of Mannatech's board of
directors, securities counsel, and independent certified public accountants
of the registration and offering documents and

e) the approval of Mannatech's Board of Directors of the settlement
documents and all terms and conditions thereof is required for this
settlement and the proposed registration to be final and binding.

7. Should Hydeman desire to pledge any of the shares acquired from
Robbins as collateral for a loan from a commercial lending institution during
the Lock Up period, Mannatech will consider waiving the restriction on
encumbrances if the following information is provided at the time a waiver is
requested: Lender, Amount, Term, Number of Shares to be pledged, Events of
Default, provisions on opportunity to cure default. After being provided that
information, Mannatech, in its sole discretion, shall determine whether it will
waive the prohibition on

SETTLEMENT AGREEMENT - Page 6
<PAGE>

encumbrance of such shares at all, and, Hydeman should expect that if Mannatech
consents to some waiver, it may require certain conditions, including but not
limited to, notice of default and a limited option to takeout in the event of
default. Mannatech, as a public company, cannot waive restrictions such as
those in the Lock Up Agreement without the ability to assess any risk or harm to
the company from such waiver and without specific approval of such waiver by
Mannatech's Board of Directors.

8. Within five (5) business days of Hydeman's receipt of stock
certificates for 40,000 shares of Mannatech stock, the Parties will execute,
file, and cause to be entered in the Arbitration Proceeding the Agreed Motion to
Dismiss and Agreed Order of Dismissal With Prejudice in the forms attached as
Exhibits "A" and "B," and will execute, file and cause to be entered in the
State Court Lawsuit the Agreed Motion to Dismiss and Agreed Order of Dismissal
With Prejudice in the forms attached as Exhibits "C" and "D". Hydeman shall
notify his counsel on the date of such receipt of stock, and his counsel will
notify all parties in writing that day of such receipt.

9. Effective as of the Effective Date, Hydeman (for himself and his
respective heirs, estates, executors, administrators, predecessors, successors,
assigns, shareholders, directors, officers, employees, agents, representatives,
spouses, attorneys, subsidiaries, related corporations, partners, related
partnerships, and other related entities) (collectively the "Hydeman Releasing
Parties") do hereby unconditionally, fully and completely release, acquit and
forever discharge, the

SETTLEMENT AGREEMENT - Page 7
<PAGE>

Robbins Respondents and Mannatech and each of their respective predecessors,
successors, assigns, shareholders, directors, officers, employees, agents,
representatives, attorneys, subsidiaries, related corporations, partners,
related partnerships, and other related entities (collectively the "Defendant
Released Parties") from any and all claims, demands, actions, causes of action,
suits, debts, compensation, bonus, commissions, accounts, notes, covenants,
contracts, agreements, promises, liabilities, damages, losses, costs and
expenses whatsoever (collectively "Claims"), known or unknown, accrued or
unaccrued, in law or in equity relating to any matter whatsoever that has
occurred or has failed to occur as of the Effective Date, including but not
limited to any Claims in any way related to: a) the Robbins and Hydeman working
relationships; b) any breach of contract (oral or written), actions, inaction,
representations, omissions, commissions, conspiracy, actual fraud, constructive
fraud, misrepresentation, breach of fiduciary duty, or breach of confidential
relationship by the Defendant Released Parties prior to the Effective Date; c)
the State Court Lawsuit, the claims, counterclaims, defenses and allegations
made or that could have been made in the State Court Lawsuit, and the facts and
circumstances involved, in the State Court Lawsuit; d) any claims,
counterclaims, defenses and allegations made or that could have been made
regarding an alleged partnership between Robbins and Hydeman; e) any claims,
counterclaims, defenses and allegations made or that could have been made
regarding the Compensation Agreements; and f) any claim that this Agreement was
induced by any fraudulent or negligent act or omission or results in or from any

