USANA's Third Quarter Earnings for 2011 Decline Over Previous Quarter - ARIIX to Blame?

FOR IMMEDIATE RELEASE:

USANA's Third Quarter Earnings for 2011 Decline Over Previous Quarter - ARIIX to Blame? 

Salt Lake City, Utah - October 26, 2011 - Net sales declined by $5,424,000 or 3.6% from the prior quarter. Earnings before income taxes declined $2,245,000 or 10.6% from the prior quarter. Several days ago I released a report showing many distributors leaving USANA to join ARIIX. Several of them were USANA's top distributors. I gave my prediction that associate levels will decline and as a result drop in overall earnings. Seems I was correct.

I'm not sure how USANA can keep a straight face while sending out a press release trying to make their third quarter earnings appear good. I predict this decline to continue due to ARIIX. Many of the USANA distributors that joined ARIIX did so during the third quarter and are still counted in USANA's active associate figures. As a result, active associates in the fourth quarter will likely continue to decline.

It's amazing that even after USANA's "Crazy Cash Contest" where associates receive huge points for recruiting additional distributors and miniscule points for signing up preferred customers, USANA still managed to lose more associates than they can recruit. I've always said USANA's business opportunity is all about selling the dream to make money instead of retailing product to customers, and this contest simply backs up my claims.

I still believe USANA has been violating China's laws by actively recruiting Chinese Nationals into their MLM business opportunity by encouraging them to open the account in Hong Kong. Mainland China has banned MLMs from operating within their country. Remember, Dave Wentz made the following statement last quarter "We definitely have a number of people [Chinese Nationals] who are building in Hong Kong. We do not have a percentage or have a number that we could point to with any accuracy." And then Jim Bramble follows that up 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." So there is clearly something very sneaky going on and I believe analysts need to keep pressing USANA on this issue. I'm not sure how the SEC can continue to turn a blind eye by allowing USANA to continue breaking foreign laws.

The following are charts showing the Active Associate & Preferred Customer trends quarter by quarter. I believe they speak for themselves. The captions describe the result from Q2-2011 to Q3-2011

US Active Associates declined by 2000 or 4%

US Preferred Customers declined by 2000 or 5%

Canada Active Associates declined by 1000 or 4%

Canada Preferred Customers remained flat

Mexico Active Associates remained flat

Mexico Preferred Customers remained flat

SE Asia/Pacific Active Associates increased 4000 or 9%

SE Asia/Pacific Preferred Customers increased 1000 or 17%

Greater China Active Associates declined 9000 or 10%

Greater China Preferred Customers declined 1000 or 12%

N Asia Active Associates remain flat

N Asia Preferred Customers remain flat

USANA lost “Major Customers” to ARIIX, which may adversely affect 3rd quarter earnings

USANA states in their own words the following in many of their 10-K SEC filings: My Emphasis in BOLD Red

Major Customers
 
Sales are made to independent Associates and Preferred Customers.  No single customer has ever accounted for 10% or more of net sales in any fiscal year.  Notwithstanding the foregoing, the nature of our business model results in a significant amount of sales to several different Associate leaders and their downline sales organizations.  Although no single Associate has ever accounted for 10% or more of our net sales, the loss of a key Associate leader or that Associate’s downline sales organization would adversely affect our net sales and our overall operating results.

That is exactly what has and is happening!


Back on May 9, 2011 I reported that four of USANA's top executives (Fred Cooper, Jeff Yates, Mark Wilson, and Riley Timmer ) resigned from their position. However, USANA released this information publicly on May 10, 2011. How did I know 1 day ahead of time? USANA sent out a private memo to all of their Gold director distributors and up. They were privy to insider information before shareholders. However, stock analysts completely dismissed this fact. So when USANA stated in a press release that these executives resigned May 10th, that is not the case according to the May 9th private memo.

Now I'm here to give shareholders heads up on the fact that USANA has lost many of their top distributors who quit their distributorship with USANA to join ARIIX, the multilevel marketing company founded by Fred Cooper and operated by the other three ex-USANA executives who resigned in May. USANA is falling apart and stock analysts covering USANA don't seem to have the shareholders in their best interests.

After some research, I have compiled a list of USANA distributors that have decided to join ARIIX (bottom of this posting). The list is incomplete since neither company publishes who their distributors are (so secretive). Most of the USANA distributor ranking I show below are as of October of 2010. I do not have any recent information of their rankings and USANA has taken great strides at keeping the information a secret.

2 - 5 Star Diamond Director
1 – 4 Star Diamond Director
*1 - 3 Star Diamond Director
2 – Diamond Director
1 – Ruby Director
2 – Gold Director
7 – Silver Director
1 – Bronze Director
1 – Director
2 – Achiever
6 – Builder
4 – Believers
3 – Sharers
 
*(Revised October 25, 2011: I must at one more 3-Star Diamond Director, Robert & Daryl Allen)

Five Six Diamond Directors are what I would consider KEY ASSOCIATE LEADERS. Many of the others were part of one of these key associate's “sales organization” and left USANA to follow their leader. These key leaders have been plastered all over USANA's website, sales material, training material and all over YouTube promoting USANA's business model and its product. However, these Diamond Directors left USANA even before ARIIX launched, which gaurantees these members key positions in the ARIIX compensation business model. This really says a lot about USANA's products and doesn't bode very well for the company. Also doesn't help that Dr. Ray Strand left USANA to join ARIIX. Recently Liz Strand (Ray's wide) had her USANA distributor page shut down as well.

That's not all. USANA terminated a couple of these key leaders (Lynn Allen Johnson & Duke Tubtim) when they were reported to USANA executives for being on a conference call with ARIIX and other interested individuals who wanted to find out more about ARIIX. Many should be very familiar with a recent 2008 arbitration that awarded an ex-USANA distributor $7,000,000 for being wrongfully terminated back in 2003. Well, now we are talking about a couple star-diamond directors that USANA terminated just a few months ago. So where are stock analysts on this issue?

Now I want to make a little prediction, but first I have to make the following very clear. I have no financial position on USANA's stock or any competitor to USANA. I have never traded USANA stock and never plan to. No one is paying me to write anything about USANA. I am volunteering my time to educate people. I do not like to see people lose their hard earned money because they were deceived or misled.

With that said, I believe USANA's active associate numbers will decline across most of their territories, with China being the exception. If USANA's own SEC filings state that “the loss of a key Associate leader or that Associate’s downline sales organization would adversely affect our net sales and our overall operating results. ” Notice it doesn't use the term “might”,“maybe” or “possibly”. It states it “would” adversely affect their overall operating results

The following is a list I have compiled of USANA distributors who have joined ARIIX.

