<PAGE>
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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 September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _________________
Commission File No. 000-24657
MANNATECH, INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
Texas 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)
Registrant's Telephone Number, including Area Code: (972) 471-7400
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 October 31, 2000, the number of shares outstanding of the
registrant's sole class of common stock, par value $0.0001 per share was
24,983,538.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
Part I - FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements.......................................................................... 1
Consolidated Balance Sheets....................................................................... 1
Consolidated Statements of Operations............................................................. 2
Consolidated Statements of Cash Flows............................................................. 3
Notes to Consolidated Financial Statements........................................................ 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......... 7
Overview.......................................................................................... 7
Results of Operations............................................................................. 9
Three months ended September 30, 2000 compared with the three months ended September 30, 1999..... 9
Nine months ended September 30, 2000 compared with the nine months ended September 30, 1999....... 11
Liquidity and Capital Resources................................................................... 14
Year 2000......................................................................................... 15
Recent Financial Accounting Standards Board Statements............................................ 16
Forward-Looking Statements........................................................................ 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk.................................... 17
Part II - OTHER INFORMATION
Item 1. Legal Proceedings............................................................................. 18
Item 2. Changes in Securities and Use of Proceeds..................................................... 18
Item 3. Defaults Upon Senior Securities............................................................... 18
Item 4. Submission of Matters to a Vote of Security Holders........................................... 19
Item 5. Other Information............................................................................. 19
Item 6. Exhibits and Reports on Form 8-K.............................................................. 19
</TABLE>
i
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MANNATECH, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
<TABLE>
<CAPTION>
December 31, September 30, 2000
ASSETS 1999 (Unaudited)
------------ -------------------
<S> <C> <C>
Cash and cash equivalents $ 11,576 $ 7,470
Short-term investments............................................ 1,388 233
Accounts receivable, less allowance for doubtful accounts of $58.. 275 247
Income tax receivable............................................. - 1,453
Current portion of notes receivable - shareholders................ 158 185
Inventories....................................................... 13,318 14,231
Prepaid expenses.................................................. 728 1,118
Deferred tax assets............................................... 564 541
------------ ------------
Total current assets............................................ 28,007 25,478
Property and equipment, net....................................... 14,093 14,558
Notes receivable-shareholders, excluding current portion.......... 543 384
Other assets...................................................... 2,136 1,389
------------ ------------
Total assets.................................................... $ 44,779 $ 41,809
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current portion of capital leases and note payable................ $ 732 $ 476
Accounts payable.................................................. 1,890 919
Accrued expenses.................................................. 13,722 14,804
------------ ------------
Total current liabilities....................................... 16,344 16,199
Capital leases and note payable, excluding current portion........ 326 38
Deferred tax liabilities.......................................... 817 823
------------ ------------
Total liabilities............................................... 17,487 17,060
------------ ------------
Commitments and contingencies..................................... - -
Commitment to repurchase common stock............................. - 1,000
------------ ------------
Shareholders' equity:
Preferred stock, $0.01 par value, 1,000,000 shares
authorized, no shares issued and outstanding.................... - -
Common stock, $0.0001 par value, 99,000,000 shares authorized
24,790,601 and 24,774,293 shares issued and outstanding
in 1999 and 25,026,301 and 24,983,538 in 2000.................. 2 2
Additional paid-in capital........................................ 17,348 17,916
Note receivable from shareholder.................................. -- (417)
Retained earnings................................................. 10,146 7,530
Accumulated other comprehensive income - foreign currency
translation adjustment......................................... - 5
------------ ------------
.................................................... 27,496 25,036
Less treasury stock, at cost, 16,308 shares in 1999 and 42,763
shares in 2000 and commitment to purchase treasury stock
of $1.0 million in 2000.......................................... (204) (1,287)
------------ ------------
Total shareholders' equity...................................... 27,292 23,749
------------ ------------
Total liabilities, repurchase of stock and shareholders'
equity........................................................ $ 44,779 $ 41,809
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
MANNATECH, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 2000
(in thousands, except per share information)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
-------------------- ---------------------
1999 2000 1999 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales.............................................. $45,814 $ 36,171 $133,465 $115,753
------- -------- -------- --------
Cost of Sales.......................................... 7,657 6,574 21,717 20,422
Commissions............................................ 18,353 14,824 54,334 47,206
------- -------- -------- --------
26,010 21,398 76,051 67,628
------- -------- -------- --------
Gross profit......................................... 19,804 14,773 57,414 48,125
------- -------- -------- --------
Operating Expenses:
Selling and administrative expenses.................. 8,839 8,179 26,200 27,113
Other operating costs................................ 6,231 8,549 18,339 23,922
Write-off of fixed asset............................. - - - 870
------- -------- -------- --------
Total operating expenses.......................... 15,070 16,728 44,539 51,905
------- -------- -------- --------
Income (loss) from operations.......................... 4,734 (1,955) 12,875 (3,780)
Interest income........................................ 233 139 406 561
Interest expense....................................... (31) (15) (123) (59)
Other income (expense), net............................ 84 (250) (133) (383)
------- -------- -------- --------
Income (loss) before income taxes...................... 5,020 (2,081) 13,025 (3,661)
Income tax (expense) benefit........................... (1,832) 558 (4,754) 1,045
------- -------- -------- --------
Net income (loss)...................................... $ 3,188 $ (1,523) $ 8,271 $ (2,616)
======= ======== ======== ========
Earnings (loss) per common share:
Basic................................................ $ 0.13 $ (0.06) $ 0.35 $ (0.10)
======= ======== ======== ========
Diluted.............................................. $ 0.12 $ (0.06) $ 0.33 $ (0.10)
======= ======== ======== ========
Weighted-average common shares outstanding
Basic................................................ 24,532 24,984 23,941 24,945
======= ======== ======== ========
Diluted.............................................. 25,678 24,984 25,320 24,945
======= ======== ======== ========
Dividends declared per common share.................... $ 0.00 $ 0.00 $ 0.06 $ 0.00
======= ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
MANNATECH, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 2000
(in thousands)
<TABLE>
<S> <C> <C>
1999 2000
---------- ----------
Cash flows from operating activities:
Net income (loss).......................................................... $ 8,271 $ (2,616)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization.......................................... 2,210 2,662
Write-off of fixed asset............................................... -- 870
Loss on disposal of assets............................................. 44 423
Tax benefit of warrants and options exercised.......................... 3,270 239
Deferred income tax expense............................................ - 29
Changes in operating assets and liabilities:
Accounts and income tax receivables.................................. 54 (1,425)
Inventories.......................................................... (1,528) (913)
Prepaid expenses..................................................... (580) (390)
Other assets......................................................... 120 151
Accounts payable..................................................... (4,810) (971)
Accrued expenses..................................................... 1,923 1,082
---------- ----------
Net cash provided by (used in) operating activities............... 8,974 (859)
---------- ----------
Cash flows from investing activities:
Acquisition of property and equipment and construction
in progress.............................................................. (1,475) (4,420)
Purchase of investments.................................................... (1,688) -
Maturities of investments.................................................. - 1,751
Repayment by shareholders/related party receivables........................ 974 132
---------- ----------
Net cash used in investing activities...................................... (2,189) (2,537)
---------- ----------
Cash flows from financing activities:
Payment of dividends....................................................... (1,327) -
Repayment of capital lease obligations..................................... (439) (403)
Proceeds from the initial public offering.................................. 12,000 -
Proceeds from warrants..................................................... 641 -
Proceeds from stock option exercises....................................... 539 328
Payment of note payable.................................................... (144) (140)
Advance to shareholder..................................................... - (500)
Deferred offering costs.................................................... (615) -
---------- ----------
Net cash provided by (used in) financing activities............... 10,655 (715)
---------- ----------
Effect of exchange rate changes on cash...................................... - 5
---------- ----------
Net increase (decrease) in cash and cash equivalents......................... 17,440 (4,106)
Cash and cash equivalents:
Beginning of period........................................................ 763 11,576
---------- ----------
End of period.............................................................. $ 18,203 $ 7,470
========== ==========
Supplemental disclosure of cash flow information:
Income taxes paid.......................................................... $ 4,671 $ 254
========== ==========
Interest paid.............................................................. $ 99 $ 59
========== ==========
Commitment to repurchase stock from shareholder............................ $ - $ 1,000
========== ==========
Treasury shares received for the payment of note receivable due
from shareholder......................................................... $ - $ 83
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<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, Australia, the United
Kingdom and Japan. 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 on their downline growth
and sales volume. The Company has eight wholly-owned subsidiaries located
throughout the world for the purpose of conducting business in the related
country. The wholly-owned subsidiaries are as follows:
<TABLE>
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------------
Wholly-owned Subsidiary Dated Began
Name Date Incorporated Location of Subsidiary Operations
-------------------------------------------------------------------------------------------------------------------------
Mannatech Australia Pty April 22, 1998 St. Leonards, Australia October 1, 1998
Limited
-------------------------------------------------------------------------------------------------------------------------
Mannatech Limited December 1, 1998 Republic of Ireland Dormant pending start
up operations
-------------------------------------------------------------------------------------------------------------------------
Mannatech Ltd. November 18, 1998 Basingstoke, Hampshire November 15, 1999
U.K.
