After 21 Years USANA Only Considers About 2820 of Their Sales Representatives as Full Time Associates.

Multi-level marketing company USANA Health Sciences, Inc. has been in business for 21 years and has had a little over 1.6 million sales reps (known as “associates” or “distributors”) join their business opportunity. However, as of December 2013 only about 2820 USANA associates have reached the leadership ranking of Gold Director or higher. USANA refers to this small group of associates as “Full-Time” while the remaining 1.6 million associates as “Part-Time”. So only 0.18% of USANA associates ever made it to at least a gold director status. USANA does not disclose the number of full time associates to people who are being asked to sign up. Doing so may lessen the chances that the individual signs up. Click on the image on the right to view a PDF document that shows the number of full time associates in each of USANA's territories. You can also follow this direct link to the document: www.mlmpyramid.com/USANA_Full-Time_Dec2013.pdf

Market	Diamond Director	Emerald Director	Ruby Director	Gold Director	Total
United States	66	39	117	389	611
Hong Kong	25	16	96	451	588
Australia	33	31	66	215	345
Canada	30	15	70	193	308
Philippines	6	8	22	130	166
Taiwan	11	6	28	117	162
Singapore	23	6	40	44	113
Malaysia	2	8	16	85	111
Mexico	6	6	12	79	104
Korea	13	6	27	53	99
New Zealand	5	9	11	70	95
Japan	16	1	34	38	89
Thailand	0	1	3	14	18
United Kingdom	0	1	3	4	8
France	0	0	0	2	2
Columbia	0	0	0	1	1

USANA should disclose the total distributor incentives ever paid to these 2820 full time associates.

According to a USANA Document, 92% of Commissions Are Paid To Less Than 1% of USANA Distributors

On USANA's website is a document titled "North American Average Total Earnings". Using a few of the numbers disclosed in this report, I will demonstrate how about 92% of the commission paid out goes to less than 1% of distributors, leaving only $52 per year on average for the remaining 99% of distributors.

USANA claims $616.72 was the average commission paid out if all 135,590 associates in the North American region are considered for 2011. Multiplying those two numbers together gives the total amount paid in commissions, which is $83.6 million.

In the chart, USANA shows that gold directors makes up 0.5% of everyone, which comes out to 677 associates if you multiply the 0.5% in the "of everyone" column by the total 135,590 associates. USANA also shows for the Gold Directors the percentage of Full-Time associates it represents, which is 67%. Now if you want to know the number of associates in the Ruby, Emerald, Diamond, and Star Diamond categories you simply multiple the percent of full-time for the category, multiply it by the number of Gold director associates and divide it by 67%. Now we have the number of associates for each leadership ranking from Gold Director on up to the Star Diamond Directors, which comes out to about 1009 associates.

USANA states in the report that $76,000 is the yearly average income for a full-time associate. Now multiply the $76,000 by the 1009 full-time associates, which comes out to $76.7 million.

$76.7 million for Full-time associates divided by the $83.6 total commissions paid is about 92%, which is the percentage of commissions paid to less than 1% of all associates.

Interestingly enough, USANA did not even update the report this year to show 2012 figures. Either USANA made a huge mistake in their report, or they do not want to publish any more distributor data that shows how little the majority of distributors make, which is virtually nothing. Certainly not enough to cover the required product purchases every 4-weeks.

Can USANA simply disclose the figures as they once did in their 2005 and 2006 North American Average Total Earnings report by showing the number of associates in each leadership rankings along with the total commission paid out in each of those levels instead of presenting a table that only shows theoretical figures that represents a very small percentage of each leadership level? Or is that just too much to ask?

About 85 Percent of USANA's Philippine Associates Quit and The Hidden Information in USANA's Regional Data.

USANA Health Sciences made a couple blunders in the last couple days which I believe reveals an 85% dropout figure for the Philippines market which is not being disclosed to shareholders. USANA wrote a press release on November 12, 2013 regarding typhoon Haiyan. The following is a quote from that press release, which is referenced directly from USANA's website (and still there as I write this):

"We have an incredible USANA family of more than 175,000 strong in the Philippines," said Dan Macuga, USANA chief communications officer. "Their courage and goodness inspires our global team. That's why we feel it so important to help them and all those suffering in the aftermath of Super Typhoon Haiyan." - USANA Investor Relations

I wrote about this 175,000 number on my blog a couple days ago and low an behold USANA tried to change the press release some news organizations got by changing one of their own quotes! Some news agencies now have the same press release but with the following change:

"We have an incredible USANA family, 25,000 Distributors strong in the Philippines," said Dan Macuga, USANA chief communications officer. "Their courage and goodness inspires our global team. That's why we feel it so important to help them and all those suffering in the aftermath of Super Typhoon Haiyan." - Prnewswire

How is it that USANA can change a QUOTE that one of their executives made? It's a quote for goodness sake. I want to thank USANA for making two fantastic mistakes.

1. USANA revealed that the total number of distributors they have recruited in the Philippines over the last 5 years is around 175,000.
2. USANA reveals that there are only 25,000 active associates currently in the Philippines.

So 85% of the Philippine USANA distributors no longer purchase USANA product or participate in the business opportunity. My previous estimate two days ago was 17,000 active associates or a 90% dropout figure.

Here is the key information shareholders should understand here:

If the Philippines has 25,000 active associates, and the East Asia Pacific region has 60,000 active associates, then that means only 35,000 active associates can account for Australia, New-Zealand, Singapore, Malaysia, and Thailand.

Let me show the last time USANA disclosed active associate numbers by the territory: - USANAWatchDog Blog

Active distributors in East Asia Pacific for Second Quarter 2010 (3 years ago)

Australia and New-Zealand =18,000

Singapore = 5,000

Malaysia = 14,000

Philippines = 7,000

Thailand = Non-existent

This totals to 44,000 active associates.

Fast forward to today: Active distributors in East Asia Pacific for Second Quarter 2013 (today)

USANA states in their SEC filing that East Asia Pacific has 60,000 active associates.

Australia and New-Zealand =14,000 *

Singapore = 3,000 *

Malaysia = 12,000 *

Philippines = 25,000 (recently revealed in press release)

Thailand = 4,000 *

* My guestimate in order to make the numbers add up to the reported 60,000 for the region.

Since USANA no longer discloses active associate numbers for each market they are in, investors are left in the dark about the true operations of USANA. The markets were grouped into “regions” and began only reporting regional numbers.

