2001
================================================================================

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

----------

FORM 10-Q

(Mark One)

|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2001

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ____________ to _________________

Commission File No. 000-24657

MANNATECH, INCORPORATED
(Exact Name of Registrant as Specified in its Charter)

Texas 75-2508900
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

600 S. Royal Lane, Suite 200
Coppell, Texas
75019
(Address of Principal Executive Offices, including Zip Code)

Registrant's Telephone Number, including Area Code: (972) 471-7400

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

As of November 1, 2001, the number of shares outstanding of the
registrant's sole class of common stock, par value $0.0001 per share was
25,051,301.

TABLE OF CONTENTS

Page
----

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements....................................................................... 1
Consolidated Balance Sheets................................................................... 1
Consolidated Statements of Operations......................................................... 2
Consolidated Statements of Cash Flows......................................................... 3
Notes to Consolidated Financial Statements.................................................... 4

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...... 8
Overview...................................................................................... 8
Results of Operations......................................................................... 11
Three-months ended September 30, 2001 compared with the three-months ended
September 30, 2000....................................................................... 11
Nine-months ended September 30, 2001 compared with the nine-months ended
September 30, 2000....................................................................... 13
Liquidity and Capital Resources............................................................... 15
Recent Financial Accounting Standards Board Statements........................................ 16
Outlook....................................................................................... 17
Forward-looking Statements.................................................................... 17

Item 3. Quantitative and Qualitative Disclosures About Market Risk................................ 19

Part II - OTHER INFORMATION

Item 1. Legal Proceedings......................................................................... 19
Item 2. Changes in Securities and Use of Proceeds ................................................ 19
Item 3. Defaults Upon Senior Securities........................................................... 20
Item 4. Submission of Matters to a Vote of Security Holders....................................... 20
Item 5. Other Information......................................................................... 20
Item 6. Exhibits and Reports on Form 8-K.......................................................... 20
Signatures......................................................................................... 22

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

MANNATECH, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)

December September
31, 30,
2000 2001
-------- --------
(Unaudited)

ASSETS
Cash and cash equivalents ................................................................... $ 5,736 $ 5,797
Accounts receivable, less allowance for doubtful accounts of $58 in 2000 and 2001 .......... 692 948
Income tax receivable ....................................................................... 2,300 1,718
Current portion of notes receivable-shareholders ............................................ 187 119
Inventories ................................................................................. 13,326 10,302
Prepaid expenses and other current assets ................................................... 745 1,448
Deferred tax assets ......................................................................... 1,201 1,199
-------- --------
Total current assets .................................................................. 24,187 21,531
Property and equipment, net ................................................................. 13,324 11,294
Notes receivable-shareholders, excluding current portion .................................... 390 327
Other assets ................................................................................ 1,000 859
Long-term investments ....................................................................... 1 --
-------- --------
Total assets .......................................................................... $ 38,902 $ 34,011
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current portion of capital leases and notes payable ......................................... $ 301 $ 526
Accounts payable ............................................................................ 4,309 453
Accrued expenses ............................................................................ 11,768 13,164
Accrued compensation to related parties (Note 4) ............................................ 520 1,582
-------- --------
Total current liabilities ............................................................. 16,898 15,725
Capital leases and notes payable, excluding current portion ................................. 27 --
Accrued compensation to related parties (Note 4) ............................................ 500 1,100
Deferred tax liabilities .................................................................... 1,752 917
-------- --------
Total liabilities ..................................................................... 19,177 17,742
-------- --------
Commitments and contingencies (Notes 4 and 5) ............................................... -- --
Commitment to repurchase common stock (Note 5) .............................................. 1,000 --

Shareholders' equity:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, no shares issued and -- --
outstanding ..............................................................................
Common stock, $0.0001 par value, 99,000,000 shares authorized, 25,051,301 shares issued
and 24,929,173 outstanding in 2000, 25,051,301 issued and outstanding in 2001 ............ 3 3
Additional paid-in capital .................................................................. 17,949 17,949

Note receivable due from shareholders (Note 5) .............................................. (167) (815)
Retained earnings (deficit) ................................................................. 2,798 (436)
Accumulated other comprehensive loss--foreign currency translation adjustment ............... (321) (432)
-------- --------
20,262 16,269
Less treasury stock, at cost, 122,128 shares in 2000 and 0 shares in 2001 and a commitment
to repurchase common stock of $1,000 in 2000 (Note 5) .................................... (1,537) --
-------- --------
Total shareholders' equity ............................................................ 18,725 16,269
-------- --------
Total liabilities, commitment to repurchase common stock and shareholders' equity ..... $ 38,902 $ 34,011
======== ========

See accompanying notes to consolidated financial statements.

MANNATECH, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE-MONTHS ENDED SEPTEMBER 30, 2000 AND 2001
AND THE NINE-MONTHS ENDED SEPTEMBER 30, 2000 AND 2001
(in thousands, except per share information)

Three-months ended Nine-months ended
September 30 September 30
---------------------- -----------------------
2000 2001 2000 2001
---- ---- ---- ----

Net Sales ............................................... $ 37,364 $ 30,307 $ 116,096 $ 97,017
-------- -------- --------- --------

Cost of Sales ........................................... 6,776 5,590 20,469 17,130
Commissions ............................................. 15,294 12,171 47,346 38,465
-------- -------- --------- --------
22,070 17,761 67,815 55,595
-------- -------- --------- --------
Gross profit ........................................ 15,294 2,546 48,281 41,422
-------- -------- --------- --------

Operating Expenses:
Selling and administrative expenses ................. 8,054 7,180 26,988 23,784
Other operating costs ............................... 8,549 5,503 23,922 17,153
Severance expenses related to former executives ..... 125 -- 125 3,420
Write-off of fixed asset ............................ -- -- 870 --
-------- -------- --------- --------
Total operating expenses .......................... 16,728 12,683 51,905 44,357
-------- -------- --------- --------

Loss from operations .................................... (1,434) (137) (3,624) (2,935)

Interest income ......................................... 139 53 561 208
Interest expense ........................................ (15) (9) (58) (24)
Other expense, net ...................................... (250) (30) (383) (132)
-------- -------- --------- --------
Loss before income taxes and cumulative effect of
accounting change ..................................... (1,560) (123) (3,504) (2,883)
Income tax (expense) benefit ............................ 357 (182) 984 194
-------- -------- --------- --------

Loss before cumulative effect of accounting change ...... (1,203) (305) (2,520) (2,689)
Cumulative effect of accounting change, net of tax of
$126 .................................................. -- -- (210) --
-------- -------- --------- --------

Net loss ................................................ $ (1,203) $ (305) $ (2,730) $ (2,689)
======== ======== ========= ========

Earnings (loss) per common share - Basic:
Before cumulative effect of accounting change ....... $ (0.05) $ (0.01) $ (0.10) $ (0.11)
Cumulative effect of accounting change .............. -- -- (0.01) --
-------- -------- --------- --------
Net ................................................. $ (0.05) $ (0.01) $ (0.11) $ (0.11)
======== ======== ========= ========

Earnings (loss) per common share - Diluted:
Before cumulative effect of accounting change ....... $ (0.05) $ (0.01) $ (0.10) $ (0.11)
Cumulative effect of accounting change .............. -- -- (0.01) --
-------- -------- --------- --------
Net ................................................. $ (0.05) $ (0.01) $ (0.11) $ (0.11)
======== ======== ========= ========

Weighted-average common shares outstanding
Basic ............................................... 24,984 24,367 24,945 24,614
======== ======== ========= ========

Diluted ............................................. 24,984 24,367 24,945 24,614
======== ======== ========= ========

See accompanying notes to consolidated financial statements.

