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LFVN_06.30.2013_10K


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________
FORM 10-K
(Mark One)
ý
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended June 30, 2013
¨
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from                      to                     
Commission file number: 001-35647
________________________________________________
LIFEVANTAGE CORPORATION
(Exact name of registrant as specified in its charter)
Colorado
90-0224471
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
 
 
9815 S. Monroe, Ste 100
 
Sandy, UT 84070
84070
(Address of principal executive offices)
(Zip Code)
 
 
Registrant’s telephone number: (801) 432-9000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value per share
(Title of Class)
________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  ý
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
¨
Accelerated filer
ý
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  ý
The aggregate market value of the registrant’s common stock (par value $0.001) held by non-affiliates as of the end of the registrant’s second fiscal quarter, December 31, 2012, was approximately $243.7 million. Shares of the registrant’s common stock held by each current executive officer and director and by each shareholder who is known by the registrant to own 10% or more of the outstanding common stock have been excluded from this computation in that such persons may be deemed to be affiliates of the registrant. Share ownership information of certain persons known by the registrant to own greater than 10% of the outstanding common stock for purposes of the preceding calculation is based solely on information on Schedules 13D and 13G, if any, filed with the Commission. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
The number of shares of common stock (par value $0.001) outstanding as of August 31, 2013, was 117,615,915 shares.
________________________________________________
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement to be filed subsequent to the date hereof with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the registrant’s fiscal year 2013 annual meeting of shareholders are incorporated by reference into Part III of this report. Such definitive proxy statement will be filed with the Commission not later than 120 days after the end of the registrant’s fiscal year ended June 30, 2013.



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this report and the information incorporated by reference herein may contain “forward-looking statements” (as such term is defined in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended). These statements, which involve risks and uncertainties, reflect our current expectations, intentions, or strategies regarding our possible future results of operations, performance, and achievements. Forward-looking statements include, without limitation: statements regarding future products or product development; statements regarding future selling, marketing, general and administrative costs and research and development spending; statements regarding expansion in new and existing markets; statements regarding our product development strategy; statements regarding the future performance of our network marketing sales; and statements regarding future financial performance and results of operations. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and applicable rules of the Securities and Exchange Commission and common law.
These forward-looking statements may be identified in this report and the information incorporated by reference by words such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “plan”, “predict”, “project”, “should” and similar terms and expressions, including references to assumptions and strategies. These statements reflect our current beliefs and are based on information currently available to us. Accordingly, these statements are subject to certain risks, uncertainties, and contingencies, which could cause our actual results, performance, or achievements to differ materially from those expressed in, or implied by, such statements.
The following factors are among those that may cause actual results to differ materially from our forward-looking statements:
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We may not succeed in expanding our operations;
•
Inability to conform to government regulations in existing markets;
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We may not succeed in growing existing markets or opening new international markets;
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Inability to manage our growth and expansion;
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Disruptions in our information technology systems;
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Claims against us as a result of our independent distributors failing to comply with our policies and procedures;
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Inability of new products to gain distributor and market acceptance;
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International trade or foreign exchange restrictions, increased tariffs, foreign currency exchange,
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Deterioration of global economic conditions;
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Inability to maintain appropriate level of internal control over financial reporting;
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We may be unable to raise additional capital if needed;
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Exposure to environmental liabilities stemming from past operations and property ownership;
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Significant dependence upon a single product;
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Our inability to obtain high quality raw material for our products;
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Improper actions by our independent distributors that violate laws or regulations;
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Our inability to retain independent distributors or to attract new independent distributors on an ongoing basis;
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We may be subject to a product recall;
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Our dependence on third parties to manufacture our products;
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Significant government regulations on network marketing activities;
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Third party and governmental actions involving our network marketing sales activities;
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Our direct selling program could be found to not be in compliance with current or newly adopted laws or regulations;
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Unfavorable publicity on our business or products;