-------------------------------------------------------------------------------------------------------------------------
Mannatech Payment Services April 11, 2000 Coppell, Texas June 26, 2000
Incorporated facilitating payment
services for Mannatech
Japan, Inc.
-------------------------------------------------------------------------------------------------------------------------
Mannatech Foreign Sales May 1, 1999 Barbados May 1, 1999 acting as a
Corporation foreign sales
corporation
-------------------------------------------------------------------------------------------------------------------------
Internet Health Group, Inc. May 7, 1999 Coppell, Texas December 20, 1999
operating through its
website
"clickwell.com"
-------------------------------------------------------------------------------------------------------------------------
Mannatech Japan, Inc. January 21, 2000 Tokyo, Japan June 26, 2000
-------------------------------------------------------------------------------------------------------------------------
Mannatech Limited February 14, 2000 New Zealand Dormant pending start
up operations
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
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 for the periods presented. 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, 1999.
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.
4
<PAGE>
Earnings (Loss) Per Share
The Company calculates earnings (loss) per share pursuant to Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("FAS 128"). FAS
128 requires dual presentation of basic and diluted earnings (loss) per share
("EPS") on the face of the consolidated statement of operations for all entities
with complex capital structures and requires a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation. Basic EPS calculations are based on the weighted-
average number of common shares outstanding during the period, while diluted EPS
calculations are calculated using the weighted-average number of common shares
and dilutive common share equivalents outstanding during each period. At
September 30, 2000, all of the 3,863,952 common stock options were excluded from
the dilutive EPS calculation as their effect was antidilutive.
The following data show the amounts used in computing earnings (loss)
per share and the effect on the weighted-average number of shares of dilutive
common share equivalents for the three months ended September 30, 1999 and 2000.
The amounts are rounded to the nearest thousands except for per share amounts.
<TABLE>
<CAPTION>
1999 2000
------------------------------------------ -----------------------------------------
Income Shares Per Share Income (Loss) Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net income (loss) available to
to common shareholders $ 3,188 24,532 $ 0.13 $ (1,523) 24,984 ($0.06)
Effect of dilutive securities:
Stock options -- 1,146 -- --
----------- ------------- ----------- -------------
Diluted EPS:
Net income (loss) available to
common shareholders plus
assumed conversions $ 3,188 25,678 $ 0.12 $ (1,523) 24,984 ($0.06)
=========== ============= ========= =========== ============= =========
</TABLE>
The following data show the amounts used in computing earnings (loss)
per share and the effect on the weighted-average number of shares of dilutive
common share equivalents for the nine months ended September 30, 1999 and 2000.
The amounts are rounded to the nearest thousands except for per share amounts.
<TABLE>
<CAPTION>
1999 2000
------------------------------------------ -----------------------------------------
Income Shares Per Share Income (Loss) Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net income (loss) available to
to common shareholders $ 8,271 23,941 $ 0.35 $ (2,616) 24,945 ($0.10)
Effect of dilutive securities:
Stock options -- 1,379 -- --
----------- ------------- ----------- -------------
Diluted EPS:
Net income (loss) available to
common shareholders plus
assumed conversions $ 8,271 25,320 $ 0.33 $ (2,616) 24,945 ($0.10)
=========== ============= ========= =========== ============= =========
</TABLE>
Accumulated Other Comprehensive Income
Unlike the Company's other subsidiaries, the local currency for its
Japan subsidiary is considered its functional currency. In the consolidated
financial statements, when the subsidiary's local currency is considered the
functional currency, all of its assets and liabilities are translated into U.S.
dollars at exchange rates existing at the balance sheet dates, revenues and
expenses are translated at weighted-average exchange rates, and shareholders'
equity and intercompany accounts are translated at historical exchange rates.
The foreign currency translation adjustment is
5
<PAGE>
recorded as a separate component of shareholders' equity and included as
accumulated other comprehensive income as required under Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income." Comprehensive
income is defined as the change in equity of a business enterprise during a
period from transactions and other events and circumstances from nonowner
sources and includes all changes in equity during a period except those
resulting from investments by owners and distributions to owners. The total
comprehensive loss, rounded to the nearest thousand, for the three months and
nine months ended September 30, 2000 would be $1,518 and $2,611, respectively.
The total comprehensive loss includes our net loss plus the accumulated
comprehensive income of $5.
NOTE 2 INVENTORIES
Inventories consist of raw materials and finished goods and are stated
at the lower of cost (using the first-in, first-out method) or market. At
December 31, 1999 and September 30, 2000 inventories, rounded to the nearest
thousands, consist of the following:
1999 2000
-------- --------
Raw materials................................ $ 5,788 $ 6,074
Finished goods............................... 7,530 8,157
-------- --------
$ 13,318 $ 14,231
======== ========
NOTE 3 ASSET IMPAIRMENT LOSS
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," the Company recorded an impairment loss on the long-lived asset
of its subsidiary Internet Health Group, Inc. as the trend in sales for the
subsidiary indicated that the undiscounted future cash flows from its operation
would be less than the carrying value of the long-lived asset related to their
operation. Accordingly, in the quarter ended June 30, 2000, the Company
recognized an asset impairment loss of $870,000. The impairment loss was
measured as the difference between the carrying value of the asset and the fair
value of the asset based on discounted estimated future cash flows.
NOTE 4 RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 133, "Accounting for Derivative, Instruments 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. In June
1999, the Financial Accounting Standards Board issued Financial Accounting
Standard No. 137, which defers the effective date of Financial Accounting
Standard No. 133 to fiscal years beginning after June 15, 2000. Management does
not believe this pronouncement will have a material impact on us.
In December 1999, the Securities and Exchange Commission ("Commission")
issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" ("SAB 101") which provides guidance on revenue recognition issues.
In June 2000, the Commission issued Staff Accounting Bulletin No. 101B, "Second
Amendment: Revenue Recognition in Financial Statements" which delayed the
implementation of SAB 101 until the fourth fiscal quarter of fiscal years
beginning after December 15, 1999. Management does not believe the
implementation of SAB 101 will have a material effect on their financial
position or results of operations.
NOTE 5 RELATED PARTY TRANSACTIONS
On August 8, 2000, the Company loaned Mr. Charles Fioretti $500,000. The
loan is collateralized by 174,570 shares of Mr. Fiorettis' stock. The
outstanding balance of the note will be repaid in six successive monthly
installments of 26,455 shares of his common stock valued at $83,333.33 beginning
on September 3, 2000 and continuing through February 3, 2001.
On August 8, 2000, the Company also entered into a lockup and repurchase
agreement with Mr. Charles Fioretti. Under the terms of the agreement, the
Company agreed to buy $1.0 million worth of Mr. Fioretti's stock. The
commitment to repurchase is included in treasury stock on the balance sheet.
The Company agreed to repurchase his stock, on a monthly basis, beginning on
March 3, 2001 through February 3, 2002. The Company agreed to buy $83,333.33
worth of his stock, valued at 90% of the fair market value price on the close of
that business day. Mr.
6
<PAGE>
Charles Fioretti is prohibited from selling any of his shares through March 2,
2002, unless approved by the Board of Directors. Beginning March 3, 2002, the
Company will have the option, but not the obligation to repurchase on a monthly
basis, at least $100,000 worth of his stock, valued at the greater of 90% of the
fair market value or $2.00 per share. As long as the Company exercises this
option, Mr. Fioretti will be prohibited from selling any of his shares.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion is intended to assist in the understanding of
Mannatech's financial position and results of operations for the three months
and nine months ended September 30, 2000 compared to the same periods in 1999.
The Consolidated Financial Statements and related Notes should be referred to in
conjunction with this discussion. Unless we state otherwise, all financial
information presented below, throughout this report and in the Consolidated
Financial Statements and related Notes includes Mannatech and all of its
subsidiaries on a consolidated basis.
Overview
We develop and sell proprietary nutritional supplements and topical
products through a network marketing system. We currently sell our products in
the United States, Canada, Australia, the United Kingdom and Japan, through a
worldwide network of approximately 274,000 active associates as of September 30,
2000, compared to approximately 253,000 active associates as of September 30,
1999. We continue to explore the most efficient way to enter the New Zealand
market, but have postponed opening until sometime late next year.
