MANNATECH INC

Cash and Cash Equivalents

As of March 31, 2024, our cash and cash equivalents increased by 2.3%, or $0.2 million, to $7.9 million from $7.7 million as of December 31, 2023. The Company is required to restrict cash for: (i) direct selling insurance premiums and credit card sales in the Republic of Korea; (ii) reserve on credit card sales in the United States and Canada; and (iii) the Australia building lease collateral. The current portion of restricted cash balances was $0.9 million at each of March 31, 2024 and December 31, 2023. The long-term portion of restricted cash balances was $0.7 million at each of March 31, 2024 and December 31, 2023.

Our principal use of cash is to pay for operating expenses, including commissions and incentives, capital assets, inventory purchases, and periodic cash dividends. We did not pay a dividend in the current quarter. Business objectives, operations, and expansion of operations are funded through net cash flows from operations rather than incurring long-term debt.

Working Capital

Working capital represents total current assets less total current liabilities. At March 31, 2024 and December 31, 2023, our working capital was $2.1 million and$1.9 million, respectively.

Net Cash Flows

Our net consolidated cash flows consisted of the following, for the three months ended March 31(in millions):

Operating Activities

Operating activities provided $1.9 million cash for the three months ended March 31, 2024 as compared to $1.4 million for the same period in 2023.

Investing Activities

At each of the three months ended March 31, 2024 and 2023, we invested cash of $0.1 million principally for back-office software projects and equipment, reported as property and equipment.

Financing Activities

For the three months ended March 31, 2024 and 2023, our financing activities used cash of $0.3 million and $0.6 million, respectively. For the three months ended March 31, 2024, we used $0.3 million in the repayment of finance lease obligations. For the three months ended March 31, 2023, we used $0.4 million in payments of dividends to shareholders and $0.2 million in the repayment of finance lease obligations.

General Liquidity and Cash Flows

Short Term Liquidity

As of March 31, 2024, our cash and cash equivalents was $7.9 million. We believe our existing liquidity and cash flows from operations are adequate to fund our normal expected future business operations for the next twelve months.

We have contractual purchase commitments with certain raw materials suppliers to purchase minimum quantities. At March 31, 2024, we have one supply agreement which was amended on April 18, 2024, that requires the Company to purchase an aggregate of $3.4 million through 2025, with no purchase commitments thereafter. We also maintain other supply agreements and manufacturing agreements to protect our products, regulate product costs, and help ensure quality control standards. These agreements do not require us to purchase any minimum quantities.

We have operating lease liabilities for the property and equipment we use in our business operations. These operating lease liabilities represent our minimum future payment obligations on operating leases, including imputed interest. At March 31, 2024, our operating lease liabilities were $3.9 million, of which $1.7 million was recorded in Accrued expenses and $2.2 million was recorded in Other long-term liabilities. We also have finance lease liabilities of $1.2 million and lease restoration liabilities of $0.4 million.

As our primary source of liquidity has historically been our cash flows from operations, our liquidity is dependent on our ability to maintain and/or continue to improve revenue as compared to our operational expenses. In this regard, our management has established a 2024 business reorganization plan focusing on revenue growth, margin improvement and cost control and reduction, including a plan to improve margin through a price increase, continued focus on supply chain costs, and certain compensation plan adjustments, as well as to reorganize certain functional operations and reduce our fixed selling and administrative overhead.

However, if our reorganization plans are not successful, or if we experience disruption in our supply chain, and/or potential decreases in consumer demands, our sales and our overall liquidity in the next twelve months could be negatively impacted. If our existing capital resources or cash flows become insufficient to meet current business plans, projections, and existing capital requirements, we may be required to raise additional funds, which may not be available on favorable terms, if at all.

On March 11, 2024, the Company’s Board of Directors authorized the Company to enter into unsecured Loan and Promissory Note agreements (“Promissory Notes”) with three related parties, who are members of the Company’s Board of Directors, and who are current stockholders of the Company, in an aggregate principal amount of $3.6 million. The purpose of the borrowing is to provide funds to the Company for general working capital needs, including payment to vendors, expansion of the Company’s non-US operations, technology investment primarily for improving the customer ordering process and software updates to improve visibility of sales associate activity. The Company received a fairness opinion on the terms of the Promissory Notes on April 15, 2024, finding that the terms of the Promissory Notes are fair from a financial point of view. We completed the financing on April 23, 2024.

Long Term Liquidity

We believe our cash flows from operations should be adequate to fund our normal expected future business operations and possible international expansion costs for the long term. As our primary source of liquidity is from our cash flows from operations, this will be dependent on our ability to maintain or improve revenue as compared to operational expenses.

However, if our existing capital resources or cash flows become insufficient to meet anticipated business plans and existing capital requirements, we may be required to raise additional funds, which may not be available on favorable terms, if at all.

Our future access to the capital markets may be adversely impacted if we fail to maintain compliance with the Nasdaq Marketplace Rules for the continued listing of our stock. We continuously monitor our compliance with the Nasdaq continued listing rules.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any special-purpose entity arrangements, nor do we have any off-balance sheet arrangements.