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•
Legal proceedings may be expensive and time consuming;
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Regulations governing the production or marketing of our products;
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Our business is subject to strict government regulations;
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We are subject to the risk of investigatory and enforcement action by the federal trade commission;
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Government authorities may question our tax positions or transfer pricing policies or change their laws in a manner that could increase our effective tax rate or otherwise harm our business;
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Failure to comply with anti-corruption laws;
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Loss of key personnel;
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Competition in the dietary supplement market;
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Our inability to protect our intellectual property rights;
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Third party claims that we infringe on their intellectual property;
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Product liability claims against us;
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Economic, political, foreign exchange and other risks associated with international operations;
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Significant dilution of outstanding voting shares if holders of our existing warrants and options exercise their securities for shares of common stock;
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Volatility of the market price of our common stock; and
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We have not paid dividends on our capital stock, and we do not currently anticipate paying dividends in the foreseeable future.
When considering these forward-looking statements, you should keep in mind the cautionary statements in this report and the documents incorporated by reference. Except as required by law, we have no obligation and do not undertake to update or revise any such forward-looking statements to reflect events or circumstances after the date of this report.

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TABLE OF CONTENTS
 
Page
 
 
 
 

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PART I
ITEM 1 — BUSINESS
Overview
LifeVantage Corporation is a company dedicated to helping people achieve their health, wellness and financial independence goals. We provide quality, scientifically-validated products and a financially rewarding network marketing business opportunity to customers and independent distributors who seek a healthy lifestyle and financial freedom. We sell our products in the United States, Japan, Hong Kong, Australia, Mexico and Canada primarily through a network of independent distributors, and to preferred customers.
We engage in the identification, research, development and distribution of advanced nutraceutical dietary supplements and skin care products, including Protandim®, our scientifically-validated dietary supplement; LifeVantage TrueScience®, our anti-aging skin care product; and Canine Health®, our companion pet supplement formulated to combat oxidative stress in dogs. We currently focus our internal research efforts on oxidative stress solutions, particularly the activation of Nuclear factor (erythroid-derived 2)-like 2, also known as Nrf2. We also evaluate healthy living products developed by third parties that we believe are scientifically-validated and compatible with our current product offerings.
We were incorporated in Colorado in June 1988 under the name Andraplex Corporation. We changed our corporate name to Yaak River Resources, Inc. in January 1992, and subsequently changed it again in October 2004 to Lifeline Therapeutics, Inc. In October 2004 and March 2005, we acquired all of the outstanding common stock of Lifeline Nutraceuticals Corporation. In November 2006, we changed our name to LifeVantage Corporation.
Fiscal Year Highlights and Challenges
In fiscal 2013 we entered additional international markets, expanded our product line and listed our common stock on the NASDAQ Capital Market. We believe these highlights are indicative of the maturation of our company.
We expanded our direct selling business into Hong Kong, and transitioned from a "not-for-resale" model to our traditional direct selling model in Japan and Canada. Under a "not-for-resale" model, we sold our products directly to customers in Japan and Canada but restricted them from reselling our product. Additionally, we opened our first international office in Tokyo, Japan. According to the World Federation of Direct Selling Associations, Japan is the second largest direct selling market in terms of revenue produced. We anticipate that Japan, and other Asia Pacific countries, will be important to our future growth.
In fiscal 2013 we also expanded our product line by introducing Canine Health®. Canine Health® is a supplement specially formulated to combat oxidative stress in dogs through Nrf2 activation. Canine Health® builds upon the same active ingredients as Protandim® to reduce oxidative stress, and also supports joint function, mobility and flexibly in dogs. Canine Health received the Quality Seal from the National Animal Supplement Council during fiscal 2013.
We recently announced our intention to conduct a self-tender offer to purchase up to $40 million worth of our common stock. We believe the repurchase of our common stock is consistent with our long-term goal of maximizing shareholder value. For additional information regarding our potential tender offer, see "Available Information" below.
We faced significant operational challenges during fiscal 2013. In December 2012 we commenced a voluntary product recall of certain lots of Protandim® to alleviate concerns that some tablets may have included small metal fragments. As of June 30, 2013, we have recorded a total net expense of $5.0 million in costs related to the recall. We also experienced lost product sales as a result of the voluntary recall, and we believe the voluntary product recall contributed significantly to our slower growth in new independent distributor and preferred customer enrollments during the third and fourth quarter of fiscal 2013. Following the voluntary recall we thoroughly examined our operations, including how we source raw materials and manufacture our products, and implemented redundancies into our quality control systems. We believe these redundancies are consistent with our commitment to deliver safe and efficacious products.
Under Japanese law, we were required to re-enroll every distributor and preferred customer in Japan as part of our transition from a "not-for-resale" model to our traditional direct selling model in fiscal 2013. This time-consuming process interfered with growth-related activities that were planned for our company and our independent distributors. Also in fiscal 2013, we introduced a new formulation of our flagship product, Protandim® in response to recently enacted Japan legislation in Japan that prohibited us from distributing a dietary supplement containing ashwagandha, one of the active ingredients in Protandim®. We believe the re-enrollment process, the reformulation of Protandim® and our global product recall contributed significantly to our slower revenue growth in Japan in fiscal 2013.