USANA Distributor #133412 - Lynn Allen Johnson - 5 Star Diamond Director
ARIIX Distributor #10146 - Lynn Allen Johnson - Vision is Power Inc.- http://www.myariix.com/lynnallenjohnson

USANA Distributor #2119355 - Duke Tubtim - 5 Star Diamond Director - Millionaire Club
ARIIX Distributor #10198 - Duke Tubtim - Kaizen Support Group Inc. - http://www.myariix.com/Kaizensupport

USANA Distributor #2111980 - Timothy Lewis - 4 Star Diamond Director - Millionaire Club
ARIIX Distributor #10138 - Timothy Lewis - 4DL Enterprises Inc. - http://www.myariix.com/4dl

USANA Distributor #33009 - Robert & Daryl Allen - 3 Star Diamond Director - http://robertallen.usana.com
ARIIX  Distributor #213647 - Robert Allen - http://www.myariix.com/robertallen

USANA Distributor #295671 - Steve and Myrna Swartz - Diamond Director - Millionaire Club
ARIIX Distributor # 10168 - Steve Swartz - Have it All, Inc. - http://www.myariix.com/steve

USANA Distributor #3053770 - Iris Lee - Team ASD – Diamond Director - http://teamasd.usana.com/
ARIIX Distributor #10228 - Iris Lee - IS Health Enterprises Ltd. - http://myariix.com/teamasd

USANA Distributor # - Sandy LV - Ruby Director -
ARIIX Distributor #19176 - Sandy LV - http://www.myariix.com/sandy

USANA Distributor #2127139 - Tatyana Sutherland - Gold Director - http://www.usana.com/webhosting/tatyana
ARIIX Distributor #11188 - Tatyana Sutherland

USANA Distributor #2765838 - Tracee Gluhaich - Gold Director - http://truehealthintl.usana.com/
ARIIX Distributor #18696 - Tracee Gluhaich - http://www.myariix.com/truehealthintl

USANA Distributor #3216982 - Phyllis Goodman - Silver Director - http://health4lifeinc.usana.com/
ARIIX Distributor #10847 - Phyllis Goodman - http://www.myariix.com/phyllisgoodman

USANA Distributor #2137359 - Glenna and Richard Norris - Silver Director
ARIIX Distributor #59886 - Glenna and Richard Norris, CHHC - http://www.myariix.com/gnr

USANA Distributor #3704262 - Randy "Yosef" Katz - Silver Director - Sabai Marketing Group http://www.usana.com/webhosting/sabaiARIIX Distributor #10247 - Randy "Yosef" Katz - Sabai - http://www.myariix.com/esuite/home/sabai

USANA Distributor #86832 - John & Carol Cliffe - Silver Director -  http://riskfree.usana.com/
ARIIX Distributor #11327 - John Cliffe -

USANA Distributor#2811720 - David & Monica Rendon - Silver Director - http://www.achievinghealth.usana.com
ARIIX Distributor #42887 - David & Monica Rendon - http://www.myariix.com/rendon

USANA Distributor #2554180 - Marlisa Hurt - Silver Director - http://www.usana.com/webhosting/marlisa
ARIIX Distributor #33636 - Marlisa Hurt


USANA Distributor #2320280 - Jean Amicarella - Silver Director -  http://www.usana.com/webhosting/jeana
USANA Distributor #3669898 - Jean Amicarella - Sharer -  http://www.usana.com/webhosting/jeanamic (Yes, two USANA IDs with separate websites for this unique distributor)
ARIIX Distributor #17766 - Jean Amicarella - http://www.myariix.com/ariixinfo

USANA Distributor #128089 - Larry & Susie Sisson - Bronze Director -  http://www.usana.com/distWeb/site/sisson
ARIIX Distributor #10547 - Larry & Susie Sisson - http://www.myariix.com/myfreedom

USANA Distributor #244097 - Arlene Hutchinson - Director - http://www.usana.com/webhosting/bhealthy2
ARIIX Distributor #11578 - Ennis Hutchinson - http://www.myariix.com/marketing

USANA Distributor #3940012 - Pollawat Pankam - Achiever
ARIIX Distributor #11357 - Pollawat Pankam - http://www.myariix.com/esuite/home/username/

USANA Distributor #2398784 - Maryann Cady - Achiever -  http://www.usana.com/webhosting/maryanncady
ARIIX Distributor #38008 - Maryann Cady - http://www.myariix.com/maryanncady

USANA Distributor #3936760 - Somboon Pongpruk - Builder -  http://how2success.usana.com/
ARIIX Distributor #11376 - Somboon Pongpruk - http://www.myariix.com/esuite/home/online

USANA Distributor #3909038, 4112764 & 4380414 (Builder) - Anh Vongbandith - http://www.dreamsmadeinc.usana.com/
ARIIX Distributor #12816 - Anh Vongbandith - http://www.myariix.com/DreamsMadeInc

 USANA Distributor #3250998 - Melissa Daniels - Builder -  http://www.usana.com/webhosting/mdaniels
ARIIX Distributor #11496 - Healthy 4 Life, LCC - Melissa Daniels - http://www.myariix.com/healthy4life

USANA Distributor #2479038 - Lucia Sanchez - Builder -  http://www.usanamexico.usana.com
ARIIX Distributor #34596 - Lucia Sanchez - http://www.myariix.com/ariixmexico

USANA Distributor #4202538 - Ed Walls - Builder - http://teamwalls.usana.com/
ARIIX Distributor #15538 - Edward Walls -

USANA Distributor #4086676 - John R. Parke - Builder - http://4086676.usana.com/
ARIIX Distributor #11507 - John R. Parke

USANA Distributor #4154550 - Rick & Cynthia Evans - Believer -  http://cevans.usana.com/
ARIIX Distributor #10896 - Rick & Cynthia Evans - http://www.myariix.com/rickevans

USANA Distributor #4446386 - Irv Segal - Believer - http://irvsegal.usana.com/
ARIIX Distributor #21328  - Irv Segal -

USANA Distributor #4353344 - Loredana Nuñez - Believer -  http://healthytime.usana.com/
ARIIX Distributor # - Francisco & Loredana Moreno -

USANA Distributor #4387858 - Ric & Carmen Goodson - Believer -
http://ricandcarmen.usana.com/
ARIIX Distributor #11387 - Ric & Carmen Goodson -
http://www.myariix.com/carmengoodson

USANA Distributor #3076606 - Angie Lee - Sharer
ARIIX Distributor #17818 - Angelica Lee - http://www.myariix.com/angielee

USANA Distributor #4202828 - Sou Fin Saechao - Sharer - http://4202828.usana.com/
ARIIX Distributor # - Sou Fin Saechao

USANA Distributor #3914138 - Jidbhong - Jayavasu - Sharer -
ARIIX Distributor #56076 - Dr Jidbhong Jayavasu - http://www.myariix.com/dr_jay

USANA Distributor #7662974 - Edward Williams - http://m3ister.usana.com/
ARIIX Distributor #12996 - Edward Williams - http://www.myariix.com/esuite/home/m3ister/