Based on my guestimate, the following represents the percent change over the last 3 years for those markets:

Australia and New-Zealand = 22% DECLINE

Singapore = 40% DECLINE

Malaysia = 14% DECLINE

Philippines = 257% INCREASE

Thailand = new market

USANA's True Health Foundation Donates $20,000 to Victims in Philippines after Typhoon Haiyan Hit. USANA Also Reveals 175,000 Associates In Philippines.

USANA Health Sciences announced in a press release on November 12, 2013 that they donated $20,000 through their True Health Foundation to help the victims of typhoon Haiyan that decimated the Philippines. This is a good thing and I have no problem with that. In fact, I want to commend USANA on their donation. However, USANA made one very interesting statement.

"We have an incredible USANA family of more than 175,000 strong in the Philippines," said Dan Macuga, USANA chief communications officer. "Their courage and goodness inspires our global team. That's why we feel it so important to help them and all those suffering in the aftermath of Super Typhoon Haiyan." - USANA Press Release

Dan Macuga just revealed that USANA has 175,000 associates in the Philippines since they opened there in early 2009. Would USANA care to disclose the current number of "active associates" for their Philippines market? We know it can't be more than the total East Asia Pacific region which they claim has 60,000 active associates as of the end of Q2-2013. I'll remind you that East Asia Pacific is made up of the following territories: Australia, New Zealand, Singapore, Malaysia, the Philippines, and Thailand.

I believe USANA's Philippines active associate numbers for their latest quarter would be somewhere around 17,000. This would reveal that 90% of their associates stopped purchasing USANA product and quit the business opportunity. This should be a clear indication of the real effectiveness of USANA's products, the MLM business model, and how much their associates really love popping the pills. Most of USANA's markets are saturated and unable to recruit more associates than drop out.

Investors and stock analysts should demand that USANA disclose the active associate numbers for each territory rather than just 3 regions. USANA used to disclose that information but no longer feels their shareholders deserve to see the whole picture. Stock analysts have repeatedly asked USANA the number of active Babycare Associates during conference calls and every time USANA refuses to disclose the figures.

It seems USANA would rather operate their publicly traded company in an Enron sort of fashion. Only disclose what doesn't reveal the truth about the numbers.

USANA 2013 third quarter earnings prediction by the USANAWatchDog

October 22, 2013: USANA Health Sciences, Inc (USNA) will be releasing their 2013 third quarter earnings statement after the market closes.

Here's the USANAWatchDog prediction:
- Record net sales

- United States, Canada, Australia, New Zealand, Japan, South Korea,  active associates flat.

- Lite associate participation in the newest market Columbia and nothing to brag about.

- Hong Kong, Thailand, Malaysia associate participation slightly up.

- Double digit percentage growth in the Philippines, possibly around 40% year over year.

- Mainland China growth for Babycare up substantially and possibly accounting for a third of their total net sales.
 - Preferred Customer growth FLAT or decline.


There may be some discussion about new product ideas or even services such as DNA or Genetic testing (possibly as a way to insinuate that their products can help with certain diseases if you can show that there are signs of it from a DNA scan). During their 2013 annual convention several months ago, several hundred associates were surveyed with questions asking about genetic testing. These associates were given special bracelets as a result, which quickly became a rush by associates to find and take this "random" survey...

I don't think they will have any additional information regarding the SEC investigation regarding the insider trading. May probably won't even acknowledge the various investigations that several firms have initiated as a result of the SEC investigation.

There will be no doubt the usual - we are working with US associate leaders to find ways to recruit more associates, as if monthly recruiting contests aren't enough... Same old same old.


Things USANA won't have disclosed in this earnings statement or conference call that follows are the following:
- 99% of USANA associates make no profit
 
- The majority of USANA associates are restricted from retailing any product to the general public even though they are required to purchase over $100 worth of product every 4 weeks. This is forced inventory loading and a major red flag for being a pyramid scheme.

- These same associates that are restricted from retailing product are only allowed to enroll preferred customers into their downline. They must have at least 5 of these preferred customers to be allowed to collect commission as part of the lip service USANA provides to regulators. However, this rule is unchecked and unenforced.

- Around 80% of new associates quit within the first year.

- USANA has recruited over 1.5 million associates since 1992.

- The number of USANA associates that share the same home address. There are several associate Genealogy Reports that show the same home address in Hong Kong was used by thousands of mainland Chinese Nationals, which breaks the laws in China. Since USANA allows an infinite number of associates to share the same home address when they enroll, it becomes very easy to manipulate the associate growth for any given market of USANA's. You want US growth up - have 10,000 Chinese Nationals sign up using addresses from the United States.

- Active Associate numbers for the individual markets of United States, Canada, Mexico, Europe, Columbia, Australia, New Zealand, Japan, MAINLAND CHINA, Philippines, South Korea, Malaysia, Thailand. Since USANA groups their markets into regions, there is no way to compare historical financial data to today's.

- Percentage or amount of distributor incentives paid out to each leadership ranking.

 I believe USANA is conducting a product-based pyramid scheme that has financially harmed over 1 million people worldwide who have signed up with the intent to make money after being prospected using deceptive and misleading information.

USANA Receives NutriSearch Gold Medal Achievement Again - Thanks To USANA Distributor Gregg Gies

USANA Health Sciences, Inc. receives the NutriSearch Gold Medal Achievement award as well as the "Editor's Choice" award which is mentioned in the latest edition (5th) of The Comparative Guide to Nutritional Supplements. This is no surprise since every single edition of the books rank USANA #1. While Lyle Macwilliam might be the author of the Comparative Guides and owner of NutriSearch, is there someone else that ought to be recognized?

I'm presenting the USANAWatchDog's "Special Thanks" award to Gregg Gies for all his hard work that he put into every edition of the Comparative Guide since 1999. Gregg was responsible for the research, editing, and layout for every edition of the book. Gregg was also co-owner of NutriSearch.

So why does Lyle Macwilliam get all the credit while nobody has ever heard of Gregg whenever the Comparative Guides are mentioned? Could it be because Gregg was also a USANA distributor (ID# 285320)? Gregg joined USANA before the first edition of the book came out. NutriSearch told me he joined before USANA had the preferred customer program and had to join as a distributor and only wanted the product. However, Gregg was a ranked associate and therefore had received commission through the business opportunity. Does the term "conflict of interest" ring a bell?

