LITIGATION

6 Months Ended

Jun. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

LITIGATION

LITIGATION

Litigation - Product Liability

    Meeja Kim, et al., v. Mannatech Korea and Eunbee Cho, Seoul Southern District Court 2020-Gadan-216374

On March 4, 2020, a complaint was filed against Mannatech Korea. Mannatech Korea was served on March 10, 2020. The plaintiffs are the surviving spouse and three children (the “Plaintiffs”) of Kong Seokhwan, a cancer patient who died in October 2017. The Plaintiffs allege that co-defendant and former independent associate, Eunbee Cho, instructed the deceased to take the Company’s products as treatment for cancer. Eunbee Cho was found guilty of fraud and began serving a sentence of one year and six months in November 2019. The Plaintiffs are seeking damages in the amount of KRW ₩110 million (USD $99,220.00) plus interest of 12% per year. Mannatech Korea has engaged local counsel to defend this matter. An evidentiary hearing was held on October 21, 2020. Due to restrictions in place relating to COVID-19, hearings scheduled during the fourth

quarter of 2020 for this matter were postponed; an evidentiary hearing was held on March 10, 2021. Another evidentiary hearing was held on April 28, 2021. During the hearing, co-defendant Eunbee Cho’s request to re-examine two witnesses was denied. Additionally, Plaintiff’s actual damages request was reduced from KRW ₩110 million to KRW ₩91,500,540 (USD $82,533.00). The hearing for final judgment in this matter was set for June 16, 2021; however, on May 12, 2021, the Plaintiffs withdrew all of their claims against Mannatech Korea and co-defendant Eunbee Cho. Under Korean law, a plaintiff may refile the same suit against the defendant when the proceeding has been withdrawn prior to the judge issuing a ruling. Therefore, Mannatech Korea will consider this matter closed unless and until the Plaintiffs refile their complaint.

Hong Wang v. Beili Guan, MTEX Hong Kong Limited, and Mannatech, Incorporated, Case No. 2020-Jin-0116-

Civil-7655, Binhai New District Court, Tianjin, China

On November 16, 2020, MTEX Hong Kong received service of process of the above-captioned matter. Hong Wang (the “Plaintiff”) is alleging that various Mannatech’s products that she purchased violate the China Food Safety Law. In addition, Plaintiff alleges that her son suffered from tooth decay after consuming the MannaBears product and that the product violates the China Consumer Protection Law. The Plaintiff is seeking damages of approximately USD $286,600. MTEX Hong Kong has engaged local counsel to defend this case. On November 22, 2020, MTEX Hong Kong filed a motion objecting to the court’s jurisdiction.

On April 7, 2021, the Company received service of process of the above-captioned matter. The claims that the Plaintiff alleges against the Company are the same as those against MTEX Hong Kong. The Company has engaged the same counsel as above to defend this case. The Company filed a motion objecting to the court’s jurisdiction on April 22, 2021.

MTEX Hong Kong and the Company received the court’s ruling rejecting the objection on jurisdiction on June 15, 2021 and June 21, 2021, respectively. Both entities filed a petition to appeal.

It is not possible at this time to predict whether MTEX Hong Kong or the Company will incur any liability, or to estimate the ranges of damages, if any, which may be incurred in connection with this matter. However, both entities believe that they have a valid defense and will vigorously defend this claim. This matter remains open.

Litigation in General

The Company has incurred several claims in the normal course of business. The Company believes such claims can be resolved without any material adverse effect on our consolidated financial position, results of operations, or cash flows.

The Company maintains certain liability insurance; however, certain costs of defending lawsuits are not covered by or only partially covered by its insurance policies, including claims that are below insurance deductibles. Additionally, insurance carriers could refuse to cover certain claims, in whole or in part. The Company accrues costs to defend itself from litigation as they are incurred.

The outcome of litigation is uncertain, and despite management’s views of the merits of any litigation, or the reasonableness of the Company’s estimates and reserves, the Company’s financial statements could nonetheless be materially affected by an adverse judgment. The Company believes it has adequately reserved for the contingencies arising from current legal matters where an outcome was deemed to be probable, and the loss amount could be reasonably estimated. No legal reserve was deemed necessary at June 30, 2021.