Item 1A. Risk Factors
We have listed below the most material risk factors applicable to us. These risk factors are not necessarily in the order of importance or probability of occurrence: You should consider the following risk factors, in addition to the information presented elsewhere in this Annual Report, particularly under the heading “ Cautionary Note Regarding Forward-Looking Statements ,” on page 1, and the disclosures contained in Part I, “ Item 1. Business ,” and Part II, “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of this report, as well as in the other filings we make from time to time with the SEC, in evaluating us, our business and an investment in our securities.
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Below is a summary of the principal factors that make an investment in the common stock of the Company risky or speculative. This summary does not address all of the risks we face. Unless otherwise indicated or otherwise required by the context, the terms “we,” “our,” “it,” “its,” “Company,” and “USANA” refer to USANA Health Sciences, Inc. and its wholly owned subsidiaries.
Risks Associated with Direct Selling
• Direct selling is subject to intense government scrutiny, and regulation and changes in the law, or the interpretation and enforcement of the law, might adversely affect our business.
• The violation of marketing or advertising laws by Brand Partners in connection with the sale of our products or the improper promotion of our Compensation Plan could adversely affect our business.
• We may have or could incur obligations relating to the activities of our Brand Partners.
• Our Brand Partner Compensation Plan, or changes we make to it, may be viewed negatively by some Brand Partners, could fail to achieve our desired objectives, and could have a negative impact on our business.
• Changes we are required to make to our Brand Partner Compensation Plan in certain markets, including limits on the amount of Brand Partner compensation we can pay, may hurt our ability to attract and retain Brand Partners, result in regulatory risk and affect our operating results.
Risks Related to Our China Business
• Our Greater China region accounts for a significant part of our business and expected growth. A decline in sales or customers in this region would harm our business, financial condition and results of operations.
• Our operations in China are subject to significant government regulation, as well as a variety of legal, political, and economic risks. If the Chinese government modifies its direct selling laws and regulations, or interprets and enforces these laws and regulations in a manner that is adverse to our business in China, our consolidated business and results of operations may be materially harmed.
• Although BabyCare Holdings, Ltd. (“BabyCare”) utilizes a business model that has been developed specifically for China’s laws and regulations, the Chinese government has not approved BabyCare’s model, compensation plan, and operations.
• BabyCare’s operations in China, and direct selling companies in general, are subject to significant government oversight, scrutiny and monitoring.
• BabyCare must apply for and receive government approval to expand its business in China and the failure to obtain such approvals could negatively impact its ability to expand and grow its business.
Risk Associated with Our International Operations
• Risks associated with operating in international markets could restrict our ability to expand globally and harm our business and prospects.
• Trade policies, disputes, tariffs or other international disputes could harm our business and operating results.
• Because some of our customers and suppliers are based in China, our business, financial condition, and results of operations could be adversely affected by the political and economic tensions between the United States and China.
• We are subject to various governmental export control and trade sanctions laws and regulations that could impair our ability to compete in international markets or subject us to liability if we violate these controls.
• Fluctuation in the value of currency exchange rates with the U.S. dollar affects our operations and our net sales and earnings.
• Inflationary pressures and persistently high prices and uncertain availability of commodities, raw materials or other inputs used by us and our suppliers, or instability in logistics and related costs, could negatively impact our profitability.
Risks Related to Our Products, Manufacturing and Operations
• Our products and manufacturing activities are subject to extensive government regulation, which could limit or prevent the sale of our products in some markets.
• Our in-house manufacturing activity is subject to certain risks.
• Our reliance on third parties to manufacture and supply certain of our products may harm our business, financial condition and operating results.
• The inability to obtain adequate supplies of raw materials for products at favorable prices, or at all, could have a material adverse effect on our business, financial condition, or operating results.
• Delays and disruptions to transporting and distributing our products may adversely affect our results.
• We may incur liability with respect to our products.
• Nutritional supplement products may be supported by only limited availability of conclusive clinical studies.
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Legal, Regulatory, Compliance and Tax Risks
• Legal action by former Brand Partners or third parties against us could harm our business.
• We may incur liability under our “Athlete Guarantee” program.
• Failure to comply with anti-corruption laws could adversely affect our business.
• We could be subject to adverse changes in tax laws, regulations and interpretations or challenges to our tax positions.
• If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.
• Environmental, Social, and Governance ("ESG") issues may have an adverse effect on our reputation, business, financial condition or results of operations.
Risk Associated with Information Technology, Data Security and Data Privacy
• A failure or interruption of our information technology systems would harm our business.
• We rely on information technology to support our operations and reporting environments. A data breach involving that technology or the data stored in it, could disrupt our ability to operate our businesses effectively, adversely affect our reported financial results and our reputation, and expose us to significant potential liability, government investigations, fines or litigation.
• We are subject to data privacy and security laws and regulations, and our actual or perceived failure to comply with them could adversely affect our business and operating results.
Human Capital Risks Associated with our Business
• If we are unable to attract and retain active Brand Partners and Preferred Customers, our business may be harmed.
• The loss of key management personnel could adversely affect our business.
Risks Associated with Business Development Activities and Acquisitions
• Growth through acquisitions is part of our strategy, and we may not successfully integrate, operate or realize the anticipated benefits of our acquisitions.
• The Hiya Acquisition may not be accretive, and may be dilutive, to our earnings per share, which may negatively affect the market price of our common stock.
• Although we expect that the Hiya acquisition will result in synergies and other benefits to us, we may not realize those benefits because of challenges inherently associated with integration, performance and the achievement of synergies.
• The Hiya Acquisition and integration may result in additional costs and expenses.
• The Hiya Acquisition may be viewed negatively by our Brand Partners.
General Economic, Publicity, Competitive, and Intellectual Property Risks Associated with our Business
• Difficult economic conditions may adversely affect our business.
• Our business is subject to the effects of adverse publicity and negative public perception.
• Our business is subject to the risks associated with intense competition from larger, wealthier, and more established competitors.
• Our business is subject to particular intellectual property risks.
Risks Related to Public Health Crises
• Pandemics, epidemics, disease outbreaks and other public health crises, such as the COVID-19 pandemic, have disrupted our business and operations, and future public health crises could materially adversely impact our business, financial condition, liquidity and results of operations.
Risks Related to Our Common Stock
• The beneficial ownership of a significant percentage of our common stock gives our founder and parties related to or affiliated with him effective control, and limits the influence of other shareholders on important policy and management issues.
• Sales by our shareholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of our common stock.
• The market price of our common stock may be influenced by many factors, some of which are beyond our control.
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Risk Associated with Direct Selling
Direct selling is subject to intense government scrutiny, and regulation and changes in the law, or the interpretation and enforcement of the law, might adversely affect our business.
Various laws and regulations in the United States and other countries regulate direct selling. These laws and regulations exist at many levels of government in many different forms, are inherently fact-based, and often do not include “bright line” rules. We are also subject to the risk that the laws and regulations, or a regulator’s interpretation and enforcement of the laws and regulations, could change.
In the United States, the FTC is one of many regulators who regulate direct selling. The FTC has actively warned various direct selling companies and the industry as a whole about certain business practices associated with direct selling and entered into settlements with several direct selling companies that required those companies to modify their compensation plans and business models. Those settlements resulted from enforcement actions brought by the FTC involving a variety of alleged violations of consumer protection laws, including misleading product claims, misleading earnings representations and legal compliance of those companies’ business models and distributor compensation plans. For example, in 2016, the FTC entered into a settlement with another direct selling company following an enforcement action in which the FTC alleged that the company’s distributors were making misleading earnings representations and that the company was utilizing an illegal business model. Also in 2016, the FTC entered into a settlement with another direct selling company following an enforcement action in which the FTC alleged that the company’s distributors had made misleading income representations and that the company was utilizing an unfair and deceptive compensation plan.
In 2019, the FTC entered into a settlement with a direct selling company following an FTC enforcement action, which included the alleged violations noted above. Pursuant to this settlement, the company is permanently prohibited from using a multilevel compensation plan in the United States. Following this settlement, the FTC initiated litigation with another direct selling company for similar alleged violations and pursued similar claims and remedies, including a prohibition of multilevel compensation in the United States. Although the court ruled in favor of the defendant company in this case, settlements such as those described in the other cases above may require a direct selling company to pay a significant fine, revise its U.S. business model and compensation plan to comply with various restrictions on how it can compensate distributors and change its marketing practices to avoid misleading product or income representations, among other things. Although a settlement between the FTC and a specific company does not generally have force of law or binding effect on other companies, FTC officials have indicated that the direct selling industry should look to these settlements, and the principles contained therein, for guidance.
In 2020, the FTC sent warning letters to several direct selling companies regarding product and/or income claims that the companies and/or their distributors were making related to the COVID-19 pandemic. In 2021, the FTC sent letters to over 1,100 companies, including USANA, warning them that the FTC, pursuant to its Penalty Offense Authority, could seek penalties for conduct determined to be unfair, deceptive, or otherwise unlawful in certain prior FTC actions. In 2023, the FTC sent letters to nearly 700 companies, including USANA, warning them that the FTC, pursuant to its Penalty Offense Authority, could seek penalties for a company's failure to adequately substantiate its product claims. The 2021 and 2023 letters did not accuse any recipient company, including USANA, of engaging in unlawful conduct. But if the FTC later alleges that we have engaged in the actions referenced in the 2021 or 2023 letters, we could be at risk of penalties and other potential liability.
