LITIGATION

3 Months Ended

Mar. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

LITIGATION

LITIGATION

Litigation - Product Liability

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 denying the motion on lack of jurisdiction on June 15, 2021 and June 21, 2021, respectively. Both entities filed a petition to appeal. On October 14, 2021, the District Appellate Court issued a decision to uphold the jurisdiction. The final hearing for the case was held on December 17, 2021. On December 29, 2021, the court issued its judgment in favor of the Company and MTEX Hong Kong. On March 9, 2022, the Company and MTEX Hong Kong received notice that the Plaintiff appealed to the Tianjin Intermediate Court. A hearing was held on April 14, 2022. On April 20, 2022, the Tianjin Intermediate Court issued a judgment affirming the lower court’s decision. MTEX Hong Kong and the Company consider this matter closed.

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 its 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 March 31, 2022.