Our basic earnings (loss) per share was ($0.10) for the nine-months
ended September 30, 2000 compared to $0.35 per share for the nine-months ended
September 30, 1999. This decrease was primarily due to the following:
. a decrease in sales of $17.7 million;
. spending $2.2 million on expenses for our subsidiary, Internet Health
Group, Inc., including a one time write-off of fixed asset software, in
the second quarter, totaling $870,000;
. $3.5 million for start-up expenses relating to our new Japanese
operation; and
. some additional expenses incurred with the development of the United
Kingdom operations, which began in November 1999.
Internet Health Group, Inc., our subsidiary, which sells various
nonproprietary vitamins and nutritional supplements through its website -
clickwell.com, has continued to report disappointing results since its inception
in December 1999. For the nine months ended September 30, 2000, we recorded a
loss before income taxes of approximately $2.2 million, for the subsidiary. The
loss included the previously mentioned write-off of their fixed asset software.
In November 2000, Mannatech's Board of Directors approved the plan to cease
operations of this subsidiary by year-end, which will include the liquidation of
their inventory, currently valued at $848,000. The liquidation could result in a
further loss or write down for the fourth quarter. Meanwhile, we have
significantly reduced the subsidiary's operating expenses. The subsidiary has
two lease agreements and one agreement relating to its website that are
noncancelable and remain in effect through December 2002. Management will
contact these vendors to cancel these agreements; but if we are unsuccessful,
the remaining payments, reduced by the sublease relating to these three
noncancelable agreements through December 2002 are approximately $366,000.
Management expects the negative trend in sales to continue in the fourth
quarter of 2000. Management is looking into ways to reverse the recent sales
trend and return the Company to profitability. In the future we expect our
international operations to account for an increasing percentage of our
consolidated net sales, as we opened our Japan operations on June 26, 2000.
During the nine months ended September 30, 2000, the percentages of consolidated
net sales were as follows:
7
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------
Nine-months ended U.S. Canada Australia U.K. Japan Total
---------------------------------------------------------------------------------------------------------------
September 30, 2000 77.1% 13.4% 6.3% 1.2% 2.0% 100.0%
---------------------------------------------------------------------------------------------------------------
September 30, 1999 77.0% 14.4% 8.6% 0.0% 0.0% 100.0%
---------------------------------------------------------------------------------------------------------------
</TABLE>
Net sales for the United States, Canada and Australia continue to
decrease as compared to the same period in 1999. We believe the decrease is due
to our associates in the United States, Canada and Australia concentrating their
efforts on the development of their presence in the United Kingdom and Japan and
some of our associates exploring new competitive Internet networking companies
as a way to supplement their income. In addition, associates may have been
concerned about management changes and the decline of our stock price due to
heavy trading by a former officer. This former officer continues to sell his
stock as Mannatech tried unsuccessfully to negotiate with him to sign a lock up
agreement. As a result, the Board approved a repurchase plan to help stabilize
the price of our stock as a result of significant selling of stock by the former
officer. We are also exploring ways to simplify our worldwide compensation
program, offering more incentive programs and revamping the training program for
our associates. On October 28, 2000, we introduced a new product, ImmunoStart TM
Chewables, which help to trigger the immune responses immediately by binding to
specific receptor sites, which send signals directly to the lymphatic system.
ImmunoStart (TM) Chewables are designed to boost the immune response when taken
with our Ambrotose products. We also plan to introduce other new products in
early 2001, which we hope will further complement our current line of products
and boost sales.
Our revenues are primarily derived from sales of our products and our
associate starter and renewal packs, which include some combination of our
products and promotional materials. The purchase of a starter or renewal pack
allows the associate to purchase products at wholesale prices. If the associate
purchases a pack with a wholesale price of $300 or higher, the associate also
receives a $50 credit toward admission to one of our corporate events. We offer
a comparable associate starter pack in each country in which we do business;
however, each country has different regulatory guidelines that must be followed
and therefore not all types of packs are offered in all countries.
We generally recognize revenues when products or promotional materials
are shipped. Our revenues are based primarily on the wholesale prices of the
products sold. On average, the wholesale value of the nutritional and topical
products contained in each of our packs is between 60% and 70% of the total
wholesale value of the packs and the other 30% to 40% of the total wholesale
value consists of various promotional materials. Revenues from promotional packs
are allocated between products and corporate event admission based on the
proportionate fair value of these items. We defer revenue received from the sale
of our promotional packs to the extent that the sales price is greater than the
wholesale value of the individual items included in such packs. Allocated event
revenues are also deferred. All deferred revenue is amortized over a 12-month
period. Total deferred revenue was approximately $845,000 at December 31, 1999
and $216,000 at September 30, 2000, respectively.
Associates are compensated by commissions and incentives, which are our
most significant expense; however, the commission structure is designed not to
materially exceed 42% of commissionable net sales. Commissions and incentives
are paid to associates based on the following:
. their placement and position within our compensation plan;
. volume of direct commissionable sales;
. number of new enrolled associates; and
. obtainment of certain levels to qualify for incentive programs.
Our United States federal statutory tax rate is between 34% and 35%. We
pay taxes in Australia at a statutory tax rate of 36% and in the United Kingdom
at 31%. We expect to pay taxes in Japan at a statutory tax rate ranging from 42%
to 54%. We also 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
8
<PAGE>
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 some of the
countries that we have expanded to or plan to have maximum statutory tax rates
higher than the United States tax rate, therefore we may pay a higher overall
effective tax rate on our consolidated operations or have net operating losses
in foreign countries, which may not be fully realized. For example, our first
year of Japanese operations will have a net operating loss, which we plan to
utilize in the future as their operation expands; however, the income tax
benefit will not be recognized until profitable operations are evident.
Results of Operations
The following table summarizes Mannatech's operating results as a
percentage of net sales for each of the periods indicated.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
------------------------ --------------------------
1999 2000 1999 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales........................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales....................................... 16.7 18.2 16.3 17.6
Commissions......................................... 40.1 41.0 40.7 40.8
------ ------ ------- -------
Gross profit................................... 43.2 40.8 43.0 41.6
Operating expenses:
Selling and administrative expenses............ 19.3 22.6 19.6 23.4
Other operating costs.......................... 13.6 23.6 13.7 20.7
Write off of fixed asset....................... 0.0 0.0 0.0 0.8
------ ------ ------- -------
Income (loss) from operations....................... 10.3 (5.4) 9.7 (3.3)
Interest income..................................... 0.5 0.4 0.3 0.5
Interest expense.................................... (0.0) (0.0) (0.1) (0.1)
Other income (expense), net......................... 0.2 (0.8) (0.1) (0.3)
------ ------ ------- -------
Income (loss) before income taxes................... 11.0 (5.8) 9.8 (3.2)
Income tax (expense) benefit........................ (4.0) 1.6 (3.6) 0.9
------ ------ ------- -------
Net income (loss)................................... 7.0% (4.2)% 6.2% (2.3)%
====== ====== ======= =======
Number of starter packs sold........................ 31,299 24,493 97,103 88,066
Number of renewal packs sold........................ 20,689 16,215 48,482 48,779
------ ------ ------- -------
Total number of packs sold.......................... 51,988 40,708 145,585 136,845
====== ====== ======= =======
Total associates canceling associate status......... 1,608 1,182 4,392 4,903
====== ====== ======= =======
</TABLE>
Three months ended September 30, 2000 compared with the three months ended
September 30, 1999
Net Sales. Net sales decreased (21.0%) to $36.2 million for the three
months ended September 30, 2000 from $45.8 million for the comparable period in
1999. The net sales for United States, Canada and Australia decreased as
compared to the same period in 1999. We believe this decrease was the result of
many of our associates concentrating their efforts on developing a presence in
Japan and concerns about recent management changes. The overall decrease, was
primarily composed of the following:
. A $1.2 million increase from the sale of our optimal health kit
introduced in June 2000. Mannatech concentrated on formulating our
existing products to meet the international countries' guidelines rather
than focusing on launching new products; however, now that our main line
of products are registered in all of the new countries, Mannatech can
refocus on the introduction of new products. Mannatech announced a new
product - ImmunoStart(TM) Chewables on October 28, 2000.
9
<PAGE>
. A ($9.4) million decrease in existing product sales resulting from a
decrease in the volume of products sold, which was partially offset by
sales from the opening of the United Kingdom operations in November 1999
and the Japan operations in June 2000.
. A ($1.4) million decrease in associate pack sales resulting from a
decrease in the number sold and the change in the mix of associate packs
sold to new associates and for associate renewal packs sold. We are
currently exploring ways to change our packs to increase the number of
associate packs and renewal packs sold.