In 2025, the FTC issued a Notice of Proposed Rulemaking ("NPR") and an Advanced Notice of Proposed Rulemaking ("ANPR") regarding potential rules for earnings claims for direct selling companies. The NPR would, among other things, prohibit direct selling companies from making misleading earnings claims, and require them to maintain written substantiation to support any earnings claims and make that substantiation available upon request. Under the ANPR, the FTC is considering additional restrictions on earnings claims and recruiting by direct selling companies that, if adopted, could have a material adverse effects on our business. Additionally, the FTC’s increased scrutiny of earnings claims, as reflected in the NPR and ANPR, could lead to new industry standards, other new rules, or more FTC actions regarding misleading claims, all of which could limit our ability to advertise and negatively impact our business.
We regularly analyze our business model in response to settlements between the FTC and other direct selling companies, as well as guidance and other communications issued by the FTC, and from time to time we refine aspects of our business model where appropriate. While we maintain a robust Brand Partner compliance program and strive to educate our Brand Partners on compliant claims, if a regulator determines we are making misleading claims, this could lead to an FTC investigation, which could harm our business operations. Additionally, while we strive to ensure that our compensation plan is compliant with applicable laws and regulatory guidance in each of our markets, we cannot assure you
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that a regulator, if it were to review our business, would agree with our assessment and would not require us to change one or more aspects of our operations. Any action against us in the future by the FTC or another regulator could materially and adversely affect our operations.
We are also subject to various direct selling laws and regulations in our other markets, including China (as explained below). We cannot predict the nature of any future law, regulation, or guidance, nor can we predict what effect additional governmental regulations, judicial decisions, or administrative orders would have on our business. Failure by us, or our Brand Partners, to comply with these laws, regulations, or guidance, could have a material adverse effect on our business in a particular market or in general. Finally, the continuation of regulatory challenges, investigations and litigation against other direct selling companies could harm our business and industry if the laws and regulations are interpreted in a way that results in additional restrictions on direct selling companies in general.
The violation of marketing or advertising laws by Brand Partners in connection with the sale of our products or the improper promotion of our Compensation Plan could adversely affect our business.
All Brand Partners contractually agree to adhere to our policies. Although these policies prohibit Brand Partners from making false, misleading and other improper claims regarding products or income potential from the sale of the products, from time to time Brand Partners, without our knowledge and in violation of our policies, create promotional materials or otherwise provide information that does not accurately describe USANA, our products or the Compensation Plan. They also may make statements regarding potential earnings, product claims, or other matters in violation of our policies or applicable laws and regulations concerning these matters. These violations may result in legal action against us in our various markets by regulatory agencies, state attorneys general, or private parties. Legal actions against us or our Brand Partners or others who are associated with us could lead to increased regulatory scrutiny of our business, including our business model. While we take what we believe to be commercially reasonable steps to regularly train our Brand Partners, and monitor their activities to promote compliance with our policies and guard against illegal or unethical conduct by Brand Partners, there can be no assurance that our efforts will be sufficient to accomplish this objective. In the past, we have experienced adverse publicity both within and outside of our sales force for enforcing our Brand Partner policies and procedures. This type of adverse publicity has made, and will continue to make, it difficult for us to attract and retain Brand Partners and Preferred Customers and may have an adverse effect on our business, financial condition, and results of operations.
We may have or could incur obligations relating to the activities of our Brand Partners.
Our Brand Partners are subject to taxation, and, in some instances, legislation or governmental agencies may impose an obligation on us to collect taxes, such as sales taxes or value added taxes, and to maintain appropriate records of such transactions. In addition, we are subject to the risk in some jurisdictions of being responsible for social security and similar taxes as well as employee benefits with respect to our Brand Partners. In particular, the laws regarding independent contractor status in certain jurisdictions, including the United States, continue to evolve and, in some cases, authorities have sought to apply these laws unfavorably against gig economy, platform and direct selling companies, including USANA. In 2020, we were named as a defendant in a private lawsuit in California by a plaintiff’s firm that is seeking to reclassify our California Brand Partners from independent contractors to employees under California state law. Although we prevailed in this litigation and continue to believe we have legally and appropriately classified our Brand Partners as independent contractors, it is possible that future lawsuits or potential future laws, could negatively impact the independent contractor status of our Brand Partners or distributors in direct selling companies in general.
In March 2024, a new Department of Labor (DOL) rule regarding the classification of workers as employees vs. independent contractors under the Fair Labor Standards Act went into effect but became subject to litigation. If the 2024 DOL final rule or other federal, state or local laws and regulations or the interpretation of such laws and regulations require us to treat our Brand Partners as employees, or if our Brand Partners are deemed by local regulatory authorities in one or more of the jurisdictions in which we operate to be our employees rather than independent contractors, under existing laws and interpretations, we may be deemed to be responsible for a variety of obligations that are imposed upon employers relating to their employees, including social security and related taxes in those jurisdictions, wages, employee benefits, plus any related assessments and penalties, which could harm our financial condition and operating results.
Our Brand Partner Compensation Plan, or changes we make to it, may be viewed negatively by some Brand Partners, could fail to achieve our desired objectives, and could have a negative impact on our business.
From time to time, we modify our Compensation Plan to (i) keep it competitive and attractive, (ii) cause or address a change in Brand Partner behavior, (iii) conform to legal and regulatory requirements, or (iv) address other business needs. It is difficult to predict how any changes to the plan will be viewed by Brand Partners and whether such
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changes will achieve their desired results. For example, in 2023 we launched our Affiliate program in certain markets and this program creates a new and different element of our Compensation Plan. In 2025, we also made certain modifications to our Compensation Plan to enhance the earning opportunity for Brand Partners and prioritize sales and customer growth. There can be no assurance that changes to our Brand Partner Compensation Plan will allow us to successfully attract new Brand Partners or retain existing Brand Partners, nor can we assure that any changes we make to our Compensation Plan will achieve our desired results. We may also face legal challenges and disputes from our Brand Partners in one or more markets regarding changes to the Compensation Plan. Additionally, the payment of Brand Partner incentives under our Compensation Plan is our most significant expense. Modifying our Compensation Plan directly affects the incentives we pay as a percentage of net sales. There can be no assurance that changes to the Compensation Plan will be successful in achieving target levels of Brand Partner incentives as a percentage of net sales. Furthermore, such changes may make it difficult to attract and retain qualified and motivated Brand Partners.
Changes we are required to make to our Brand Partner Compensation Plan in certain markets, including limits on the amount of Brand Partner compensation we can pay, may hurt our ability to attract and retain Brand Partners, result in regulatory risk and affect our operating results.
We have been required to modify our Brand Partner Compensation Plan in certain markets to comply with the laws and regulations in these markets or the interpretation of the same by authorities in these markets. For example, we have been required to use a different compensation plan for our BabyCare operations in China (as noted elsewhere in this report) and have been required to modify our Compensation Plan in India, South Korea, Malaysia, and Indonesia to comply with applicable laws and regulations. We obtain regulatory approval of our Compensation Plan when required or, when not required, we may seek a legal opinion regarding compliance. We may also be prohibited from distributing products through direct selling or paying multilevel compensation in some countries. Several markets, including China, South Korea, and Indonesia also impose limits on the amount of compensation we can pay to our Brand Partner sales force.
If we fail to comply with the legal requirements for our Compensation Plan in our various markets, including the limits on compensation we are legally permitted to pay, we may incur fines or other sanctions, including the loss of applicable licenses to conduct our business. These required changes to our Compensation Plan, including compensation limits, may also be viewed as limiting the incentive for people to join our Brand Partner sales force and may reduce the competitive advantage of our Brand Partner Compensation Plan.
Risks Related to Our China Business
Our Greater China region accounts for a significant part of our business and expected growth. A decline in sales or customers in this region would harm our business, financial condition and results of operations.
Our Greater China region consists of China, Hong Kong, and Taiwan and has been our largest region for sales over the last several years and China has been our largest market. Our international growth strategy has focused largely on growing our China business. For the last several years, officials in Greater China have responded to the COVID-19 pandemic and, more recently, overall economic conditions in China, all of which have created a challenging operating environment for our business in China and negatively impacted our sales and customer results. Prior to that, in 2019, our sales and active Customer counts in both the Greater China region and our China market declined, largely because of a challenging operating environment in China, following the China’s governments inquiry into and review of the health foods industry in China. If we are not successful in growing BabyCare’s sales and customer base in China, our consolidated growth as a company will be negatively affected and our business, financial condition, results of operations and cash flows may be harmed.
BabyCare must comply with significant operational, financial, and other regulatory requirements to engage in direct selling in China. Although we believe that we will be successful in growing BabyCare’s business in China, it is difficult to assess the extent to which BabyCare’s business model and compensation plan will be successful or deemed to be compliant with applicable Chinese laws and regulations. In light of the factors listed above, and the other risks to our business, there can be no assurance that we will be successful in increasing sales and customers in China through BabyCare.
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Our operations in China are subject to significant government regulation, as well as a variety of legal, political, and economic risks. If the Chinese government modifies its direct selling laws and regulations, or interprets and enforces these laws and regulations in a manner that is adverse to our business in China, our consolidated business and results of operations may be materially harmed.
Our operations in China are conducted by BabyCare, our China subsidiary. BabyCare operates in China pursuant to direct selling laws and regulations that are uncertain and evolving. These regulations contain a number of financial and operational restrictions for direct selling companies, including prohibitions on pyramid selling and multi-level compensation. The laws and regulations are also subject to discretionary interpretation and enforcement by various state, provincial and municipal level officials in China. Regulators in China may modify current direct selling laws and regulations or change how they interpret and enforce them. As a result, there can be no assurance that the Chinese government’s current or future interpretation and application of existing and new regulations will not negatively impact our business in China, result in regulatory investigations or lead to fines or penalties against us or our Brand Partners.
