MANNATECH INC

Cash and Cash Equivalents

As of September 30, 2024, our cash and cash equivalents increased by 57.2%, or $4.5 million, to $12.2 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) reserves related to credit card sales in the United States and Canada; and (iii) collateral for a building lease in Australia. The current portion of restricted cash balances was $0.9 million at each of September 30, 2024 and December 31, 2023. The long-term portion of restricted cash balanceswas $0.6 million and $0.7 millionat September 30, 2024 and December 31, 2023, respectively.

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 September 30, 2024 and December 31, 2023, our working capital was $5.7 million and$1.9 million, respectively.

Net Cash Flows

Our net consolidated cash flows consisted of the following, for the nine months ended September 30(in millions):

Operating Activities

Operating activities provided $2.5 million cash for the nine months ended September 30, 2024 as compared to a use of $1.0 million cash in the same period in 2023. The improvement is due to reduced operating costs and management of inventory carrying balances over the nine months ended September 30, 2024.

Investing Activities

For the nine months ended September 30, 2024 and 2023, we invested cash of $0.4 million and $0.5 million, respectively, principally for back-office software projects, reported as property and equipment.

Financing Activities

For the nine months ended September 30, 2024 our financing activities provided cash of $2.9 million. We received $3.6 million from the issuance of notes payable (see Note 4) and we used $0.7 million in the repayment of finance lease obligations.

For the nine months ended September 30, 2023 our financing activities used $1.6 million. For the nine months ended September 30, 2023, we used $0.7 million in payments of dividends to shareholders, $0.7 million in the repayment of finance lease obligations and $0.2 million in the repurchase of common stock.

General Liquidity and Cash Flows

Short Term Liquidity

As of September 30, 2024, our cash and cash equivalents was $12.2 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.

On April 23, 2024, the Company entered into unsecured Loan and Promissory Note agreements 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 was 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.

We have contractual purchase commitments with certain raw materials suppliers to purchase minimum quantities. At September 30, 2024, we have one supply agreement which was amended on April 18, 2024, that requires the Company to purchase an aggregate of $1.8 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 September 30, 2024, our operating lease liabilities were $3.3 million, of which $1.5 million is presented as the current portion and $1.8 million is presented as Operating lease liabilities excluding current portion on our Condensed Consolidated Balance Sheets. We also have finance lease liabilities of $1.0 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 further or unexpected 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.

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.