Cost of Sales. Cost of sales decreased (14.3%) to $6.6 million for the
three months ended September 30, 2000 from $7.7 million for the comparable
period in 1999. As a percentage of net sales, cost of sales increased to 18.2%
for the three months ended September 30, 2000 from 16.7% for the comparable
period in 1999. The increase in cost of sales as a percentage of net sales was
primarily due to a change in the product mix sold. The dollar amount decrease
was due to the decrease in the volume of finished goods sold and a decrease of
($209,000) for write-offs of discontinued promotional materials, normal
inventory shrinkage and inventory given away as samples and charitable
contributions, offset by an increase in freight of $100,000 for shipping
finished product to the United Kingdom and Japan.
Commissions. Commissions consist of payments to associates for sales
activity and down line growth. Commissions decreased (19.6%) to $14.8 million
for the three months ended September 30, 2000 from $18.4 million for the
comparable period in 1999. As a percentage of net sales, commissions increased
to 41.0% for the three months ended September 30, 2000 from 40.1% for the
comparable period in 1999. The dollar amount of the decrease in commissions was
a direct result of decreased commissionable sales offset slightly by the
introduction and payout of some new incentive programs for our associates.
Gross Profit. Gross profit decreased (25.3%) to $14.8 million for the
three months ended September 30, 2000 from $19.8 million for the comparable
period in 1999. As a percentage of net sales, gross profit decreased to 40.8%
for the three months ended September 30, 2000 from 43.2% for the comparable
period in 1999. These changes were primarily attributable to the factors
described above.
Selling and Administrative Expenses. Selling and administrative expenses
consist of human resource expenses, including wages, bonuses, printing,
recruiting, marketing expenses and associate events and are a mixture of both
fixed and variable expenses. Selling and administrative expenses decreased
(6.8%) to $8.2 million for the three months ended September 30, 2000 from $8.8
million for the comparable period in 1999. As a percentage of net sales, selling
and administrative expenses increased to 22.6% for the three months ended
September 30, 2000 from 19.3% for the comparable period in 1999. The dollar
decrease was due primarily to the following:
. a decrease of ($968,000) in freight and warehousing costs due to the
decrease in sales;
. an increase of $326,000 in wages and benefits primarily due to increased
wages and recruiting fees related to the Japan expansion, which was
partially offset by a decrease in bonuses to executives of ($170,000);
. a decrease of ($605,000) related to advertising expense incurred in 1999
for our website subsidiary, which was not incurred in 2000;
. an increase of $391,000 for hosting our national events and associate
events held overseas; and
. an increase of $148,000 related to printing costs associated with the
expansion into new countries;
Other Operating Costs. Other operating costs include utilities,
depreciation, consulting, professional fees, office supplies and travel
expenses. Other operating costs increased 37.1% to $8.5 million for the three
months ended September 30, 2000 from $6.2 million for the comparable period in
1999. As a percentage of net sales, other operating costs increased to 23.6% for
the three months ended September 30, 2000 from 13.6% for the comparable period
in 1999. The dollar increase was primarily due to the following:
10
<PAGE>
. an increase of approximately $945,000 related to consulting services,
including accounting and legal fees for the start up of our
international expansion into the United Kingdom and Japan;
. an increase of $447,000 in travel expenses, of which $300,000 is related
to the new incentive trip to Hawaii for our associates and $147,000 is
related to traveling to our international subsidiaries for the opening
of the Japanese operations;
. an increase of approximately $200,000 related to various general and
administrative expenses such as building rent for our overseas offices,
insurance, depreciation, postage and telephone related to international
expansion into the United Kingdom and Japan; and
. an increase of approximately $692,000 in fees charged by third party
processors for our international sales and distribution facilities.
Interest Income. Interest income decreased (40.3%) to $139,000 for the
three months ended September 30, 2000 from $233,000 for the comparable period in
1999. As a percentage of net sales, interest income decreased to 0.4% for the
three months ended September 30, 2000 from 0.5% for the comparable period in
1999. The decrease was the result of using some of our investments to fund
current year operational losses.
Interest Expense. Interest expense decreased (51.6%) to $15,000 for the
three months ended September 30, 2000 from $31,000 for the comparable period in
1999. As a percentage of net sales, interest expense remained the same for the
three months ended September 30, 2000 and for the comparable period in 1999. The
dollar decrease was due primarily to the reduction of the two lease agreements
with a bank for purchase of various equipment for our warehouse and laboratory
facility.
Other Income (Expense), Net. Other income (expense) consists of tax
penalties, miscellaneous income, foreign currency exchange and nonoperating
items. Other income (expense) increased to ($250,000) for the three months ended
September 30, 2000 from $84,000 for the comparable period in 1999. As a
percentage of net sales, other income (expense) increased to (0.8%) for the
three months ended September 30, 2000 from 0.2% for the comparable period in
1999. For the three months ended September 30, 2000, other income (expense)
consisted of ($133,000) loss on disposal of obsolete computer equipment and
($108,000) in currency exchange losses due to translation fluctuations. For the
three months ended September 30, 1999, other income (expense) consisted of
$70,000 of currency exchange gains due to translation fluctuations.
Income Tax (Expense) Benefit. Income tax (expense) benefit was $558,000
for the three months ended September 30, 2000 and ($1.8) million for the
comparable period in 1999. The effective tax rate decreased to 26.8% for the
three months ended September 30, 2000 from 36.5% for the comparable period in
1999. Our effective tax rate decreased primarily as a result of recording
certain nondeductible expenses and recording the income tax benefit expected
from the current year net loss from operations.
Net Income (Loss). For the three months ended September 30, 2000 we had
a net loss of ($1.5) million compared to net income of $3.2 million for the
comparable period in 1999. As a percentage of net sales, the net income (loss)
decreased to (4.2%) for the three months ended September 30, 2000 compared to
7.0% in 1999. The dollar amount of the decrease was due primarily to net sales
decreasing by (21.0%), expenses incurred for our international expansion and our
website subsidiary and other factors described above.
Nine months ended September 30, 2000 compared with the nine months ended
September 30, 1999
Net Sales. Net sales decreased (13.3%) to $115.8 million for the nine
months ended September 30, 2000 from $133.5 million for the comparable period in
1999. The net sales for United States, Canada and Australia decreased as
compared to the same period in 1999. We believe this decrease was the result of
many of our associates concentrating their efforts on developing a presence in
the United Kingdom and Japan as well as concerns over recent management changes.
The overall decrease in net sales was primarily composed of the following:
11
<PAGE>
. A $2.5 million increase from the sale of our optimal health kits
introduced in June 2000. Mannatech concentrated on formulating our
existing products to meet the international countries' guidelines rather
than focusing on launching new products; however, now that our main line
of products are registered in all of the new countries, Mannatech can
refocus on the introduction of new products. Mannatech announced a new
product - ImmunoStart(TM) Chewables on October 28, 2000.
. A ($17.7) million decrease in existing product sales resulting from a
decrease in the volume of products sold, which was partially offset by
the opening of the United Kingdom operations in November 1999 and Japan
operation in June 2000.
. A ($2.5) million decrease in associate pack sales resulting from a
decrease in the number sold and changes in the mix of associate packs
sold to new associates and for associate renewal packs.
Cost of Sales. Cost of sales decreased (6.0%) to $20.4 million for the
nine months ended September 30, 2000 from $21.7 million for the comparable
period in 1999. As a percentage of net sales, cost of sales increased to 17.6%
for the nine months ended September 30, 2000 from 16.3% for the comparable
period in 1999. The increase in cost of sales as a percentage of net sales and
decrease in the dollar amount was primarily due to the following:
. a decrease in volume and change in mix of finished goods sold;
. offset by the recording of write-offs of discontinued promotional
materials totaling $383,000;
. recording $367,000 for normal inventory shrinkage and inventory given
away as samples and charitable contributions; and
. an increase in freight of $182,000 due to shipping finished product to
the United Kingdom and Japan.
Commissions. Commissions consist of payments to associates for sales
activity and downline growth. Commissions decreased (13.1%) to $47.2 million for
the nine months ended September 30, 2000 from $54.3 million for the comparable
period in 1999. As a percentage of net sales, commissions increased to 40.8% for
the nine months ended September 30, 2000 from 40.7% for the comparable period in
1999. The dollar decrease was the direct result of a decrease in commissionable
sales, which was partially offset by the following:
. the introduction of new incentive programs for associates, including the
fast start bonus program in the fourth quarter of 1999 and the personal
consumption plan for the first six months of 2000; and
. the start up of operations in the United Kingdom in November 1999 and
Japan in June 2000.
Gross Profit. Gross profit decreased (16.2%) to $48.1 million for the
nine months ended September 30, 2000 from $57.4 million for the comparable
period in 1999. As a percentage of net sales, gross profit decreased to 41.6%
for the nine months ended September 30, 2000 from 43.0% for the comparable
period in 1999. These changes were primarily attributable to the factors
described above.