The Chinese government also exercises significant control over the Chinese economy, including through controlling capital, foreign currency exchange, foreign exchange rates, and tax regulations, providing preferential treatment to certain industry segments or companies and issuing required licenses to conduct business. We also face additional risks resulting from new and expanded China data privacy and security laws and regulations. Accordingly, any adverse change in the Chinese governmental, economic or other policies could have a material adverse effect on BabyCare’s business in China and our consolidated results of operations.
In addition to BabyCare's business in China, we periodically offer and sell certain U.S. products in China through a cross-border e-commerce sales channel by utilizing one of our separate China subsidiaries that is registered to engage in cross-border e-commerce. This cross-border e-commerce channel is legally required to be separate from BabyCare's business in China. The products that we offer and sell through this channel are neither registered for retail sale in China nor registered as direct selling products under BabyCare's direct selling license. Consequently, products sold via our cross-border e-commerce channel can only be sold to China customers for their personal consumption and cannot be sold through BabyCare's direct selling channel. BabyCare's business in China could be negatively impacted if China regulatory authorities (i) attribute our cross-border e-commerce sales and related product claims to BabyCare's business, and (ii) make a determination that the same are in violation of direct selling or other applicable laws and regulations.
Although BabyCare utilizes a business model that has been developed specifically for China’s laws and regulations, the Chinese government has not approved BabyCare’s model, compensation plan, and operations.
BabyCare’s business model has been designed specifically for China’s laws and regulations based on, among other things, BabyCare’s (i) communications with the Chinese government, (ii) interpretation of the direct selling laws and regulations, as well as its understanding of how the government interprets and enforces the regulations, and (iii) understanding of how other multinational direct selling companies operate in China. Many of the components of BabyCare’s business model are unique to China and are not part of our business model in our markets outside of China. For example, BabyCare sells products in China through a variety of methods, including: (a) online through its website; (b) at physical branch retail locations in China; (c) through direct sellers in provinces and municipalities where BabyCare has received a direct selling license; and (d) through independent distributors who are considered independent business owners under Chinese law. BabyCare has not received confirmation from the Chinese government that its business model and operations in China comply with applicable laws and regulations, including those pertaining to direct selling. We cannot assure that Chinese regulatory authorities would deem BabyCare's business model, compensation plan or the activities of its employees, direct sellers or independent distributors to be compliant with current or future laws and regulations. If BabyCare’s model were deemed to be in violation of applicable regulations, as they are now or may in the future be interpreted or enforced, BabyCare could be subject to fines, penalties or suspension of its business in China or, ultimately, have its direct selling license revoked by the Chinese government, all of which could have a material adverse impact on our business in China.
BabyCare’s operations in China, and direct selling companies in general, are subject to significant government oversight, scrutiny and monitoring.
Chinese regulators regularly monitor and make inquiries about the business activities of direct sellers in China and have done so with BabyCare. For example, following adverse media coverage of certain health product companies and direct selling companies in 2019, several departments of the Chinese government, including SAMR, MPS, and MOFCOM, initiated a review of health product and direct selling companies in China. The review required applicable companies such as BabyCare to conduct a self-assessment of the regulatory compliance of their business and to provide information to the
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government regarding the same. The review also entailed a review of a company’s regulatory compliance by various departments of the Chinese government. During this review, the Chinese government, among other things, (i) instructed direct selling companies not to hold large distributor meetings, and (ii) suspended its application review process for direct selling licenses and authorizations. The Chinese government has yet to re-open the application review process for direct selling licenses and authorizations or indicate if or when it plans to do so.
Direct selling regulations in China prevent persons who are not Chinese nationals from engaging in direct selling in China. We have implemented internal policies that are designed to promote our Brand Partners’ compliance with these regulations, however, we cannot guarantee that any of our Brand Partners residing outside of China or any of BabyCare’s Brand Partners in China have not engaged or will not engage in activities that violate our policies in this market or that violate Chinese law or other applicable laws and regulations, which might result in regulatory action and adverse publicity and potential harm to our business in China.
The Chinese government has investigated and imposed significant fines on companies and their distributors believed to have violated direct selling and anti-pyramiding regulations. In some cases, it has even shut such companies down. There have been instances where inquiries or complaints about BabyCare’s business have resulted in warnings from the Chinese government as well as the payment of fines by BabyCare or its distributors. We expect that BabyCare will continue to face the risk of government inquiries, complaints or investigations. Any determination that BabyCare’s business or the activities of its Brand Partners are not in compliance with applicable regulations could result in additional fines, disruption of business, or the suspension or termination of BabyCare’s licenses, including its direct selling licenses, all of which could have a material adverse effect on our business and operations. There can be no assurance that the Chinese government’s interpretation and enforcement of applicable laws and regulations will not negatively impact BabyCare’s business, result in regulatory investigations or lead to fines or penalties against BabyCare, USANA or our Brand Partners in China.
BabyCare must apply for and receive government approval to expand its business in China and the failure to obtain such approvals could negatively impact its ability to expand and grow its business.
BabyCare has obtained direct selling licenses in certain provinces and municipalities and it must obtain various licenses and approvals from additional municipalities and provinces within China if it is to operate its direct selling business model in China. Although direct selling licenses are centrally issued, the licenses are generally valid only in the jurisdictions within which related approvals have been obtained. Those approvals are generally awarded on local and provincial bases, and the approval process requires involvement of multiple ministries at each level.
BabyCare also will be required to obtain licenses from municipalities and provinces within China where it currently does not hold a license. The Chinese government has not reopened its application review process for direct selling licenses and approvals since suspending the process in 2019. If BabyCare is unable to obtain additional direct selling licenses and approvals as quickly as we would like, or at all, it would negatively impact our ability to expand and grow our business in China. Ultimately, there can be no assurance that BabyCare will be successful in maintaining its current direct selling licenses or obtaining additional direct selling licenses or the required approvals to expand into additional locations in China that are important to its business.
Risk Associated with Our International Operations
Risks associated with operating in international markets could restrict our ability to expand globally and harm our business and prospects.
We currently conduct our business in various foreign countries, and we expect to expand the number of countries in which we operate in the future. Economic conditions, including those resulting from wars, civil unrest, political unrest, acts of terrorism and other conflicts or volatility in the global markets, may adversely affect our customers, their demand for our products and their ability to pay for our products. In addition, there are numerous risks inherent in conducting our business internationally, including, but not limited to, potential instability in international markets, changes in regulatory requirements applicable to international operations, currency fluctuations in foreign countries, political, economic and social conditions in foreign countries and complex U.S. and foreign laws and treaties.
We believe that our ability to achieve future growth is dependent in part on our ability to continue our international expansion efforts. There can be no assurance, however, that we will be able to grow in our existing international markets or enter new international markets on a timely basis, or that new markets will be profitable. We must overcome significant regulatory and legal barriers before we can begin marketing in any international market. In addition, before marketing commences in a new country or market, it is difficult to assess the extent to which our products and sales
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techniques will be accepted or successful in any given country. In addition to significant regulatory barriers, we may also encounter problems conducting operations in new markets with different cultures and legal systems from those encountered elsewhere. We may be required to reformulate certain of our products before commencing sales in a given country. Once we have entered a market, we must adhere to the regulatory and legal requirements of that market. No assurance can be given that we will be able to successfully reformulate our products in any of our current or potential international markets to meet local regulatory requirements or to attract local customers. Our failure to do so could have a material adverse effect on our business, financial condition, or results of operations.
In many market areas, other direct selling companies already have significant market penetration, the effect of which could be to desensitize the local population to a new opportunity, such as USANA, or to make it more difficult for us to attract qualified Brand Partners or sell to customers generally. Even if we are able to commence operations in new markets, there may not be a sufficient population of persons who are interested in our business.
Trade policies, disputes, tariffs or other international disputes could harm our business and operating results.
Trade policies and actions which have been, or in the future may be, implemented by the United States against other countries, including China, relating to the import and export of certain products, and negotiations with respect thereto, may have a negative effect on our business, financial condition, and results of operations in China and other markets. In 2025, there have been increased, consistent, ongoing discussions and activities from the presidential administration that raise concern in this regard.
Additionally, any actions taken by the Chinese government, or the government in our other markets, to implement further trade policy changes, financial restrictions, or increased regulatory scrutiny on U.S. companies could negatively impact our business, financial condition, and results of operations. For instance, China has previously taken or threatened to take trade and other actions in retaliation against U.S. policies, and is likely to continue to do so. Past or future developments in this regard may have a material adverse effect on the economies, financial markets, and currency exchange rates in China and the United States.
Tensions between the United States and China have increased over the past few years as a result of disputes in areas including trade policy, intellectual property, cybersecurity and data privacy. China is our largest market and the United States is one of our largest markets and the location of our corporate headquarters. Our business could be harmed if relations between the United States and China worsen or if either government imposes additional policies, tariffs or sanctions and our business could encounter increased regulatory scrutiny in China, as well as adverse media or public attention in China, as a result of the deteriorating bilateral relationship.
We are subject to various governmental export control and trade sanctions laws and regulations that could impair our ability to compete in international markets or subject us to liability if we violate these controls.