USANA Distributor #2926598 - Rick Billings - http://www.usana.com/distWeb/site/rickbillings
ARIIX Distributor #10727 - Rick Billings - http://www.myariix.com/RickBillings

USANA Distributor #2812402 - Mike Delevante - http://www.usana.com/distWeb/site/miked
ARIIX Distributor #10817 - Mike Delevante - http://www.myariix.com/mikedelevante

USANA Distributor #8297220 - Debbie Turner - http://turner.usana.com/
ARIIX Distributor #20916 - Debbie Turner - http://www.myariix.com/turner/

USANA Distributor #9638662 - Susan Hamilton - http://www.usana.com/webhosting/susanhamilton
ARIIX Distributor #34007 - Susan Hamilton, CHHC - http://www.myariix.com/SusanHamilton

USANA Distributor #9202660 - Chad zinda - http://www.usana.com/webhosting/9202660
ARIIX Distributor #  - Chad Zinda

USANA Distributor #9613734 - Lyn Clark -
ARIIX Distributor #37967 - Lyn Clark

USANA Distributor #7016988 - Emery Krahn - http://www.usana.com/webhosting/emery
ARIIX Distributor #36707 - Emery Krahn - http://www.myariix.com/emery

USANA Endorses Manny Pacquiao or Vice Versa? Special Privileges For One Lucky Distributor

How does a distributor obtain special privileges from USANA? Hundreds of thousands of individuals join USANA each year as an associate/distributor. 99% of them never manage to even see a profit. But once in a blue moon, USANA picks a winner. This winner is Tim Sladeck.

How does this work? Good question! I'm not really sure. What I have found is the following.

Tim Sladeck works on many of Manny Pacquiao's endorsement deals. Who is Manny Pacquiao? He is the first boxer in history to hold world titles in 8 different weight divisions. Manny endorses USANA  and takes USANA supplements. In fact, USANA has taken this endorsement to a whole new level. USANA now offers a special "Manny Basic Pack" and "Manny Advanced Pack". Both are considered a MyHealthPak deal, so they are nonrefundable (yes, not refundable because they are not resalable according to USANA). No big deal here, just smart advertizing.

But here's the fishy part: USANA customer service is instructed to sell these special Manny Packs through Tim Sladeck's distributor website! So the USANA distributor Tim Sladeck appears to make all of the sales! Think I'm kidding? Below is a screenshot of the USANA document that proves it.

Following the http://www.usana.com/webhosting/8662528 link takes you to Tim Sladeck's USANA website. So USANA has instructed their customer service to sell this "Manny Pack" exclusively through a USANA distributor named Tim Sladeck.

So is any USANA distributor allowed to make a special name for a "MyHealthPak" package, like "Obama Advanced Pack", and have the customer service direct all sales through that single distributor if anyone in the country calls about it? What a deal! Sign me up!!!

Dr. Ray Strand Leaves USANA to Join ARIIX

Dr. Ray Strand, another prominent member of USANA Health Sciences, Inc. (USNA) has left to join ARIIX. Strand has been part of USANA's medical advisory board pretty much since USANA's beginning. He has played a very important role for USANA not only by acting as a credible figure on USANA's team with his title, but is also one of the so called "independent authorities" in Lyle MacWilliam's book, the Comparative Guide To Nutritional Supplements.

This departure becomes even more interesting because not only was Dr. Ray Strand a medical advisor for USANA, but is also a USANA distributor who has reached USANA's millionaire club. You wouldn't know this however, because USANA does not promote Dr. Ray Strand as a distributor. In fact, the distributor account (#73631) is under his wife's name, Elizabeth Strand. Here is their USANA distributor page. So what will happen with this distributor account now? Will USANA terminate their account like they did to other top distributors who took interest in ARIIX? Will they simply leave USANA to join ARIIX?

I look forward to seeing how this plays out. I think USANA is crumbling in the US market and wouldn't be surprised if USANA moves their headquarters out of the US all together.

If a USANA Distributor Asks You To Join Their MLM, Ask Them This Simple Question

If a USANA distributor asks you to join their Multi-Level Marketing business opportunity, simply ask them the following question.

How much commission do you make each month on average from (1) Downline Distributor's purchases and (2) Preferred Customer's purchases?

If the promoting distributor has actually made anything (66% of them haven't made a penny), then the answer you get will likely break down as the following: 90% of their commission came from Downline Distributors and 10% came from Preferred Customers. What does this mean? It means the distributor's primary job is to sell the business opportunity and recruit more distributors. Only 10% of the business opportunity is committed toward selling the product and signing up preferred customers.

How do I know this? Because 90% of USANA's products are purchased by USANA distributors according to their latest SEC filings. Does this mean distributors want the product because they use it or because they have a customer to resell it to? Absolutely not. In fact, USANA distributors are forced to purchase over $100 worth of product every 28 days in order to participate in the business venture. It is a business obligation. If the distributor fails to make this required purchase, then that distributor loses all volume points accumulated, is not eligible to collect commission and is no longer considered as “Active”.

So in order to be successful in USANA, distributors must recruit enormous downlines. Not only that, but these distributors must pressure downline members to also recruit more distributors. This is an endless chain of recruiting. More than half of new distributors stop participating within the first year. So in order for MLMs to survive, distributors must recruit new distributors at a higher rate than those who are dropping out. This is a pyramid scheme. If the recruitment of new distributors were to stop, then the MLM company like USANA would go out of business in just a couple months. The product itself cannot retain enough customers. Only the dream of becoming rich in their deceptive business opportunity keeps the company alive. Only 1% of those who join make a profit.

Now if that USANA promoter answers your question by telling you they make most of their commission from preferred customers, then ask them what the dollar amount is per month. If it is not more than $100, then they are not even recovering the expense of their $100 required product purchase, not to mention all the other expenses incurred.

Another answer you may hear is that they immediately received a $100 commission check their first week. This is a very deceptive answer because of the following. If you joined USANA and signed up purchasing their $1250 "Professional Pack" starter package, you will automatically receive a $100 commission check without having to sell anything! Now ask yourself, if you purchase something for $1250 and receive $100 back, would you seriously consider that an earning let alone a commission? This is one of USANA's dirty little secrets ad violates even their own policies and procedures by paying a commission to someone without any selling whatsoever. It's also used to manipulate their numbers.

If you are asked to join, consult with your accountant regarding the business opportunity. Take them the compensation plan and ask them to evaluate it.

Does USANA having a product mean they are not a MLM pyramid scheme? No.

Remove the USANA product from the equation and what do we have? The same thing.

Most MLM promoters claim that Multilevel Marketing is not a pyramid scheme because they offer products and claim pyramid schemes don't have products. This is far from the truth. Modern pyramid schemes offer products to make their scam appear legitimate. Lets look more closely at this and use USANA as the example.