SETTLEMENT AGREEMENT - Page 8
<PAGE>

actual or constructive fraud, negligent misrepresentation, conspiracy, breach of
fiduciary duty, breach of confidential relationship, or a breach of any other
duty under law or in equity; excluding an action for breach of contract based on
breach of this Agreement; notwithstanding the foregoing or anything else in this
------------------------------------------------------
Agreement, none of the Hydeman Releasing Parties release any rights created by
- ------------------------------------------------------------------------------
this Agreement nor do they release any claims against Mannatech for accrued but
- --------------
unpaid funds due and owing from Mannatech to the following Associate Positions
owned by the Hydeman Releasing Parties: Robert B. Hydeman, Control No. 747. THIS
PARAGRAPH 9 IS INTENDED TO BE A GENERAL RELEASE OF ALL CLAIMS, EXCEPT THOSE
SPECIFICALLY EXCLUDED HEREIN, SO, TO THE EXTENT THAT THE HYDEMAN RELEASING
PARTIES STILL POSSESS ANY VIABLE CLAIMS OR CAUSES OF ACTION AGAINST THE
DEFENDANT RELEASED PARTIES, THE HYDEMAN RELEASING PARTIES HEREBY ASSIGN TO THE
ROBBINS RESPONDENTS AND MANNATECH ALL CLAIMS THEY HAVE OF ANY KIND AGAINST THE
DEFENDANT RELEASED PARTIES, EXCEPT THOSE SPECIFICALLY EXCLUDED HEREIN.

10. Effective as of the Effective Date, the Robbins Respondents and
Mannatech (for themselves and their respective predecessors, successors,
assigns, shareholders, directors, officers, employees, agents, representatives,
spouses, attorneys, subsidiaries, related corporations, partners, related
partnerships, and other related entities) (collectively the "Defendant Releasing
Parties") do hereby unconditionally, fully and completely release, acquit and
forever discharge Robert

SETTLEMENT AGREEMENT - Page 9
<PAGE>

B. Hydeman and each of his respective heirs, estates, executors, administrators,
predecessors, successors, assigns, shareholders, directors, officers, employees,
agents, representatives, attorneys, subsidiaries, related corporations,
partners, related partnerships, and other related entities (collectively the
"Hydeman Released Parties"), from any and all claims, demands, actions, causes
of action, suits, debts, compensation, bonus, commissions, accounts, notes,
covenants, contracts, agreements, promises, liabilities, damages, losses, costs
and expenses whatsoever (collectively "Claims"), known or unknown, accrued or
unaccrued, in law or in equity relating to any matter whatsoever that has
occurred or has failed to occur as of the Effective Date, including but not
limited to any Claims in any way related to a) the Robbins and Hydeman working
relationships; b) any breach of contract (oral or written), actions, inaction,
representations, omissions, commissions, conspiracy, actual fraud, constructive
fraud, misrepresentation, breach of fiduciary duty, or breach of confidential
relationship by the Defendant Released Parties prior to the Effective Date; c)
the State Court Lawsuit, the claims, counterclaims, defenses and allegations
made or that could have been made in the State Court Lawsuit, and the facts and
circumstances involved, in the State Court Lawsuit; d) any claims,
counterclaims, defenses and allegations made or that could have been made
regarding an alleged partnership between Robbins and Hydeman; e) any claims,
counterclaims, defenses and allegations made or that could have been made
regarding the Compensation Agreements; and f) any claim that this Agreement was
induced by any fraudulent or negligent act or omission or results in or from any

SETTLEMENT AGREEMENT - Page 10

<PAGE>

actual or constructive fraud, negligent misrepresentation, conspiracy, breach of
fiduciary duty, breach of confidential relationship, or a breach of any other
duty under law or in equity; excluding an action for breach of contract based on
breach of this Agreement; notwithstanding the foregoing or anything else in this
------------------------------------------------------
Agreement, none of the Defendant Releasing Parties release any rights created by
- --------------------------------------------------------------------------------
this Agreement and Mannatech does not release Hydeman's obligations as a
- --------------
Mannatech Associate pursuant to his Associate Agreement with regard to the
following Associate Positions owned by the Hydeman Releasing Parties: Robert B.
Hydeman, Control No. 747. THIS PARAGRAPH 10 IS INTENDED TO BE A GENERAL RELEASE
OF ALL CLAIMS, EXCEPT THOSE SPECIFICALLY EXCLUDED HEREIN, SO, TO THE EXTENT THAT
THE DEFENDANT RELEASING PARTIES STILL POSSESS ANY VIABLE CLAIMS OR CAUSES OF
ACTION AGAINST HYDEMAN, THE DEFENDANT RELEASING PARTIES HEREBY ASSIGN TO HYDEMAN
ALL CLAIMS THEY HAVE OF ANY KIND AGAINST THE HYDEMAN RELEASED PARTIES, EXCEPT
THOSE SPECIFICALLY EXCLUDED HEREIN,