MANNATECH, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 2000 AND 2001
(in thousands)

2000 2001
---- ----

Cash flows from operating activities:
Net loss ....................................................................................... $ (2,730) $(2,689)
Adjustments to reconcile the net loss to net cash provided by (used in) operating activities:
Depreciation and amortization ................................................................ 2,662 2,911
Write-off of a fixed asset ................................................................... 870 --
Loss on disposal of assets ................................................................... 423 126
Tax benefit from exercise of stock options ................................................... 239 --
Cumulative effect of accounting change, net of tax ........................................... 210 --
Deferred income tax expense (benefit) ........................................................ 29 (833)
Changes in operating assets and liabilities:
Accounts receivable ........................................................................ 27 (274)
Income tax receivable ...................................................................... (1,393) 582
Inventories ................................................................................ (866) 2,968
Prepaid expenses and other current assets .................................................. (390) 61
Other assets ............................................................................... 151 142
Accounts payable ........................................................................... (971) (2,386)
Accrued expenses and accrued compensation to related parties ............................... 879 3,067
-------- -------
Net cash provided by (used in) operating activities ...................................... (860) 3,675
-------- -------

Cash flows from investing activities:
Acquisition of property and equipment ........................................................ (4,420) (1,057)
Cash proceeds from sale of property and equipment ............................................ -- 2
Repayments by shareholders/related parties ................................................... 132 130
Maturities of investments .................................................................... 1,752 1
-------- -------
Net cash used in investing activities .................................................... (2,536) (924)
-------- -------

Cash flows from financing activities:
Payment of cash overdrafts ................................................................... -- (1,450)
Proceeds from stock options exercised ........................................................ 328 --
Payment of capital lease obligations ......................................................... (403) (293)
Purchase of common stock from shareholder .................................................... -- (656)
Advance to shareholder ....................................................................... (500) --
Payment of notes payable ..................................................................... (140) (280)
-------- -------
Net cash used in financing activities .................................................... (715) (2,679)
-------- -------

Effect of exchange rate changes on cash and cash equivalents ................................... 5 (11)
-------- -------

Net increase (decrease) in cash and cash equivalents ........................................... (4,106) 61
Cash and cash equivalents:
Beginning of the period ...................................................................... 11,576 5,736
-------- -------
End of the period ............................................................................ $ 7,470 $ 5,797
======== =======

Supplemental disclosure of cash flow information:
Interest paid ................................................................................ $ 59 $ 24
======== =======

Summary of non-cash investing and financing activities follows:
Assets acquired through notes payable ........................................................ $ -- $ 771
======== =======
Treasury shares received for the payment of a note receivable due from a shareholder ......... $ 83 $ 167
======== =======
Treasury shares acquired by issuance of note receivable due from a shareholder ............... $ -- $ 815
======== =======
Commitment to repurchase common stock from a shareholder ..................................... $ 1,000 $ (417)
======== =======

See accompanying notes to consolidated financial statements.

MANNATECH, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Mannatech, Incorporated (the "Company") was incorporated in the State of
Texas on November 4, 1993, as Emprise International, Inc. Effective October 25,
1995, the Company changed its name to Mannatech, Incorporated. The Company,
located in Coppell, Texas, develops and sells high-quality, proprietary
nutritional supplements, topical products and weight-management products
primarily through a network marketing system operating in the United States,
Canada, Australia, the United Kingdom and Japan. Independent associates
("Associates") purchase products at wholesale, for the primary purpose of
selling to retail consumers or for personal consumption. Active Associates earn
commissions on their downline growth and sales volume. In June 2001, the Company
introduced its member program specifically designed for consumers ("Members") to
purchase products for personal consumption at a discount but not to participate
in the various incentive programs.

The Company's nine wholly-owned subsidiaries are as follows:

Wholly-owned subsidiary name Date incorporated Location of subsidiary Date operations began
---------------------------- ----------------- ---------------------- ---------------------

Mannatech Australia Pty Limited April 22, 1998 St. Leonards, Australia October 1, 1998
Mannatech Limited December 1, 1998 Republic of Ireland No operations
Mannatech Ltd. November 18, 1998 Aldermaston, Berkshire November 15, 1999
U.K.
Mannatech Payment Services Incorporated April 11, 2000 Coppell, Texas June 26, 2000
Mannatech Foreign Sales Corporation May 1, 1999 Barbados May 1, 1999
Internet Health Group, Inc. (ceased May 7, 1999 Coppell, Texas December 20, 1999
operations as of December 29, 2000)
Mannatech Japan, Inc. January 21, 2000 Tokyo, Japan June 26, 2000
Mannatech Limited February 14, 2000 New Zealand No operations
Mannatech Products Company, Inc. April 17, 2001 Coppell, Texas No operations

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of Company's management, the accompanying
unaudited consolidated financial statements contain all adjustments, consisting
of normal recurring adjustments, considered necessary for a fair statement of
the Company's financial information as of and for the periods presented. The
consolidated results of operations of any interim period are not necessarily
indicative of the consolidated results of operations to be expected for the
fiscal year. For further information, refer to the Company's consolidated
financial statements and accompanying footnotes included in their annual report
on Form 10-K for the year ended December 31, 2000.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.

Revenue Recognition

The Company's revenues primarily consist of sales from products, starter
and renewal packs and shipping fees. Substantially all product sales are sold to
Associates at published wholesale prices and to Members at published discounted
retail prices. Net sales include a reserve for estimated product returns and any
related refunds, which are based on its historical experience. The Company
adopted Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial
Statements" ("SAB 101") in the fourth quarter of 2000. As a result of adopting
SAB 101, the Company has restated its 2000 quarterly financial information and
recorded a one-time charge of $210,000, net of tax of $126,000 for

the cumulative effect of this accounting change at January 1, 2000. Beginning in
2000, the Company defers all of its revenues until the consumer receives the
products shipped.

The Company also defers a portion of its revenue received from sales of
starter and renewal packs, which are in excess of the average cumulative
wholesale value of all of the individual items included in such packs and
amortizes such deferrals over a twelve-month period. Total deferred revenue was
$691,000 at December 31, 2000 and $736,000 at September 30, 2001.

Shipping and Handling Costs

In accordance with the Emerging Issue Task Force No. 00-10 "Accounting for
Shipping and Handling Fees and Costs," the Company records freight and shipping
revenues collected from its Associates and Members, as revenue. The Company
records the in-bound freight and shipping costs as a part of cost of sales and
records the shipping and handling costs associated with shipping its products to
all of its consumers as selling and administrative expenses. Total shipping and
handling costs included in selling and administrative expenses was approximately
$1.2 million and $1.3 million for the three-months ended September 30, 2001 and
2000, respectively and $4.3 million and $5.8 million for the nine-months ended
September 30, 2001 and 2000, respectively.

Earnings Per Share

The Company calculates earnings (loss) per share pursuant to Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS 128"). FAS
128 requires dual presentation of basic and diluted earnings (loss) per share
("EPS") on the face of the Consolidated Statement of Operations for all entities
with complex capital structures and requires a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation. Basic EPS calculations are based on the
weighted-average number of common shares outstanding during the period, while
diluted EPS calculations are calculated using the weighted-average number of
common shares and dilutive common share equivalents outstanding during the
period. At September 30, 2000, all of the 3,863,952 common stock options were
excluded from the diluted EPS calculation and at September 30, 2001, all of the
3,764,307 common stock options and 213,333 warrants were excluded from the
diluted EPS calculation, as their effect was antidilutive.

The following data shows the amounts used in computing earnings (loss) per
share and their effect on the weighted-average number of common shares of
dilutive common share equivalents for the three-months ended September 30, 2000
and 2001. The amounts are rounded to the nearest thousand except for per share
amounts.

2000 2001
----------------------------------------- ----------------------------------------
Net loss Shares Per share Net loss Shares Per share
(Numerator) (Denominator) amount (Numerator) (Denominator) amount
----------- ------------- --------- ----------- ------------- ---------

Basic EPS:
Net loss available to
to common shareholders $(1,203) 24,984 $(0.05) $(305) 24,367 $(0.01)

Effect of dilutive securities:
Stock options/warrants -- -- -- --
------- ------ ----- ------

Diluted EPS:
Net loss available to
common shareholders plus
assumed conversions $(1,203) 24,984 $(0.05) $(305) 24,367 $(0.01)
======= ====== ====== ===== ====== ======

The following data shows the amounts used in computing earnings
(loss) per share and their effect on the weighted-average number of common
shares of dilutive common share equivalents for the nine-months ended September
30, 2000 and 2001. The amounts are rounded to the nearest thousand except for
per share amounts.