Selling and Administrative Expenses. Selling and administrative expenses
consist of human resource expenses, including wages, bonuses, printing,
recruiting, marketing expenses and associate events and are a mixture of both
fixed and variable expenses. Selling and administrative expenses increased 3.4%
to $27.1 million for the nine months ended September 30, 2000 from $26.2 million
for the comparable period in 1999. As a percentage of net sales, selling and
administrative expenses increased to 23.4% for the nine months ended September
30, 2000 from 19.6% for the comparable period in 1999. The dollar amount of the
increase was due primarily to the following:
. $700,000 increase related to hosting our national events, which includes
events in Australia, United Kingdom and Japan and an increase in the
attendance of our annual national event held in March 2000;
. $250,000 increase related to mailing and printing costs associated with
international expansion, reports for public filings and hosting our
first annual shareholders meeting;
12
<PAGE>
. $214,000 increase related to advertising for our Internet Health Group,
Inc. subsidiary and for our international operations;
. $546,000 increase in wages and benefits of which $2.3 million related to
our international expansion offset by the decrease in executive bonuses
of ($679,000) and a decrease in contract labor of ($1 million); and
. a decrease of ($838,000) in freight related to the decrease in sales.
Other Operating Costs. Other operating costs include utilities,
depreciation, consulting, professional fees, office supplies and travel
expenses. Other operating costs increased 30.6% to $23.9 million for the nine
months ended September 30, 2000 from $18.3 million for the comparable period in
1999. As a percentage of net sales, other operating costs increased to 20.7% for
the nine months ended September 30, 2000 from 13.7% for the comparable period in
1999. The dollar amount of the increase was primarily due to the following:
. an increase of approximately $2.4 million related to consulting
services, including accounting and legal fees for the start up of our
international expansion into the United Kingdom and Japan and
consultants for various corporate changes;
. an increase of $1.1 million related to travel expenses, which includes
$300,000 for the new incentive trip to Hawaii for our associates and
$800,000 related to the expansion into the United Kingdom and Japan;
. an increase of approximately $1.3 million related to various general and
administrative expenses such as postage and depreciation; which was
offset by the decrease in net sales;
. an increase of approximately $1.4 million in fees charged by third party
processors for our international sales and distribution facilities due
to the expansion into the United Kingdom and Japan; and
. a decrease of ($575,000) related to the buyout of the Ray Robbins
royalty agreement in 1999 offset by the additional payment to him in
2000, of $200,000.
Write off of fixed asset. In the second quarter of 2000, management
determined our Internet Health Group, Inc. subsidiary's fixed asset with a book
value of $870,000 was impaired and should be written off. The write off was a
result of the continuation of the poor performance of our subsidiary.
Management has also reduced the subsidiary's future operating costs and approved
the plan to cease its operations by year-end.
Interest Income. Interest income increased 38.2% to $561,000 for the
nine months ended September 30, 2000 from $406,000 for the comparable period in
1999. As a percentage of net sales, interest income increased to 0.5% for the
nine months ended September 30, 2000 from 0.3% for the comparable period in
1999. The dollar increase was primarily due to investing in certain investments
for all of 2000 compared to the middle of 1999; which was offset by using some
of the investments to fund current year operations.
Interest Expense. Interest expense decreased (52.0%) to $59,000 for the
nine months ended September 30, 2000 from $123,000 for the comparable period in
1999. As a percentage of net sales, interest expense remained the same at 0.1%
for the nine months ended September 30, 2000 and for the comparable period in
1999. The dollar decrease was due primarily to the reduction of the two lease
agreements with a bank for the purchase of various equipment for our warehouse
and laboratory facility.
Other Income (Expense), Net. Other income (expense) consists of tax
penalties, miscellaneous income, foreign currency exchange and nonoperating
items. Other income (expense) increased 188.0% to ($383,000) for the nine months
ended September 30, 2000 from ($133,000) for the comparable period in 1999. As a
percentage of net sales, other income (expense) increased to 0.3% for the nine
months ended September 30, 2000 from 0.1% for the comparable period in 1999. For
the nine months ended September 30, 2000, other income (expense) consisted of
approximately ($36,000) in sales tax payments and tax penalties, loss from the
disposal of obsolete computer equipment of ($133,000) and approximately
($199,000) in currency
13
<PAGE>
exchange losses due to translation fluctuations. For the nine months ended
September 30, 1999, other income (expense) consisted primarily of tax penalties
of ($91,000) and ($42,000) of loss from the disposal of computer hardware.
Income Tax (Expense) Benefit. Income tax (expense) benefit was $1.0
million for the nine months ended September 30, 2000 and ($4.8) million for the
comparable period in 1999. The effective tax rate decreased to 28.5% for the
nine months ended September 30, 2000 from 36.5% for the comparable period in
1999. Our effective tax rate decreased primarily as a result of recording
certain nondeductible expenses and the income tax benefit expected from the
current year net loss from operations.
Net Income (Loss). For the nine months ended September 30, 2000 we had a
net loss of ($2.6) million compared to net income of $8.3 million for the
comparable period in 1999. As a percentage of net sales the net income (loss)
decreased to (2.3%) for the nine months ended September 30, 2000 compared to
6.2% in 1999. The dollar amount of the decrease was due to net sales decreasing
by (13.3%); the $870,000 write-off of fixed asset, operating losses from our
subsidiary totaling $2.2 million; $3.5 million in expenses incurred related
to our international expansion and associate events hosted by Mannatech and
other factors as 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, at $8.00 per
share and have used all of the proceeds. We used approximately $6.3 million of
our proceeds from the initial public offering for international expansion,
primarily for product registration, initial inventory requirements and similar
items and have used the remaining $2.9 million to fund working capital and for
general corporate purposes.
Our primary capital requirement is to fund working capital to support
our international growth and fund current operations. We financed our
operations, in 1999, primarily through cash flows from operating activities and
proceeds from our initial public offering. As a result of our expenditures on
the facilities, equipment and personnel necessary to support our international
expansion, we had working capital of $11.7 million as of December 31, 1999
compared to working capital of $9.3 million at September 30, 2000. For the first
nine months of 1999, we invested approximately $1.5 million relating to property
and equipment including the expansion into Australia and the United Kingdom.
During the first nine months of 2000 we invested approximately $4.4 million in
property and equipment, including our expansion into the United Kingdom and
Japan and opening our website subsidiary. All of these projects were financed
through operating cash flow in 2000.
We paid approximately $1.3 million in dividends to our shareholders in
January and February of 1999. For the nine months ended September 30, 2000,
current liabilities decreased due to a decrease in payables relating to the
curtailment of expenses and a reduction in our international expansion expenses.
We believe our existing facilities are sufficient to support any 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 (used in) operating activities was $9.0 million for
the nine months ended September 30, 1999 compared to ($859,000) for the nine
months ended September 30, 2000. During 1999, net income was partially offset by
increases in inventories and other expenses related to our international
expansion and a decrease in income tax payable of approximately $3.0 million
from the tax benefit related to the exercise of warrants and options. During the
nine months ended September 30, 2000, we incurred a net loss, significantly due
to the decrease in net sales, an increase in inventories, a decline in payables;
increase in income tax receivable of $1.5 million related to the current year
net loss from operations; and expesnese of approximately $3.5 million for the
start up operations in Japan and the United Kingdom.
14
<PAGE>
Net cash used in investing activities was $2.2 million for the nine
months ended September 30, 1999 compared to $2.5 million for the nine months
ended September 30, 2000. In 1999, these activities consisted primarily of
purchases of computer hardware, internal development of computer software and
investing the net proceeds from the initial public offering into investments,
offset by the repayment of the notes receivable due from certain shareholders to
us of approximately $974,000. In the first nine months of 2000, investing
activities consisted of purchases of computer hardware and software, build out
of our Japan facility and liquidation of investments. During the remainder of
2000, we intend to spend up to an additional $300,000 for additional purchases
of equipment for our international expansion into Japan. We believe the existing
facilities and software program should be sufficient for our immediate needs;
however, we are planning to change the network platform of our existing
proprietary software and integrate it with the Internet over the next two years.
Net cash provided by (used in) financing activities totaled $10.7
million for the nine months ended September 30, 1999 and ($715,000) for the nine
months ended September 30, 2000 In 1999, we paid dividends on a monthly basis to
our shareholders in the amount of $0.02-$0.06 per share and paid dividends 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. In the
first nine months of 2000, we received approximately $328,000 related to the
exercise of 235,700 stock options at a price per share ranging from $1.35 to
$2.00.