11. Notwithstanding any other provision of this Agreement, all parties
remain subject to the Agreed Protective Order and Stipulation For Confidential
Information entered by the Panel on March 24, 1999 and the Addendum To Agreed
Protective Order and Stipulation For Confidential Information, and will continue
in effect after the Effective Date. Effective as of the Effective Date, the
parties state that they will refrain from making public statements

SETTLEMENT AGREEMENT - Page 11
<PAGE>

about the terms of this settlement and that any statements made by any party
regarding this settlement shall be consistent with the terms of this Agreement.
Notwithstanding anything to the contrary in this paragraph, nothing herein will
prevent a party from: i) producing a copy of the Agreement in response to a
valid discovery request; ii) from providing a copy of the Agreement to any
accountant or attorney if required for the filing of any tax returns or other
filings required by law or by court order; iii) disclosing the terms of the
Agreement to any officer of a corporate party, to the extent such disclosure is
related to the performance of that officer's duties for the corporation; iv) in
any action to enforce the Agreement, or (v) Mannatech making all reports and
disclosures required or advisable pursuant to Texas and federal securities laws,
provided, however, that: i) in the event a party receives a subpoena or demand
- -------- -------
for the production of the Agreement or the disclosure of any of its terms, the
party will immediately notify the other party and its attorney in writing of the
request; and ii) the party shall not produce the Agreement or disclose its terms
until the other parties have been given a reasonable opportunity to seek an
appropriate confidentiality or other order from the court.

12. The parties each covenant not to sue one another with respect to
any claims released or assigned by this Agreement.

13. Each of the parties to this Agreement hereby represents and
warrants to each of the other parties as follows:

a) the person executing this Agreement on behalf of such party has
full power and authority to enter into this Agreement and to perform all

SETTLEMENT AGREEMENT - Page 12

<PAGE>

of that party's obligations as herein set forth or contemplated, and, in the

case of a corporate or partnership party, the undersigned corporate officer or

partnership representative has been duly authorized by all necessary corporate

or partnership actions to deliver this Agreement on behalf of such corporation

or partnership;

b) the execution of this Agreement, and the performance of the

obligations set forth herein, do not and will not constitute a default (or with

the giving of notice or passage of time will not constitute a default) under any

document or agreement by which such party is bound;

c) prior to the execution of this Agreement by each such party,

such party has fully informed themselves as to the terms, contents, provisions

and effects of this Agreement, and all facts and conditions sufficient and

necessary to the decision to execute this Agreement;

d) prior to the execution of this Agreement by each such party,

such party has had the benefit of the advice of an attorney or attorneys chosen

and employed by that party concerning this Agreement;

e) no promise or representation of any kind has been made to that

party or his representative by any other party or his representative except as

expressly set forth in this Agreement;

f) such party is not relying on any oral understandings, oral

representations, or oral agreements of any kind or on any other matter not

SETTLEMENT AGREEMENT-Page 13

<PAGE>

expressly stated in this Agreement and any such reliance would be
unintended by the other parties and otherwise unreasonable and
unjustifiable;

g) this Agreement shall remain in all respects effective and not
subject to termination, modification or rescission by any difference in
facts or circumstances hereafter occurring, becoming known or becoming
known differently; and

h) this Agreement constitutes a valid, binding, and enforceable
obligation of that party, its terms are lawful and fair, and it constitutes
an equitable settlement of their differences; and

i) each party to bear his or its own tax consequences of this
settlement.

14. Each party further declares and represents that this Agreement
contains and constitutes the entire agreement between the parties with respect
to the subject matter hereof and terminates, supersedes, and replaces any and
all prior arrangements, understandings, representations, promises, inducements,
or other communications, whether written or oral between the parties, except as
expressly stated herein. This Agreement can only be amended in writing signed
by all of the parties hereto.