Interestingly enough, the following quote comes out of the Comparative Guides:

"The research, development, and findings are the sole creative effort of the author and NutriSearch Corporation, neither of whom is associated with any manufacturer or product represented in this guide."

I believe Gregg's involvement in the Comparative Guides and Nutrisearch completely contradicts the above quote and discredits the entire book, awards, and USANA's integrity.


I have written about this in much greater detail on a previous blog entry titled "USANA and the Comparative Guide to Nutritional Supplements - A Symbiotic Relationship"

Citron Research Uncovers Thousands of Fraudulent USANA Associates Living in Mainland China

July 23, 2013 Citron Research has uncovered evidence that USANA Health Sciences, Inc (USNA) has recruited thousands of people from mainland China into their Multi-Level Marketing (MLM) compensation plan. A four month long investigation by Citron Research has revealed the enormity of the situation. China's direct selling laws prohibit any MLM business from operating in their country. However, USANA has been recruiting thousands of China's citizens by having them use an address from Hong Kong. In fact, thousands of these recruits used the same Hong Kong address with the sole purpose to circumvent China's laws and to try and hide under the radar.

Read the latest Citron Research report on USANA

Citron Research obtained genealogy reports of several top USANA associates whose downline consisted of thousands of associates all sharing the same address. This list contained email addresses and phone numbers of these associates. Every associate Citron contacted on that list that showed a Hong Kong address all actually live in mainland China.

When this was revealed last year by Citron Research, they only showed evidence of a couple associates from mainland China signed up under Ada Chai, a 2-star diamond director that USANA terminated shortly after the scheme was revealed. USANA quickly made a statement simply claiming they do business legally in mainland China through Babycare and never even bothered to address the fact that Chinese Nationals are being recruited into USANA through Hong Kong.

So USANA admits it is illegal for Chinese Nationals to sign up as a USANA distributor in Hong Kong because Ada Chai was terminated for the action. However, Ada's terminated was nothing more than lip service to shareholders and federal regulators because she was a scape goat. The fact of the matter is USANA has been fully aware of how massive this illegal activity is for the following reasons.

October 6, 2009 - USANA sends out internal memo contains the following information about mainland China USANA distributors: INTERNAL MEMO (rogue associates in mainland China)

VI. Question #6: Which market experienced the greatest sales growth from 2007-2008, and by how much?
i. Answer: East Asia (Hong Kong mainly and a little Taiwan), increased by almost $13 million.
ii. Things to look out for – rogue associates in Mainland China, trying to order US product.

IV. What is the biggest market that buys our products that we are not eligible to operate in?
i. Once again I couldn’t give you an exact answer on this. Since I work with our Asian markets, I know that a large sum of product ends up in China, but I’m sure product somehow gets shipped to other unauthorized markets as well...

 
July 28, 2011 - USANA CEO Dave Wentz admits during a financial conference call that a percentage of Hong Kong distributors are actually Chinese Nationals: TRANSCRIPT

question by John San Marco at Janney Montgomery Scott LLC:
"Do you know what the percentage of your Hong Kong associates that are actually Chinese nationals?"

USANA's Dave Wentz replies back with:
"We definitely have a number of people who are building in Hong Kong. We do not have a percentage or have a number that we could point to with any accuracy."

John San Marco asks USANA if there are any Chinese Laws that prevent Chinese Nationals from doing any sort of multilevel marketing outside their borders.

USANA's James Bramble responds with
"Well if an individual does not have residency in Hong Kong and the ability to build in Hong Kong, then they can only build in China."

November 29, 2012 - Citron Releases investigative report that reveals 2-star diamond director USANA associate Ada Chai actively participated in the recruitment of Chinese Nationals into her USANA downline. As a result of this report, USANA terminates Ada Chai. USANA: An Arresting Story by Citron Research


January 25, 2013 - USANA posts an internal memo that reveals the fact USANA allows associates to use the same address over 15 times: INTERNAL MEMO (associates using same address)

- First, as of January 26th the online enrollment system will not accept any address as a home address if that address has already been used by more than 15 other active associates.
          - Limited to main addresses only
          - however will not catch spelling or abreaviation differences
                - example: 123 Jon Boulevard vs. 123 Jon Blv.
          - The example would read as two different addressses
          - This will need to be evaluated and reported to compliance when noticed
          - This prohibition can be manually over-ruled by a DSR so that in the extremely rare circumstance that more than 15 associates truly do share the same address they simply need to enroll by phone.
          - A DSR will then verify that the address is really their address and can complete the enrollment.

DSR = Distributor Services Representative


March 10, 2013 - In USANA's 2012 10K SEC Filings the following statement was made regarding the November report by Citron Research: USANA 2012 10K SEC Filing

"More recently, in November 2012, we were again the target of false and misleading statements concerning our business practices, particularly in China and Hong Kong. This adverse publicity also adversely impacted the market price of our stock and caused insecurity among our Associates. 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."

The report by Citron in November did not contain "false and misleading statements" because USANA terminated Ada Chai after the report was released.


July 23, 2013 - Citron Research uncovers THOUSANDS of USANA distributors living in mainland China: Creating a Criminal Conspiracy out of Your Own Customers by Citron Research


I personally believe USANA cannot plead ignorance because they play an active role in hiding the location of their distributors. USANA should disclose to shareholders the percentage of net sales that was the result of USANA distributors living in mainland China. Chinese authorities should revoke Babycare's direct selling license as a result USANA's strategic circumvention of their laws.

USANA First Quarter Earnings for 2013 - What About Those Undisclosed Statistics? What Should USANA Disclose?

USANA Health Sciences, Inc. (NYSE:USNA) releases their first quarter 2013 financial earnings after the market closes today. Through my research over the years I have found the following statistics about USANA which I believe are pretty accurate and should be considered while reviewing USANA's quarterly result:

Over the last 21 years of USANA's existance, they have recruited about 1.5 million associates.

Over 99% of USANA's associates never made a profit, and instead lost money.

At the beginning of the quarter, USANA had about 247,000 associates who have purchased product during the previous three months. This means 83% of USANA's associates have stopped doing business with USANA when considering the total ever recruited.

Roughly one third of USANA associates, or 82,000 are “active associates” as defined by their policies and procedures (having personally purchased over $100 worth of product during a four week period in order to qualify for commissions). This contradicts their 247,000 active associates as defined and reported in their SEC filings (having simply purchased a USANA product).