2000 2001
-------------------------------------------- --------------------------------------------
Net loss Shares Per share Net loss Shares Per share
(Numerator) (Denominator) amount (Numerator) (Denominator) amount
----------- ------------- --------- ----------- ------------- ---------

Basic EPS:
Net loss available to
to common shareholders $(2,730) 24,945 $(0.11) $(2,689) 24,614 $(0.11)

Effect of dilutive securities:
Stock options/warrants -- -- -- --
------- ------ ------- ------

Diluted EPS:
Net loss available to
common shareholders plus
assumed conversions $(2,730) 24,945 $(0.11) $(2,689) 24,614 $(0.11)
======= ====== ====== ======= ====== ======

NOTE 2 INVENTORIES

At December 31, 2000 and September 30, 2001 inventory, rounded to the
nearest thousands, consisted of the following:

2000 2001
---- ----
Raw materials ................................ $ 6,587 $ 5,105
Finished goods ............................... 6,739 5,197
------- -------
$13,326 $10,302
======= =======

NOTE 3 COMPREHENSIVE LOSS

Comprehensive loss for the three-months and the nine-months ended
September 30, 2000 and 2001 is as follows (in thousands):

Three-months ended Nine-months ended
------------------ -----------------
September 30 September 30
------------ ------------
2000 2001 2000 2001
---- ---- ---- ----

Net loss .................................. $(1,203) $(305) $(2,730) $(2,689)
Foreign currency translation adjustment ... 5 118 5 (112)
------- ----- ------- -------
Comprehensive loss ........................ $(1,198) $(187) $(2,725) $(2,801)
======= ===== ======= =======

NOTE 4 COMMITMENTS AND CONTINGENCIES

In the fourth quarter of 2000, Mr. Anthony Canale resigned and in the
second quarter of 2001, Ms. Deanne Varner, Mr. Charles Fioretti and Mr. Patrick
Cobb resigned as executive officers of the Company. As a result, the Company
entered into Separation Agreements with each of them. Under the terms of their
agreements, the executives are bound by certain non-compete and confidentiality
clauses and the Company agreed to pay them an aggregate amount of $1.9 million
in 2001, $1.6 million in 2002, $850,000 in 2003 and $150,000 in 2004. The
payments consist of compensation related to the cancellation of their employment
agreements, accrued vacation, health insurance and automobile expenses. The
Company also agreed to grant Mr. Canale 213,333 warrants, Ms. Varner a total of
163,333 stock options and Mr. Cobb a total of 60,000 stock options, all at
exercise prices ranging from $1.75 to $4.00. As of September 30, 2001, none of
these options or warrants had been exercised. The warrants and stock options
vest on the date they were granted and are exercisable for ten years. In the
second quarter of 2001, the Company recorded a one-time charge for all of these
separation agreements of which $2.7 million remained unpaid as of September 30,
2001.

In September 2001, the Company amended its agreement with a high-level
Associate, shareholder and advisory board member to promote the Company and
develop downline growth in Japan. The amendment further clarified that the
Company would pay this Associate a royalty of $5.00 per each specific
promotional materials sold, by the Company, up to a maximum of $1.6 million. The
Company does not expect to incur any royalty expense associated with this
agreement until the first quarter of 2002.

NOTE 5 TRANSACTIONS WITH RELATED PARTIES

On September 24, 2001, the Company amended their agreement with Mr.
Charles Fioretti to contingently release Mr. Fioretti from his Lockup and
Repurchase Agreement in which the Company originally agreed to buy, on a monthly
basis, up to $1.0 million worth of his stock valued at 90% of the fair market
value so that Mr. Fioretti could sell 3,500,000 of his common shares to Mr. J.
Stanley Fredrick. Under the terms of their agreement, Mr. Fredrick agreed to
purchase 3,500,000 shares of Mr. Fioretti's stock, and Mr. Fioretti agreed to
transfer all of the voting rights associated with his remaining shares to Mr.
Fredrick. In addition, Mr. Fredrick has the right of first refusal to acquire
the remaining 690,848 shares from Mr. Fioretti. On September 28, 2001, the
Company's Board of Directors appointed Mr. Fredrick to the Board of Directors to
fill the vacancy created when Mr. Fioretti resigned in August 2001.

On September 28, 2001, the Company entered into an agreement with Mr. Ray
Robbins, a high-level Associate, shareholder and board member, to sell him all
of the Company's 815,009 shares of treasury stock at $1.00 per share. The
Company recorded the sale and a receivable due from a shareholder on September
30, 2001. The receivable was non-interest bearing and paid in full in October
2001.

On October 1, 2001, the Company entered into a two-year Consulting and
Lockup Agreement with Mr. Fredrick. This agreement automatically renews annually
unless thirty-day written notice is given to all parties. Under the terms of
this agreement, Mr. Fredrick will provide advice and perform various functions
for the Board of Directors for which the Company will pay Mr. Fredrick a total
of $185,000 per year. In addition, under this agreement, Mr. Fredrick is
prohibited from selling his shares, unless approved by the Company's Board of
Directors.

NOTE 6 RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 141 ("SFAS 141") "Business Combinations"
and No. 142 ("SFAS 142") "Goodwill and Other Intangibles Assets."

SFAS 141 supercedes Accounting Principles Board Opinion No. 16 "Business
Combinations." The most significant changes made by SFAS 141 are that it
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001, establishes specific criteria for
recognition of certain intangibles assets separately from goodwill and requires
the immediate write-off of unallocated negative goodwill.

SFAS 142 supercedes Accounting Principles Board Opinion No. 17 "Intangible
Assets." SFAS 142 is effective for fiscal years beginning after December 15,
2001. SFAS 142 prohibits goodwill and indefinite lived intangible assets from
being amortized and requires them to be annually tested for impairment at each
reporting unit level. In addition, SFAS 142 removes the limitation of forty
years for the useful lives of finite intangible assets.

In June 2001, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 143 ("SFAS 143") "Accounting for Asset
Retirement Obligations" and in October 2001, issued No. 144 ("SFAS 144")
"Accounting for the Impairment or Disposal of Long-Lived Assets."

SFAS 143 amends SFAS 19, "Financial Accounting and Reporting by Oil and
Gas Producing Companies" and is effective for fiscal years beginning after June
15, 2002. This statement requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is incurred
if a reasonable estimate of fair value can be determined. In addition, SFAS 143
requires the associated asset retirement costs to be capitalized as part of the
carrying amount of the long-lived asset.

Reporting the Effects of Disposal of a Segment of a Business." SFAS 144 is
effective for fiscal years beginning after December 15, 2001. SFAS 144 requires
that impaired long-lived assets be measured at the lower of carrying amount or
fair value less costs to sell, regardless if they are reported in continuing
operations or in discontinued operations. In addition, discontinued operations
should no longer be measured at net realizable value or include amounts for
operating losses that have not yet occurred. Finally, SFAS 144 broadens the
reporting of discontinued operations to include all components of an entity with
operations that can be distinguished from the rest of the entity and that will
be eliminated from the ongoing operations of the entity in a disposal
transaction.

The Company believes the above pronouncements will have no significant
effect on its consolidated financial positions, results of operations or cash
flows.

NOTE 7 SUBSEQUENT EVENTS

On October 1, 2001, the Company entered into an employment agreement with
Ms. Bettina S. Simon to serve as the new Senior Vice President and General
Counsel. Under the terms of the employment agreement, Ms. Simon will be paid an
annual base salary of $200,000 and was granted 50,000 stock options, which vest
over three-years and are exercisable over ten years at a stock price of $1.07
per share. The employment agreement has no fixed term; however, if cancelled
without cause, Ms. Simon will be entitled to receive between three to six months
of her annual base salary.

