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.