In some cases, our products are subject to export control laws and regulations, including the Export Administration Regulations administered by the U.S. Department of Commerce, and our activities may be subject to trade and economic sanctions, including those administered by the United States Department of the Treasury’s Office of Foreign Assets Control, or OFAC (collectively, “Trade Controls”). As such, a license may be required to export or re-export our products, or provide related services, to certain countries and end-users, and for certain end-uses. The process for obtaining necessary licenses may be time-consuming or unsuccessful, potentially causing delays in sales or losses of sales opportunities and these licenses may not be issued.
Trade Controls are complex and dynamic regimes and monitoring and ensuring compliance can be challenging. Although we have procedures in place designed to ensure our compliance with Trade Controls, any failure to comply could subject us to both civil and criminal penalties, including substantial fines, possible incarceration of responsible individuals for willful violations, possible loss of our export or import privileges, and reputational harm. Although we have no knowledge that our activities have resulted in violations of Trade Controls, any failure by us or our partners to comply with applicable laws and regulations could have negative consequences for us, including reputational harm, government investigations, and penalties.
Fluctuation in the value of currency exchange rates with the U.S. dollar affects our operations and our net sales and earnings.
For the year ended January 3, 2026, 75.7% of our total net sales were generated in markets outside of the United States. Consequently, exchange rate fluctuations have, and will continue to have, a significant effect on our sales and earnings. If exchange rates fluctuate dramatically, it may become uneconomical for us to establish or to continue activities
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in certain countries. For instance, changes in currency exchange rates may affect the relative prices at which we and our competitors sell similar products in the same market. As our business expands outside the United States, an increasing share of our net sales and operating costs is transacted in currencies other than the U.S. dollar. Accounting practices require that our non-U.S. financial results be converted to U.S. dollars for reporting purposes. Consequently, our reported net earnings may be significantly affected by fluctuations in currency exchange rates, with earnings generally increasing with a weaker U.S. dollar and decreasing with a strengthening U.S. dollar.
Currently our strategy for reducing our exposure to currency fluctuation includes the timely and efficient repatriation of earnings from international markets where such earnings are not considered to be indefinitely reinvested, and settlement of intercompany transactions. We also enter into currency exchange contracts to offset foreign currency exposure in various international markets. We do not use derivative instruments for speculative purposes. A foreign government may impose, and some have imposed, foreign currency remittance restrictions. For example, several markets in which we conduct business, including China, require that we file the necessary statutory financial statements for the relevant period as a prerequisite to repatriating cash in the form of a dividend. Any government restrictions on transfers of cash out of the country and control of exchange rates may have a materially adverse effect on our business, financial condition, liquidity and cash flows. There can be no assurance that we will be successful in protecting our operating results or cash flows from potentially adverse effects of currency exchange fluctuations. Any such adverse effects could also adversely affect our business, financial condition, or results of operations.
Inflationary pressures and persistently high prices and uncertain availability of commodities, raw materials or other inputs used by us and our suppliers, or instability in logistics and related costs, could negatively impact our profitability.
Increases in prices, including as a result of inflation and rising interest rates, for commodities, raw materials or other inputs that we and our suppliers use in manufacturing products, systems, components and ingredients or other similar raw materials, or increases in logistics and related costs, have led and may continue to lead to higher costs for our products. In addition, any increase in the cost, or reduced availability, of critical materials for our products could lead to higher production costs and could impede our ability to successfully deliver on business strategy. Further, increasing global demand for, and uncertain supply of, such materials could disrupt us or our suppliers’ ability to obtain such materials in a timely manner and/or could lead to increased costs. Geopolitical risk, fluctuations in supply and demand, fluctuations in interest rates, any weakening of the U.S. dollar and other economic and political factors have created and may continue to create pricing pressure for commodities, raw materials and other inputs. These inflationary pressures could, in turn, negatively impact our profitability because we may not be able to pass all of those costs on to our customers or require our suppliers to absorb such costs. Additionally, any price increases we impose on our products as a result of the inflationary environment may result in decreased demand of our products, which could adversely affect our business, financial condition, or results of operations.
Risks Related to Our Products, Manufacturing and Operations
Our products and manufacturing activities are subject to extensive government regulation, which could limit or prevent the sale of our products in some markets.
The manufacture, packaging, labeling, advertising, promotion, distribution, and sale of our products are subject to regulation by numerous national and local governmental agencies in the United States and other countries, including the FDA and the FTC. Failure to comply with FDA regulatory requirements may result in, among other things, injunctions, product withdrawals, recalls, product seizures, fines, and criminal prosecutions. Any action of this type by the FDA could materially adversely affect our ability to market our products successfully. The manufacture of nutritional or dietary supplements and related products in the United States requires compliance with dietary supplement GMPs, which are based on the food-model GMPs, with additional requirements that are specific to dietary supplements. We believe our manufacturing processes comply with these GMPs for dietary supplements. Nevertheless, any FDA action determining that our processes were non-compliant with dietary supplement GMPs, could materially adversely affect our ability to manufacture and market our products. In addition, the Dietary Supplement & Nonprescription Drug Consumer Protection Act requires manufacturers of dietary supplement and over-the-counter products to notify the FDA when they receive reports of serious adverse events occurring within the United States. Potential FDA responses to any such report could include injunctions, product withdrawals, recalls, product seizures, fines, or criminal prosecutions. We have an internal adverse event reporting system that has been in place for several years and believe that we comply with this new law. Nevertheless, any action by the FDA in response to a serious adverse event report that may be filed by us could materially and adversely affect our ability to market our products successfully.
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In markets outside the United States, prior to commencing operations or marketing our products, we may be required to obtain approvals, licenses, or certifications from a country’s ministry of health or a comparable agency. Approvals or licensing may be conditioned on reformulation of products or may be unavailable with respect to certain products or product ingredients. We must also comply with product labeling and packaging regulations that vary from country to country. These activities are also subject to regulation by various agencies of the countries in which our products are sold.
We cannot predict the nature of any future laws, regulations, interpretations, or applications, nor can we determine what effect additional governmental regulations or administrative orders, when and if promulgated, could have on our business. These potential effects could include, however, requirements for the reformulation of certain products to meet new standards, the recall or discontinuance of certain products, additional record keeping and reporting requirements, expanded documentation of the properties of certain products, expanded or different labeling, or additional scientific substantiation. Any or all of these requirements could have a material adverse effect on our business, financial condition, or results of operations.
Our in-house manufacturing activity is subject to certain risks.
We manufacture approximately 56% of the products sold to our customers. Additionally, over the past several years we have increased self-manufacturing of our foods, personal care and skincare products, which has increased the percentage of products we manufacture in-house. Because of our self-manufacturing practices, we are dependent upon the uninterrupted and efficient operation of our manufacturing facilities. Those operations are subject to power failures, the breakdown, failure, or substandard performance of equipment, the improper installation or operation of equipment, natural or other disasters, and the need to comply with the requirements or directives of government agencies, including the FDA and CFDA. There can be no assurance that the occurrence of these or any other operational problems at our facilities would not have a material adverse effect on our business, financial condition, or results of operations.
We are subject to a variety of environmental laws relating to the storage, discharge, handling, emission, generation, manufacture, use and disposal of chemicals, solid and hazardous waste, and other toxic and hazardous materials. Our manufacturing operations presently do not result in the generation of material amounts of hazardous or toxic substances. Nevertheless, complying with new or more stringent laws or regulations, or more vigorous enforcement of current or future policies of regulatory agencies, could require substantial expenditures by us that could have a material adverse effect on our business, financial condition, or results of operations. Environmental laws and regulations require us to maintain and comply with a number of permits, authorizations, and approvals and to maintain and update training programs and safety data regarding materials used in our processes. Violations of those requirements could result in financial penalties and other enforcement actions and could require us to halt one or more portions of our operations until a violation is cured. The combined costs of curing incidents of non-compliance, resolving enforcement actions that might be initiated by government authorities, or of satisfying new legal requirements could have a material adverse effect on our business, financial condition, or results of operations.
Our reliance on third parties to manufacture and supply certain of our products may harm our business, financial condition and operating results.
We contract with third-party suppliers and manufacturers for the production of certain of our products, which accounted for approximately 44% of our product sales for the year ended January 3, 2026. These third-party suppliers and manufacturers produce and, in most cases, package the products according to formulations and specifications that have been developed by or in conjunction with our in-house product development team. These products include most of our gelatin-capsulated supplements, Rev3 Energy Drink, Probiotic, our powdered drink mixes, foods, and certain of our personal care products, including our Celavive line for markets outside of China. Hiya and Rise also utilize third-party manufacturers for certain of their products. Products manufactured by third-party suppliers at their locations must also pass through quality control and assurance procedures to ensure they are manufactured in conformance with our specifications. We cannot assure you that our outside contract manufacturers will continue to reliably supply products to us at the levels of quality, or the quantities, we require, and in compliance with our specifications or applicable laws, including under the FDA’s GMP regulations. We have encountered situations in the past where we have had disagreements with contract manufacturers about the overall quality of products they have produced for us, and specifically whether such products conform to our specifications. We have also suspended and terminated relationships with contract manufacturers for quality issues and non-conforming products. While our business continuation plan contemplates events such as these, identifying and obtaining acceptable replacement manufacturing sources, on a timely basis or at all, is challenging. Additionally, transferring our third-party manufacturing business to another contract manufacturer can be expensive, time-consuming,
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result in delays in our production or shipping, reduce our net sales, damage our relationship with customers and damage our reputation in the marketplace.
The inability to obtain adequate supplies of raw materials for products at favorable prices, or at all, could have a material adverse effect on our business, financial condition, or operating results.