Scenario 1) Lets pretend that USANA had no product. All the distributors who want to participate in the compensation plan would be required to pay $68 every four weeks (13 times a year) in order to collect commission from their downline. Those who make their payments would be considered as “Active Associates”. If a distributor neglects to make their payment for any given four week cycle, then that distributor loses all rights to collect commission from their downline and are no longer considered as “Active”.

So what does this $68 fee consist of? Well, $23 of it goes toward paying the operators of the pyramid scheme (USANA executives and employees). The remaining $45 is used to pay commissions and bonuses to Active Distributors who joined earlier. The amount of commission paid to a distributor depends on the number of active members they have in their downline. The more you recruit and get others to recruit for you, the more you make.

Distributors with 10 active members in their downline would receive $100 every four weeks.

Distributors with 100 active members in their downline would receive $1000 every four weeks.

Distributors with 1000 active members in their downline would receive $10,000 every four weeks.

Unfortunately, the majority of participants (over 90%) do not make enough to even cover the required $68 fee they must pay every four weeks to participate. Most participants don't even receive a single commission check! This is a pyramid scheme. While distributors aren't paid when new recruits pay the $19.95 startup kit (required to become a member), the distributors are paid commission when downline members pay their $68 mandatory participation fee. Thus, distributors are paid to recruit!

Scenario 2) Now lets go ahead and include USANA's products into the mix. USANA's cost to produce their product is $18. Adding that to the $68 fee and we end up with $86, but that is not what distributors will actually pay. In fact, USANA distributors will pay an additional $14, which brings the total to $100. These are actual figures based on USANA's SEC filings. For ever $100 of net revenue, 45% goes toward commissions and bonuses paid to distributors, 23% goes toward “selling, general & administrative” expenses, and 18% goes toward USANA's “cost of sales”.

The only differences between the two scenarios is that one you get a product and the other you don't. Both are still pyramid schemes. Both have over 90% of participants losing money. These percentages are fixed no matter how hard members try to “work the business”. Success in MLM takes a lot of hard work at deceiving people into throwing their hard earned money away by joining a pyramid scheme.

If you are considering joining USANA or any other MLM company, take the compensation plan to your accountant and ask them if you should join. Ask your accountant if the majority of their clients who are in MLM lose money. This broad of a question would not break any client confidentiality rules. Do not let the USANA promoter pressure you into making a decision without doing your own homework. 99% of MLM participants lose money.

USANA Recruits Chinese Nationals To Participate and Build Their Business in Hong Kong in Violation of Chinese Direct Selling Laws.

I've been stating this for years now. USANA has been recruiting citizens from mainland China as distributors in a multilevel marketing company for their Hong Kong territory. I've pointed out in the past how USANA's Hong Kong distributor numbers are way out of proportion (now 1 in every 112 Hong Kong citizens are USANA distributors = RED FLAG) and that mainland China only allows their citizens to participate in SINGLE-level marketing companies.

Well, today USANA was asked during their dismal second quarter earnings results the following 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?" - Transcripts

Finally, someone asks USANA a real question instead of the soft balls USANA usually receives. Dave Wentz's first answer was a very calculated "No, we do not". If Dave is being honest, then USANA's management team doesn't know their ass from a hole in the ground. But I'm sure USANA knows the answer but refuses to publicly disclose that number.

Better yet, Dave Wentz could have just simply quoted their own internal document that surfaced over a year ago!

"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… "

Dave could have simply stated that he isn't sure of the exact percentage, but that a "LARGE SUM OF PRODUCT ENDS UP IN CHINA". But Dave is only the CEO, so why would he know any of this...

After John San Marco asked for USANA to at least give a ball park estimate on the percentage, 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."

 Really!? Chinese Nationals "building in Hong Kong"? Uh oh! Dave Wentz was not suppose to admit that. During the first quarter's conference call 3 months ago, USANA's Fred Cooper said "we have a large group of Asian Associates who are involved with USANA only because of the products and are buying in Hong Kong for consumption only."

So now USANA is in a pickle. Dave Wentz lets the truth come out and admits that the Chinese Nationals are actually building a USANA downline in Hong Kong. So USANA has been "Cheating in China". And of course they are having trouble "transitioning" these distributors over to BabyCare because they all know that without a downline they have no chance of making a dime. The product is over priced and over rated. There is little to no demand for USANA's product except as a required purchase to participate in a pyramid scheme. To transition these Chinese Nationals over to BabyCare would mean breaking apart their already formed downlines. And best of all, these downlines are attached beneath many of USANA's top distributors. That is why USANA's distributor leaders were upset about some changes USANA was trying to implement which forced USANA to quickly retract their plan. To split up the Chinese Nationals out from USANA would mean top distributors of USANA losing tens of thousands of dollars in commissions. Commissions which come from the mandatory product purchases by these Chinese Nationals in order to participate in the scheme.


Lastly, 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. Dave defers the question to Jim Bramble, USANA's legal officer. Jim dances around the question and John had to then be more specific. Finally, Jim makes the following statement:

"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." - Jim Bramble

Jim follows that up with a lot of rambling and back peddling. So in otherwords, Chinese Nationals are not legally allowed to participate in USANA's multilevel marketing business opportunity whatsoever. I have been making this claim for a while now USANA finally admits it. But wait a minute, in regards to Chinese Nationals, Dave Wentz had just stated that "We definitely have a number of people who are building in Hong Kong." I think we have a winner folks. USANA caught in a lie regarding Chinese Nationals as USANA distributors.


I want to thank John San Marco at Janney Montgomery Scott LLC for asking USANA his questions. Good job.

USANA Second Quarter 2011 Earnings Results Reveal Stagnant Distributor Base

USANA Health Sciences, Inc (USNA) released their second quarter financial statement on July 26, 2011 and they still can't seem to grow in the United States, Canada, Mexico, Australia, New Zealand, Japan, or Malaysia. In fact, USANA seems to be relying primarily on Hong Kong and mainland China. We have heard USANA's excuse for the lack of distributors for several quarters now, which is to blame the bad economy. However, if you read much about the MLM industry, it is said that the industry benefits from a down economy because people need jobs and are more likely to join companies like USANA. If you look at Herbalife (HLF), you'll see that they have been "increasing" their distributor base in North America and Mexico. So what is USANA's problem? Is the pyramid scheme becoming more clear in the eyes of potential recruits? Is it the fact distributors are unable to retail the product for more than their cost since it is over priced and preferred customers get it at the same price as distributors?