On November 1, 2001, the Company granted 625,000 stock options to various
executive officers. The options vest over three years, expire in ten years and
are exercisable at $2.69 per share.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

The following discussion is intended to assist in the understanding of
Mannatech's financial position and its results of operations for the three and
nine-months ended September 30, 2001 compared to the same periods in 2000. The
Consolidated Financial Statements and related Notes should be referred to in
conjunction with this discussion. Unless stated otherwise, all financial
information presented below, throughout this report and in the Consolidated
Financial Statements and related Notes includes Mannatech and all of its
subsidiaries on a consolidated basis.

Overview

Mannatech develops and sells its high-quality, proprietary nutritional
supplements, topical products and weight-management products primarily through a
worldwide network marketing system operating in the United States, Canada,
Australia, the United Kingdom and Japan. Currently Mannatech has approximately
202,000 active members and associates as of September 30, 2001 compared to
approximately 274,000 active associates as of September 30, 2000. Mannatech
defines an active associate or member as one having purchased products within
the last twelve months. Members may purchase Mannatech's high-quality
proprietary products for personal consumption at a discount but not participate
in the various incentive programs.

Mannatech's earnings (loss) per share remained at ($0.11) for each of the
nine-months ended September 30, 2001 and for the comparable period in 2000,
respectively in spite of recording a one-time charge of $3.4 million, in the
second quarter of 2001, which related to the resignations of various former
executives with employment agreements. In addition, Mannatech reported a
decrease in net sales, which was directly attributed to a 26% decrease in
Mannatech's active associate and member base. For the nine-months ended
September 30, 2001, Mannatech would have reported net income of $731,000,
exclusive of the $3.4 million one-time severance charge and continues to report
income from operations for its North American operations. The net loss for 2000
totaling ($2.7 million) primarily related to a decrease in net sales, incurring
approximately $4.4 million related to international expansion into the United
Kingdom and Japan, and continuing to fund operations for its Internet
subsidiary, Internet Health Group, Inc, which ceased operations on December 29,
2000.

Beginning in February 2001, Mannatech increased the shipping fees it
charges to consumers and in March 2001, Mannatech increased the sale prices of
some of its finished goods. The price increase on certain finished goods
was Mannatech's first price increase since its inception in 1993.

In June 2001, Mannatech introduced its member program and announced the
hiring of new general managers for both its Australia and Japan operations,
which it believes will help in strengthening its international operations. In
addition, in the second quarter of 2001, Mannatech implemented some new
incentive programs specifically designed to reward its entry-level associates
faster, increase its active associate base and boost net sales. In October 2001,
Mannatech unveiled its strategy for its new global compensation plan that will
help to refocus its associates to primarily concentrate on Mannatech's
performance and leadership incentive programs. Overall, Mannatech believes the
changes to its compensation plan will better reward its associates and continue
to pay approximately 42% of commissionable sales as compensation expense to its
active associates.

Net sales by country, as a percentage of consolidated net sales, including
the Japan operations, which began operations on June 26, 2000, are as follows:

Nine-months ended September 30 U.S. Canada Australia U.K. Japan Total
- ------------------------------ ----- ------ --------- ---- ----- ------

2001............. 77.0% 14.7% 3.4% 0.9% 4.0% 100.0%
2000............. 77.1% 13.4% 6.3% 1.2% 2.0% 100.0%

Mannatech believes that it continues to provide the highest-quality of
products to its consumers, which helps the consumer achieve optimal health and
wellness. Mannatech also believes it only introduces products that help meet a
current demand in the wellness industry at the highest quality available.
Recently Mannatech introduced four new products including:

o ImmunoStart(TM), which was introduced in October 2000, as a chewable
tablet that aids in energy levels and helps the immune system.

o Glyco-Bears(R), which was introduced in March 2001 as a new chewable
multivitamin for children. Mannatech believes the chewable vitamin
will help supplement children's diets and aid in their overall
health and wellness.

o Glycentials(TM), which was introduced in August 2001 as an
antioxidant-rich multivitamin/mineral formula that helps to provide
vitamin and mineral support. Mannatech believes this multivitamin
will aid in ones overall health and wellness.

o CardioBALANCE (TM), which was introduced in October 2001 to provide
a wide range of certain nutritional benefits specifically designed
to aid in the cardio-vascular system.

Mannatech primarily derives its revenues from sales of its products and
starter and renewal packs. Starter and renewal packs include some combination of
Mannatech's proprietary products and promotional materials. An active associate
who purchases a starter or renewal pack is entitled to purchase Mannatech's
high-quality proprietary products at wholesale prices and earn various
incentives and bonuses. In June 2001, Mannatech introduced its member program,
which allows a member to purchase its high-quality proprietary products at 95%
of the suggested retail price or 86% of the suggested retail price for an
automatic monthly order. Mannatech offers comparable starter and renewal packs
in each country in which it does business; however, due to different regulatory
guidelines in each country, not all of Mannatech's packs are offered in all
countries.

Mannatech adopted Staff Accounting Bulletin No. 101 "Revenue Recognition
in Financial Statements" ("SAB 101") in the fourth quarter of 2000. Under SAB
101, Mannatech is required to defer the recognition of revenues until

the consumer receives the products shipped. The adoption of SAB 101 resulted in
a one-time cumulative effect of accounting change of approximately $210,000, net
of tax of $126,000.

On average, the wholesale value of the nutritional and topical products
contained in each of Mannatech's starter and renewal packs are between 60% and
100% of the total wholesale value of the packs. The remainder of the total
wholesale value, if any, consists of various promotional materials. Mannatech
defers revenue over a twelve-month period for revenue received from the sale of
its associate packs to the extent that the sales price exceeds the sum of the
total average wholesale value of all of the individual items included in such
packs. Total deferred revenue was approximately $691,000 at December 31, 2000
and $736,000 at September 30, 2001.

Mannatech compensates its active associates by paying them commissions and
incentives, which is its most significant expense. The commission structure is
designed to not materially exceed 42% of commissionable net sales. In March
2001, Mannatech announced the following two incentive bonus programs for its
active associates:

o The Power Plan incentive bonus, which pays active associates for
enrolling six All-Star associates; and
o The Team incentive bonus, which pays active associates for meeting
and maintaining certain purchasing levels in their organizations.

Mannatech believes these incentive programs will ultimately pay more
commissions to the entry-level associate faster. In October 2001, Mannatech
announced that its strategy for its new compensation plan would help to refocus
its associates to concenrate on its leadership and performance incentive
programs; however, none of these changes to its compensation plan are expected
to significantly change the total commissions paid as a percentage of
commissionable net sales. Commissions and incentives paid to active associates
are based on the following criteria:

o associates placement and position within the compensation plan;

o volume of their direct commissionable net sales;

o number of new enrolled associates; and

o achievement of certain levels to qualify for various incentive
programs.

In 2001, Mannatech believes its United States federal statutory tax rate
will remain at 34%. Mannatech also pays taxes in various state jurisdictions at
an approximate average effective tax rate of 3%. Mannatech expects to pay taxes
in Australia, the United Kingdom and Japan at statutory tax rates ranging from
31% to 42%. The payment of such foreign taxes could result in foreign tax
credits that would reduce the amount of United States taxes owed; however,
Mannatech may not be able to fully-utilize all of such foreign tax credits in
the United States. Mannatech has also incurred net operating losses from its
Japan subsidiary that may not be fully realizable in the future.

Results of Operations

The following table summarizes Mannatech's operating results as a
percentage of net sales for each of the periods indicated.

