Nature's Sunshine Products (NATR) Risk Analysis

On August 25, 2014, we completed a transaction with Shanghai Fosun Pharmaceutical (Group) Co., Ltd. ("Fosun Pharma"), which created a joint venture owned 80 percent by us and 20 percent by a wholly owned subsidiary of Fosun Pharma. On June 30, 2025, we entered into share purchase agreements with Fosun Industrial Co., Ltd. ("Fosun Industrial," an affiliate of Fosun Pharma) to purchase Fosun Industrial's interests in our two joint ventures, Nature's Sunshine Hong Kong Limited and Shanghai Nature's Sunshine Health Products Co., Ltd., for cash consideration of $3.9 million and $3.1 million, respectively. On December 17, 2025, we completed these purchases, acquiring the interest in Nature's Sunshine Hong Kong Limited for $3.1 million and the interest in Shanghai Nature's Sunshine Health Products for total consideration consisting of $2.9 million paid at closing and an additional $1.0 million payable on December 17, 2027. As a result of these transactions, we now face risks inherent in directly owning and operating these businesses in China (including Hong Kong), including: (i) integration risks as we transition to direct ownership; (ii) compliance risks related to Chinese licensing, regulatory approvals, product registrations, and ongoing regulatory requirements, including PRC laws applicable to Wholly Foreign-Owned Enterprises; (iii) risks related to our ability to satisfy the deferred purchase price obligation due December 17, 2027; and (iv) broader China-related risks, including changes in PRC laws or regulations, foreign exchange controls, restrictions on the repatriation of funds, and potential adverse treatment by Chinese or other authorities. Any failure to manage these risks effectively could have a material adverse effect on our business, results of operations, and financial condition.

We are subject to anti-bribery laws, including the FCPA, which generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business as well as requiring companies and their intermediaries to maintain accurate books and records. In recent years, there has been a substantial increase in anti-bribery law enforcement activity by the Department of Justice ("DOJ") and the SEC relating to business operations within certain countries in which we operate, including China. For example, in recent years, U.S. based direct selling companies with operations in China have been the subject of investigations and enforcement actions or, in some cases, have initiated their own internal investigation relating to alleged violations of the FCPA. Our policies mandate compliance with anti-bribery laws by our employees and agents, including the requirements to maintain accurate information and internal controls. However, we may be liable for actions of our employees and agents, even if such actions are inconsistent with our policies. Being subject to an investigation by the DOJ or the SEC for an alleged violation of the FCPA could cause us to incur significant expenses and distractions that could adversely affect our business. Violations of the FCPA, or a similar anti-bribery law, may result in criminal or civil sanctions, including contract cancellations or debarment and loss of reputation, which could have a material adverse effect on our results of operations and financial condition.

The formulation, manufacturing, packaging, labeling, advertising, distribution and sales of each of our major product groups are subject to regulation by numerous domestic and foreign governmental agencies and authorities. In the U.S., these governmental agencies and authorities include the FDA, the FTC, the CPSC, the EPA, the USDA and state regulatory agencies. Generally, each international market in which we operate has regulatory agencies similar to the regulatory agencies in the U.S. In addition, each state in the United States has an attorney general who is responsible for enforcing the laws of that state. Some states' attorneys general have, from time to time, demonstrated a focus on the manufacture and sale of various dietary supplements. As the primary manufacturer of our own products, we are subject to FDA regulations on Good Manufacturing Practices ("GMP"), which require us to maintain good manufacturing processes, including ingredient identification, manufacturing controls and record keeping. In the future, we may be subject to additional laws or regulations administered by the FDA or other federal, state, local or foreign regulatory authorities, the repeal or amendment of laws or regulations which we consider favorable and/or more stringent interpretations of current laws or regulations. Additionally, regulatory standards governing dietary supplements continue to evolve, and regulatory authorities may adopt more restrictive interpretations of existing laws and regulations. Such changes could, among other things, require reformulation of certain products to meet new standards, cause us to recall or discontinue certain of our products, impose additional record-keeping or registration requirements, expand documentation of the properties of certain products and expand or alter labeling and/or scientific substantiation requirements. Any or all such requirements could increase our costs of operating the business and have a material adverse effect on our results of operations and financial condition. The FTC and states' attorneys general have in the past instituted enforcement actions against cosmetic, dietary supplement and food companies and manufacturers for false and misleading advertising of some of their products. Improper or unsubstantiated product or earnings claims by independent consultants, even where contrary to our policies, may subject us to regulatory investigations, enforcement actions, fines, penalties, product relabeling requirements or reputational harm. The FTC and states' attorneys general from time to time have initiated investigations and enforcement actions against direct selling companies alleging that the companies operated a pyramid scheme. Although the FTC and states' attorneys general exercise a substantial degree of subjectivity in determining whether a company is operating a pyramid scheme, the FTC and states' attorneys general consider whether the compensation received by independent consultants is based primarily on recruitment of other persons as participants in the compensation program and not on bona fide sales of products to consumers. An enforcement action brought by a government agency, like the FTC in the United States, or a class action lawsuit, could adversely affect our reputation and potentially result in significant penalties and costs, either of which could have a material adverse effect on our results of operations and financial condition.