We'll soon listen to USANA's 2nd quarter conference call in the coming hours and doubt anything relevant will be mentioned by USANA. Maybe I will be surprised! I think the following question should be asked by stock analysts during the conference call:

ANALYSTS, ASK THIS DURING CONFERENCE CALL:

USANA, is it true you terminated Lynn Allen Johnson & Duke Tubtim (Both are 5 star diamond directors) because they showed an interest in ARIIX (company started by former USANA president Fred Cooper). What about Steve Swartz & Tim Lewis (Diamond and 4 star diamond directors), were they "terminated" as well? All four of these members are now active members in ARIIX; have additional USANA distributors joined ARIIX following the ex-USANA leaders? Do you expect lower distributor figures for the United States in the third quarter as a result of ARIIX? And most importantly, do you expect these former USANA leaders mentioned above to sue USANA because they were terminated? How is this distributor termination any different than the one where USANA was forced to pay $7,000,000 to TWO distributors for wrongful termination?

I will be disappointed if analysts never mention the termination of their top distributors because investors should be made aware of this.

	2010-Q2	2010-Q3	2010-Q4	2011-Q1	2011-Q2
ACTIVE ASSOCIATES
United States	57000	55000	51000	49000	49000
Canada	26000	25000	24000	24000	24000
Mexico	12000	11000	11000	10000	10000
SE Asia Pacific	44000	46000	41000	40000	43000
Greater China	63000	89000	93000	82000	87000
North Asia	8000	8000	8000	8000	9000
ACTIVE PREFERRED CUSTOMERS
United States	39000	37000	36000	38000	37000
Canada	15000	14000	14000	14000	13000
Mexico	3000	3000	4000	3000	3000
SE Asia Pacific	6000	7000	6000	6000	6000
Greater China	2000	12000	16000	8000	8000
North Asia	1000	1000	1000	1000	1000

Top USANA associates leave USANA for ARIIX - a MLM founded by former USANA president Fred Cooper

From USANA to ARIIX.

Fred Cooper, Mark Wilson, Jeffrey Yates and Riley Timmer resigned from USANA on May 9th, 2011 launched their own multilevel marketing company called ARIIX. At the beginning of July, USANA discovered that several of their top distributors (and I mean very top) had joined ARIIX as founding distributors. USANA terminated these members and may have a much larger problem looming. I believe we have to wait until the Third Quarter financial results to see the damage if any ARIIX has on USANA's distributor numbers.

When top distributors leave one MLM company to join another, their devote congregation (Downline members) usually follow. These leaders were used in virtually all of USANA's literature as well. So who are these so called USANA leaders that joined ARIIX?

USANA Distributor #2111980 - Timothy Lewis - 4 Star Diamond Director - Millionaire Club
ARIIX Distributor #10138 - Timothy Lewis - 4DL Enterprises Inc. - http://www.myariix.com/4dl

USANA Distributor #133412 - Lynn Allen Johnson - 5 Star Diamond Director - Millionaire Club
ARIIX Distributor #10146 - Lynn Allen Johnson - Vision is Power Inc.- http://www.myariix.com/lynnallenjohnson

USANA Distributor #2119355 - Duke Tubtim - 5 Star Diamond Director - Millionaire Club
ARIIX Distributor #10198 - Duke Tubtim - Kaizen Support Group Inc. - http://www.myariix.com/Kaizensupport

USANA Distributor #295671 - Steve and Myrna Swartz - Diamond Director - Millionaire Club
ARIIX Distributor # 10168 - Steve Swartz - Have it All, Inc. - http://www.myariix.com/steve


(There may be more leaders who joined ARIIX, and I will post them on here when I find them)


These members have all made over one million dollars in commission and bonuses at USANA and they decided to take a risk and join ARIIX instead. Interestingly enough, all four of these USANA distributors are placed at the very top of ARIIX's distributor hierarchy (because they were the first ones in). A couple of these members have written on the internet why they believe they were terminated by USANA and express their displeasure.
Lynn Allen Johnson letter
Duke Tubtim letter

Now USANA does have a policy in place that allows their distributors to join other MLM companies as long as the other company does not offer a competing product. Well, ARIIX markets vitamins and minerals just as USANA does. So none of USANA distributors can join ARIIX and remain a USANA distributor. So are other USANA distributors joining ARIIX? You bet!


As I find additional USANA members also with ARIIX, I will update the list below.


USANA Distributor #3704262 - Randy "Yosef" Katz - - Sabai Marketing Group http://www.usana.com/webhosting/sabai
ARIIX Distributor #10247 - Randy "Yosef" Katz - Sabai - http://www.myariix.com/esuite/home/sabai
See Randy Yosef Katz USANA resignation letter

USANA Distributor #3940012 - Pollawat Pankam -
ARIIX Distributor #11357 - Pollawat Pankam - http://www.myariix.com/esuite/home/username/

USANA Distributor #3936760 - Somboon Pongpruk - http://how2success.usana.com/
ARIIX Distributor #11376 - Somboon Pongpruk - http://www.myariix.com/esuite/home/online

USANA Distributor #7662974 - Edward Williams - http://m3ister.usana.com/
ARIIX Distributor #12996 - Edward Williams - http://www.myariix.com/esuite/home/m3ister/


(added to this list Aug 5, 2011)
USANA Distributor #3053770 - Iris Lee - Team ASD - http://teamasd.usana.com/
ARIIX Distributor #10228 - Iris Lee - IS Health Enterprises Ltd. - http://myariix.com/teamasd


(Following added to this list Aug 20, 2011. These USANA Distributors were all part of the Team "Global Success Leaders" in USANA with Lynn Allen Johnson. Now they are all part of the same team and same name, but under ARIIX. )
USANA Distributor #2926598 - Rick Billings - http://www.usana.com/distWeb/site/rickbillings
ARIIX Distributor #10727 - Rick Billings - http://www.myariix.com/RickBillings

USANA Distributor #4154550 - Rick & Cynthia Evans - http://cevans.usana.com/
ARIIX Distributor #10896 - Rick & Cynthia Evans - http://www.myariix.com/rickevans

USANA Distributor #2812402 - Mike Delevante - http://www.usana.com/distWeb/site/miked
ARIIX Distributor #10817 - Mike Delevante - http://www.myariix.com/mikedelevante

USANA Distributor #3909038, 4112764 & 4380414 - Anh Vongbandith - http://www.dreamsmadeinc.usana.com/
ARIIX Distributor #12816 - Anh Vongbandith - http://www.myariix.com/DreamsMadeInc

USANA Distributor #2127139 - Tatyana Sutherland - http://www.usana.com/webhosting/tatyana
ARIIX Distributor #11188 - Tatyana Sutherland

USANA Distributor #4086676 - John R. Parke - http://4086676.usana.com/
ARIIX Distributor #11507 - John R. Parke - 11507


(Following added to this list Aug 23, 2011.)
 USANA Distributor #: 3250998 - Melissa Daniels - http://www.usana.com/webhosting/mdaniels
ARIIX Distributor #: 11496 - Healthy 4 Life, LCC - Melissa Daniels - http://www.myariix.com/healthy4life