Our existing capital resources, including cash provided by (used in)
operating activities, bank borrowings, limiting future international expansion,
curtailment of operating expenses and the suspension of dividend payments to
shareholders, should be adequate to fund our operations for at least the next
twelve months. We have no present commitments or agreements with respect to any
acquisitions or purchases of manufacturing facilities or new technologies. On
August 8, 2000, we loaned Mr. Charles Fioretti $500,000 and agreed to purchase
$1.0 million of his stock through February 2002. See item 5, on page 19 for a
summary of terms. Mannatech also has agreed to reserve, for the next twelve
months, up to $2.0 million to buy back its stock, on the open market, under
certain price conditions. As of this filing, we have not repurchased any of our
shares in the open market. Changes could also 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 and retention of associates;
. timing and amount of change to our existing global compensation plan;
and
. our research and development efforts, including launching new products.
If our existing capital resources are insufficient to meet our capital
requirements, we will be required to raise additional funds. We cannot be sure
that additional funding, if necessary, will be available on favorable terms, if
at all.
Year 2000
Prior to January 1, 2000, there was a great deal of concern regarding
the ability of computers to adequately distinguish 21st century dates from 20th
century dates due to the two-digit date fields used by many computer systems and
software programs. This inability to distinguish whether "00" means 1900 or 2000
may have resulted in failures or the creation of erroneous results. Most reports
to date, however, are that computer systems are functioning normally and the
compliance and remediation work accomplished leading up to 2000 was effective
and prevented such problems.
We believe that our current versions of software products licensed from
third parties are Year 2000 compliant; however, some of our suppliers may be
running earlier versions of software products that may not be Year 2000
compliant. We have evaluated the Year 2000 readiness of our vendors and third
parties and found no system failures. Furthermore, we currently are unaware of
any material operational issues or costs associated with preparing and
15
<PAGE>
maintaining our computer and technology systems for the Year 2000; however, we
may still experience material unanticipated problems and costs caused by
undetected errors or defects, which could seriously harm our business.
Our total cost associated with Year 2000 identification, remediation and
testing was approximately $100,000 and was funded through our operating cash
flows. None of our applications failed to perform on January 1, 2000; however,
computer experts have warned that there may still be residual consequences of
the change in centuries. If we experience any application failures in 2000, it
could result in a decrease in sales of our products or an increase in the
allocation of resources to address the problem with the Year 2000. If this
should occur, we would have to resort to temporary manual processing, which is
not expected to have a material adverse impact on our short-term operations.
Recent Financial Accounting Standards Board Statements
In June 1998, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 133, "Accounting for Derivative, Instruments 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. In June
1999, the Financial Accounting Standards Board issued Financial Accounting
Standard No. 137, which defers the effective date of Financial Accounting
Standard No. 133 to fiscal years beginning after June 15, 2000. We do not
believe this pronouncement will have a material impact on us.
In December 1999, the Securities and Exchange Commission ("Commission")
issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" ("SAB 101") which provides guidance on revenue recognition issues.
In June 2000, the Commission issued Staff Accounting Bulletin No. 101B, "Second
Amendment: Revenue Recognition in Financial Statements" which delayed the
implementation of SAB 101 until the fourth fiscal quarter of fiscal years
beginning after December 15, 1999. We do not believe the implementation of SAB
101 will have a material effect on our financial position or results of
operations.
Forward-Looking Statements
Some of our statements under "Legal Proceedings," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Quantitative and Qualitative Disclosures about Market Risk," "Other
Information" and elsewhere in this report may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 that are subject to certain
events, risks and uncertainties that maybe outside of our control. These
forward-looking statements include statements of:
. management's plans and objectives for our future operations and future
economic performance;
. our capital budget and future capital requirements;
. meeting our existing and future operating needs;
. the level of future expenditures; including plans for any of our
subsidiaries;
. planned international expansion;
. launching of new products;
. revamping the existing compensation program; and
. the outcome of regulatory and litigation matters, and the assumptions
described in this report underlying such forward-looking statements.
Actual results and developments may differ materially from those
expressed in or implied by such statements due to a number of factors,
including, without limitation:
16
<PAGE>
. those described in the context of such forward-looking statements;
. future product development and manufacturing costs;
. timely development and acceptance of new products;
. the entrance 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 other documents and
reports filed with the Securities and Exchange Commission.
In some cases, forward-looking statements are identified by terminology
such as "may," "will," "should," "could," "expects," "plans," "intends,"
"anticipates," "believes," "estimates," "approximates," "predicts," "potential"
or "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 and
we are under no duty to update any of the forward-looking statements after the
date of this report.
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, hedges that are likely to expose us to certain types of
market risk including interest rate, commodity price or equity price risk. We
have purchased investments but there has been no material change in our exposure
to interest rate risk from our investments. We have not issued any debt
instruments, entered into any forward or futures contracts, purchased any
options or entered into any swaps.
We also 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 exchange
rates may positively or negatively affect our financial results (as expressed in
United States dollars). When the United States dollar increases against
currencies in which we sell products or a weakening 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 variability in currency exchange rate is assessed by applying an appropriate
range of potential rate fluctuations to our assets, obligations and projected
transactions denominated in foreign currency. Based upon our overall currency
rate exposure at September 30, 2000, we do not believe that our present exposure
to exchange rate fluctuations will have a material impact on our consolidated
financial position or consolidated results of operations. However, the foreign
currencies in which we have exposure to foreign currency exchange rate risk
include Japan, Australia and the United Kingdom. The high and low exchange rates
to the United States dollar, for each of these countries, during the first nine
months of 2000 were as follows:
----------------------------------------------------------------
Country/Currency High Low
----------------------------------------------------------------
Australia/Dollar .6685 .5358
----------------------------------------------------------------
United Kingdom/British Pound 1.6569 1.3945
----------------------------------------------------------------
Japan/Yen 111.7 101.3
----------------------------------------------------------------
Given the uncertainty of the exchange rate fluctuation against the
United States dollar, we cannot determine the dollar effect, if any, of the
fluctuation on our future business, product pricing, results of operations or
financial condition. All statements other than historical information
incorporated in this Item 3 are forward-looking statements.
17
<PAGE>
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
On May 19, 2000, our Notice of Opposition to the issuance of a
registered trademark issued to IntraCell Nutrition, Inc. for the name "Manna"
was rejected. Intracell has brought no action against us, contending any
infringement by Mannatech on that of Intracell; although it could happen in the
future. Nevertheless, if Intracell brings any infringement action against
Mannatech, such action could have an adverse effect on our business, results of
operations, financial condition and liquidity.
On August 13, 1999, Mannatech filed a lawsuit against Dr. Daryl See, in
Federal District Court and on May 22, 2000, Mannatech agreed to dismiss all
claims against Dr. Daryl See.
On May 30, 2000, Mannatech filed suit in the United States District
Court of the Northern District of Texas, Dallas Division, against Gryphon
Advisors II, L.L.C. a Delaware limited liability company. Mannatech alleges the
amount billed for out-of-pocket expenses and advisory service fees totaling $1.6
million was unreasonable and the Gryphon Advisors breached their Advisory
Agreement. Under the Advisory Agreement, Gryphon was to provide advice on
potential financing opportunities, acquisitions, the financial management of
Mannatech and other issues. The advice should consist of all aspects of its
capital structure, capital-raising transactions and assisting the Company in
evaluating potential acquisition targets. On June 26, 2000, Gryphon Advisors
filed a cross-action suit for breach of contract, fraud seeking the payment of
the $1.6 million and exemplary damages on its fraud claim. The case is in the
discovery stage. Mannatech intends to vigorously fight these allegations;
however, an adverse outcome of this claim could have a material effect on our
business, results of operations, financial condition and liquidity.
On February 24, 2000, Ms. Caroline Rivers filed a class action complaint
against Mannatech and three other defendants, in District Court, County of
Boulder, State of Colorado; alleging breach of contract, negligence and that the
defendants were marketing and selling illegal health insurance policies. On June
29, 2000, Mannatech's Motion for Dismissal was granted and all claims relating
to the uncertified class action complaint were dismissed against Mannatech.
Except as described above, there were no other material changes in, or
additions to, the legal proceedings previously reported in Mannatech's Annual
Report on Form 10-K for 1999 as filed with the Commission on March 30, 2000 or
in our Quarterly Report on Form 10-Q for our second quarter of 2000 as filed
with the Commission on August 14, 2000.
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
None.
18
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
On August 2, 2000, the Board of Directors unanimously voted Mr. Samuel
L. Caster as a Class II director to replace Mr. Chris T. Sullivan. In the
future, the Board of Directors intends to add up to three additional independent
directors whom they believe would strengthen our Board of Directors. The Board
of Directors is especially interested in candidates who have multi-level
marketing and significant management experience.
On August 8, 2000, an agreement between Mannatech and Mr. Charles E.