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Our Competitive Advantages
We believe we have a competitive advantage in several key areas:
•
Our Compensation Plan: Our compensation plan enables independent distributors to earn compensation early and often as they sell our products. Some elements of our compensation plan are paid weekly, allowing new independent distributors to receive compensation quickly. We believe more frequent payments of earned compensation helps us retain new independent distributors by allowing them to experience success soon after enrolling. We also offer a variety of incentive programs to our independent distributors for achieving specified sales goals. We introduced in fiscal 2013 My LifeVentures, an incentive program that enables independent distributors to earn the title to a new Jeep Wrangler by achieving and maintaining specified sales goals. We also offer various training resources to help our independent distributors become more effective. We believe our compensation plan, incentive programs and training resources help to motivate and prepare our independent distributors for success.
•
Our Products: We offer quality, scientifically-validated products focused on healthy living and the reduction of oxidative stress. Protandim® is a patented dietary supplement clinically proven to combat oxidative stress. Oxidative stress is a natural consequence of cellular metabolism and is associated with many of the undesirable effects of aging. Protandim® has been studied extensively and has been the subject of numerous peer-reviewed publications. Our skin care cream, LifeVantage TrueScience®, is a unique, scientifically based anti-aging skin care product formulated to target the visible signs of aging on the skin. Our companion pet supplement, Canine Health®, incorporates some of the same active ingredients as Protandim® to combat oxidative stress in dogs. We believe our significant number of preferred customers who regularly purchase our products without the intention of becoming independent distributors is a strong indicator of the benefits of our products.
•
Our Culture: We are committed to creating a culture for our independent distributors and employees that focuses on ethical, legal and transparent business practices. At enrollment, our independent distributors agree to abide by our policies and procedures. Our policies and procedures, when followed, ensure that our independent distributors comply with applicable laws and regulations. Our compliance department monitors the activities of our independent distributors as part of our effort to enforce our policies and procedures. Similarly, our code of business conduct and ethics sets forth guidelines and expectations for our employees. We believe our ethical, legal and transparent culture attracts highly qualified employees and independent distributors who share our commitment to these principles.
Scientific Background
Oxidative Stress
Oxidative stress refers to the cellular and tissue damage caused by chemically reactive oxygen radicals and related oxidants, formed as a natural consequence of cellular metabolism, and which results from the use of oxygen to generate energy. A small percentage of the oxygen we utilize generates toxic oxygen free radicals that damage human cells and tissue and consequently negatively impact our general health. Levels of these reactive oxygen species, also known as ROS, and free radicals can be elevated under a wide variety of conditions, including radiation, UV light, smoking, excessive alcohol consumption, as well as medical conditions involving inflammation, cardiovascular disease, neurodegenerative disease, diabetes and advancing age.
Elevated ROS levels inflict structural damage on nucleic acid, lipid, carbohydrate and protein components of cells, thereby directly contributing to or exacerbating tissue dysfunction, disease and age-related debilitation. Normally, cellular antioxidant enzymes serve to inactivate ROS and maintain their levels at those compatible with normal cell function. Important among these enzymes are superoxide dismutase and catalase. However, the levels of these protective antioxidant enzymes decrease with age and also decrease in a number of disease conditions, while ROS levels may increase.
Superoxide dismutase is believed to be the body’s most effective natural antioxidant. Superoxide dismutase works in conjunction with catalase and under some circumstances the balance between these two enzymes may be important. The potent antioxidant activity of superoxide dismutase produces as a by-product hydrogen peroxide, which is a dangerous substance that subsequently needs to be converted into water and oxygen by catalase. Together, these two enzymes constitute the first line of antioxidant defense in humans. Scientists have long believed that increasing levels of superoxide dismutase and catalase is an important means of fighting oxidative stress, disease and the effects of aging; however, superoxide dismutase and catalase supplements by themselves have not been shown to be absorbed and retain activity when administered orally.
Oxidative stress is the result of the metabolic process and may promote some of the undesirable effects of aging. As people age, oxidative stress levels increase significantly, as the body is unable to maintain homeostasis relative to the free radicals produced through the metabolic process.