Three-months ended Nine-months ended
September 30 September 30
------------------ -----------------
2000 2001 2000 2001
---- ---- ---- ----

Net sales ........................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales ..................................... 18.1 18.4 17.6 17.7
Commissions ....................................... 40.9 40.2 40.8 39.6
------ ------ ------- ------
Gross profit ........................................ 41.0 41.4 41.6 42.7
Operating expenses:
Selling and administrative expenses ............... 21.6 23.7 23.2 24.5
Other operating costs ............................. 22.9 18.2 20.6 17.7
Severance expenses related to former executives ... 0.3 0.0 0.8 3.5
Write-off of a fixed asset ........................ 0.0 0.0 0.1 0.0
------ ------ ------- ------
Loss from operations ................................ (3.8) (0.5) (3.1) (3.0)

Interest income ................................... 0.4 0.2 0.5 0.2
Interest expense .................................. (0.1) 0.0 (0.1) 0.0
Other expense, net ................................ (0.7) (0.1) (0.3) (0.2)
------ ------ ------- ------
Loss before income taxes and cumulative effect of
accounting change .................................. (4.2) (0.4) (3.0) (3.0)
Income tax (expense) benefit ........................ 1.0 (0.6) 0.8 0.2
------ ------ ------- ------

Loss before cumulative effect of accounting change .. (3.2) (1.0) (2.2) (2.8)
Cumulative effect of accounting change, net of tax .. 0.0 0.0 (0.2) 0.0
------ ------ ------- ------
Net loss ............................................ (3.2)% (1.0)% (2.4)% (2.8)%
====== ====== ======= ======

Number of starter packs sold ........................ 24,493 16,095 88,066 49,274
Number of renewal packs sold ........................ 16,215 10,816 48,779 34,128
------ ------ ------- ------
Total number of packs sold .......................... 40,708 26,911 136,845 83,402
====== ====== ======= ======
Total associates canceling associate status ......... 1,182 1,174 4,903 3,540
====== ====== ======= ======

Three-months ended September 30, 2001 compared with the three-months ended
September 30, 2000

Net sales. Net sales decreased (19.0%) to $30.3 million for the
three-months ended September 30, 2001 from $37.4 million for the comparable
period in 2000. This decrease was primarily composed of a decrease of 26% in its
active associate base, which was partially offset by a 7% increase in the sales
prices of some of its finished goods implemented in March 2001and the
introduction of several new products including ImmunoStart(TM), Optimal Health
Pack (TM), GlycoBears(R) and Glycentials(TM).

Cost of sales. Cost of sales decreased (17.6%) to $5.6 million for the
three-months ended September 30, 2001 from $6.8 million for the comparable
period in 2000. As a percentage of net sales, cost of sales increased to 18.4%
for the three-months ended September 30, 2001 from 18.1% for the comparable
period in 2000. The increase in cost of sales as a percentage of net sales was
primarily due to a write-off of some expected spoilage and obsolescence of
products totaling $525,000 and a change in the product mix of finished goods
sold. The dollar decrease was primarily due to a decrease in the volume of
finished goods sold, which was partially offset by the write-off of certain
products.

Commissions. Commissions consist of payments to active associates for
their sales activity and downline growth. Commissions decreased (20.3%) to $12.2
million for the three-months ended September 30, 2001 from $15.3 million for the
comparable period in 2000. As a percentage of net sales, commissions slightly
decreased to 40.2% for

the three-months ended September 30, 2001 from 40.9% for the comparable period
in 2000. The decrease was the direct result of a decrease in commissionable net
sales and a 7% increase in the sales prices of some of its finished goods.

Gross profit. Gross profit decreased (18.3%) to $12.5 million for the
three-months ended September 30, 2001 from $15.3 million for the comparable
period in 2000. As a percentage of net sales, gross profit slightly increased to
41.4% for the three-months ended September 30, 2001 from 41.0% for the
comparable period in 2000. These changes were primarily attributable to the
factors described above.

Selling and administrative expenses. Selling and administrative expenses
are a mixture of both fixed and variable expenses and include compensation,
shipping and freight and marketing expenses. Selling and administrative expenses
decreased (11.1%) to $7.2 million for the three-months ended September 30, 2001
from $8.1 million for the comparable period in 2000. As a percentage of net
sales, selling and administrative expenses increased to 23.7% for the
three-months ended September 30, 2001 from 21.6% for the comparable period in
2000, which was the result of Mannatech's inability to reduce some fixed and
semi-variable expenses associated with the decrease in net sales. The dollar
decrease was primarily due to the following:

o a decrease of ($700,000) in compensation and related employee
benefits due to the reduction of employees, including the
resignation of various executives;

o a decrease of ($404,000) in marketing related expenses, which
was the result of recording a car incentive bonus and
elimination of various events for its Japan operations;

o the above were partially offset by an increase of $226,000 in
freight cost as a result of opening its Japan operations.

Other operating costs. Other operating costs include utilities,
depreciation, travel, office expenses and printing expenses. Other operating
costs decreased (35.3%) to $5.5 million for the three-months ended September 30,
2001 from $8.5 million for the comparable period in 2000. As a percentage of net
sales, other operating costs decreased to 18.2% for the three-months ended
September 30, 2001 from 22.9% for the comparable period in 2000. The decrease
was primarily due to the following:

o a decrease of ($870,000) related to variable expenses
associated with a decrease in net sales and the curtailment of
certain operating expenses;

o a decrease of ($1.3 million) relating to the reduction in
long-distance telephone expenses, postage and international
travel related to the international expansion that was
substantially completed by the end of 2000; and

o a decrease of ($835,000) related to the completion of several
projects by outside consultants.

Interest income. Interest income decreased (61.9%) to $53,000 for the
three-months ended September 30, 2001 from $139,000 for the comparable period in
2000. As a percentage of net sales, interest income decreased to 0.2% for the
three-months ended September 30, 2001 from 0.4% for the comparable period in
2000. The decrease was due to using investments to fund current year operations.

Interest expense. Interest expense decreased (40.0%) to $9,000 for the
three-months ended September 30, 2001 from $15,000 for the comparable period in
2000. As a percentage of net sales, interest expense decreased to 0.0% for the
three-months ended September 30, 2001 from (0.1%) for the comparable period in
2000. The decrease was primarily due to Mannatech paying off an existing note
and two capital leases.

Other expense, net. Other expense, net consists of foreign currency
translation adjustments relating to the United Kingdom and Australia operations
and miscellaneous non-operating items. Other expense, net decreased to ($30,000)
for the three-months ended September 30, 2001 from ($250,000) for the comparable
period in 2000. As a percentage of net sales, other expense, net decreased to
(0.1%) for the three-months ended September 30, 2001 from

(0.7%) for the comparable period in 2000. For the three-months ended September
30, 2001, other expense, net consisted primarily of currency translation
adjustments. For the three-months ended September 30, 2000, other expense, net
consisted of currency translation adjustments and a loss from the abandonment of
certain fixed assets.

Income tax (expense) benefit. Income tax (expense) benefit was ($182,000)
for the three-months ended September 30, 2001 and $357,000 for the comparable
period in 2000. Mannatech's effective tax rate increased to (148.0%) for the
three-months ended September 30, 2001 from 22.9% for the comparable period in
2000. Mannatech's effective tax rate increased primarily as a result of
Mannatech's inability to recognize foreign income tax benefits relative to its
Japan operations.

Cumulative effect of accounting change, net of tax. In the fourth quarter
of 2000, Mannatech adopted SAB 101, which resulted in a one-time charge of
$210,000, net of tax of $126,000 for the cumulative effect of the accounting
change. SAB 101 required Mannatech to defer the recognition of revenues until
the consumers receive their products shipped.

Net loss. Net loss decreased (74.6%) to ($305,000) for the three-months
ended September 30, 2001 from ($1.2 million) for the comparable period in 2000.
As a percentage of net sales, the net loss decreased to (1.0%) for the
three-months ended September 30, 2001 from (3.2%) for the comparable period in
2000. The decrease was due to the following:

o curtailment of various operating expenses;

o no longer incurring expenses related to its Internet subsidiary;

o a 19% decrease in net sales; and

o substantial completion of its planned international expansion into
three foreign countries.

Nine-months ended September 30, 2001 compared with the nine-months ended
September 30, 2000

Net sales. Net sales decreased (16.5%) to $97.0 million for the
nine-months ended September 30, 2001 from $116.1 million for the comparable
period in 2000. This decrease was primarily composed of a decrease of 26% in is
active associate base, which was partially offset by a 7% sales price increase
in some of its finished goods implemented in March 2001, a $3.7 million increase
from opening Japan on June 26, 2000 and the introduction of several new products
including ImmunoStart(TM), Optimal Health Pack(TM), GlycoBears(R) and
Glycentials(TM).