15. Each party declares and represents that such person is the sole owner
and holder of the claims they are releasing by this Agreement and no such claims
have been assigned or otherwise transferred, in whole or in part, to any other
person or entity. Hydeman agrees to and does hereby indemnify and hold harmless
the

SETTLEMENT AGREEMENT - Page 14

<PAGE>

Robbins Respondents and Mannatech from any losses, costs, damages, and demands,

including attorney's fees, resulting from any claim made by or through Hydeman

with respect to any claim released or assigned by Hydeman by this Agreement.

The Robbins Respondents agree to and do hereby indemnify and hold harmless

Hydeman from any losses, costs, damages, and demands, including attorneys' fees,

resulting from any claim made by or through the Robbins Respondents with respect

to any claim released or assigned by the Robbins Respondents by this Agreement.

16. No delay or omission by the party to exercise any right in

connection herewith shall impair such right or be construed to be a waiver

thereof, and no waiver of any right or the breach of any provision hereof shall

be construed to be a waiver of any other right or provision or any subsequent

breach of such provision.

17. Each party acknowledges and agrees that this Agreement is being

executed, and the consideration hereunder being given by each party, in full

compromise and settlement of disputed claims between the parties and to avoid

further trouble, litigation, and expense and that the fact of this Agreement

shall not be taken in any way as an admission of fact or liability by any party.

18. The parties agree that each will pay their own respective court

costs and attorneys' fees in connection with the State Court Lawsuit and the

Arbitration Proceeding.

19. THIS SETTLEMENT AGREEMENT, ANY DISPUTES WHICH MAY ARISE IN

CONNECTION WITH THE INTERPRETATION OR

SETTLEMENT AGREEMENT-Page 15

,
<PAGE>

ENFORCEMENT OF THE SETTLEMENT AGREEMENT, AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES GENERALLY SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND
WITHOUT REGARD OR REFERENCE TO CHOICE OR CONFLICT OF LAW RULES.

20. If one or more disputes arise with regard to the interpretation
and/or performance of this Agreement or any of its provisions, the parties agree
to attempt to resolve same by phone conference: if the parties cannot resolve
their differences by phone conference, then each agrees to schedule one day of
mediation within thirty (30) days to resolve the disputes and to share the costs
of the mediation equally. If a party refuses to mediate as set out above, then
that party may not recover attorneys' fees or costs in any arbitration brought
to construe or enforce this Agreement. Otherwise, if mediation is unsuccessful,
then the prevailing party or parties in later arbitration that participated in
the mediation shall be entitled to recover reasonable attorneys' fees and
expenses, including the cost of the unsuccessful mediation. Notwithstanding the
foregoing, this paragraph 20 shall not apply to any suits or claims for
injunctive relief.

21. In all instances in which a party to this Agreement is required
under this Agreement to do any act at a particular time or within a particular
period of time, time is of the essence in the performance of such act.

22. Each party represents that such party has substantial experience in
negotiating contracts, that this Agreement is the product of negotiations among
the

SETTLEMENT AGREEMENT - Page 16
<PAGE>

parties, and that, therefore, no party to this Agreement shall be charged with
having promulgated this Agreement.

23. All notices under this Agreement shall be in writing and delivered
by certified mail, return receipt requested, at the addresses listed below:

Hydeman:

Robert B. Hydeman
13743 Creekside Place
Dallas, Texas 75240

the Robbins Respondents:

Ray Robbins
2201 Ingleside
Grand Prairie, Texas 75050

Mannatech:

c/o Deanne Varner
600 S. Royal Lane, Suite 200
Coppell, Texas 75019

24. This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original for all purposes, and all of which together
shall constitute one instrument.

25. The parties agree that this settlement agreement is not subject to
revocation.

26. The parties agree that any controversy or claim arising out of or
relating to this Agreement or the breach of this Agreement, except claims for
injunctive relief, shall be resolved exclusively by arbitration administered by
the American Arbitration Association. The arbitration will be conducted in
Dallas,

SETTLEMENT AGREEMENT - Page 17
<PAGE>

Texas by three (3) arbitrators selected in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. The Commercial
Arbitration Rules of the American Arbitration Association rules shall also
govern the arbitration proceeding, and the judgment on the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.