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Oxidative stress is widely believed to be a key factor in the aging process because it triggers premature cell death. The body’s defenses against oxidative stress and free radicals decrease with age. High levels of oxidative stress have also been linked as a causative or associated factor in over 100 diseases, including cancer, cardiovascular diseases, inflammation, neurological diseases and renal disease, and, conversely, lowering oxidative stress levels is linked to improved health.
Nrf2 Activation
Nuclear factor (erythroid-derived 2)-like 2, also known as NFE2L2 or Nrf2, is a transcription factor that in humans is encoded by the NFE2L2 gene. Nrf2 is the master regulator of the antioxidant response, which is important for the amelioration of oxidative stress. Because Nrf2 is able to induce gene activity important in combating oxidative stress, thereby activating the body’s own protective response, it helps protect from a variety of complications related to oxidative stress.
Under normal or unstressed conditions, Nrf2 resides in the cytoplasm of the cell, outside the nucleus, and is targeted for degradation. When activated, Nrf2 is able to move into the nucleus, where it promotes the expression of several thousand genes, including those that encode antioxidant enzymes as well as anti-inflammatory and anti-fibrotic proteins. These include, but are not limited to, the following:
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NAD(P)H quinone oxidoreductase 1 (Nqo1), a Nrf2 target gene that catalyzes the reduction and detoxification of highly reactive quinones that can cause redox cycling and oxidative stress;
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Glutathione synthase and xCT, a protein required for cystine amino acid entry into the cell, which establish Nrf2 as a regulator of glutathione, one of the most important antioxidants in the body;
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Heme oxygenase-1 (HMOX1), an enzyme that catalyzes the breakdown of heme into the antioxidant biliverdin, the anti-inflammatory agent carbon monoxide, and iron. HO-1 is a Nrf2 target gene that has been shown to protect from a variety of pathologies, including sepsis, hypertension, atherosclerosis, acute lung injury, kidney injury and pain; and
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The glutathione S-transferase (GST) family, including cytosolic, mitochondrial and microsomal enzymes that catalyze the conjugation of GSH with a number of toxic molecules, aiding in their elimination from the body.
Nrf2 as a Therapeutic Target
In recent years, Nrf2 has become the subject of intense research. A common theme in much of this research is that activation of Nrf2 upregulates a coordinated antioxidant response and is therefore capable of protecting against oxidative stress-related injury and inflammatory disease in a wide variety of animal models. Therefore, Nrf2 represents an important therapeutic target.
Research and Development
We believe our research and development efforts to date related to our Protandim®, LifeVantage TrueScience® and Canine Health® products are among our competitive strengths. We intend to continue our research and development efforts to create, develop and evaluate new products that are consistent with our commitment to provide quality, scientifically-validated products to our customers and independent distributors. We also plan to continue sponsoring additional studies on our current products in an effort to further validate the benefits they provide.
Product Overview
Protandim® 
Our Protandim® product is a patented dietary supplement that has been shown in a clinical trial to reduce the age-dependent increase in markers of oxidative stress, and has also been shown to provide substantial benefits to combat the variety of negative health effects linked to oxidative stress.
Protandim® combats oxidative stress by increasing the body’s natural antioxidant protection at the genetic level, inducing the production of naturally-occurring protective antioxidant enzymes, including superoxide dismutase, catalase and glutathione-related enzymes. The unique blend of phytonutrients in Protandim® signals the activation of Nrf2 to increase production of antioxidant enzymes, specifically superoxide dismutase and catalase, and other cell-protective gene products. These enzymes are “catalytic,” which means these enzymes are not used up upon neutralizing free radicals.
We hold six U.S. patents and three international patents relating to Protandim®. We believe these patents set Protandim® apart from other dietary supplements and protect the original formula as well as certain formula modifications we could create to extend our Protandim® product line.
Protandim® has been, and is currently, the subject of numerous independent scientific studies at various universities and research facilities. The nature and stages of the studies vary, as some are still in planning stages, while other studies are in