Fioretti was entered into to purchase some of his stock and enter into an
eighteen month lock up agreement. The terms of the agreement is as follows:
. On August 8, 2000, Mannatech loaned Mr. Charles Fioretti $500,000. The
outstanding balance of the note will be repaid in six successive monthly
installments of 26,455 shares of common stock ($83,333.33 divided by the
agreed price of stock on August 8, 2000 at $3.50 times .90) beginning on
September 3, 2000 and continuing through February 3, 2001, at which time
any remaining balance will be due. The note is collateralized by 174,570
shares of stock owned by Mr. Fioretti.
. From March 3, 2001 through February 3, 2002, Mannatech will repurchase
$83,333.33 of his stock on a monthly basis, valued at 90% of the fair
market value price on the close of that business day.
. Mr. Fioretti is prohibited from selling any shares, that he owns
directly or indirectly for eighteen months beginning on August 8, 2000
unless it is approved by our Board of Directors.
. Commencing on March 3, 2002 and on the third business day thereafter,
Mannatech will have the right, but not the obligation, to purchase, on a
monthly basis, at least $100,000 worth of his stock, valued at the
greater of 90% of the fair market value or $2.00 per share.
On August 9, 2000 the Board of Directors approved up to $2.0 million to
be used to buy back our common stock, over the next twelve months, in the open
market, under certain price conditions. As of September 30, 2000 Mannatech has
not repurchased any of its shares on the open market. The Board of Directors
also agreed to end the unsuccessful negotiations with Mr. William C. Fioretti, a
former officer, to obtain a lock up agreement, as the terms he demanded were
considered unreasonable.
On October 13, 2000, Mannatech hired Ms. Cynthia Tysinger to replace Mr.
Eoin Redmond as the Chief Information Officer and Vice President. Ms. Tysinger
was an associate and will be transferring her associate position to her father.
Before being hired, Ms. Tysinger performed various consulting services for our
Glycoscience website. Ms. Tysinger has more than twenty-six years of experience
in the information technology industry and spent five years with GTE Information
Systems Division in Virginia.
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 Mannatech,
dated October 25, 1995, incorporated herein by reference to
Exhibit 3.1 to Mannatech's Form S-1 (File No. 333-63133) filed
with the Commission on September 10, 1998.
3.2 Second Amended and Restated Bylaws of Mannatech, dated August 26,
1997, incorporated herein by reference to Exhibit 3.2 to
Mannatech's Form S-1 (File No. 333-63133) filed with the
Commission on September 10, 1998.
19
<PAGE>
3.3 Amendment to the Bylaws of Mannatech dated May 19, 1998,
incorporated herein by reference to Exhibit 3.3 to Mannatech's
Form S-1 (File No. 333-63133) filed with the Commission on
September 10, 1998.
3.4 Amendment to the Bylaws of Mannatech dated October 20, 1999,
incorporated herein by reference to Exhibit 99 to Mannatech's
Form 8-K (File No. 000-24657) filed with the Commission on
November 3, 1999.
4 Specimen Certificate representing the common stock, par value
$0.0001 per share, of Mannatech, incorporated herein by
reference to Exhibit 4.1 to Mannatech's Amendment No. 1 to Form
S-1 (File No. 333-63133) filed with the Commission on October
28, 1998.
10.1 1997 Stock Option Plan dated May 20, 1997, incorporated herein
by reference to Exhibit 10.1 to Mannatech'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 Mannatech's
Form S-1 (File No. 333-63133) filed with the Commission on
September 10, 1998.
10.3 Option Agreement dated July 1, 1997 with Multi-Venture Partners,
Ltd., incorporated herein by reference to Exhibit 10.7 to
Mannatech's Form S-1 (File No. 333-63133) filed with the
Commission on September 10, 1998.
10.4 Option Agreement dated October 19, 1999 with Steven A. Barker
Ph.D., incorporated by reference to Exhibit 10.8 to Mannatech's
1999 Form 10-K (File No. 000-24657) filed with the Commission on
March 30, 2000.
10.5 Form of Indemnification Agreement with a schedule of director
signatures, incorporated herein by reference to Exhibit 10.8 to
Mannatech's Form S-1 (File No. 333-63133) filed with the
Commission on September 10, 1998.
10.6 Schedule of additional directors signatories relating to the
Form of Indemnification Agreements in Exhibit 10.5 above,
incorporated by reference to Exhibit 10.10 to Mannatech's 1999
Form 10-K (File No. 000-24657) filed with the Commission on
March 30, 2000.
10.7 Letter of Understanding Regarding Development of Proprietary
Information for Mannatech effective as of August 1, 1997, as
amended, by and between Bill H. McAnalley, Ph.D. and Mannatech,
incorporated herein by reference to Exhibit 10.12 to Mannatech's
Form S-1 (File No. 333-63133) filed with the Commission on
September 10, 1998.
10.8 Commercial Lease Agreement dated November 7, 1996 between MEPC
Quorum Properties II Inc. and Mannatech, 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 Mannatech's Form S-1 (File
No. 333-63133) filed with the Commission on September 10, 1998.
10.9 Commercial Lease Agreement dated May 29, 1997 between MEPC
Quorum Properties II Inc. and Mannatech, as amended by the First
Amendment thereto dated November 6, 1997, incorporated herein by
reference to Exhibit 10.14 to Mannatech's Form S-1 (File
No. 333-63133) filed with the Commission on September 10, 1998.
20
<PAGE>
10.10 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 Mannatech,
incorporated herein by reference to Exhibit 10.15 to
Mannatech's Form S-1 (File No. 333-63133) filed with the
Commission on September 10, 1998.
10.11 Supply Agreement effective as of August 14, 1997 by and between
Mannatech and Caraloe, Inc., incorporated herein by reference
to Exhibit 10.17 to Mannatech's Form S-1 (File No. 333-63133)
filed with the Commission on September 10, 1998.
10.12 Trademark License Agreement effective as of August 14, 1997 by
and between Mannatech and Caraloe, Inc., incorporated herein by
reference to Exhibit 10.19 to Mannatech's Form S-1 (File No.
333-63133) filed with the Commission on September 10, 1998.
10.13 Supply Agreement effective January 12, 2000 by and between
Mannatech and Caraloe, Inc, incorporated herein by reference to
Exhibit 10.17 to Mannatech's 1999 Form 10-K (File No. 000-
24657) filed with the Commission on March 30, 2000.
10.14 Letter of Agreement from Mannatech to Michael L. Finney of
LAREX, Incorporated dated December 23, 1997, incorporated
herein by reference to Exhibit 10.20 to Mannatech's Form S-1
(File No. 333-63133) filed with the Commission on September 10,
1998.
10.15 Product Development and Distribution Agreement effective as of
September 15, 1997 between New Era Nutrition Inc. and
Mannatech, incorporated herein by reference to Exhibit 10.21 to
Mannatech's Form S-1 (File No. 333-63133) filed with the
Commission on September 10, 1998.
10.16 Summary of Management Bonus Plan, incorporated herein by
reference to Exhibit 10.23 to Mannatech's Form S-1 (File No.
333-63133) filed with the Commission on September 10, 1998.
10.17 Individual Guaranty of Samuel L. Caster dated January 5, 1998,
incorporated herein by reference to Exhibit 10.27 to
Mannatech's Form S-1 (File No. 333-63133) filed with the
Commission on September 10, 1998.
10.18 Individual Guaranty of Charles E. Fioretti dated January 5,
1998, incorporated herein by reference to Exhibit 10.28 to
Mannatech's Form S-1 (File No. 333-63133) filed with the
Commission on September 10, 1998.
10.19 Form of Employment Agreement entered into between Mannatech 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 Mannatech's Amendment
No. 1 to Form S-1 (File No. 333-63133) filed with the
Commission on October 28, 1998.
10.20 Employment Agreement dated November 1, 1999, entered into
between Mannatech and Terry L. Persinger, incorporated herein
by reference to Exhibit 10.25 to Mannatech's 1999 Form 10-K
(File No. 000-24657) filed with the Commission on March 30,
2000.
10.21 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
Mannatech's 1998 Form 10-K (File No. 000-24657) filed with the
Commission on March 31, 1999.
21
<PAGE>
10.22 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
Mannatech's 1998 Form 10-K (File No. 000-24657) filed with the
Commission on March 31, 1999.
10.23 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
Mannatech's 1998 Form 10-K (File No. 000-24657) filed with the
Commission on March 31, 1999.
10.24 Form of Employment Agreement entered into between Mannatech and
Robert M. Henry, incorporated herein by reference to Exhibit
10.24 to Mannatech's 2000 Form 10-Q (File No. 000-24657) filed
with the Commission on March 30, 2000.