SETTLEMENT AGREEMENT - Page 18

<PAGE>

/s/ ROBERT B. HYDEMAN 7/2/99
- ------------------------------------ ----------------
ROBERT B. HYDEMAN DATE

/s/ RAY ROBBINS 7/2/99
- ------------------------------------ ----------------
RAY ROBBINS DATE

/s/ RAY ROBBINS 7/2/99
- ------------------------------------ ----------------
ROBBINS ENTERPRISES, INC. DATE
BY: RAY ROBBINS

/s/ DEANNE VARNER 7/2/99
- ------------------------------------ ----------------
MANNATECH INCORPORATED DATE
BY: DEANNE VARNER,
VICE PRESIDENT AND
GENERAL COUNSEL

SETTLEMENT AGREEMENT - Page 19

<PAGE>

APPROVED AS TO FORM:

/s/ BLAKE C. BECKHAM 7/2/99
- ------------------------------------ ----------------
BLAKE BECKHAM DATE
JOSE PORTELA
ATTORNEYS FOR ROBERT B. HYDEMAN

/s/ VAN VANBEBBER 7/2/99
- ------------------------------------ ----------------
MARK K. SALES DATE
MARION TURNER "VAN" VANBEBBER
ATTORNEYS FOR RAY ROBBINS AND
ROBBINS ENTERPRISES, INC.

/s/ JOHN LILLY 7/2/99
- ------------------------------------ ----------------
JOHN LILLY DATE
ATTORNEY FOR MANNATECH INCORPORATED

SETTLEMENT AGREEMENT - Page 20

<PAGE>

EXHIBIT 10.20

REGUS AGREEMENT REGUS

<TABLE>
<CAPTION>
LICENCE AGREEMENT
---------------------------------------------------
[LOGO OF REGUS D D M M Y Y
APPEARS HERE] ----------------------------------------- ---------------------------------------------------
Agreement Nr.: Agreement Date:
----------------------------------------- ---------------------------------------------------
<S> <C>
- ----------------------------------------------------------- ---------------------------------------------------
1a OPERATOR - REGISTERED ADDRESS 1b OPERATOR - LOCATION
- ----------------------------------------------------------- ---------------------------------------------------
REGUS (UK) LTD - TRAFALGAR DIVISION REGUS (UK) LTD - BASINGSTOKE DIVISION
1 Northumberland Avenue Pinewood, Chineham Business Park, Basingstoke
Trafalgar Square Hampshire, RG24 8YJ
London Bank details: National Westminster Bank
WC2N 5BW West Byfleet Branch, PO Box 320
5 Station Approach, Surrey, KT14 6YJ - UK
Sort code: 60-23-40, Acct: 65706498
- ----------------------------------------------------------- ---------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------
2a USER - REGISTERED ADDRESS 2b USER - INVOICING ADDRESS (if different)
- ----------------------------------------------------------- ---------------------------------------------------
COMPANY NAME MANNATECH INC COMPANY NAME:
- ----------------------------------------------------------- ---------------------------------------------------
CONTACT/TITLE MICHELLE VOHS. CONTACT/TITLE:
- ----------------------------------------------------------- ---------------------------------------------------
ADDRESS: 6005 ROYAL LN. ADDRESS:
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SUITE 200, COPPELL
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TEXAS
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POST CODE: 75019 POST CODE:
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TELEPHONE: 001 972 471 7400 TELEPHONE:
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3 FOR COMPANY USE ONLY COMMENTS:
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User's Suite Room No.(s) 102 104 103 106 107 AN INCREMENT OF THE CURRENT
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or such other room within the accommodation as allocated by RATE OF INFLATION + 5% WILL
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the Operator in substitution from time to time. BE ADDED TO THE STANDARD FACILITY
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Deposit Receipt 13260 XXXXXXXXXXXXX FEE.
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In respect of the agreed accommodation on behalf of (INFLATION RATE AS OF 01/05/00)
----------------------------------------------------
Regus UK Ltd.
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Standard Facility Fee 6630 per calender month
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VAT (pound) 1160-25 D D M M Y Y
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Term Commencement Date 0 1 0 6 0 0
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XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
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Termination Date 3 1 0 5 0 1
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<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
This Licence Agreement (hereafter LA) is made between the User whose name appears in 2 above (hereafter "User") and
the Operator whose registered name and address appear in 1a (hereafter "Operator"). The Accommodation is Pinewood,
Chinewood Business Park, Basingstoke, Hampshire RG24 8YJ hereafter "Accommodation").
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- -------------------------------------------------------------------------------------------------------------------
The User hereby confirms that The User has read and understood the terms and conditions overleaf and agrees to be
bound thereby and The Operator agrees to provide the services and facilities as mentioned overleaf.
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<S> <C>
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For and on behalf of The Operator For and on behalf of The User
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Name (printed): JASON MCCOY Name (printed): PATRICK COBB
- -------------------------------------------------------------------------------------------------------------------
Title: AREA SALES MANAGER Title: CFO
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Signature: Date: Signature: Date:

/s/ JASON MCCOY 27/04/99. /s/ PATRICK COBB 29/4/99
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/s/ ILLEGIBLE
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</TABLE>
<PAGE>

Terms and Conditions

1. Facilities and Services provided under this Agreement.

a) In consideration of the payment by the Client of the standard facility
fee specified in box 3 overleaf each month, the Operator provides the Client
with access to and use of fully furnished office accommodations (the
"Accommodations") as specified overleaf in box 3 and public areas such as
reception, kitchen, sanitary facilities and photocopying areas during the normal
operating hours of 08.30 hours and 18.00 hours from Mondays to Fridays and with
express permission from the Operator outside these hours. The standard facility
fee includes all rates (except where specifically agreed between Client and
Operator). In addition, the standard facility fee includes:

. four hours free use of the conference room for every complete
calendar month of this Agreement, subject to availability.

. three days office usage of any Regus centre world-wide, subject to
availability, free of charge for every complete calendar month of
this agreement.

. all service charges relating to normal use of heating, lighting,
cleaning, and servicing of public areas such as reception, kitchen,
and sanitary facilities.

. personalized telephone answering and receptionist to greet visitors.

b) The following services and facilities are made available for an
additional service charge, either directly or through third parties: secretarial
services; photocopying; messaging; courier Services; facsimile; travel
arrangements; office supplies; translations; meeting rooms; food and beverage
services; mail handling; and video conferencing (subject to availability).

2. Duration and Termination of the Agreement.

a) This Agreement is concluded for the duration specified in section 3
overleaf. Unless terminated in writing by either party giving three months
notice (two months if the original duration is three months or less), it will be
automatically extended by further periods of three months until three months
notice of termination is received to the end of an extension period.

b) Extraordinary termination of the Agreement and of the right of
access to the business centre.

i. The Operator may terminate the Agreement or refuse an extension
of the Agreement for just cause, including breach of any part of this
Agreement. Equally, if the Client, being a company, enters into
liquidation whether compulsory or voluntary (save for the purpose of
reconstruction or amalgamation) or, being an individual, has a receiving
order made against him or becomes bankrupt, the Operator will have the
right to terminate all of the Clients rights under the Agreement or such
other rights as the

<PAGE>

Operator delegates with or without notice to the Client and in addition
to and not in lieu of other remedies available. Upon such action by the
Operator, the Client will remain liable for all obligations which have
previously accrued and will have to pay an indemnity equal to three
months standard facility fee or the total facility fee of the unexpired
term whichever is greater.

ii. In case of termination of the contract between the Operator
and the building owner, the Operator is entitled to terminate the
agreement with the Client by giving the Client no less than three months
notice to the end of a calendar month.

c) Extension of stay beyond the normal period of the Agreement.

Should the Client require the use of the Accommodation once his
Agreement period has terminated and has not been renewed under the general
provisions of this Agreement, it is at the Operator's discretion to permit such
an extension, and it is subject to a surcharge on the standard facility fee.

3. Payment of the Standard Facility Fee and Service Charges.

a) Standard Facility Fee.

The standard facility fee plus applicable VAT as listed in section 3
overleaf is payable in advance on the first working day of each month.

b) Service charges.

All service charges for additional services and facilities used plus
applicable VAT are invoiced in arrears and are payable within seven days of
receipt of invoice. The Operator reserves the right to change the cost of any
or all of the service charges at any time during the term of the Agreement by
giving 30 days notice to the Client.

c) Deposit.