USANA recruited about 60,000 new associates during the first quarter of 2013. In order for new associates to begin, they must activate atleast one business center which requires over $200 worth of products to be personally purchased by the associate on top of a $29.95 startup fee. This amounts to about $13.8 million just for these 60,000 new associates to get started.

The majority of USANA associates are not permitted to resell product to retail customers because they are classified as "non-distributing" associate. These same associates are still required to personally purchase product over $100 worth of product every four weeks as part of their obligation toward USANA if they want to be eligible to collect a commission as well as grow and keep their downline and/or preferred customer purchase volume points. This is a blatant case of inventory loading as these associates are stuck with product they are not allowed to sell.

USANA classifies a “full-time” associate as one who has reached the leadership rank of “Gold Director” and up. After 21 years in business, USANA has about 2900 full-time associates which is only 0.8% of their active associates as defined by their SEC filings.

The majority of distributor incentives paid to their distributors goes to this top 0.8% which are Gold Directors and up. Two thirds of USANA associates never received a single penny in commissions.

There aren't enough preferred customers to cover the 5 customer rule (anti-pyramiding rule) to justify paying commissions to the majority of those associates who collected a commission. Most associates who collected a commission are still losing money.

I believe there are more Chinese Nationals who are USANA associates (illegally participating in Multi-Level Marketing) than there are Chinese Nationals who are Babycare Associates (legally participating in Single-Level Marketing). I believe Chinese Nationals joining USANA account for the majority of USANA's growth in both sales and distributorships as the recruiting in mainland China into USANA's MLM has been in overdrive. I believe these Chinese Nationals are counted toward growth in many of USANA's MLM territories.

USANA should disclose during their first quarter earnings conference call:

1. the number of associates that received a commission during the quarter and of those how many are non-distributing associates. Dividing the number of reported Preferred Customers by 5 will give you the maximum number of non-distributing associates USANA can pay a commission to.
2. Number of newly recruited associates during the quarter.
3. Number of full-time associates currently active with USANA.
4. The percentage of distributor incentives paid to these full-time associates.
5. The number of active associates as defined by their policies and procedures.
6. The actual associate turnover rate (instead of simply stating that it is high).
7. The percentage of net sales that was the direct result of associates activating or keeping active their business centers.
8. The amount of sales USANA received as a result of new associates purchasing a $1250 professional enrollment package.
9. Number of associates that cancelled their distributorship.
10. Number of USANA distributors (not Babycare) living in mainland China.
11. Number of associates who share the same home address as two or more other associates (possible Chinese Nationals using an address from Hong Kong or other USANA territories).

USANA May Be Operating an Illegal Pyramid Scheme By Primarily Paying Associates To Recruit Rather Than Selling Product To Customers.

USANA Health Sciences, Inc. (NYSE: USNA) is a multi-level marketing company that pays out commission to their associates who are suppose to have at least 5 customers. USANA admits that paying associates who do not have customers would technically be paying associates to recruit and acknowledge that doing so is illegal.

I have written a report that shows how USANA is paying associates to recruit and have asked USANA to disclose the number of active associates that received a commission check and of those how many are non-distributing associates.

Read The Report: USANA Watchdog Report on USANA - Paying To Recruit

An Untrue Statement in USANA's 2012 10-K Financial Statement - "Target of False and Misleading Statements Regarding China"

USANA makes untrue statement in their 2012 Form 10-K SEC filing. USANA stated the following:

"More recently, in November 2012, we were again the target of false and misleading statements concerning our business practices, particularly in China and Hong Kong. This adverse publicity also adversely impacted the market price of our stock and caused insecurity among our Associates. 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."

USANA's claim about being the target of “false and misleading statements concerning our business practices, particularly in China and Hong Kong” is a lie. USANA does in fact illegally recruit Chinese Nationals from mainland China into USANA's multilevel marketing compensation plan through Hong Kong (and possibly other USANA territories), which is a direct violation of China's law. Dave Wentz even admitted Chinese Nationals are signing up in the MLM compensation plan during the July 27, 2011 financial conference call:

John San Marco at Janney Montgomery Scott LLC asks:

“Do you know what the percentage of your Hong Kong associates that are actually Chinese nationals?”

Dave Wentz, CEO of USANA Health Sciences responds after trying to avoid answering the question:

“We definitely have a number of people who are building in Hong Kong. We do not have a percentage or have a number that we could point to with any accuracy.”

This violation of the law is not just the problem from a couple associates, but an organized circumvention of Chinese foreign laws conducted by USANA. This violation could (and should) cause USANA to lose their direct selling license in mainland China and possibly face serious fines by regulatory agencies both domestic and foreign. Again, USANA's CEO Dave Wentz already admitted the fraud exists.

USANA Associates Pay More Than Suggested Retail Price For USANA Products

USANA Health Sciences is a multilevel marketing company that recruits sales reps into an endless binary hierarchy where each person receives points based on the personal purchases (noticed I did not write "sales") of those associates below their position. One of the biggest factors in determining if a MLM is legitimate or simply an illegal pyramid scheme is whether their products are being resold to retail customers. Lets take a look at USANA's hottest selling products and see if it can be retailed.

USANA's suggested retail price for their Essentials is $54.54.
USANA's wholesale price of Essentials is $50.50.

The shipping and handling (UPS Ground) is $10.94 to have one Essentials shipped.
It costs a total of $61.44 which is $6.90 over the suggested retail price! How are associates suppose to retail the product?

Lets try three Essentials. Wholesale price would be $151.50 and shipping is $11.77 which comes to a total of $163.27. However, the retail price on three Essentials if $163.62. Again, there is no chance for the associate to make a profit even after purchasing three Essentials.


What about Autoship prices? Autoship is a term USANA uses for an automated product purchase of 100 points ($114-$137) made by the associate every 4 weeks. This personal purchase allows the associate to be "commission qualified" (Again, notice I did not write "sale"). Now that associate can collect commissions from the personal purchases made by the associates below their position in the endless binary system as well as their preferred customers. Being on autoship also allows the associate to receive a 10% discount from the wholesale prices.

If the associate purchases one Essentials at the autoship price, it will cost them $45.45 plus the $10.94 shipping for a total of $56.39. That is still $1.85 higher than the suggested retail price if you can believe it!