10.25 Consultancy Agreement dated June 1, 2000 by and between
Mannatech, Incorporated and Samuel L. Caster incorporated
herein by reference to Exhibit 10.25 to Mannatech's 2000 Form
10-Q (File No. 000-24657) filed with the Commission on August
14, 2000.
10.26 2000 Stock Option Plan, dated June 19, 2000 incorporated herein
by reference to Exhibit 10.26 to Mannatech's 2000 Form 10-Q
(File No. 000-24657) filed with the Commission on August 14,
2000.
10.27 Lock-up agreement between Mannatech and Charles E. Fioretti,
dated August 8, 2000. incorporated herein by reference to
Exhibit 10.27 to Mannatech's 2000 Form 10-Q (File No. 000-
24657) filed with the Commission on August 14, 2000.
27* Financial Data Schedule.
_____________
* Filed herewith.
(b) Reports on Form 8-K.
None.
22
<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
November 14, 2000 /S/ ROBERT M. HENRY
-------------------------------
Robert M. Henry
Chief Executive Officer
November 14, 2000 /S/ STEPHEN D. FENSTERMACHER
-------------------------------
Stephen D. Fenstermacher
Senior Vice President and Chief
Financial Officer and principal
financial officer
23
<PAGE>
INDEX TO EXHIBITS
3.1 Amended and Restated Articles of Incorporation of Mannatech,
dated October 25, 1995, incorporated herein by reference to
Exhibit 3.1 to Mannatech's Form S-1 (File No. 333-63133) filed
with the Commission on September 10, 1998.
3.2 Second Amended and Restated Bylaws of Mannatech, dated August
26, 1997, incorporated herein by reference to Exhibit 3.2 to
Mannatech's Form S-1 (File No. 333-63133) filed with the
Commission on September 10, 1998.
3.3 Amendment to the Bylaws of Mannatech dated May 19, 1998,
incorporated herein by reference to Exhibit 3.3 to Mannatech's
Form S-1 (File No. 333-63133) filed with the Commission on
September 10, 1998.
3.4 Amendment to the Bylaws of Mannatech dated October 20, 1999,
incorporated herein by reference to Exhibit 99 to Mannatech's
Form 8-K (File No. 000-24657) filed with the Commission on
November 3, 1999.
4 Specimen Certificate representing the common stock, par value
$0.0001 per share, of Mannatech, incorporated herein by
reference to Exhibit 4.1 to Mannatech's Amendment No. 1 to Form
S-1 (File No. 333-63133) filed with the Commission on October
28, 1998.
10.1 1997 Stock Option Plan dated May 20, 1997, incorporated herein
by reference to Exhibit 10.1 to Mannatech'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 Mannatech's
Form S-1 (File No. 333-63133) filed with the Commission on
September 10, 1998.
10.3 Option Agreement dated July 1, 1997 with Multi-Venture
Partners, Ltd., incorporated herein by reference to Exhibit
10.7 to Mannatech's Form S-1 (File No. 333-63133) filed with
the Commission on September 10, 1998.
10.4 Option Agreement dated October 19, 1999 with Steven A. Barker
Ph.D., incorporated by reference to Exhibit 10.8 to Mannatech's
1999 Form 10-K (File No. 000-24657) filed with the Commission
on March 30, 2000.
10.5 Form of Indemnification Agreement with a schedule of director
signatures, incorporated herein by reference to Exhibit 10.8 to
Mannatech's Form S-1 (File No. 333-63133) filed with the
Commission on September 10, 1998.
10.6 Schedule of additional directors signatories relating to the
Form of Indemnification Agreements in Exhibit 10.5 above,
incorporated by reference to Exhibit 10.10 to Mannatech's 1999
Form 10-K (File No. 000-24657) filed with the Commission on
March 30, 2000.
10.7 Letter of Understanding Regarding Development of Proprietary
Information for Mannatech effective as of August 1, 1997, as
amended, by and between Bill H. McAnalley, Ph.D. and Mannatech,
incorporated herein by reference to Exhibit 10.12 to
Mannatech's Form S-1 (File No. 333-63133) filed with the
Commission on September 10, 1998.
24
<PAGE>
10.8 Commercial Lease Agreement dated November 7, 1996 between MEPC
Quorum Properties II Inc. and Mannatech, 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 Mannatech's Form S-1 (File No.
333-63133) filed with the Commission on September 10, 1998.
10.9 Commercial Lease Agreement dated May 29, 1997 between MEPC
Quorum Properties II Inc. and Mannatech, as amended by the
First Amendment thereto dated November 6, 1997, incorporated
herein by reference to Exhibit 10.14 to Mannatech's Form S-1
(File No. 333-63133) filed with the Commission on September 10,
1998.
10.10 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 Mannatech,
incorporated herein by reference to Exhibit 10.15 to
Mannatech's Form S-1 (File No. 333-63133) filed with the
Commission on September 10, 1998.
10.11 Supply Agreement effective as of August 14, 1997 by and between
Mannatech and Caraloe, Inc., incorporated herein by reference
to Exhibit 10.17 to Mannatech's Form S-1 (File No. 333-63133)
filed with the Commission on September 10, 1998.
10.12 Trademark License Agreement effective as of August 14, 1997 by
and between Mannatech and Caraloe, Inc., incorporated herein by
reference to Exhibit 10.19 to Mannatech's Form S-1 (File No.
333-63133) filed with the Commission on September 10, 1998.
10.13 Supply Agreement effective January 12, 2000 by and between
Mannatech and Caraloe, Inc, incorporated herein by reference to
Exhibit 10.17 to Mannatech's 1999 Form 10-K (File No. 000-
24657) filed with the Commission on March 30, 2000.
10.14 Letter of Agreement from Mannatech to Michael L. Finney of
LAREX, Incorporated dated December 23, 1997, incorporated
herein by reference to Exhibit 10.20 to Mannatech's Form S-1
(File No. 333-63133) filed with the Commission on September 10,
1998.
10.15 Product Development and Distribution Agreement effective as of
September 15, 1997 between New Era Nutrition Inc. and
Mannatech, incorporated herein by reference to Exhibit 10.21 to
Mannatech's Form S-1 (File No. 333-63133) filed with the
Commission on September 10, 1998.
10.16 Summary of Management Bonus Plan, incorporated herein by
reference to Exhibit 10.23 to Mannatech's Form S-1 (File No.
333-63133) filed with the Commission on September 10, 1998.
10.17 Individual Guaranty of Samuel L. Caster dated January 5, 1998,
incorporated herein by reference to Exhibit 10.27 to
Mannatech's Form S-1 (File No. 333-63133) filed with the
Commission on September 10, 1998.
10.18 Individual Guaranty of Charles E. Fioretti dated January 5,
1998, incorporated herein by reference to Exhibit 10.28 to
Mannatech's Form S-1 (File No. 333-63133) filed with the
Commission on September 10, 1998.
10.19 Form of Employment Agreement entered into between Mannatech 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 Mannatech's Amendment
No. 1 to Form S-1 (File No. 333-63133) filed with the
Commission on October 28, 1998.
25
<PAGE>
10.20 Employment Agreement dated November 1, 1999, entered into
between Mannatech and Terry L. Persinger, incorporated herein
by reference to Exhibit 10.25 to Mannatech's 1999 Form 10-K
(File No. 000-24657) filed with the Commission on March 30,
2000.
10.21 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
Mannatech's 1998 Form 10-K (File No. 000-24657) filed with the
Commission on March 31, 1999.
10.22 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
Mannatech's 1998 Form 10-K (File No. 000-24657) filed with the
Commission on March 31, 1999.
10.23 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
Mannatech's 1998 Form 10-K (File No. 000-24657) filed with the
Commission on March 31, 1999.
10.24 Form of Employment Agreement entered into between Mannatech and
Robert M. Henry, incorporated herein by reference to Exhibit
10.24 to Mannatech's 2000 Form 10-Q (File No. 000-24657) filed
with the Commission on March 30, 2000.
10.25 Consultancy Agreement dated June 1, 2000 by and between
Mannatech, Incorporated and Samuel L. Caster incorporated
herein by reference to Exhibit 10.25 to Mannatech's 2000 Form
10-Q (File No. 000-24657) filed with the Commission on August
14, 2000.
10.26 2000 Stock Option Plan dated June 19, 2000 incorporated herein
by reference to Exhibit 10.26 to Mannatech's 2000 Form 10-Q
(File No. 000-24657) filed with the Commission on August 14,
2000.
10.27 Lock-up agreement between Mannatech and Charles E. Fioretti,
dated August 8, 2000 incorporated herein by reference to
Exhibit 10.27 to Mannatech's 2000 Form 10-Q (File No. 000-
24657) filed with the Commission on August 14, 2000.
27* Financial Data Schedule.
_____________
* Filed herewith.
26