Prior to being given access to the Accommodation, the Client will pay a
deposit specified overleaf as security against all obligations entered into by
the Client in this Agreement, including any damage to the Client's
Accommodations and furnishings and fittings therein. This deposit will be
returned to the Client within 60 days of the Client vacating the premises,
subject to the deduction of any outstanding standard facility fee or service
charges or other fees outstanding and the case of returning the Accommodation to
the condition it was found in at the commencement of the term, reasonable wear
and tear excepted. The Operator reserves the right to increase the deposit
should the Client's outstanding facility fee and service charges exceed the
deposit amount held or if the Client is repeatedly in arrears with payment of
invoices.

d) Penalties upon late payment.

The Operator reserves the right to terminate the Agreement and ask the
Client to vacate the Accommodation immediately if the standard facility fee is
not paid or the service charges for the additional services are not paid by the
end of the day they are due. Any unpaid charges left

<PAGE>

outstanding after their due date will be subject to increase at the rate of 4%
above the prevailing base rate.

e) Payment of disputed invoiced items.

Should part of an invoice issued by the operator be in dispute, the
Client will be obliged to pay by the deadlines mentioned above the part of the
invoice which is not in dispute while the disputed amount is being settled
between the operator and the Client without prejudice to paragraph 3(d) above.

4. The Client's Rights and Responsibilities.

a) The Client will be entitled to carry on his business in the
Accommodation specified in box 3 overleaf. The Operator reserves the right to
reduce the Client to move to another Accommodation of similar size and equipment
within the business centre should this become necessary for business reasons.

b) During the term of this Agreement and subject to timely payment of
the standard facility fee, the Client is entitled to use the address of the
business centre as his business address. Upon termination of the Agreement for
whatever reason, it is the Client's responsibility to notify all parties of the
change of address. Subsequent mail sent to the address will be returned to
sender.

c) The Client may only conduct business from the Accommodation in the
name of the Client specified overleaf or such other business name as may be
agreed in writing with the Operator.

d) Upon being given access to the Accommodation, an inventory list will
be drawn up in which the Client confirms receipt of keys or entry cards, the
condition of the Accommodation and furniture and fittings at the start of the
Agreement.

e) The keys and entry cards remain the property of the Operator and
shall not be duplicated or transferred to third parties without the express
written permission of the Operator. The loss of keys must be reported to the
Operator immediately. The cost of lost keys or cards as well as the cost of
changing locks will be born by the Client. Should the Client use the premises
outside normal working hours, he is responsible for locking all doors used.

f) The Client may not alter the Accommodation allocated to him in any
way or install any furniture, equipment or telecommunication connections without
the prior written consent of the Operator. The granting of this consent is
entirely at the discretion of the Operator.

g) The Client will conduct his business in a way which does not
interfere with the Operator or any other Client of the business centre and will
comply with all laws, permits, licensing laws, taxes and any other requirements
regulating the conduct of his business.

h) The Client may not bring animals into the centre or play loud music
or use amplification equipment.

<PAGE>

i) The Client may not mount signs or any type of advertising boards
visible from outside his immediate Accommodation. If a house directory is
available in the business centre, the Client will be included in this. Any costs
incurred in doing so will be paid for by the Client.

j) The Client may not use the Accommodation for any activities or
actions which could be damaging to the Operator or the building owner or which
could lead to an increase in the insurance premiums to be paid by the Operator.

k) The Client may not itself or by any connected company or person
offer or procure the offer of any employment or hire of the employees of the
Operator. This applies to the entire duration of the Agreement and six months
following its termination. If the Client contravenes this provision, the
Operator will be entitled to compensation in the sum of the total annual
remuneration of the employees in question.

l) The Client will remain solely responsible for the safety of its
property and personnel and is responsible for arranging contents and third party
liability insurance for his equipment and belongings and for his actions and the
actions of his employees. The Client shall defend, indemnify and hold the
Operator harmless from any and all claims, liability or loss arising out of or
incident to (i) any injury to or death of persons occurring on or about the
Accommodation and (ii) the provision of, or use by the Client of any facilities
(including occupancy of the Accommodation) or services hereunder.