USANA Distributor #: 128089 - Larry & Susie Sisson - http://www.usana.com/distWeb/site/sisson
ARIIX Distributor #: 10547 - Larry & Susie Sisson - http://www.myariix.com/myfreedom

USANA Distributor #: 2765838 - Tracee Gluhaich - http://truehealthintl.usana.com/
ARIIX Distributor #: 18696 - Tracee Gluhaich - http://www.myariix.com/truehealthintl


(Following added to this list Aug 29, 2011.)
USANA Distributor #:  - Sandy LV - Ruby Director -
ARIIX Distributor #: 19176 - Sandy LV - http://www.myariix.com/sandy

USANA Distributor #: 8297220 - Debbie Turner - http://turner.usana.com/
ARIIX Distributor #: 20916 - Debbie Turner - http://www.myariix.com/turner/

USANA Distributor #: 2479038 - Lucia Sanchez - http://www.usanamexico.usana.com
ARIIX Distributor #: 34596 - Lucia Sanchez - http://www.myariix.com/ariixmexico


(Following added to this list Sept 1, 2011.)
USANA Distributor #: 244097 - Arlene Hutchinson -http://www.usana.com/webhosting/bhealthy2
ARIIX Distributor #: 11578 - Ennis Hutchinson - http://www.myariix.com/marketing

USANA Distributor #: 2320280 - Jean Amicarella - http://www.usana.com/webhosting/jeana
USANA Distributor #: 3669898 - Jean Amicarella - http://www.usana.com/webhosting/jeanamic (Yes, two USANA IDs with separate websites for this unique distributor)
ARIIX Distributor #: 17766 - Jean Amicarella - http://www.myariix.com/ariixinfo


(Following added to this list Sept 15, 2011.)
USANA Distributor #: 9638662 - Susan Hamilton - http://www.usana.com/webhosting/susanhamilton
ARIIX Distributor #: 34007 - Susan Hamilton, CHHC - http://www.myariix.com/SusanHamilton

USANA Distributor #: 2137359 - Glenna and Richard Norris
ARIIX Distributor #: 59886 - Glenna and Richard Norris, CHHC - http://www.myariix.com/gnr

USANA Distributor #: 2398784 - Maryann Cady - http://www.usana.com/webhosting/maryanncady
ARIIX Distributor #: 38008 - Maryann Cady - http://www.myariix.com/maryanncady

Finally, USANA Receives FDA certification for Pharmaceutical Good Manufacturing Practices.

 I have criticized USANA for many years for not seeking certification to back their claim that they adhere to "Pharmaceutical GMP". But after 19 years, USANA finally gets the certification and can now use this fact to bolster their product's manufacturing quality. The certification was done by none other than the United States Food and Drugs Administration. Finally, USANA does something right.

Now if they can fix their compensation plan to eliminate the pyramid scheme in which 99% of associates who joined the business opportunity with the intent to make money actually end up losing money. Those with no intent to make money sign up as preferred customers. All associates are required to continually purchase over $100 worth of product every 28 days in order to participate in the business venture. Those mandatory purchases pay out commission to the upline associates. However, the associate making those purchases receive no commission even if they retail the product. This is why I believe USANA is a pyramid scheme.

The FTC made the following statement regarding pyramid schemes:

"...a multi-level compensation system funded primarily by payments made for the right to participate in the venture is an illegal pyramid scheme." - Staff Advisory Opinion - Pyramid Scheme Analysis

Now one of USANA's very top associates who claims to have made over $4 million as a USANA distributor recently made the following statement when explaining to team members whether they should join as distributors or non-distributors:

"Our recommendation, unless you plan to make a lot of retail sales (which most Associates don’t, because of the USANA PC Program), would be to enroll as a non-Distributor Associate, since you would be charged sales tax on the lower, Wholesale, rather than Retail, prices of taxable items for your location." - Distributor or Non-Distributor Associate - by Pete and Dora Zdanis

So like I have pointed out many times, USANA's distributors cannot retail the product because the preferred customers get it at the same price the distributors do. Here we have a top USANA distributor who has been with the company for 18 years (since the beginning) admitting that most associates don't make a lot of retail sales because of the preferred customer program. USANA has 213,000 ACTIVE associates and 70,000 ACTIVE preferred customers. Since there are 3 associates for every 1 preferred customer, it doesn't take a genius to come to the conclusion that very little marketing of USANA products goes on beyond the associates.

I bring this up to make my point that USANA's commissions are funded primarily by their associates' required 4 week purchases which are made for the right to participate in the venture and be commission eligible. The FTC stated that commissions funded primarily by these required payments is illegal pyramid scheme. I believe USANA can do it legitimately by doing one of two things.

1) Either stop FORCING associates to purchase over $100 worth of products every 4 weeks in order to be commission eligible (you lose any sales points built by preferred customers or downline associates if you fail to make these purchases)

OR

2) Stop paying commission to upline distributors from the FORCED purchases made by their downline distributors in order to fulfill business obligations. The associates are buying product from USANA, not each and every upline distributor above them.

Of Course, USANA will never consider doing either one of my suggestions because it would collapse the pyramid scheme and the company would go out of business in less than 3 months. This is because the only distributors who would continue to make product purchases would be those who actually want to product and not because it is a required business obligation.

So how about it USANA, would you like to make the next step in the right direction?

USANA Allows Their Top Distributors Dictate Which Rules and Foreign Laws are Followed. USANA Sends Three Confusing Letters To Their Chinese Distributors.

It is clear to me who really runs USANA; The top 1% of distributors.

I have received a series of letters from an anonymous source that USANA sent to their Chinese distributors. I believe these letters might shine some light on the recent executive resignations. What transpires in these letters is USANA trying to put an end to the underground recruiting of Chinese Nationals into USANA's business opportunity in Hong Kong. However, when USANA's leaders (top distributors) complain, USANA caves and changes their mind. As a reminder, it is against China's direct selling laws for their citizens to participate in a Multi-Level Marketing scheme. 

USANA has recently admitted to recruiting Chinese Nationals in one of the recent conference calls. However, USANA claimed these citizens from mainland China only signed up to consume the product (even though they joined as DISTRIBUTORS and not Preferred Customers). Here's the transcript & quote:

we have a large group of Asian Associates who are involved with USANA only because of the products and are buying in Hong Kong for consumption only. We expect many of these consumers will begin purchasing USANA products through BabyCare and either remain consumers or become entrepreneurs and build a BabyCare business.

So the following first two letters sent to their Chinese Distributors try to set rules to prevent this illegal recruiting. The third letter tells their Chinese distributors to cancel the effects of the first two letters! The first letter was sent before the 4 executive's resignations. The last two letters came after the resignations.

The letters were sent in English and Chinese together. For the purpose of this blog, I only included the English version. To view the three letters in their Chinese & English form, you can view the following PDF documents: Letter 1, Letter 2, Letter 3.