Cost of sales. Cost of sales decreased (16.6%) to $17.1 million for the
nine-months ended September 30, 2001 from $20.5 million for the comparable
period in 2000. As a percentage of net sales, cost of sales slightly increased
to 17.7% for the nine-months ended September 30, 2001 from 17.6% for the
comparable period in 2000. The slight increase in cost of sales as a percentage
of net sales was primarily due to the write-off of products for spoilage and
obsolescence, a change in the product mix of finished goods sold, partially
offset by a 7% price increase for some of its finished goods that was
implemented in March 2001. The dollar decrease was due to a decrease in the
volume of finished goods sold.

Commissions. Commissions consist of payments to active associates for
sales activity and downline growth. Commissions decreased (18.6%) to $38.5
million for the nine-months ended September 30, 2001 from $47.3 million for the
comparable period in 2000. As a percentage of net sales, commissions slightly
decreased to 39.6% for the nine-months ended September 30, 2001 from 40.8% for
the comparable period in 2000 due to a 7% increase in the sale prices of some of
its finished goods. The dollar decrease was the direct result of a decrease in
commissionable net sales.

Gross profit. Gross profit decreased (14.3%) to $41.4 million for the
nine-months ended September 30, 2001 from $48.3 million for the comparable
period in 2000. As a percentage of net sales, gross profit increased to 42.7%
for the nine-months ended September 30, 2001 from 41.6% for the comparable
period in 2000. These changes were primarily attributable to the factors
described above.

Selling and administrative expenses. Selling and administrative expenses
are a mixture of both fixed and variable expenses and include compensation,
shipping and freight and marketing expenses. Selling and administrative expenses
decreased (11.9%) to $23.8 million for the nine-months ended September 30, 2001
from $27.0 million for the comparable period in 2000. As a percentage of net
sales, selling and administrative expenses increased to 24.5% for the
nine-months ended September 30, 2001 from 23.2% for the comparable period in
2000, which was the result of the inability to reduce some fixed and
semi-variable expenses associated with the decrease in net sales. The dollar
decrease was primarily due to the following:

o a decrease of ($1.3 million) in compensation and related
employee benefits related to a reduction in employees
including the resignation of various executives;

o a decrease of ($600,000) in freight cost resulting from a
decrease in net sales, which was partially offset by opening
its Japan operations;

o a decrease of ($1.1 million) in marketing related expenses,
which was the result of not hosting various events for its
Japan and United Kingdom operations; and

o a decrease of ($200,000) in advertising expenses as a result
of discontinuing operations of its Internet subsidiary.

Other operating costs. Other operating costs include utilities,
depreciation, travel, office expenses and printing expenses. Other operating
costs decreased (28.0%) to $17.2 million for the nine-months ended September 30,
2001 from $23.9 million for the comparable period in 2000. As a percentage of
net sales, other operating costs decreased to 17.7% for the nine-months ended
September 30, 2001 from 20.6% for the comparable period in 2000. The percentage
decrease was the result of management making a concerted effort to curtail
expenses. The dollar decrease was primarily due to the following:

o a decrease of ($2.0 million) related to variable expenses
associated with a decrease in net sales and the curtailment of
certain operating expenses;

o a decrease of ($4.3 million) in expenses related to travel,
consulting, postage and telephone expenses incurred in the
prior year related to the expansion into the United Kingdom
and Japan;

o a decrease of ($200,000) from the prior year related to the
buyout of Ray Robbins last remaining incentive agreement in
2000, which was initially canceled in July 1999;

o a decrease of ($400,000) related to license fees paid to a
third party for the Internet subsidiary, which discontinued
operations on December 29, 2000, which was;

o partially offset by an increase of $200,000 in depreciation
expense related to the recent expansion into Japan.

Severance expenses related to former executives. In the second quarter of
2001, management entered into Separation Agreements with various former
executives and recorded a one-time charge of $3.4 million. The $3.4 million
consisted of compensation related to the cancellation of their employment
agreements, accrued vacation, health insurance and automobile expenses that will
be paid to the former employees at various times through 2004.

Write-off of a fixed asset. In the second quarter of 2000, Mannatech
determined its Internet subsidiary, Internet Health Group, Inc.'s, fixed asset
with a book value of $870,000 was impaired and should be written off. The write-
off was a result of the continuation of the poor performance of the subsidiary,
which discontinued operations as of December 29, 2000.

Interest income. Interest income decreased (62.9%) to $208,000 for the
nine-months ended September 30, 2001 from $561,000 for the comparable period in
2000. As a percentage of net sales, interest income decreased to 0.2%

for the nine-months ended September 30, 2001 from 0.5% for the comparable period
in 2000. The decrease was due to using investments to fund current year
operations.

Interest expense. Interest expense decreased (59.3%) to $24,000 for the
nine-months ended September 30, 2001 from $58,000 for the comparable period in
2000. As a percentage of net sales, interest expense decreased to 0.0% for the
nine-months ended September 30, 2001 from (0.1%) for the comparable period in
2000. The decrease was primarily due to paying off an existing note and two
capital leases.

Other expense, net. Other expense, net consists of foreign currency
translation adjustments related to the United Kingdom and Australia operations
and miscellaneous non-operating items. Other expense, net decreased (65.5%) to
($132,000) for the nine-months ended September 30, 2001 from ($383,000) for the
comparable period in 2000. As a percentage of net sales, other expense, net
decreased to (0.2%) for the nine-months ended September 30, 2001 from (0.3%) for
the comparable period in 2000. For the nine-months ended September 30, 2001,
other expense, net consisted primarily of currency exchange losses due to
currency translation fluctuations. For the nine-months ended September 30, 2000,
other expense, net primarily consisted of approximately $36,000 in certain tax
penalties and currency exchange losses due to currency translation fluctuations.

Income tax (expense) benefit. Income tax benefit was $194,000 for the
nine-months ended September 30, 2001 and $984,000 for the comparable period in
2000. Mannatech's effective tax rate decreased to 6.7% for the nine-months ended
September 30, 2001 from 28.1% for the comparable period in 2000. Mannatech's
effective tax rate decreased primarily as a result of Mannatech's inability to
recognize foreign income tax benefits relative to its Japan operations.

Net loss. Net loss remained at ($2.7 million) for both the nine-months
ended September 30, 2001 and the comparable period in 2000. As a percentage of
net sales, the net loss slightly increased to (2.8%) for the nine-months ended
September 30, 2001 from (2.4%) for the comparable period in 2000. In 2001, the
net loss was primarily due to recording a one-time charge of $3.4 million
related to the resignation of various executives who held employment agreements
and a decrease in net sales of (16.5%), which was a direct result of a 26%
decrease in active associates. This was partially offset by the curtailment of
various operating expenses, no longer incurring expenses related to its Internet
subsidiary and substantial completion of its planned international expansion
into three foreign countries. For the nine-months ended September 30, 2001,
Mannatech would have reported net income of $731,000, exclusive of the one-time
severance charge for four former executives totaling $3.4 million. The net loss
for 2000 primarily related to a decrease in net sales and incurring
approximately $4.4 million in expenses related to its international expansion.

Liquidity and Capital Resources

Historically, Mannatech has funded its business objectives, working
capital and operations through its cash flows from operations. Mannatech's
working capital decreased to $5.8 million as of September 30, 2001 from $7.3
million at December 31, 2000. In 2000, Mannatech funded approximately $4.4
million for expansion into Japan and $4.1 million for operations for its
Internet subsidiary, Internet Health Group, Inc. In 2001, Mannatech funded $2.1
million in payments to various former executives holding employment agreements,
which totaled $3.4 million, and reported a decrease in net sales of 16.5%.
Mannatech plans to continue to fund its business objectives, working capital and
operations primarily through its current cash flows from operations.