However, if the associate purchases three Essentials at the autoship price, it will cost $136.35 plus $11.77 in shipping for a total of $148.12. If the associate can manage to retail all three boxes at USANA's suggested retail price, the associate will make $15.50 profit, which is only $5.17 per box. This dilemma causes inventory loading, the other ingredient to be an illegal pyramid scheme.

So there is no possible way USANA associates are retailing product because there is no money to be made by reselling the product. There is no reason to become an associate or preferred customer either because in the end they'll be paying the retail price anyway. Plus, associates have to fork out an additional $30 to join and $20 each year to renew.

So not only are USANA's products grossly overpriced (in order to fund the pyramid scheme), but associates end up paying the same price for the product whether they joined or not. In fact, USANA's product (new condition) sells for half the autoship price on Ebay.

USANA Associates Do Not Want Their Prospects To Read This Blog. I Wonder Why?

I got a kick out of a message someone posted on the USANA distributor team Integritas facebook page. Unfortunately the message was removed (no surprise), but not before I commented on it and took a screen shot.

http://www.facebook.com/IntegritasGroup

Anthony ***** - How can associates protect themselves from usanawatchdog.com when a prospect decides to research the company on their own?

Usana WatchDog - Really? USANA Associates need to protect themselves when prospects decide to research the company on their own? This is priceless.

USANA May Have Misled Shareholders During Fourth Quarter Earnings 2012 Conference Call Regarding BabyCare, China, and Hong Kong

USANA Health Sciences, Inc. (USNA) appears to have misled shareholders during their fourth quarter 2012 earnings conference call on February 6, 2013 as well as several other calls in the past.


When USANA purchased BabyCare Ltd. in August 2010 (an already established direct selling (single level marketing) company in mainland China) it added 12,000 Active Associates and 7000 Active Preferred Customers to USANA's "Greater China" region. Over the last couple years USANA has attributed any of Hong Kong declining active associates to BabyCare, claiming that leaders would re-evaluate where to go (USANA Hong Kong, or China BabyCare).

Today (over two years later), BabyCare has about 17,000 Active Associates and about 2000 Active Preferred Customers. That's a net gain of ZERO customers since USANA purchased BabyCare! So all this talk about BabyCare being a hot market is simply untrue. All this talk about BabyCare siphoning off Hong Kong distributors was a farce. Truth be told, BabyCare is an utter failure and has virtually no growth.

I have datamined USANA's BabyCare distributor IDs and found there to be 38,000 issued ID numbers as of September 2012. If there are only 17,000 active associates in Babycare right now, then over half of all the associates recruited in BabyCare have quit since USANA purchased them.

As for Preferred Customers, what a utter failure. USANA doesn't explicitly state what the figure is this quarter, but since there are 4000 total preferred customers in Greater China, it seems like a safe bet that BabyCare accounts for 2000 active preferred customers. If this figure is accurate, then Babycare has lost 70% of their active preferred customers.

That's a huge problem if Active Associates in Babycare are required to have a certain number of customers to be qualified to earn a commission check.


What is hot right now is the growth in Hong Kong, which is largely attributed to Chinese Nationals from mainland China being illegally recruited into USANA's MLM Hong Kong market (instead of in BabyCare). They are recruited from mainland China and put in USANA under an address from someone living in Hong Kong. This way Auditors, shareholders, and federal regulators can be fooled. USANA allows this to happen and even has a policy set up that allows for over 15 distributors to share the same home address and the same credit card when signing up with USANA.

Stock analysts refuse to address these BabyCare issues with USANA and really don't seem to have a clue about what USANA is doing in China.

USANA Q4-2012 Earnings - Questions USANA Should Answer for Shareholders and Federal Regulators

USANA Health Sciences, Inc (USNA) Fourth Quarter Earnings for 2012 are released at the end of the day today. I'll give my two cents followed by a series of questions I think USANA should answer.

Flat to declining United States, Canada, and Mexico active associates. However, USANA might show a gain in North American active associates which could be due to European associate recruiting. USANA continues to combine Europe with United States associate numbers even though the market territories are over 3000 miles apart.

Greater China will see the biggest increase of active associates, which I attribute to mainland China citizens signing up primarily into USANA's MLM opportunity through Hong Kong rather than joining BabyCare which is only a singlelevel marketing company. As of mid-September 2012, I counted roughly 38,000 Babycare distributor IDs issued. It is unknown how many of those are actually considered "active" and how many have already dropped out.

Philippines will probably show gains since my blog is getting a lot more hits from that area of the world. This seems to be a good indication that recruiting is on the increase. Most of the Google searches that come to my website are searching the term "USANA Scam". Typically new recruits or those who have been approached by a recruit search these such terms. I also receive a lot of emails from concerned family members and friends from the Philippines.

Future sales will probably be forecast higher, which is no surprise since USANA increased the price of several top selling products. Shipping charges have been increased as well.


Questions USANA should answer during their 2012 fourth quarter earnings conference call on February 6, 2013.

New distributors who purchase a Professional Enrollment Pack for $1250 get a $100 commission check sent back to them from USANA. No customers were necessary to receive this commission check.

Question 1) How many Professional Enrollment Packs were sold to new sales reps during the 2012 year?

This answer would give investors an idea of just how much in Net Sales USANA makes upfront from newly recruited sales reps. It will also reveal what percentage of the distributor incentives was paid as a result of a phoney commission payout.


USANA has two classes of sales reps: Distributors and Associates. USANA states that "distributors" must satisfy the 5 customer rule by either having either Preferred Customers, Retail Customers, or a combination of the two. USANA goes on to further state that "associates" must satisfy the 5 customer rule by having only Preferred Customers (typically the terms are used interchangeably, except when referring to the 5 customer rule). There were only 64,000 Preferred Customers during the Q3-2012. This amount of preferred customers can only satisfy up to 12,800 active associates. USANA also states that 1 in 3 associates receive a commission check. There were 242,000 active associates in Q3-2012. So according to USANA's numbers, 80,600 active associates received a commission check.

Question 2) How many active associates received a commission check during the last quarter and how many of them are considered "Associates" and how many are considered "Distributors"?

If more than 12,800 sales reps who collected a commission check are officially classified as "associates", then USANA is not enforcing their own 5 customer rule policy.

Question 3) How many retail customers combined do the active associates who collected a commission check have?

It has to be over 339,000 to cover the remaining active associates who collected a commission check.


