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font-size: 10pt;"><div style="text-align: left; font-family: ''Times New Roman'', Times, serif; font-size: 10pt; font-weight: bold;">NOTE 8: RECENT ACCOUNTING PRONOUNCEMENTS</div><div><br /></div><div style="text-align: left; text-indent: 36pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt;">&#160;In February 2013, the Financial Accounting Standards Board (&#8220;FASB&#8221;) issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. 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Disclosure of the income statement line item impacts will be required only for components of AOCI reclassified into income in their entirety. This ASU is effective beginning January 1, 2013. Because this standard only impacts presentation and disclosure requirements, its adoption did not have a material impact on the Company&#8217;s consolidated results of operations or financial condition. No additional disclosures were presented during the quarter as there were no material reclassifications from AOCI during the periods presented.</div></div> 225000 685000 11 1 2009 2005 34557000 36165000 74448000 67871000 1550000 -1406000 -3462000 2205000 <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt;"><div style="text-align: left; font-family: ''Times New Roman'', Times, serif; font-size: 10pt; font-weight: bold;">NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</div><div><br /></div><div style="text-align: left; text-indent: 36pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt;">Mannatech, Incorporated (together with its subsidiaries, the &#8220;Company&#8221;), located in Coppell, Texas, was incorporated in the state of Texas on November 4, 1993 and is listed on the NASDAQ Global Select Market (&#8220;Nasdaq&#8221;) under the symbol &#8220;MTEX&#8221;. The Company develops, markets, and sells high-quality, proprietary nutritional supplements, topical and skin care products, and weight-management products. &#160;We currently sell our products in three regions: (i) North America (the United States, Canada, and Mexico); (ii) Europe/the Middle East/Africa (&#8220;EMEA&#8221;) (Austria, the Czech Republic, Denmark, Estonia, Finland, Germany, the Republic of Ireland, Namibia, the Netherlands, Norway, South Africa, Sweden, Ukraine, and the United Kingdom); (iii) Asia/Pacific (Australia, Hong Kong, Japan, New Zealand, the Republic of Korea, Singapore, and Taiwan). &#160;In December 2012, the Company commenced the shipment of its products to Hong Kong and officially launched Hong Kong operations in April 2013. &#160;In November 2012, the Company commenced the shipment of its products to Ukraine and officially launched Ukrainian operations in July 2013.</div><div><br /></div><div style="text-align: left; text-indent: 36pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt;">Independent associates (&#8220;associates&#8221;) purchase the Company&#8217;s products at published wholesale prices to either sell to retail customers or for personal use. Members purchase the Company&#8217;s products at a discount from published retail prices primarily for personal use. &#160;The Company cannot distinguish products sold for personal use from other sales because it is not involved with the products after delivery, other than usual and customary product warranties and returns. Only associates are eligible to earn commissions and incentives.</div><div><br /></div><div style="text-align: left; text-indent: 36pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt;">The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the Company&#8217;s consolidated financial statements and footnotes contained herein do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (&#8220;GAAP&#8221;) to be considered &#8220;complete financial statements&#8221;. However, in the opinion of the Company&#8217;s management, the accompanying unaudited consolidated financial statements and footnotes contain all adjustments, including normal recurring adjustments, considered necessary for a fair presentation of the Company&#8217;s consolidated financial information as of, and for, the periods presented. The Company cautions that its consolidated results of operations for an interim period are not necessarily indicative of its consolidated results of operations to be expected for its fiscal year. The December 31, 2012 consolidated balance sheet was included in the audited consolidated financial statements in the Company&#8217;s annual report on Form 10-K for the year ended December 31, 2012 and filed with the United States Securities and Exchange Commission (the &#8220;SEC&#8221;) on March 28, 2013 (the &#8220;2012 Annual Report&#8221;), which includes all disclosures required by GAAP. Therefore, these unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company included in the 2012 Annual Report.</div><div><br /></div><div style="text-align: left; font-style: italic; text-indent: 36pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt; font-weight: bold;">Principles of Consolidation</div><div><br /></div><div style="text-align: left; text-indent: 36pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt;">The consolidated financial statements and footnotes include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.</div><div><br /></div><div style="text-align: left; font-style: italic; text-indent: 36pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt; font-weight: bold;">Reclassifications</div><div><br /></div><div style="text-align: left; text-indent: 36pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt;">Certain reclassifications have been made to the financial statements for prior periods to conform to the current period presentation.</div><div><br /></div><div style="text-align: left; font-style: italic; text-indent: 36pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt; font-weight: bold;">Use of Estimates</div><div><br /></div><div style="text-align: left; text-indent: 36pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt;">The preparation of the Company&#8217;s consolidated financial statements in accordance with generally accepted accounting principles requires the use of estimates that affect the reported value of assets, liabilities, revenues and expenses. These estimates are based on historical experience and various other factors. The Company continually evaluates the information used to make these estimates as the business and economic environment changes. Historically, actual results have not varied materially from the Company&#8217;s estimates, and the Company does not currently anticipate a significant change in its assumptions related to these estimates. 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The Company includes in its cash and cash equivalents credit card receivables due from its credit card processor, as the cash proceeds from credit card receivables are received within 24 to 72 hours of submission to the credit card processor. As of each of June 30, 2013 and December 31, 2012, credit card receivables were $1.7 million and cash and cash equivalents held in bank accounts in foreign countries totaled $14.4 million and $10.8 million, respectively. &#160;The Company invests cash in liquid instruments, such as money market funds and interest bearing deposits. &#160;The Company also holds cash in high quality financial institutions and does not believe it has an excessive exposure to credit concentration risk.</div><div><br /></div><div style="text-align: left; font-style: italic; text-indent: 36pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt; font-weight: bold;">Restricted Cash</div><div><br /></div><div style="text-align: left; text-indent: 36pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt;">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. 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The Company periodically evaluates its receivables for collectability based on historical experience, recent account activities, and the length of time receivables are past due and writes-off receivables when they become uncollectible. At each of June 30, 2013 and December 31, 2012, the Company held an allowance for doubtful accounts of less than $0.1 million.</div><div><br /></div><div style="text-align: left; font-style: italic; text-indent: 36pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt; font-weight: bold;">Inventories</div><div><br /></div><div style="text-align: left; text-indent: 36pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt;">Inventories consist of raw materials, finished goods, and promotional materials that are stated at the lower of cost or market (using standard costs that approximate average costs). 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As of June 30, 2013 and December 31, 2012, accrued restoration costs related to these leases amounted to $0.2 million and $0.5 million, respectively. &#160; Also included in long-term liabilities at June 30, 2013 and December 31, 2012 was an estimated defined benefit obligation related to a non-U.S. defined benefit plan for its Japan operations of $0.6 million and $0.7 million, respectively.</div><div><br /></div><div style="text-align: left; text-indent: 36pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt;">In August 2003, the Company entered into a Long-Term Post-Employment Royalty Agreement with Dr. Bill McAnalley, the Company&#8217;s former Chief Science Officer, pursuant to which the Company is required to pay Dr. McAnalley, or his heirs, royalties for ten years beginning September 2005 and continuing through August 2015. Quarterly payments related to this Long-Term Post-Employment Royalty Agreement are based on certain applicable annual global product sales by the Company in excess of $105.4 million. At the time the Company entered into this Long-Term Post-Employment Royalty Agreement, it was considered a post-employment benefit and the Company was required to measure and accrue the present value of the estimated future royalty payments related to this benefit and recognize it over the life of Dr. McAnalley&#8217;s employment agreement, which was two years. 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