Provided by (used in) September 30, 2001 September 30, 2000
- --------------------- ------------------ ------------------
Operating activities $3.7 million ($860,000)
Investing activities ($924,000) ($2.5 million)
Financing activities ($2.7 million) ($715,000)

Operating activities. For the nine-months ended September 30, 2000,
operating activities primarily related to its international expansion into the
United Kingdom and Japan, which resulted in a net loss of ($2.7 million)
combined

with an increase in inventory of ($866,000), an increase in prepaids of
($390,000) and increase in receivables of ($1.4 million) for the expected income
tax refund. These decreases were partially offset by $2.7 million in
deprecation, the write-off of certain abandoned fixed assets of $423,000, and
the impairment of a fixed asset from its Internet subsidiary totaling $870,000.
For the nine-months ended September 30, 2001, operating activities primarily
related to a one-time charge of $3.4 million related to the resignation of
various executives, which resulted in a net loss of ($2.7 million), which was
offset by recording $2.9 million in depreciation, a decrease in inventory of
$3.0 million due to the closing of the Internet subsidiary, completion of its
planned international expansion in 2000 and depleting its current on-hand
inventory levels.

Investing activities. For the nine-months ended September 30, 2000,
investing activities consisted of purchases of computer hardware and software
and the build out of the Japan facility totaling ($4.4 million), which was
partially offset by the maturing of investments of $1.8 million. The investments
were primarily used to fund current operations and opening its Japan subsidiary.
For the nine-months ended September 30, 2001, investing activities consisted of
purchases of property and equipment and software development costs totaling
($1.1 million) which were assets purchased for the new database primarily for
its associates called Success Tracker, which was partially offset by the
repayment of notes receivable due from a shareholder of $130,000.

Financing activities. For the nine-months ended September 30, 2000,
financing activities consisted of the repayment of various capital leases and
notes payable totaling ($543,000), partially offset by the receipt of $328,000
related to the exercise of 235,700 stock options at prices per share ranging
from $1.35 to $2.00. For the nine-months ended September 30, 2001, financing
activities consisted of the payment of cash overdrafts of ($1.5 million), paying
off two capital leases and a note payable of ($573,000) and the repurchase of
655,833 shares of common stock from Mr. Charles Fioretti totaling ($656,000)
pursuant to his Lock-up and Repurchase Agreement, which was terminated on
September 24, 2001.

Mannatech believes its existing liquidity, capital resources and bank
borrowings, coupled with the continuation of the suspension of dividend payments
to shareholders should be adequate to fund its business operations and
commitments for at least the next twelve months including the following:

o In August 2001, Mannatech committed to fund up to $1 million
to expand its core software database application onto a more
easily maintainable architecture, which should provide
additional reporting capabilities and scheduled to be
substantially complete within the next twelve-months.

o Funding payments totaling $2.7 million related to the recent
resignations of Mr. Anthony Canale, Ms. Deanne Varner, Mr.
Charles Fioretti and Mr. Patrick Cobb. Under the terms of the
various separation agreements, Mannatech is required to pay an
aggregate amount of $2.7 million, of which $1.6 million will
be paid over the next twelve-months.

o Funding payments of its annual insurance premiums, totaling
approximately $1 million, which Mannatech has historically
funded over ten monthly installments to various finance
companies.

Mannatech has no present commitments or agreements with respect to any
acquisitions or purchases of any manufacturing facilities. Mannatech believes
any future changes in its operations may consume available capital resources
faster than anticipated. Mannatech believes its existing capital requirements
depend on its retention and expansion of its current associate and member base
and continuing to refine and introduce high-quality products.

If existing capital resources or cash flows become insufficient to meet
Mannatech's business plans and existing capital requirements, Mannatech would be
required to raise additional funds, which it cannot assure will be available on
favorable terms, if at all.

Recent Financial Accounting Standards Board Statements

SFAS 144 supercedes SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and Accounting
Principles Board Opinion No. 30 "Reporting Results of Operations-Reporting the
Effects of Disposal of a Segment of a Business." SFAS 144 is effective for
fiscal years beginning after December 15, 2001. SFAS 144 requires that impaired
long-lived assets be measured at the lower of carrying amount or fair value less
costs to sell, regardless if they are reported in continuing operations or in
discontinued operations. In addition, discontinued operations should no longer
be measured at net realizable value or include amounts for operating losses that
have not yet occurred. Finally, SFAS 144 broadens the reporting of discontinued
operations to include all components of an entity with operations that can be
distinguished from the rest of the entity and that will be eliminated from the
ongoing operations of the entity in a disposal transaction.

Mannatech believes the above pronouncements will have no significant
effect on its consolidated financial positions, results of operations or cash
flows.

Outlook

Mannatech believes its outlook for the remainder of 2001 and looking
forward into 2002 will be contingent upon the success of retaining and expanding
its active associate and member base, its ability to refine and introduce new
high-quality products, which will expand sales to support its global operations
and effectively communicate its changes to its compensation plan.

Forward-Looking Statements

Some of our statements under "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Quantitative and Qualitative
Disclosures about Market Risk" and Notes to Consolidated Financial Statements
and elsewhere in this report may constitute "forward-looking statements" within
the meaning of the Private Litigation Reform Act of 1995. Opinions, forecasts,
projections, guidance or other statements other than statements of historical
fact are considered forward-looking statements and reflect Mannatech's current
views about future events and financial performance. These forward-looking
statements are subject to certain events, risks and uncertainties that may be
outside Mannatech's control. Some of these forward-looking statements include
statements regarding:

o existing cash flows being adequate to fund its current business
operations;

o beliefs that some of its incentive plans will pay entry-level
associates faster;

o commissions not exceeding 42% of commissionable net sales;

o the value of the United States dollar not materially effecting its
overall financial results;

o establishment of certain policy, procedures and internal processes
to combat any exposure to market risk;

o any actual impact of future market changes due to future exposure to
currency rate fluctuations;

o management's plans, objectives and budgets for its future operations
and future economic performance;

o capital budget and future capital requirements relating to capital
projects and severance payments to executives;

o maintaining current levels of future expenditures;

o any significant impact on its financial positions, results of
operations or cash flows by recent accounting pronouncements;

o the outcome of any regulatory and litigation matters;

o global statutory tax rates remaining unchanged;

o the recent increase in its price of its stock;

o Mannatech's products aiding in the overall health and wellness; and

o the assumptions described in this report underlying such
forward-looking statements.

Actual results and developments may materially differ from those expressed
in or implied by such statements due to a number of factors, including, without
limitation:

o those described in the context of such forward-looking statements;

o future product development and manufacturing costs;

o recent and future changes in Mannatech's global compensation and
incentive plans;

o retention and expansion of its associate and member base;

o timely development and acceptance of new products or refinements of
existing products;

o the markets for Mannatech's domestic and international operations;

o the impact of competitive products and pricing;

o the political, social and economic climate in which Mannatech
conducts its operations; and

o the risk factors described in other documents and reports filed with
the Securities and Exchange Commission.

In some cases, forward-looking statements are identified by terminology
such as "may," "will," "should," "could," "expects," "plans," "intends,"
"anticipates," "believes," "estimates," "approximates," "predicts," "potential,"
"in the future" or "continue" or the negative of such terms and other comparable
terminology. Readers are cautioned when considering these forward-looking
statements to keep in mind these risks and uncertainties and any other
cautionary statements in this report as all of the forward-looking statements
contained herein speak only as of the date of this report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Mannatech does not engage in trading market risk sensitive instruments and
does not purchase investments and hedges for purposes "other than trading," that
are likely to expose it to certain types of market risk, including interest
rate, commodity price or equity price risk. Mannatech has investments, but there
has been no material change in its exposure to interest rate risk. Mannatech has
not issued any debt instruments, entered into any forward or futures contracts,
purchased any options or entered into any swaps.

Mannatech is exposed to certain other market risks, including changes in
currency exchange rates as measured against the United States dollar. The value
of the United States dollar may affect Mannatech's financial results. Changes in
exchange rates may positively or negatively affect its financial results, as
expressed in United States dollars. When the United States dollar increases
against currencies in which products are sold or when the exchange rate weakens
against currencies in which Mannatech incurs costs, net sales or costs may be
adversely affected.