m) The Client shall take such steps as are necessary to comply with its
health and safety obligations and shall comply with such reasonable requirements
as the Operator in this regard or in the management of the business centre
generally as are necessary from time to time.

n) The Client will use the premises for general office purposes only
and for no other purposes (i.e. retail or a service open to the general public),
and will not use the premises to provide to others services provided by Regus to
Regus Clients and will not in any way whatsoever use or combine the Regus name,
in whole or in part, for the purpose of trading activities.

o) The Client shall vacate the Accommodation on the day of expiration
of this Agreement leaving the Accommodation in the same condition as it was
found save fair wear and tear. The Operator does not accept responsibility for
any belongings of the Client left in the Accommodation and has a right to
dispose of such property.

p) Joint and several liability. Should the Client be more than one
person, all parties to the Agreement are liable jointly and severally for all
obligations arising from the Agreement.

5. The Operator's Rights and Responsibilities.

a) The Operator is responsible for:

. general maintenance of the business centre and the Client's
Accommodation;

. cleaning of the entire business centre;

<PAGE>

. adequate lighting during normal opening hours; and

. maintenance, checks and renewals of equipment in the business centre.

b) The Operator has the right to enter the Client's Accommodation upon
giving reasonable notice, to inspect them, undertake repairs and maintenance
work and to show the Accommodation to prospective clients.

c) The Operator will not be liable for any loss sustained as a result
of the Operator failing to provide any of the services as set in this Agreement
as a result of any mechanical breakdown, strike, delay or failure of any staff,
manager or caretaker to perform their duties unless acting with gross negligence
and intent.

d) If the Client cannot be given access to the Accommodation or
services temporarily, the Operator's liability will be limited to forfeiting the
standard facility fee chargeable for that period.

e) If the Operator is unable to deliver possession of any part of the
Accommodation to be provided at the commencement of the term, the Operator will
not be liable for any resulting damage nor will he have any liability except
that the Client will not have to pay the standard facility fee for the period
concerned and may withdraw from the Agreement.

6. Other Provisions.

a) This Agreement represents a contractual agreement between the Client
and the Operator for the provision of services by the Operator to the Client.
The Operator and the Client acknowledge by their execution hereof that no
tenancy or lease rights are created in favor of the Client.

b) This Agreement is not assignable by the Client without the express
written permission of the Operator.

c) This Agreement may be transferred to another Regus Centre world-wide
with 60 days notice.

d) All notices by the Client or the Operator to the other must be in
writing and delivered to an officer or authorized representative of the party
concerned or sent by registered mail to the respective address shown overleaf.

e) The invalidity or unenforceability of any provision herein will not
effect or impair the validity of any other provision. No waiver of any default
of the Client will be implied from any failure by the Operator to take action
with respect to such default.

f) This Agreement supercedes any prior agreement and embodies all the
contractual stipulations between the Client and the Operator relative to its
subject matter.

<PAGE>

g) Venue and jurisdiction. This Agreement is interpreted and enforced
in accordance with the laws of the country in which the Regus Centre in question
is registered, as specified in box 1 overleaf.

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT JUNE 30, 1999 AND THE CONSOLIDATED STATEMENT OF
INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1999
<CASH> 14,001
<SECURITIES> 1,337
<RECEIVABLES> 925
<ALLOWANCES> 58
<INVENTORY> 7,932
<CURRENT-ASSETS> 24,923
<PP&E> 17,922
<DEPRECIATION> 4,675
<TOTAL-ASSETS> 39,545
<CURRENT-LIABILITIES> 16,503
<BONDS> 0
0
0
<COMMON> 3
<OTHER-SE> 16,461
<TOTAL-LIABILITY-AND-EQUITY> 39,545
<SALES> 87,651
<TOTAL-REVENUES> 87,651
<CGS> 14,060
<TOTAL-COSTS> 50,041
<OTHER-EXPENSES> 29,468
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 78
<INCOME-PRETAX> 8,005
<INCOME-TAX> 2,922
<INCOME-CONTINUING> 5,083
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,083
<EPS-BASIC> .22
<EPS-DILUTED> .20

</TABLE>