Over 200 of USANA sales reps are part of the million dollar club. 10 of them are part of a $5 million dollar club. So over $240 million in commission has been paid out to roughly 200 associates since USANA joined the stock market in 1996. That is over 13% of all commission ever paid out.

Question 4) Are the million dollar club members (who have received over 13% of all commission ever paid out) audited to ensure they have 5 or more customers and if so, how frequently are they audited?


USANA's Asia markets have exploded with distributor growth over the last several years. During that time, i have shown on numerous occasions how unlikely these numbers are real. In fact, according to USANA, 1 in every 100 Hong Kong citizens is a USANA distributor. Citron Research uncovered USANA distributors recruiting Chinese Nationals and training them on how to circumvent US and Chinese laws by opening a bank account in Hong Kong and signing up under their sponsor's home address. Recently I have uncovered a USANA document that shows how USANA has no limit to the number of distributors that can sign up under the same address let alone the same credit card.

Question 5) How long has USANA allowed three or more associates to sign up using the same address?

Question 6) How many USANA associates share the same address with 3 or more other associates?

Question 7) How many USANA associates share the same creditcard with 3 or more other associates?

Question 8) How many Chinese Nationals who live in mainland China have joined USANA's MLM business opportunity in other markets such as Hong Kong, Australia, Philippines, Malaysia, etc...? (Not related to BabyCare)


USANA has defined an "Active Associate" two different ways. In the SEC filings it states that an active associate has purchased product at anytime during the most recent three months. In every single other publicized location regarding USANA's business opportunity, an active associate is defined as one who personally purchases over 100/200 PSV points in order to qualify for commissions.

Question 9) What exactly is an "active associate" as described in your SEC filings. Is it an associate who could have simply purchased a single tube of toothpaste for $7.50, or is it an associate who has met the 100/200 PSV point requirement ($110 to $240) to be commission eligible?


The FTC has made the following statement in a letter to the Direct Selling Association: "a multi-level compensation system funded primarily by payments made for the right to participate in the venture is an illegal pyramid scheme."

Question 10) What percentage of net sales was the result of the distributor's PSV purchases to be commission qualified and remain as "active associate" status?

The FTC letter further states that "Modem pyramid schemes generally do not blatantly base commissions on the outright payment of fees, but instead try to disguise these payments to appear as if they are based on the sale of goods or services. The most common means employed to achieve this goal is to require a certain level of monthly purchases to qualify for commissions. While the sale of goods and services nominally generates all commissions in a system primarily funded by such purchases, in fact, those commissions are funded by purchases made to obtain the right to participate in the scheme."


USANA has never published a worldwide statistic of their distributor's leadership ranking and the percentage of distributor incentives paid out to each of those rankings. Doing so I believe would raise a red flag to federal regulators like the FTC as it would reveal just how little USANA distributors make.

Question 11) How many distributors in 2012 were in each of the Leadership Rankings from plain "associate" (commissionless) to "sharers" (bare minimum) to "#-Star Diamond Directors" (yes, each of the star rankings listed separately)?

Question 12) How much distributor incentives was paid out to each of the leadership rankings during the 2012 year?


It has been stated for many years now that MLM companies (including USANA) have a 99% distributor failure rate, meaning they did not make a profit. Based on my years of research into USANA I also have come to the same conclusion based on available information I have been able to find. However, USANA could clarify this issue once and for all and answer the following:

Question 13) What percentage of USANA sales reps make a "profit" after expenses are subtracted?


USANA states in their SEC filings "we experience a high turnover among new Associates from year to year". This is very vague and could mean 10% or it could mean 90%. This needs to be clarified with a real value.

Question 14) What is USANA's distributor turnover rate in 2012 among new associates from year to year in terms of a percentage? 


USANA claims to have about 242,000 active associates as of Q3-2012. Last year at this time it was said to have 222,000 active associates (Q4-2011). This would lead investors to believe USANA recruited 20,000 more active associates. However, because of a high turnover rate, it is actually unknown how many new associates joined.

Question 15) How many unique individuals were USANA Active Associates during the 2012 year (total)?

Question 16) How many associates left their distributorship and cancelled their membership?


I believe many USANA associates stay as a member because upline leaders discourage their members from cancelling memberships and tell them that one day they may have a downline under their business center. So the idea is that all these associates who didn't drop out have to do is keep paying a yearly renewal fee of $20. As of mid-September 2012, I have counted over 1.3 million USANA distributor IDs.

Question 17) How many distributor's paid a $20 renewal membership fee during the 2012 year?

Question 18) How many Business Development Systems (BDS) were sold or given to new distributors throughout 2012?


All of these questions are useful in continuing to build the case that USANA is a product-based pyramid scheme similar to the MLM Fortune Hi-Tech Marketing (FHTM) which was recently shut down by the FTC. It may be that the FTC chose to go after Fortune Hi-Tech first, build a strong case, and then apply that case and the judges rulings to other MLMs in the industry like Herbalife (HLF), Nu Skin (NUS), Amway, Monavie, Ariix, and hundreds of others that all have a similar business model.

Disclosure: I have no stock position in USANA or any of their competitors. I have never and will never hold a stock position with USANA. I am not paid to write this article. I make no money from this blog. I have never and will never be a USANA distributor or a distributor of any other MLM company.

USANA Allows Distributors To Sign Up Under The Same Home Address and Credit Card - Recipe For Circumventing Foreign Laws

USANA Health Sciences, Inc (USNA) has virtually expanded their Multilevel Marketing (MLM) operation from about 19 markets to every market in the entire world.

A recently written internal USANA document reveals a secret policy that only insiders and several top distributors are aware of. This hidden policy allows over 15 active associates to use the same home address as well as using the same credit card. I cannot find this sort of policy mentioned anywhere on the web or through distributor literature. This policy essentially allows USANA distributors to sign people up into their MLM downlines within any country in this world including unauthorized markets such as mainland China, which has laws preventing their citizens from participating in MLM schemes.