We acquire all of our raw materials for the manufacture of our products from third-party suppliers. Materials used in manufacturing our products are purchased through purchase order, often invoking pre-negotiated annual supply agreements. We have very few long-term agreements for the supply of these materials. There is a risk that any of our suppliers could discontinue selling raw materials to us. Although we believe that we could establish alternate sources for most of our products, any delay in locating and establishing relationships with other sources could result in product shortages or back orders for products, with a resulting loss of net sales. In certain situations, we may be required to alter our products or to substitute different products from another source. There can be no assurance that suppliers will provide the raw materials that are needed by us in the quantities that we request or at the prices that we are willing to pay. Because we do not control the actual production of certain raw materials, we are also subject to delays caused by any interruption in the production of these materials, based on conditions not within our control, including those related to the COVID-19 pandemic, weather, crop conditions, transportation interruptions, strikes by supplier employees, and natural disasters (the nature and severity of which may be impacted by climate change) or other catastrophic events.
In the past, we have experienced temporary shortages of the raw materials used in certain of our nutritional products. Although we had identified multiple sources to supply such raw material ingredients, quantities of the materials we purchased during these shortages were at higher prices, which had a negative impact on our gross margins for those products. While we periodically experience price increases due to unexpected raw material shortages and other unanticipated events, we have been able to manage this by increasing the price at which we sell our products, therefore, this has historically not resulted in a material effect on our gross margin. Supply chain interruptions, including as a result of shortages and transportation issues or unexpected increases in demand, and price increases can adversely affect us as well as our suppliers and Brand Partners, whose performance may have a significant impact on our results. Such shortages or disruptions could be caused by factors beyond the control of our suppliers, Brand Partners or us. Any of these events, if they were to occur, could harm our business, results of operations and financial condition.
Delays and disruptions to transporting and distributing our products may adversely affect our results.
We may experience delays and disruptions in shipping, transporting and otherwise distributing our products, including increased airport and shipping port congestion, a lack of transportation capacity, increased expenses, import or export controls or delays, and labor disputes or shortages. Disruptions in transportation and shipments may result in increased costs, including the additional use of airfreight to meet demand. Congestion to ports can affect previously negotiated contracts with shipping companies, resulting in unexpected increases in shipping costs and reduction in our profitability. For example, the COVID-19 pandemic resulted in several delays, cost increases, and disruptions in our global distribution channel.
We may incur liability with respect to our products.
As a manufacturer and a distributor of products for human consumption and topical application, we could become exposed to product liability claims and litigation. Additionally, the manufacture and sale of these products involves the risk of injury to consumers due to tampering by unauthorized third parties or product contamination. To date, we have not been a party to any product liability litigation, although, like any dietary supplement company, we have received reports from individuals who have asserted that they suffered adverse consequences as a result of using our products. The number of reports we have received to date is nominal. These matters historically have been settled to our satisfaction and have not resulted in material payments. We are aware of no instance in which any of our products are or have been defective in any way that could give rise to material losses or expenditures related to product liability claims. Although we maintain product liability insurance, which we believe to be adequate for our needs, there can be no assurance that we will not be subject to such claims in the future or that our insurance coverage will be adequate.
Nutritional supplement products may be supported by only limited availability of conclusive clinical studies.
Our products include nutritional supplements that are made from vitamins, minerals, herbs, and other substances for which there is a long history of human consumption. Some of our products contain innovative ingredients or combinations of ingredients. Although we believe that all of our products are safe when taken as directed, there is little long-term experience with human consumption of certain of these product ingredients or combinations of ingredients in concentrated form. We conduct research and test the formulation and production of our products, but we have performed or
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sponsored only limited clinical studies. Furthermore, because we are highly dependent on consumers’ perception of the efficacy, safety, and quality of our products, as well as similar products distributed by other companies, we could be adversely affected in the event that those products prove or are asserted to be ineffective or harmful to consumers or in the event of adverse publicity associated with any illness or other adverse effects resulting from consumers’ use or misuse of our products or similar products of our competitors.
Legal, Regulatory, Compliance and Tax Risks
Legal action by former Brand Partners or third parties against us could harm our business.
We continually monitor and review our Brand Partners’ compliance with our policies and procedures as well the laws and regulations applicable to our business. In the ordinary course of our business, Brand Partners occasionally fail to adhere to our policies and procedures. If this happens, we may take disciplinary action against the breaching Brand Partner. This disciplinary action is based on the facts and circumstances of the particular case and may include anything from warnings for minor violations to termination of the Brand Partner’s purchase and distribution rights for more serious violations. From time to time, we become involved in litigation with a Brand Partner whose purchase and distribution rights have been terminated. We consider this type of litigation to be routine and incidental to our business. While neither the existence nor the outcome of this type of litigation is typically material to our business, in the past we have been involved in litigation of this nature that resulted in a large cash award against us.
Our competitors have also been involved in this type of litigation, and more and more of these cases have resulted in class action litigation, where the result has been a large cash award against the competitor or a large cash settlement by the competitor. These types of challenges, awards or settlements could provide incentives for similar actions by other former Brand Partners against us in the future, which could result in class action litigation against us. Any such challenge involving others in our industry or us, could harm our business by resulting in fines or damages against us, creating adverse publicity about us or our industry, or hurting our ability to attract and retain customers.
We believe that Brand Partner compliance is critical to the integrity of our business, and therefore, we will continue to be assertive in ensuring that our Brand Partners comply with our policies and procedures. As such, there can be no assurance that this type of litigation will not occur again in the future or result in an award or settlement that has a materially adverse effect on our business. We could also be subject to challenges by private parties in civil actions. We are aware of recent civil litigation against various direct selling companies in the United States, which have already resulted in settlements and may result in additional significant settlements in the future by these companies. There can be no assurance that we will not be challenged by private parties in litigation.
We may incur liability under our “Athlete Guarantee” program.
We believe that our nutritional supplement products are free from substances that have been banned by world-class training and competitive athletic programs. We retain independent testing agencies to conduct periodic checks for banned substances. We further believe that, while our products promote good health, they are not otherwise considered “performance enhancing” as that term has been used in defining substances that are banned from use in international competition by the World Anti-Doping Agency (“WADA”). For many years, we have been a sponsor of Olympic level athletes and professional competitors around the world. These athletes have been tested on many occasions and have never tested positive for banned substances as a result of taking USANA nutritional products. To back up our claim that athletes who use USANA products as part of their training regimen will not be consuming banned substances, we have offered to enter into agreements with select athletes, some of whom have high-profiles and are highly compensated. These agreements provide that, during the term of the agreement, should the athlete test positive for a banned substance included in the WADA, and should such positive result be caused by taking USANA nutritional products, we will compensate that athlete at an amount equal to two times their current annual earnings, up to $1.0 million, based on the athlete’s personal level of competition, endorsement, and other income, as well as other factors. Although we believe that the pool of current and potential participants in the program is small and that the procedures and safeguards implemented by us in connection with the program are sound, there is no guarantee that an athlete who is accepted in the program will not successfully make a claim against us. We currently have no insurance to protect us from potential claims under this program.
Failure to comply with anti-corruption laws could adversely affect our business.
We currently conduct our business in various foreign countries and expect to expand the number of countries in which we operate in the future. Our international business is subject to various anti-corruption laws, including principally the U.S. Foreign Corrupt Practices Act ("FCPA"). In recent years, there have been an increasing number of investigations and other enforcement activities under these laws, including a voluntary investigation we concluded several years ago
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concerning our China operations. The FCPA prohibits U.S.-based companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business. Other anti-corruption laws prohibit both domestic and international bribery as well as bribery across both public and private sectors. We pursue opportunities in certain parts of the world that experience government corruption and in certain circumstances compliance with anti-bribery laws may conflict with local customs and practices. Our policies mandate compliance with all applicable anti-bribery laws. Further, we require our partners, subcontractors, agents and others who work for us or on our behalf to comply with these and other anti-bribery laws.
Although we have policies and procedures and a compliance program designed to ensure that we comply with the FCPA and other anti-bribery laws, there is no assurance that such policies or procedures will protect us against liability under the FCPA or other laws for actions taken by our agents, employees and intermediaries. If we are found to be liable for violations of these acts (either due to our own acts or our inadvertence or due to the acts or inadvertence of others), we could incur severe criminal or civil penalties or other sanctions, which could have a material adverse effect on our reputation, business, results of operations or cash flows. In addition, detecting, investigating and resolving actual or alleged violations of these acts is expensive and could consume significant time and attention of our senior management.
We could be subject to adverse changes in tax laws, regulations and interpretations or challenges to our tax positions.
We are subject to tax laws and regulations in the United States and numerous other foreign jurisdictions. Tax laws, regulations, and interpretations in various jurisdictions may change, with or without notice, due to social, economic, political and other considerations. As a result, our evaluation and estimates for our provision for income taxes may change perhaps negatively. Our future effective tax rates could be affected by numerous factors, including changes in the market mix for our net sales, the amount of our earnings and where earned, intercompany transactions, the inability to realize tax benefits, changes in currency exchange rates, tax positions, allocation and apportionment of state taxes, changes in our deferred tax assets and liabilities and their valuation, changes in our business operations, acquisitions, and entry into new markets. There can be no assurance that additional changes in tax laws or regulations, both within the United States and the other jurisdictions in which we operate, will not materially and adversely affect our effective tax rate, tax payments, financial condition and results of operations. Similarly, changes in tax laws and regulations that impact our customers and counterparties or the economy generally may also impact our financial condition and results of operations.