My Emphasis in Bold Red:

LETTER ONE – Sent May 8, 2011

USANA and BabyCare: 3 Steps to Long-term Success

Dear USANA Family,

The Management Team, Board of Directors, and I all eagerly looked forward to the day that we could announce that BabyCare and USANA would be working together to realize my vision of a world free from pain and suffering. After the indirect acquisition of BabyCare was finalized last year, we were incredibly excited to tell the world that the USANA family now had an opportunity to help even more individuals attain improved health and better wealth. The partnership with BabyCare has brought my vision one step closer to reality by allowing USANA to recommend the finest nutritional products and direct selling opportunity to China in a way that meets all local laws and regulations.

When Dave became aware of BabyCare, he was focused on the prospect of having a license to operate in China and thereby share the USANA products with the People’s Republic of China. After thoroughly reviewing the management, culture, direction, values, products, and performance of BabyCare, he and I came to the realization that we could take an even larger step forward by making BabyCare a part of our family. Today, we are confident that BabyCare is the way for Distributors in China to share in the success of USANA. To realize this ambitious dream, however, we have to complete several steps:

1. Provide the highest quality, science-based products to consumers in China. As I stated during the Asia Pacific Convention, BabyCare’s products are exceptional, and something we can proudly add to the USANA product line. Additionally, we have product approvals underway to expand the variety of USANA products offered in China throughout 2011.

2. Offer an excellent direct selling plan to Distributors in China. As many of you know, a binary multi-level plan is not allowed in China. Yet, USANA remains committed to ensuring that we offer the richest opportunity for everyone, regardless of the market. As such, I had Dr. Fred Cooper evaluate the direct selling plan offered currently by BabyCare to see if he could make any improvements to the commission-earning potential of current and future BabyCare Distributors while adhering to the Direct Sales Regulations in China. After careful consideration, I am pleased to announce that while the Integrated Sales Program (ISP) has remained unchanged, modifications have been made to enrich BabyCare’s current plan. So we encourage all Achievers and above who have not yet received their ISP certification to do so. A meeting for Gold Directors and above will be held in Beijing on May 21 to explain these changes.

3. Ensure full compliance of all market regulations. USANA enjoys a great reputation all over the world where we do business. We want to make sure that in China we have the same reputation with all governing bodies. To secure that reputation—and thus the long-term success of our products and direct selling plan—we must add some changes to the rules for those Distributors doing business in Hong Kong. Therefore, the following changes have been established and are effective for all Distributors:

Beginning May 21, 2011

New enrollment

1. New Hong Kong Distributors will be asked to prove their compliance with our residency requirement by presenting their original Hong Kong Permanent Identity Cards, or Hong Kong Identity Cards, in person. They must also provide a Hong Kong bank account matching the main applicant’s name for enrollment and payment.

Common address

2. A limit of only five (5) Distributorships will be allowed to enroll using any single Hong Kong address for any new enrollments.

Credit card usage

3. Distributors may use their credit cards for purchase on another distributorship only at the time of enrollment. Continual use of a credit card for multiple distributorships is not allowed.

Existing Hong Kong Distributors can continue to purchase products and participate in the USANA compensation plan, but restrictions will apply to those who fail to prove their Hong Kong residency.

Beginning June 4, 2011

Limit on ordering and collection

1. Existing Hong Kong Distributors who have not proven their compliance with Hong Kong residency requirements can only (1) place orders, and (2) pick up products, up to a total of 250 sales volume points in any given rolling four-week period. This includes Autoships, orders placed online, or orders placed over the counter.

Personal pick-up

2. Existing Hong Kong Distributors who have not proven their compliance with Hong Kong residency requirements can only pick up orders in person. They will no longer be allowed to authorize third-party pick-ups, nor can their orders be shipped to a designated address.

Restriction on new Autoships

3. Existing Hong Kong Distributors who have not proven their compliance with Hong Kong residency requirements will not be allowed to initiate a new Autoship.

 

Photo identification

4. All Hong Kong Distributors must produce photo identification when picking up their orders. USANA reserves the right to place a Distributor’s account on hold if he/she refuses to provide photo identification.

I know that change is difficult. We certainly do not want to add unnecessary rules or cause inconvenience to our valued Distributors. However, the above changes are essential if we are to maintain our reputation as a company that stands true to its principles and the rules of the governments around the world where we do business.

On behalf of all of USANA, I want to thank you for all you do to share USANA’s opportunity for true health and true wealth. With these changes, we will embark on a future for USANA that I feel is brighter than ever! To our new prospects and soon-to-be partners through BabyCare, I welcome you on behalf of both USANA and BabyCare to join the healthiest family on earth.

Sincerely,

Dr Myron Wentz

Founder & Chairman, USANA Health Sciences

“直銷商" refers to “distributor” as defined in USANA’s Policies and Procedures. The English version of this communication will govern in case of dispute or confusion due to translation.

For any enquiries, please contact us at our hotline (852) 2162-1812.

It seems very clear to me that this letter is directed towards Chinese Nationals (not to be confused with residents living in Hong Kong) who joined USANA's business opportunity in Hong Kong. The most important line out of "Letter One" was "the above changes are essential if we are to maintain our reputation as a company that stands true to its principles and the rules of the governments around the world where we do business." This line validates my ongoing claims that USANA has been illegally recruiting Chinese Nationals into their Hong Kong territoty and is responsible the explosive growth in Hong Kong. This letter was sent before the Executive Resignations. Now for letter 2.

LETTER TWO – Sent May 11, 2011 (after 4 executives resigned)

A Message From Deborah Woo & Dave Wentz

Dear Distributors,

I am honored to be appointed USANA's President of Asia Pacific.

I understand the responsibility that comes with this position, and promise that I will dedicate myself to helping all our Asia Pacific Distributors in USANA and BabyCare Distributors in China achieve true health and true wealth.

Dave and I received some feedback from leaders on the challenges which some Hong Kong Distributors will face in adhering to the new requirements we announced recently. Therefore, we are pleased to announce the following changes to the requirements which were due to be implemented on June 4:

For Hong Kong Distributors who have not proven their compliance with Hong Kong residency requirements,

(1) The 250-point limit for every rolling four-week period will still apply to order-placing, but no longer to order-pickup

(2) The requirement to pick up orders in person will be rescinded. This means that all Hong Kong Distributors will continue to be able to authorize third-party pick-up, as well as have their orders shipped to a designated address

However, the restrictions on new Distributor enrollment to those with Hong Kong Identity Cards, common address, and credit card usage from May 21, 2011 will remain.

Dave and I will continue to work to improve the BabyCare compensation plan to ensure that both BabyCare and USANA Distributors will enjoy a fair and lucrative way of building their future with the USANA family.

We look forward to working with you.