Internal USANA document regarding address and creditcard enhancements states the following:
QUOTE

         Address and Credit Card System Enhancements

    - System enhancements took effect starting as of January 26, 2013.
    - As each of you are aware, in order to enroll as an associate in any market where USANA does business an associate must provide their correct address in country to show residency and to allow us to contact them.
    - In addition, downline purchasing is strictly forbidden, meaning an associate must pay for his or her own orders.
    - These policies are difficult to enforce at times because an associate may “lend” the use of his or her address to downline members allowing enrollments that do not meet residency requirements.  Likewise, an upline may use the same credit card to pay for all orders in an organization, thus causing compensation plan manipulation.
    - The compliance team has been charged with enforcing these rules but has found it difficult.
    - With project upgrade complete IT has been able to help this situation with two new enhancements.
    - First, as of January 26th the online enrollment system will not accept any address as a home address if that address has already been used by more than 15 other active associates.
          - Limited to main addresses only
          - however will not catch spelling or abreaviation differences
                - example: 123 Jon Boulevard vs. 123 Jon Blv.
          - The example would read as two different addressses
          - This will need to be evaluated and reported to compliance when noticed
          - This prohibition can be manually over-ruled by a DSR so that in the extremely rare circumstance that more than 15 associates truly do share the same address they simply need to enroll by phone.
          - A DSR will then verify that the address is really their address and can complete the enrollment.
    - Second, as of January 26th our online product order system will not accept as payment for product any credit card that is already in use on more than 15 active distributorships. 
          - This rule will not apply for the time being in Mexico or the Philippines until we are comfortable that we have a working solution in those markets for distributors who do not have a credit card. 
          - In addition, this prohibition will not apply to an associate’s first order as it is common for a sponsor to lend his or her credit card to a new associate and take cash as payment for the first order.
          - As with the first system enhancement, this prohibition can also be manually over-ruled by a DSR where the DSR speaks to the associate and the upline and verifies that the associate has paid cash to the upline and the upline authorizes use of the card.
    - Note that these enhancements do not represent a change in policy.  The policy remains that each associate must pay for his or her own orders and provide a legitimate address to enroll.  These enhancements simply will allow us to better enforce rules that were previously more difficult to enforce.
    - Kevin Guest and Deborah Woo informed each of the IDCs about this new enhancement in November and there were no complaints.
    -  Brent Neidig will be writing a compliance corner article to remind associates of these policies.
    - In addition associates who have previously had a practice of signing many people up at one address or with one credit card will notice the restriction.
    - Please make sure you are prepared to respond to these associates and help them understand the restrictions and that your DSRs, compliance and field development staff

UNQUOTE

DSR stands for Distributor Services Representative
IDC stands for Independent Distributor Council

USANA's 2012-2013 Independent Distributor Council (IDC) is made up of the following distributors:

Zak Ross – 10 Star Diamond Director
Simon Chan – 3 Star Diamond Director
Tony and Tammy Daum – 2 Star Diamond Director
Daniel and Paige Hunter – 2 Star Diamond Director
Jordan Kemper – Diamond Director
Tom and Lorie Mulhern – Diamond Director
Jared Creds – Ruby Director
Soomin Kim – Ruby Director

USANA is only talking about restricting their ONLINE ENROLLMENT SYSTEM from allowing associates to sign up more distributors under the same address if they already have 15 active associates sharing that address. Obviously distributors have been doing this or else USANA would not have to put in place a limit on the online enrollment. Does it really matter though since all the associate has to do is call USANA's customer service to get an override.

This policy outlined in the internal memo about allowing over 15 associates sharing the same address contradicts USANA's published policies and procedures which states the following:
QUOTE

3.13 One Distributorship
 

An Associate may operate, receive compensation from, or have an ownership interest, legal or equitable, as a sole proprietorship, shareholder, trustee, or beneficiary in only one USANA Distributorship. However, notwithstanding this rule, your spouse may become an Associate and operate a second distributorship as long your spouse’s distributorship is placed below one of your business centers and not in a cross line sales organization. The second business must be a bona fide independent business that is operated by the person listed on the agreement and not by the owner of the first business.

UNQUOTE

Now unless USANA executives have been watching too much "Sister Wives" on The Learning Channel, there is no way somebody has 4 spouses let alone over 15! So aside from polygamy, USANA's policies and procedures limits a household to only two distributor accounts. The policies and procedures USANA publicly publishes serves as nothing more than lip service to federal regulators. USANA's unpublished set of policies shown in these internal memos are the real policies that the federal regulators should be interested in.

A couple years ago there was another internal USANA document regarding compliance and training for their employees that makes the following contradictory statements:

QUOTE (my emphasis in red)

VII. Questions from DSR
II. When can we get the computer to list accounts with same address, phone, ssn, etc.
 

i. We already have access to most of that information, it just doesn’t automatically show us it. We have spoken with IT and the more actions we place on the system, the more burdensome it becomes and the slower it  operates. So for now, we have to run our own little reports to try and find multiples.

UNQUOTE

At the time why would USANA be interested in finding distributor accounts that share the same address? USANA admits they have access to the information and is fully capable finding these "multiples". Obviously there was a problem back then with associates using the same home address.

Lets look at another quote regarding credit card fraud and usage.

QUOTE (my emphasis in red)

III. Fraud
iii. Credit card usage

1. If someone is trying to use a card other than their own, do not let them. There have been several instances of fraud lately where people’s cards have been stolen and used to purchased product.

2. A good response would be: “I noticed that the name on this card is different than your own. You may not be aware of this, but recently there have been several instances where credit card fraud has taken place. Because of this, we are trying to increase our associates protection by only allowing the account holders credit card to be used  on their account. So unfortunately I can’t let you use this credit card. I know it may be a bit inconvenient, but I’m sure you would be glad if we
stopped someone else from using your card on their account without  your authorization.”

VII. Questions from DSR
III. How rampant is credit card fraud in the system?
i. Lately we have had several issues with Fraud. I don’t have an exact  number on how many issues we have, but it is a growing concern. As a result, we are currently working on changing our credit card policy to ensure an added level of protection for our associates.

UNQUOTE

According to USANA's 2010 internal document, credit cards can only be used on the card holder's own distributor account. Here USANA discusses trying to tackle credit card fraud. Yet, in their latest internal document just recently written they allow over 15 active associates to all use the same credit card.


So why does any of this matter at all? For starters, it allows a distributor to recruit anyone from anywhere into their downline. All they have to do is use the sponsoring distributor's address and credit card. The sponsoring distributor is simply reimbursed by those in his or her downline who reside in countries that are not authorized to participate in MLM companies. This leads me to China.

For several years now I have been writing on my blog about mounting evidence that USANA has been signing up Chinese Nationals into their MLM compensation plan. It is against the law for Chinese Nationals to own or operate a MLM distributorship. USANA is not authorized to conduct MLM activities within mainland China.

