Table of Contents 2003 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003 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 Identification No.) Incorporation or Organization) 600 S. Royal Lane, Suite 200, Coppell, Texas 75019 (Address of Principal Executive Offices) (Zip Code) Registrant’s Telephone Number, including Area Code: (972) 471-7400 Securities Registered Pursuant to Section 12(b) of the Act: None Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, par value $0.0001 per share Title of each class Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 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 ☒ No ☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐ Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act) Yes ☒ No ☐ The aggregate market value of the voting and non-voting common stock held by non-affiliates of the Registrant as of June 30, 2003 (the last business day of the Registrant’s most recently completed second fiscal quarter) was approximately $33,127,700. The number of shares of the Registrant’s common stock outstanding as of March 8, 2004 was 26,323,052 shares. Documents Incorporated by Reference Mannatech incorporates information required by Part III (Items 10, 11, 12, 13, and 14) of this report by reference to its definitive proxy statement for the Registrant’s 2003 annual shareholders’ meeting to be filed pursuant to Regulation 14A on or before April 29, 2004. Table of Contents TABLE OF CONTENTS Page Special Note Regarding Forward-Looking Statements 1 Part I Item 1. Business 2 General 2 Industry Overview 3 Operating Strengths 4 Business Strategy 7 Products and Product Development 8 Competition 10 Intellectual Property 11 Associate Distribution System 12 Information Technology Systems 15 Government Regulations 16 Employees 20 Risk Factors 21 Item 2. Properties 27 Item 3. Legal Proceedings 27 Item 4. Submission of Matters to a Vote of Security Holders 28 Part II Item 5. Market for Registrant’s Common Equity and Related Shareholder Matters 28 Item 6. Selected Financial Data 29 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 30 Company Overview 30 Critical Accounting Policies and Estimates 32 Results of Operations 34 Historical Results of Operations for the Years 2001, 2002 and 2003 35 Seasonality and Selected Quarterly Statements of Operations 40 Liquidity and Capital Resources 41 Recent Financial Accounting Standards Board Statements 45 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 46 Item 8. Financial Statements and Supplementary Data 47 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 47 Item 9A. Controls and Procedures 47 Part III Item 10. Directors and Executive Officers of the Registrant 47 Item 11. Executive Compensation 47 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters 47 Item 13. Certain Relationships and Related Transactions 47 Item 14. Principal Accountant Fees and Services 47 Part IV Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 47 Signatures 51 Since its initial public offering, Mannatech’s common stock has traded on the NASDAQ National Market under the symbol “MTEX.” Corporate filings can be viewed on the SEC’s website www.sec.gov or on Mannatech’s corporate website at www.mannatech.com. The filings can also be obtained by contacting Mannatech’s investor relations department at [email protected] or calling 972-471-6512. Table of Contents Special Note Regarding Forward-Looking Statements Certain disclosure and analysis in this report, including information incorporated by reference, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Private Securities Litigation Reform Act of 1995 that are subject to various risks and uncertainties. Opinions, forecasts, projections, guidance or other statements other than statements of historical fact are considered forward-looking statements and reflect the current views about the future events and financial performance of Mannatech, Incorporated, also referred to herein as Mannatech or the Company. These forward-looking statements are subject to certain events, risks, and uncertainties that may be outside Mannatech’s control. Some of these forward-looking statements include statements regarding: • management’s plans and objectives for Mannatech’s future operations; • existing cash flows being adequate to fund future capital needs; • future plans related to budgets, future capital requirements, market share growth, and anticipated capital projects and obligations; • the realization of Mannatech’s net deferred tax assets; • Mannatech’s ability to curtail its operating expenditures; • global statutory tax rates remaining unchanged; • the impact of future market changes due to exposure to foreign currency translations; • the possibility of certain policies, procedures, and internal processes minimizing Mannatech’s exposure to market risk; • the impact of accounting pronouncements on Mannatech’s financial condition, results of operations, or cash flows; • the outcome of regulatory and litigation matters; and • other assumptions described in this report underlying such forward-looking statements. Actual results and developments could materially differ from those expressed in or implied by such statements due to a number of factors, including: • expected growth in the nutritional supplements industry; • plans for expected future product development; • changes in product mix and/or manufacturing costs; • the future impact of any changes to Mannatech’s global associate career and compensation plan or incentives; • the ability to attract and retain associates and members; • regulatory changes that affect Mannatech’s operations and/or products; • the impact of competition, competitive products, and pricing; • the political, social, and economic climate in which Mannatech conducts its operations; and • the risk factors described in this report, as well as other reports filed by Mannatech with the Securities and Exchange Commission. Forward-looking statements generally can be identified by use of phrases or terminology such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “approximates,” “predicts,” “projects,” “potential,” and “continues” or other similar words or the negative of such terms and other comparable terminology. Similarly, descriptions of Mannatech’s objectives, strategies, plans, goals, or targets contained herein are also considered forward-looking statements. Readers are cautioned when considering these forward-looking statements to keep in mind these risks and uncertainties and any other cautionary statements in this report, as all of the forward-looking statements contained herein speak only as of the date of this report. 1 Table of Contents Unless stated otherwise, all financial information throughout this report and in the Consolidated Financial Statements and related Notes include Mannatech, Incorporated and all of its subsidiaries on a consolidated basis and may be referred to herein as “Mannatech,” “the Company,” “its,” “we,” “our,” or “their.” Mannatech’s products are not intended to diagnose, cure, treat, or prevent any disease. Statements about Mannatech’s products contained in this report have not been evaluated by the Food and Drug Administration, also referred to herein as the FDA. PART I Item 1. Business General Mannatech began operations in 1993 and is a developer of innovative, high-quality, proprietary nutritional supplements, topical products, and weight- management products. Mannatech sells its products and packs through a global network-marketing system throughout the United States, Canada, Australia, the United Kingdom, Japan, and New Zealand. Mannatech plans to expand into South Korea in the second half of 2004 and Taiwan in the first quarter of 2005. Mannatech operates as a single segment and primarily sells its products and starter and renewal packs through a network of approximately 264,000 independent associates and members who have purchased Mannatech’s products within the last 12 months. Mannatech’s product philosophy is based on the belief that specific carbohydrates and antioxidants are