Mannatech has established certain policies, procedures and internal
processes, which it believes will help monitor any significant market risks.
Currently, Mannatech does not use any financial instruments to manage its
exposure to such risks. The sensitivity of earnings and cash flows to
variability in currency exchange rates is assessed by applying an appropriate
range of potential rate fluctuations to Mannatech's assets, obligations and
projected transactions denominated in foreign currency. Based upon its overall
currency rate exposure at September 30, 2001, Mannatech believes the actual
impact of future market changes could differ materially due to, among other
things, factors discussed in this report. Mannatech cannot predict with any
certainty its future exposure to such currency exchange rate fluctuations or the
impact, if any, it may have on its future business, product pricing,
consolidated financial position, results of operations or cash flows; however,
Mannatech believes it closely monitors current fluctuations for exposure to such
market risk. Currently, the foreign currencies in which Mannatech has exposure
to foreign currency exchange rate risk include Australia, the United Kingdom and
Japan. The high and low currency exchange rates to the United States dollar, for
each of these countries, for the nine-months ended September 30, 2001 are as
follows:

Country/Currency High Low
- ---------------- -------- --------
Australia/Dollar ................ $0.57220 $0.47730
United Kingdom/British Pound .... $1.51030 $1.36770
Japan/Yen ....................... $0.00880 $0.00788

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

There have been no material changes in, or additions to, the legal
proceedings previously reported in Mannatech's Annual Report on Form 10-K as
amended (File No. 000-24657) for 2000 as filed with the Securities and Exchange
Commission on April 2, 2001.

Item 2. Changes in Securities and Use of Proceeds

On September 28, 2001, Mannatech entered into an agreement with Mr. Ray
Robbins, a high-level associate, shareholder and board member, to sell to him
all of Mannatech's 815,009 shares of treasury stock at $1.00 per share.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

On October 1, 2001, the Board of Directors appointed Mr. J. Stanley
Fredrick to the Board of Directors to replace Mr. Charles Fioretti, who resigned
from the Board of Directors in August 2001. Mr. Fredrick has considerable
industry experience with various companies engaged in direct selling activities.
Mr. Fredrick has served as the President and CEO of SMC Industries, which
included Saladmaster Corporation among its holdings, and was co-founder,
Chairman and CEO of Cameo Couture, which sold products through home parties. Mr.
Fredrick has also served as a member of the Board of Texas Central Bank, was a
co-founder of Irving National Bank Shares, a commercial bank holding company and
currently is the owner of Fredrick Consulting Services. Mr. Fredrick has many
professional affiliations including Founding Board Membership of the National
Aloe Science Council; the Personal Selling Institute of Baylor University;
served as past Chairman and Board member of the Direct Selling Association
("DSA") and Direct Selling Education Foundation. Mr. Fredrick was awarded the
DSA Hall of Fame award, is a member of the Circle of Honor from the Direct
Selling Education Foundation. As a result of his vast experience in the direct
selling industry, Mannatech entered into a two-year Consulting and Lockup
Agreement with Mr. Fredrick to perform various consulting and other services for
the Board. Under the terms of the agreement, Mannatech will pay Mr. Fredrick
$185,000 annually. The Consulting and Lockup Agreement automatically renews
annually unless terminated by either party. In addition, under the terms of this
agreement, Mr. Fredrick is prohibited from selling his shares unless approved by
the Company's Board of Directors.

Effective October 1, 2001, Mannatech hired Ms. Bettina S. Simon to serve
as the new Senior Vice President and General Counsel. Ms. Simon holds both a BFA
and Juris Doctorate from Southern Methodist University and is a member of the
State Bar of Texas. Ms. Simon has served as the Associate General Counsel for
Zale Corporation where she was responsible for a majority of the general legal
matters for approximately 15,000 employees in 1,200 retail locations. Ms. Simon
has also served as the General Counsel, Vice President and Corporate Secretary
for Home Interiors and Gifts, Inc. where she was responsible for all general
legal maters as well as regulatory and compliance matters. On November 1, 2001,
Ms. Simon was appointed as Mannatech's Corporate Secretary.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits required by Item 601 of Regulation S-K

3.1 Amended and Restated Articles of Incorporation of Mannatech dated May 19,
1998, incorporated herein by reference to Exhibit 3.1 to Mannatech's Form
S-1 (File No. 333-63133) filed with the Commission on October 28, 1998.

3.2 Fourth Amended and Restated Bylaws of Mannatech dated April 27, 2001,
incorporated herein by reference to Exhibit 99.1 to Mannatech's Form 8-K
(File No. 000-24657) filed with the Commission on August 22, 2001.

4.1 Specimen Certificate representing Mannatech's common stock, par value
$0.0001 per share, incorporated herein by reference to Exhibit 4.1 to
Mannatech's Amendment No. 1 to Form S-1 (File No. 333-63133) filed with
the Commission on October 28, 1998.

10.1 Consulting Agreement dated October 1, 2001 between Mannatech and Mr. J.
Stanley Fredrick.*

10.2 Release Agreement dated September 24, 2001 between Mannatech and Mr.
Charles E. Fioretti.*

10.3 Employment Agreement dated October 1, 2001 between Mannatech and Ms.
Bettina S. Simon.*

10.4 Royalty Agreement dated September 10, 2001 between Mannatech and Jett.*

10.5 Agreement dated September 28, 2001 between Mannatech and Mr. Marlin Ray
Robbins.*

- ----------
* Filed herewith.

(b) Reports on Form 8-K.

On August 22, 2001, Mannatech filed a Form 8-K (File No.
000-24657) with the United States Securities and Exchange Commission
in connection with the adoption of the Fourth Amendment to the
By-laws. Mannatech believes the amendment helps to further clarify
certain procedures relating to shareholder voting and shareholders'
meetings. The changes includes, but are not limited to the
following:

o the validity of any proxy shall be determined according
to the criteria established by the Board or its
designee;
o the directors shall be elected if the director receives
the vote of the holders of a plurality of the shares
entitled to vote in the election of directors that are
represented in person or by proxy at a shareholders'
meeting;
o Mannatech will be required to publish in advance of any
shareholders' meeting the rules and procedures that will
govern the conduct of such meeting;
o the Board is required to maintain at least the minimum
number of independent directors required by the rules of
the United States Securities and Exchange Commission and
any applicable securities exchanges on which the stock
of Mannatech maybe listed; and
o clarifies the procedures by which shareholders may
nominate candidates for membership to the Board of
Directors stating that any shareholder may deliver to
Mannatech written notice of a proposed director
candidate no later than December 31st of the prior year.
The nominating committee or the Board shall establish
criteria for consideration of any such nominees to the
Board and if such nominees will be disclosed in
Mannatech's proxy statement and/or listed on the ballot
for election of directors distributed at a shareholders
meeting.

SIGNATURES

Pursuant to the requirements of Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

MANNATECH, INCORPORATED

November 14, 2001 /S/ ROBERT M. HENRY
----------------------------------------
Robert M. Henry
Chief Executive Officer and Director
(principal executive officer)

November 14, 2001 /S/ STEPHEN D. FENSTERMACHER
----------------------------------------
Stephen D. Fenstermacher
Senior Vice President and Chief
Financial Officer
(principal financial officer)

INDEX TO EXHIBITS

10.1 Consulting Agreement dated October 1, 2001 between Mannatech and Mr. J.
Stanley Fredrick.*

10.2 Release Agreement dated September 24, 2001 between Mannatech and Mr.
Charles E. Fioretti.*

10.3 Employment Agreement dated October 1, 2001 between Mannatech and Ms.
Bettina S. Simon.*

10.4 Royalty Agreement dated September 10, 2001 between Mannatech and Jett.*

10.5 Agreement dated September 28, 2001 between Mannatech and Mr. Marlin Ray
Robbins.*

- ----------
* Filed herewith.