So one possible way USANA can circumvent China's laws is to sign up Chinese Nationals in other countries such as Hong Kong and use the sponsoring distributor's Hong Kong address. By doing so, it removes any paper trails within USANA's computer system and from auditors eyes. The shareholders simply see USANA's Hong Kong market rise sharply while the rest of USANA's markets hold steady or even decline. This sharp rise in sales and distributorships in Hong Kong sends USANA's stock price soaring. When the price is right, insiders dump millions of dollars worth of stock (Myron Wentz sold over $30,000,000 in November and December).

In November, Citron Research released evidence of Chinese Nationals being recruited in USANA's MLM compensation plan by a distributor from Hong Kong. Each of the Chinese Nationals used the address of the distributor from Hong Kong. They were also instructed to open up bank accounts in Hong Kong as well. This internal memo is strong evidence that USANA has in place a policy that allows for such questionable recruiting activities. USANA filed a response with the SEC regarding the Citron report and simply stated that they operate BabyCare Ltd. in mainland China and do it legally. USANA's response diverges from the actual issue, which is the recruitment of Chinese Nationals into USANA's MultiLevel Marketing plan through Hong Kong, not the BabyCare SingleLevel Marketing plan already established in mainland China.

With unethical hidden policies like these it's no wonder USANA executives are leaving like rats on a sinking ship. Someone should ask USANA during their financial conference call next week "how many associates share the same address with three or more other associates and what percentage of net sales did they account for."

I'll finish with one of my favorite non-disclosures by USANA revealed in the older internal USANA document:
QUOTE

IV. What is the biggest market that buys our products that we are not eligible to operate in?

i. Once again I couldn’t give you an exact answer on this. Since I work with our Asian markets, I know that a large sum of product ends up in China, but I’m sure product somehow gets shipped to other unauthorized markets as well…

UNQUOTE

A Large Sum sounds like a lot to me.

Now that the FTC has shut down MLM company Fortune Hi Tech (FHTM), could USANA be next in their sights? I will discuss this in my next article.

Disclosure: I have no stock position in USANA or any of their competitors. I have never and will never hold a stock position with USANA. I am not paid to write this article. I make no money from this blog. I have never and will never be a USANA distributor or a distributor of any other MLM company.

The Number One Product USANA Distributors Sell is the Business Opportunity Membership. Is This Worse Than Herbalife and Amway?

USANA distributors' number one selling product is not a vitamin supplement or skin care product. It is actually the business opportunity membership. That's right, a $19.95 startup fee someone pays when they are recruited into USANA's business opportunity and placed in the distributor's downline. This might sound unbelievable but I believe it is true. USANA product cannot be retailed for a profit because 1) “preferred customers” get the product at the same cost as distributors and 2) the product is absurdly overpriced because of the percentage of “distributor incentives” paid out, so there is zero demand for the product above the distributor's cost. So the only thing reasonably priced is the actual membership fee to join as a USANA distributor. All the distributor has to do now is convince others that they too can become rich by signing up in USANA's business opportunity.

USANA claims distributors aren't paid commission from this signup fee and claims that doing so would make them an illegal pyramid scheme. USANA claims that if commissions are paid based on product sales, then it is not a pyramid. However, this $19.95 fee alone doesn't let the newly recruited distributor even start their USANA business. Their business venture does not begin until they “activate” a business center. To do this, the new distributor must “personally purchase” over $220 worth of product, which is 200 “personal sales volume” (PSV) as USANA calls it. Once activated, the new distributor can take part in USANA's compensation plan.

USANA considers this required personal purchase to activate the new distributor's status as a “sale”. Did the distributor who recruited this new member sell the product to the new distributor? Absolutely not. Did the new distributor purchase the product from the person who recruited them? Not at all. The only product that was sold by the distributor was a membership (recruitment). So USANA gives Group Sales Volume (GSV) points to every upstream member above the newly recruited distributor based on the $220 worth of product purchased. These GSV will travel all the way up to the very first USANA distributor if it needs to. Once enough GSV points are accumulated, they are converted into commission dollars.

After the newly recruited distributor has activated their business center, they must now personally purchase 100 points worth of product ($110) every 4 weeks to remain active. If the associate fails to make this personal purchase, that distributor is no longer considered active, is no longer able to make any commission, and loses all their accumulated GSV points (if they had 10,000 GSV, they now have 0).

Now imagine over 220,000 USANA active distributors all making their required personal purchases in order to stay active. Many are required to personally purchase 200 PSV since they have multiple business centers. That's a lot of product purchased from USANA but none actually sold by USANA distributors. Again, the primary product sold by USANA distributors is the membership. So why should any of these distributors make any commission whatsoever from these “required” product purchases made by every active distributor?

The only real customers are the USANA “preferred customers”. There are around 64,000 of them. In 2011, preferred customers only account for 10% of USANA's net revenue, which is virtually insignificant. 10% of $589 million is only $58.9 million. The amount of commission paid out is 45% of net revenue. So preferred customers only account for around $26 million in commission paid out. However, USANA paid a total of $265 million total. Where did the remaining $239 million in commission funds come from? USANA distributor's required personal purchases.

The FTC wrote a letter tothe Direct Selling Association back in 2004 the states the following: (my emphasis in bold)

QUOTE

...a multi-level compensation system funded primarily by payments made for the right to participate in the venture is an illegal pyramid scheme.

…

Modern pyramid schemes generally do not blatantly base commissions on the outright payment of fees, but instead try to disguise these payments to appear as if they are based on the sale of goods or services. The most common means employed to achieve this goal is to require a certain level of monthly purchases to qualify for commissions.

UNQUOTE

There is no question about it, USANA is operating as a pyramid scheme. Federal regulators have completely ignored complaints from thousands of MLM distributors and critics and have instead made it easier for these kinds of scams to exist (FTC's business opportunity rule exempts multilevel marketing business opportunities). Hopefully the recent attention Herbalife has been receiving from pyramid scheme allegations of their own draws enough attention to the MLM industry that federal regulators are forced to investigate frauds like USANA. Hundreds of thousands of USANA distributors are losing money and never even had a chance to make a profit. A 99% failure rate cannot and should not be ignored. And don't forget, USANA's #1 product sold by its distributors are memberships into the business opportunity.