Deborah Woo

President of Asia Pacific

Dave Wentz

Chief Executive Officer

____________

A Short Summary of the Important Messages (Revised on May 11, 2011)

Beginning May 21, 2011

New enrollment

1. New Hong Kong Distributors will be asked to prove their compliance with our residency requirement by presenting their original Hong Kong Permanent Identity Cards, or Hong Kong Identity Cards, in person. They must also provide a Hong Kong bank account matching the main applicant’s name for enrollment and payment.

Common address

2. A limit of only five (5) Distributorships will be allowed to enroll using any single Hong Kong address for any new enrollments.

Credit card usage

3. Distributors may use their credit cards for purchase on another distributorship only at the time of enrollment. Continual use of a credit card for multiple distributorships is not allowed.

Existing Hong Kong Distributors can continue to purchase products and participate in the USANA compensation plan, but restrictions will apply to those who fail to prove their Hong Kong residency.

Beginning June 4, 2011

Limit on ordering

1. Existing Hong Kong Distributors who have not proven their compliance with Hong Kong residency requirements can only place orders up to a total of 250 sales volume points in any given rolling four-week period. This includes Autoships, orders placed online, or orders placed over the counter.

Restriction on new Autoships

2. Existing Hong Kong Distributors who have not proven their compliance with Hong Kong residency requirements will not be allowed to initiate a new Autoship.

The English version of this communication will govern in case of dispute or confusion due to translation.

For any enquiries, please contact us at our hotline (852) 2162-1812.

So it appears that "leaders" or those distributors who are Gold Directors and up (you know, the special ones who found out 4 executives resigned a day before shareholders found out) are upset with Myron Wentz's plan to ensure they are abiding by foreign laws. Now that Fred Cooper has jumped ship, Deborah Woo and Dave Wentz have begun erasing the necessary rules to abide by China Direct Selling Laws. Lets find out what Letter 3 is all about!

LETTER THREE – Sent May 13, 2011

Dear USANA Family,

It is a new era of growth and opportunity for USANA. Our success as a family relies heavily on our ability to listen and respond to feedback from our leaders and Associates. As a result, we have reassessed previous decisions in regards to Hong Kong policies announced last weekend that were attributed to Dr Wentz. We would like to formally announce that all policy changes that were recommended are being canceled.

There is a bright future for the USANA family through USANA China and BabyCare. We were gratified for the feedback and great suggestions we received from our leaders and those that took time to meet with us in person on how to complete this transition successfully.

Our strategy going forward will be to work with leaders individually to help them transition their teams when they are ready. The leaders have told us they understand the need to transition to China for the long term benefit of their Distributorships, but we want to allow each of them to have the necessary time and training to make this transition smooth and rewarding.

We apologize for the confusion and concern this has created. We remain focused on securing long-term success for you and your business.

Deborah Woo

President of Asia Pacific

Dave Wentz

Chief Executive Officer

Wait a minute! Didn't Myron Wentz's first letter state "the above changes are essential if we are to maintain our reputation as a company that stands true to its principles and the rules of the governments around the world where we do business." So because USANA's top distributors complain, USANA decides to scrap the rules for Chinese Nationals?

From the evidence I have seen, USANA has knowingly allowed citizens of mainland China to join USANA's Hong Kong territory for several years. They even admit that a LARGE SUM of USANA product ends up in mainland China (long before they even owned Babycare Ltd) as stated in this internal memo. They finally admit it in a recent conference call. And these three letters add to the evidence that USANA is fully aware of the restrictions mainland China has on their citizens joining a Multi-Level Marketing scheme, even if they cross the border and join in Hong Kong. 

How much longer will USANA get away with this? Shareholders should be demanding answers from USANA. Questions USANA should answer to shareholders are:

1) How many total mainland Chinese citizens joined USANA's business opportunity in Hong Kong?

2) How much of USANA's revenues came from the underground recruitment of Chinese Nationals into their Hong Kong territory over the past several years?

3) How much commission is paid to USANA "Leaders" (Gold Distributors and up) that came as a result of these Chinese Nationals who joined USANA's business opportunity in violation of China's Direct Selling Laws?

USANA forgot to mention Riley Timmer's resignation until after markets closed. Can they do anything right?

None of USANA's press releases today regarding the resignation of their executives ever mentioned Riley Timmer's resignation. It wasn't until USANA's 4:00 PM conference call did a caller ask when Riley Timmer's resignation was given. USANA took a while to respond and admitted his resignation came the same day as all the others.

When the President & Chief Operating Officer (Fred Cooper), Chief Financial Officer (Jeffrey Yates),  Vice president of Sales (Mark Wilson), and Vice President of Finance (Riley Timmer) all resign on the same day, then there is something much more serious that USANA is not willing to admit. I have a feeling it has more to do with the issues I have raised on this blog regarding their overpriced products, saturated markets, underground China recruiting, and the fact 99% of their distributors don't make a penny worth of a profit while enriching the top 1%. And to top it off, USANA told this top 1% of distributors (Gold Directors and Up) about their executives resigning 1 day before announcing it to their shareholders.

It amazes me how USANA can get away with so much questionable activities like giving away 3 iPads to distributors who purchase Myron and Dave's book "The Healthy Home" (violates lottery laws), or the underground recruiting of Chinese Nationals into their Hong Kong distributor market (MLM is banned in mainland China). When will stock analysts start asking tough questions and demanding answers to those questions? One caller asked when USANA was made aware of these resignations. After dancing around the question, USANA finally answered "Recently"... Well, Recently could have been 4 weeks ago. Then, instead of the analyst demanding a specific date, this analyst just accepted USANA's answers. I'm starting to believe USANA writes the questions for the analysts to ask...

I feel sorry for anyone who invests in USANA. How can anyone invest in a company that makes its money off the backs of 99% of their distributors who are all losing money because they are forced to purchase the overpriced product just to participate in the scheme.

I have several questions that I believe USANA should answer:

1) How many "Professional Packs" were sold to new associates and distributors?

2) How many starter kits were sold to new associates including those that were free during promotional periods?

3) How many associates have or had a subscription to USANA's DownLine Management software?

4) How many associates and distributors renewed their membership?

5) How much of the net revenues came from associates and distributors maintaining their Personal Sales Volume?

Too bad USANA would never answer these questions. It would reveal too much...

USANA executives Fred Cooper, Jeff Yates, Mark Wilson, and Riley Timmer send in their resignations to USANA.

USANA has a little shake up taking place. Fred Cooper, Jeff Yates, Mark Wilson, and Riley Timmer have given USANA their resignations.

*** UPDATE - 05/10/2011

USANA sent out a memo YESTERDAY to all their their Gold Director distributors and up. These special individuals were privy to important information before USANA released a press announcement to their shareholders. The SEC should investigate to see if any Gold Directors and up sold their shares yesterday before the public announcement was made.