We are also subject to examination by tax authorities, including state revenue agencies and foreign governments. While we regularly assess the likelihood of favorable or unfavorable outcomes resulting from examinations by tax authorities to determine the adequacy of our provision for income taxes, there can be no assurance that the actual outcome resulting from these examinations will not materially adversely affect our financial condition and operating results. The IRS and several foreign tax authorities have also increasingly focused attention on intercompany transfer pricing. Tax authorities, in certain instances, have disagreed with our transfer pricing calculations and agreements and assessed us with additional taxes. Going forward, tax authorities could continue to disagree with our intercompany charges, cross-jurisdictional transfer pricing or other matters and assess additional taxes. If we do not prevail in any such disagreements, our profitability may be affected. Tax laws and regulations are complex and subject to varying interpretations and any significant failure to comply with applicable tax laws and regulations in all relevant jurisdictions could give rise to substantial penalties and liabilities. Any changes in enacted tax laws, rules or regulatory or judicial interpretations; any adverse outcome in connection with tax audits in any jurisdiction; or any change in the pronouncements relating to accounting for income taxes could materially and adversely impact our effective tax rate, tax payments, financial condition and results of operations.
Our effective tax rate has meaningfully increased over the last few years and will likely remain elevated due to profitability erosion in the U.S. resulting from geographic misalignment between net sales and operating expenses.
Our effective tax rate has increased meaningfully over the past few years and is expected to remain elevated in the next fiscal year. The principal driver of this increase is the misalignment between the markets in which we generate net sales and those in which we incur operating expenses. Specifically, nearly 76% of our net sales are generated in markets outside the United States, while a substantial majority of our operating expenses are incurred in the United States. Due to the tax laws, regulations, and administrative practices of the international markets in which we operate, including transfer pricing rules and other limitations on intercompany arrangements, we are limited in our ability to charge or allocate U.S.-incurred expenses to certain foreign markets through intercompany agreements. As a result, a significant portion of our taxable income may be recognized in foreign markets without a corresponding allocation of global administrative and support. This structural mismatch may increase our overall effective tax rate and reduce our after-tax profitability. In addition, changes in global tax laws, evolving interpretations of existing tax regulations, increased scrutiny by tax authorities, and ongoing international initiatives addressing cross-border taxation could further restrict our ability to align
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income and expenses across our markets. Any such developments may increase the disparity between the location of our net sales and expenses and could cause our effective tax rate to remain elevated or increase further.
An elevated effective tax rate may materially and adversely affect our net earnings, cash flows, and financial condition. If we are unable to diversify our income geographically or implement cross-border tax planning strategies that are compliant with applicable laws, our effective tax rate may continue to exceed historical levels and may fluctuate significantly from period to period.
If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.
In 2024, we concluded that our disclosure controls and procedures were not effective as of December 30, 2023, due to material weaknesses in internal control over financial reporting. The material weaknesses resulted from an insufficient complement of trained resources with specialized skills and knowledge in information technology general controls (ITGCs), or an alternative contingency plan, to timely respond to the impacts of turnover in key personnel with responsibility for ITGCs that occurred during 2023. Although these material weaknesses did not result in any errors to the financial statements, and there were no changes to previously released financial results, the applicable control deficiencies were not remediated as of December 30, 2023, and consequently, there was a reasonable possibility that it could have resulted in a material misstatement in the Company's financial statements that would not have been detected.
The Company’s management, under the oversight of the Audit Committee, completed a remediation plan for these material weaknesses in 2024 and later concluded that these material weaknesses had been remediated, that the related controls were effective. Similarly, for fiscal year 2025, management has concluded that the Company's disclosure controls and internal control over financial reporting are effective as of January 3, 2026. Going forward, if we fail to maintain effective internal controls, we could be required to take costly and time-consuming corrective measures, to remedy any number of deficiencies, significant deficiencies or material weaknesses, be required to restate the affected historical financial statements, be subjected to investigations and/or sanctions by federal and state securities regulators and be subjected to civil lawsuits by security holders. Any of the foregoing could also cause investors to lose confidence in our reported financial information and in our company and would likely result in a decline in the market price of our stock and in our ability to raise additional financing if needed in the future.
Environmental, Social and Governance ("ESG") issues may have an adverse effect on our reputation, business, financial condition or results of operations.
Companies across all industries are facing increasing scrutiny relating to their ESG policies. If we are unable to meet our sustainability goals or evolving regulator, investor, industry or stakeholder expectations and standards, or if we are perceived to have not responded appropriately to the continuing concern for ESG issues, customers may choose to stop purchasing our products and our reputation, business or financial condition may be adversely affected. In particular, these constituencies are increasingly focusing on environmental issues, including climate change, water use, plastic waste, and other sustainability concerns. These factors could cause us to incur additional costs, to make changes to our operations to make additional commitments, set targets or establish additional goals and take actions to meet them, which could expose us to market, operational and execution costs or risk.
In addition to environmental issues these constituencies are also focused on social and other governance issues, including matters such as, but not limited to, human capital and social issues. We also have established inclusion and belonging goals as part of our ESG initiative.
Concern over climate change, including plastics and packaging materials, in particular, may result in new or increased legal and regulatory requirements, including, for example, two climate disclosure laws and recycling laws adopted by California. Increased regulatory requirements related to environmental causes, and related ESG disclosure rules, including the new California laws, additional states that have enacted similar laws, and any new laws or regulations on climate change promulgated by the SEC, other states, or other countries in which we do business, may result in increased compliance costs or increased costs of energy, raw materials or compliance with emissions standards, which may cause disruptions in the manufacture of our products or an increase in operating costs. Any failure to achieve our sustainability goals or a perception (whether or not valid) of our failure to act responsibly with respect to the environmental, human capital, or social issues, or to effectively respond to new, or changes in, legal or regulatory requirements concerning environmental or other ESG matters, or increased operating or manufacturing costs due to increased regulation or environmental causes could adversely affect our business and reputation and increase risk of litigation.
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Risk Associated with Information Technology, Data Security and Data Privacy
A failure or interruption of our information technology systems would harm our business.
The global nature of our business, shopping and our global compensation plan requires the development and implementation of robust and efficiently functioning information technology systems. Such systems are vulnerable to a variety of potential risks, including damage or interruption resulting from natural disasters, power outages, certain aging system architecture, systems failures, hardware or software corruption, human error or hacking, malware, ransomware, phishing or other similar acts. We rely on both self-developed and third-party developed and supported information technology systems. Although we have adopted and implemented a business continuity and disaster recovery plan and a variety of other operational safeguards, the occurrence of any of these events could result in costly interruptions or failures adversely affecting our business and the results of our operations.
We rely on information technology to support our operations and reporting environments. A data breach involving that technology or the data stored in it, could disrupt our ability to operate our businesses effectively, adversely affect our reported financial results and our reputation, and expose us to significant potential liability, government investigations, fines or litigation.
In the ordinary course of our global business, we collect and store in our data centers and on our networks, including cloud systems, significant amounts of data, including personally identifiable information (PII), intellectual property, and our proprietary business information. The secure collection, storage and other processing of this information is critical to our operations, regulatory compliance and business strategy. Although we strive to frequently analyze and improve our data security measures, our information technology and infrastructure are subject to persistent attacks of varying degrees and types and we may be vulnerable to attacks by hackers. Such attacks could include viruses, ransomware attacks, computer denial of service attacks, or phishing schemes. In some instances, despite our reasonable efforts, it could take us some time to discover that our networks have been breached.
Any such breach of our networks and the information and PII stored therein could cause such information and PII to be accessed, publicly disclosed, altered, damaged, held ransom, lost or stolen. In any such event, we could suffer significant loss or incur significant liability, including: damage to our reputation; increased cyber insurance premiums; loss of customer confidence or goodwill; and significant expenditures of time and money to address and remediate the resulting damage (including notification and credit monitoring costs, as well as fines and penalties imposed by regulators) to affected individuals or business partners, or to defend ourselves in resulting litigation or other legal proceedings, by affected individuals, business partners or regulators.
Likewise, a failure to adhere to the payment card industry’s data security standards could lead to significant penalties from payment card associations, termination of our ability to receive credit or debit card payments, any of which could have a material adverse effect on our business and financial condition. Furthermore, such data breach could result in significant disruption of our operations, which could adversely affect our business, revenues and competitive position.
Additionally, as we utilize artificial intelligence ("AI") technologies throughout our business, we will encounter an expanded risk landscape, including data security and data privacy risks, unintended biases, discriminatory outputs, and intellectual property risk, all of which could impact our ability to protect our customer information and data and expose us to additional liability. Various U.S. and international jurisdictions have passed laws regulating the use of AI technologies and we believe we will see an increase in regulation in this area, which may impact our ability to use AI technologies throughout our business.
We are subject to data privacy and security laws and regulations, and our actual or perceived failure to comply with them could adversely affect our business and operating results.
Compliance with data privacy and security laws and regulations is a significant effort for us in all of our markets because we collect, store and otherwise process significant amounts of customer and employee personal information for business (including for transactional and marketing purposes) and legal purposes. The governments of our various markets have adopted, or are adopting, complex and strict laws and regulations governing data privacy and security, and these areas are still rapidly evolving.
These laws and regulations have resulted in greater compliance risk and cost for us.
These laws and regulations often require us to take a variety of actions, including: implementing new data privacy and security policies; granting individuals a wide variety of rights with respect to their PII, including access, correction and
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deletion rights; informing individuals of security breaches that affect their PII; disclosing to individuals how we process their PII and obtaining their written consent to such processing; and localizing individuals' PII within national borders and complying with cross border PII transfer assessments and requirements, among other things. Examples of significant, recent data privacy and security laws affecting our various markets include the European Union General Data Protection Regulation, ("GDPR"), China’s national Data Privacy Law and Personal Information Protection Law, China's Cybersecurity Law, Korea’s Personal Information Protection Act, the California Consumer Privacy Act, ("CCPA"), and the California Privacy Rights Act, and other national and state data privacy laws in our various markets. There also is a wide range of enforcement agencies at both the state and national levels in our markets that can review companies for privacy and data security concerns based on general consumer protection laws. The FTC and state Attorneys General all are aggressive in reviewing privacy and data security protections for consumers.
We have incurred, and will continue to incur, substantial costs in striving to comply with these various data privacy and security laws and regulations. Compliance with these laws and regulations may limit our ability to provide products and services to our customers that they may find valuable or otherwise require us to change our business practices in a manner that is ultimately adverse to our business objectives. As such, we cannot assure ongoing compliance with all such laws or regulations, industry standards, contractual obligations and other legal obligations. Any failure or perceived failure by us to comply with data security and privacy laws and regulations may result in governmental enforcement actions and prosecutions, private litigation, significant fines and penalties, adverse publicity, or reputation damage, which could have an adverse effect our business and operating results.
Human Capital Risks Associated with our Business
If we are unable to attract and retain active Brand Partners and Preferred Customers, our business may be harmed.
Our consumer base includes Brand Partners who personally consume and sell our products, Preferred Customers who join USANA and simply consume our products, and retail customers who do not join USANA but purchase products directly from us or one of our Brand Partners and consume our products. We refer to Brand Partners and Preferred Customers in this Annual Report together as active Customers. We rely largely on our Brand Partners to market and sell our products and to generate active Customer growth. Our ability to maintain and increase sales in the future will depend in large part upon our success in increasing our number of active Customers. Our success will also depend on our ability to retain and motivate our existing Brand Partners and attract new Brand Partners to sell our products. Brand Partners typically market and sell our products on a part-time basis and often engage in other business activities, some of which may compete with us. Our ability to continue to attract and retain active Customers can be affected by a number of factors, some of which are beyond our control, including each of the other risks identified in this Annual Report. Our Brand Partners may terminate their services at any time and, like most direct selling companies, we experience a high turnover among new active Customers from year to year. Customers may also stop buying from us at any time and it is challenging to determine why a customer actually stops buying. For the last few years, most of our markets, including China, have experienced active Customer declines. If our strategies, including our customer experience strategy, do not generate growth in our active Customer base, our operating results could be harmed.
We also rely on the successful efforts of our Brand Partners who become leaders with our Company. Our Compensation Plan is designed to permit Brand Partners to sponsor new Brand Partners and Preferred Customers, thereby creating sales organizations. As a result, Brand Partners develop business and personal relationships with other Brand Partners and Preferred Customers. The loss of a key Brand Partner or group of Brand Partners, large turnover or decreases in the size of the key Brand Partner force, seasonal or other decreases in product purchases, sales volume reduction, the costs associated with training new Brand Partners, and other related expenses may adversely affect our business, financial condition, or results of operations.
Hiya's ability to increase sales in the future will also depend in large part upon their success in increasing their number of subscribers and their ability to retain subscribers. If Hiya's strategies do not generate growth in subscribers, our operating results could be harmed.
The loss of key management personnel could adversely affect our business.
Our executive officers are primarily responsible for our day-to-day operations, and we believe our success depends in part on our ability to retain our executive officers, to compensate our executive officers at attractive levels, and to continue to attract additional qualified individuals to our management team. We depend upon the services of our Chairman and Chief Executive Officer, Kevin Guest; and our Chief Financial Officer, Douglas Hekking, as well as other key members of our executive team. We cannot guarantee continued service by our key executive officers. We do not maintain key man life insurance on any of our executive officers, nor do we have an employment agreement with any of
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our executive officers. The loss or limitation of the services of any of our executive officers or the inability to attract additional qualified management personnel could have a material adverse effect on our business, financial condition, or results of operations.
Risks Associated with Business Development Activities, Acquisitions and our Acquired Businesses
Growth through acquisitions is part of our strategy, and we may not successfully integrate, operate or realize the anticipated benefits of our acquisitions.
Our growth strategy contemplates acquiring additional businesses, such as the Hiya Acquisition that we completed during 2024 and our acquisition of Rise and another small business in 2022. We may acquire additional businesses in the future to the extent that we find prospects that meet our acquisition criteria. Our acquisition criteria includes, but is not limited to: vertical integration; product and category expansion; channel expansion; geographic expansion; and other opportunities that strengthen, diversify and grow our omni-channel business. Our completed and potential future acquisitions entail a variety of risks and uncertainties, including: (i) potential disruption to our core nutritional business; (ii) failure to achieve our strategic objectives, efficiencies, and growth strategies for the acquisition; (iii) potential loss of key employees, customers, or other stakeholders of acquired businesses, particularly given that our strategy contemplates our acquired businesses operating and growing independently of USANA; (iv) general risks associated with owning and overseeing businesses and industries where we have limited or no prior experience; (v) expense and indebtedness, including unanticipated liabilities and litigation; (vi) shareholder dilution; (vii) difficulty in implementing an effective control environment for acquired companies, in a timely and efficient manner; or (viii) the failure to consummate transactions in a timely or efficient manner or at all.
The occurrence of any of the foregoing risks or others, or our inability to effectively execute our business development strategy, could have a material adverse effect on our business, financial condition and operating results. We cannot assure you that we will be able to identify suitable acquisition prospects, consummate acquisitions on favorable terms or at all, or accomplish the objectives of an acquisition.
Although we expect that the Hiya Acquisition will result in synergies and other benefits to us, we may not realize those benefits because of challenges inherently associated with integration, performance and the achievement of synergies.
The Company and Hiya were operated independently until completion of the Hiya Acquisition, and there can be no assurances that our businesses can be combined in a manner that allows for the achievement of substantial benefits. If we are delayed or not able to successfully integrate Hiya’s businesses with ours, pursue our Hiya direct-to-consumer strategy successfully, or realize the strategic value of the Hiya assets, the anticipated benefits and cost savings of the Hiya Acquisition may not be realized fully or may take longer than expected to be realized. Further, it is possible that there could be loss of key employees, loss of customers, disruption of ongoing businesses or unexpected issues, higher than expected costs and an overall post-acquisition process that takes longer than originally anticipated. Specifically, the following issues, among others, must be addressed in the integration of Hiya businesses in order to realize the anticipated benefits of the Hiya Acquisition so the combined company performs as we hope:
• combining certain of the companies’ business functions;
• combining certain aspects of the businesses of the Company and Hiya in a manner that permits us to achieve the synergies anticipated to result from the Hiya Acquisition, the failure of which would result in the anticipated benefits of the Hiya Acquisition not being realized in the time frame currently anticipated or at all;
• maintaining existing agreements with customers, manufacturers, distributors, talent and vendors and avoiding delays in entering into new agreements with prospective customers, distributors, manufacturers, talent and vendors;
• possible inconsistencies in standards, controls, procedures and policies, and compensation structures between Hiya’s structure and our structure;
• determining whether and how to address possible differences in company cultures and management philosophies;
• integrating the companies’ administrative and information technology infrastructure; and
• developing products and technology that allow value to be unlocked in the future.
The Hiya Acquisition was consummated in December 2024 and various integration activities commenced in 2025. The pursuit of the Hiya Acquisition, preparation for the integration of Hiya and the integration of Hiya have required the time and attention of USANA and Hiya management and other internal resources and the integration of Hiya may continue to do so. This may disrupt our ongoing business and the business of the combined company.
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The Hiya Acquisition and integration may result in additional costs and expenses.
We have incurred and expect to continue to incur significant costs, expenses and fees for professional services and other transaction costs in connection with the Hiya Acquisition and integration. We may also incur accounting and other costs in the integration of the businesses of Hiya that were not anticipated at the time of the acquisition, including costs for which we have established reserves or which may lead to reserves in the future. Such costs could negatively impact the Company’s free cash flow.
The Hiya Acquisition may be viewed negatively by our Brand Partners.
The Hiya Acquisition and our expansion into new businesses may be viewed negatively by some of our Brand Partners as Hiya sells products that are similar to, and potentially competitive with, those of our core nutritional business and may be perceived as utilizing disproportionate resources for business that does not relate to direct selling. These perspectives of our Brand Partners could have a material negative impact on the number or productivity of our Brand Partners and result in a reduction in our net sales or active Customer counts.
Hiya's ability to acquire customers in a cost effective manner depends on its capacity to adapt to changes in the digital marketing environment.
Hiya relies significantly on digital marketing channels, including social media platforms, search engines, and other online advertising networks to drive brand awareness, customer acquisition, customer engagement and sales. These channels frequently modify their algorithms, advertising products, pricing models, privacy practices and other terms of service, often without advance notice. Hiya encountered certain of these changes in 2025 and they negatively impacted Hiya's customer acquisition and sales. Future changes in social media advertising algorithms or platform policies may reduce the visibility of Hiya's content, limit its ability to target audiences effectively, increase customer acquisition costs or otherwise diminish the effectiveness of its marketing campaigns.
Additionally, evolving data privacy laws and increased restrictions on the acquisition and use of consumer data may impair Hiya's ability to digitally advertise, measure campaign performance, or optimize advertising spend and marketing efforts. Increased competition for digital advertising inventory may further increase advertising costs and reduce returns on advertising campaign investments.
If Hiya is unable to effectively anticipate, respond to or manage these changes in the digital marketing environment, it may experience reduced traffic to their website, lower conversion rates, higher customer acquisition costs and diminished returns on marketing investments, which could materially adversely affect its business, overall financial condition or results of operations.
Rise's business depends on a limited number of key retail customers, and the loss of, or a significant reduction in orders from, any of these customers could materially adversely affect Rise's business, financial condition and results of operations.
Notwithstanding Rise's omni-channel platform, a substantial portion of Rise's net sales is generated from orders placed by a limited number of large retail customers. Sales to these customers are generally made pursuant to purchase orders rather than long-term, binding agreements. Consequently, these customers may reduce, delay or discontinue their purchases from Rise at any time for any reason. These customers may also seek to renegotiate pricing, payment terms, promotional support, exclusivity arrangements or other terms in a manner that is unfavorable to Rise.
Additionally, Rise's retail customers' purchasing and merchandising decisions are influenced by various factors outside of Rise's control, including consumer demands, inventory management practices, financial condition, and general economic conditions. If any of Rise's key retail customers restructures, consolidates, alters shelf space of Rise products or competing products, Rise's sales volume could decline meaningfully and we can make no assurances that we would be able to replace such lost sales volumes on comparable terms, on a timely basis or at all.
The loss of, or a material reduction in orders from, any of Rise's significant retail customers, or Rise's failure to accurately forecast demand from such customers, could result in lower sales, excess inventory, increased promotional spending, write-downs, and negative margin impact. Any of these events could have a materially adverse effect on Rise's business, overall financial condition or results of operations.
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General Economic, Publicity, Competitive, and Intellectual Property Risks Associated with our Business
Difficult economic conditions may adversely affect our business.
Over the past few years, economic conditions in many of the markets where we sell our products have resulted in challenges to our business and economies around the world have been negatively impacted by the COVID-19 pandemic. We cannot predict whether world or market-specific economies will improve or deteriorate in the future. If difficult economic conditions continue or worsen, we could experience declines in net sales, profitability and cash flow due to lower demand for our products or other factors caused by economic challenges faced by our customers, potential customers or suppliers. Additionally, these conditions may result in a material adverse effect on our liquidity and capital resources or otherwise negatively impact our operations or overall financial condition.
Our business is subject to the effects of adverse publicity and negative public perception.
Our ability to attract and retain active Customers in our core nutritional business and to sustain and enhance sales through our Brand Partners can be affected by adverse publicity or negative public perception regarding our industry, our competition, or our business generally. Our business prospects, financial condition and results of operations could be adversely affected if our public image or reputation were tarnished by negative publicity. This negative public perception may include publicity regarding the legality of direct selling, the quality or efficacy of nutritional supplement products or ingredients in general or our products or ingredients specifically, data privacy or security concerns, and regulatory investigations, regardless of whether those investigations involve us or our Brand Partners or the business practices or products of our competitors or other direct selling companies.
There has been significant media and short-seller attention regarding the viability and legality of direct selling in the United States, China, and internationally over the past several years. This attention has led to intense public scrutiny of the industry, as well as volatility in our stock price and the stock price of companies similar to ours. There can be no assurance that we will not be subject to adverse publicity or negative public perception in the future or that such adverse publicity will not have a material adverse effect on our business, financial condition, or results of operations.
Hiya's and Rise's businesses are also subject to the effects of adverse publicity or negative public perception, and such adverse publicity could have a material adverse effect on their businesses, overall financial condition, or results of operations.
Our business is subject to the risks associated with intense competition from larger, wealthier, and more established competitors.
We face intense competition in the business of distributing and marketing nutritional supplements, vitamins and minerals, personal care products, and other nutritional products, as described in greater detail in “Business — Competition.” Numerous manufacturers, distributors, and retailers compete actively for consumers and, in the case of other direct selling companies, for Brand Partners. Additionally, our failure to develop and utilize AI technology throughout our business could negatively impact our competitive position in the market. AI technology is playing a greater role in product development, operational efficiency, shopping experience, customer engagement, and overall marketing. Our business could be harmed if we are unable to adopt and utilize these technologies as quickly or efficiently as our competition. There can be no assurance that we will be able to compete in this intensely competitive environment. In addition, nutrition and personal care products can be purchased in a wide variety of channels of distribution, including retail stores. Entry to market is not particularly capital intensive or otherwise subject to high barriers and as a result, new competitors can enter easily and compete with us for customers and distributors, including our Brand Partners. Our product offerings in each product category are also relatively small, compared to the wide variety of products offered by many of our competitors.
Our business is subject to particular intellectual property risks.
Most of our products are not protected by patents. The labeling regulations governing our nutritional supplements require that we indicate ingredients of such products precisely and accurately on product containers. Accordingly, patent protection for nutritional supplements often is impractical given the large number of manufacturers who produce nutritional supplements having many active ingredients in common. Additionally, the nutritional supplement industry is characterized by rapid change and frequent reformulations of products, as the body of scientific research and literature refines current understanding of the application and efficacy of certain substances and the interactions among various substances. We protect our investment in research, as well as the techniques we use to improve the purity and effectiveness of our products, by relying on trade secret laws. We have also entered into confidentiality agreements with certain of our employees involved in research and development activities. Additionally, we endeavor to seek, to the fullest extent permitted by
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applicable law, trademark and trade dress protection for our products, which protection has been sought in many of our existing and potential future markets. Notwithstanding our efforts, there can be no assurance that our efforts to protect our trade secrets and trademarks will be successful. Nor can there be any assurance that third parties will not assert claims against us for infringement of their intellectual proprietary rights. If an infringement claim is asserted, we may be required to obtain a license of such rights, pay royalties on a retrospective or prospective basis, or terminate our manufacturing and marketing of our infringing products. Litigation with respect to such matters could result in substantial costs and diversion of management and other resources and could have a material adverse effect on our business, financial condition, or operating results.
Risks Associated with Public Health Crises
Pandemics, epidemics, disease outbreaks and other public health crises, such as the COVID-19 pandemic, have disrupted our business and operations, and future public health crises could materially adversely impact our business, financial condition, liquidity and results of operations.
Public health crises such as pandemics, epidemics or disease outbreaks in the United States or globally, including the COVID-19 pandemic, have disrupted, and may in the future disrupt, our business, which could materially affect our results of operations, financial condition, liquidity and future expectations. Any such events may adversely impact our global supply chain and global manufacturing operations and cause us to again limit or suspend our operations in the United States, China and elsewhere. For example, to address the COVID-19 pandemic, many governments issued various restrictive orders that affected businesses and consumers. During the COVID-19 pandemic, government-imposed restrictions, health and safety mandated best practices, and public hesitance regarding in-person gatherings reduced our ability and the ability of our Brand Partners to hold sales meetings, required our Brand Partners to share and sell our products in a predominantly virtual environment, resulted in cancellations of key Company events and trips, required us to utilize a work-from-home strategy for all non-manufacturing and non-distribution employees, and required us to temporarily close our walk-in and fulfillment locations we maintain in some markets. The COVID-19 pandemic also affected the availability and cost of several of our raw materials, packaging materials and shipping resources to transport our product to our various markets around the world.
Any new pandemic or future public health crises could have a material adverse impact on our business, financial condition, liquidity and results of operations.
Risks Related to Our Common Stock
The beneficial ownership of a significant percentage of our common stock gives our founder and parties related to or affiliated with him effective control, and limits the influence of other shareholders on important policy and management issues.
Gull Global, Ltd., an entity that is solely owned and controlled by our founder, Dr. Myron Wentz, owned approximately 40.0% of our outstanding common stock at January 3, 2026. Dr. Wentz is no longer active in the management of USANA and is an emeritus member of our Board of Directors. By virtue of this stock ownership, Dr. Wentz is able to exert significant influence over the election of the members of our Board of Directors and our business affairs. This concentration of ownership could also have the effect of delaying, deterring, or preventing a change in control that might otherwise be beneficial to shareholders. There can be no assurance that conflicts of interest will not arise with respect to these relationships or that conflicts will be resolved in a manner favorable to our other shareholders.
Sales by our shareholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of our common stock.
A large number of outstanding shares of our common stock are held by several of our principal shareholders, including Gull Global, Ltd. If any of these principal shareholders were to decide to sell large amounts of stock over a short period of time such sales could cause the market price of our common stock to decline.
The market price of our common stock may be influenced by many factors, some of which are beyond our control.
There can be no assurance that an active market in our stock will be sustained. We have a relatively small public float compared to the number of our shares outstanding. Accordingly, we cannot predict the extent to which investors’ interest in our common stock will provide an active and liquid trading market. We are also vulnerable to investors taking a “short position” in our common stock, which has the effect of depressing the price of our common stock and adding volatility to our trading market. The price of our common stock also may fluctuate in the future in response to quarter-to-
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quarter variations in operating results, material announcements by us or our competitors, governmental regulatory action, conditions in the nutritional supplement industry, negative publicity, or other events or factors, many of which are beyond our control. In addition, the stock market has historically experienced significant price and volume fluctuations, which have particularly affected the market prices of many dietary and nutritional supplement companies and which have not had a strong correlation in certain cases to the operating performance of these companies. Our operating results in future quarters may be below the expectations of securities analysts and investors. If that were to occur, the price of our common stock, and accordingly, the value of a shareholder’s investment in our company, would likely decline, perhaps substantially.