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progress or completed. The universities and institutions that have been involved in this research include the University of Colorado; Colorado State University; Children’s Hospital, Denver; Virginia Commonwealth University; Louisiana State University; Ohio State University; Northwestern University; Medical College of Wisconsin; Harvard University; and VU University Medical Center, Amsterdam. The various studies deal with the alleviation of oxidative stress under a wide variety of conditions, including aging, exercise, altitude sickness, lung antioxidant status in withdrawing alcoholics, autonomic physiology, skin cancer, multiple sclerosis, pulmonary hypertension, heart disease, coronary artery bypass graft failure, Duchenne muscular dystrophy, salt-sensitive hypertension and other conditions.
Clinical Study
A peer-reviewed human clinical study that we conducted in 2004 and 2005 showed that after Protandim® was taken for 30 consecutive days, the level of circulating TBARS, a laboratory marker for oxidative stress in the human body, decreased by an average of 40 percent, to levels typical to a 20-year-old. This study was published in the journal Free Radical Biology and Medicine, vol. 40, pp. 341-7 (2006).
Published Peer Reviewed Studies and Papers
Since the initial clinical studies completed in 2004 and 2005, Protandim® has been studied and reviewed in numerous laboratories of respected universities and institutions. Pre-clinical studies have been published in peer-reviewed scientific journals, including: a study that we funded which explored the synergistic mechanism of action of Protandim®; an animal study using mice to examine the tumor prevention capabilities of Protandim® conducted at Louisiana State University; an animal study exploring pulmonary hypertension and subsequent right heart failure conducted at Virginia Commonwealth University; an animal study examining the effects of Protandim® in a mouse model of Duchenne Muscular Dystrophy conducted at the University of Colorado; a second study conducted at Louisiana State University probing Protandim®’s ability to modulate the relationship between superoxide dismutase and tumor suppressor p53; a study conducted at The Ohio State University showing that Protandim® markedly decreases the intimal hyperplasia (or wall thickening) of saphenous veins, as occurs when such veins are used in coronary artery by-pass grafting; a Company-funded study which examined Protandim®’s effects on gene expression relative to colon carcinoma, atherosclerosis, and Alzheimer’s disease; studies conducted at Colorado State University demonstrating effects of Protandim® on human coronary artery endothelial cells and mouse heart muscle cells, and resistance to oxidative stress in vitro; and a study conducted at the University of Colorado examining the role of Nrf2 activators, including Protandim®, on tolerance to high altitude exposure.
A study we funded identified the mechanism of action for Protandim® to be activation of the transcription factor Nrf2. The results of this peer-reviewed study were published in Free Radical Biology and Medicine, vol. 46, pp. 430-40 (2009). This study also demonstrated synergy among the five active ingredients of Protandim® which would enable them to be effective while being administered at lower concentrations of each.
A study completed at Louisiana State University and sponsored by the Skin Cancer Foundation was published in the journal PloS ONE,vol. 4: e5284 (2009), an international, peer-reviewed, open access journal published by the Public Library of Science. This study, entitled “Protandim®, a Fundamentally New Antioxidant Approach in Chemoprevention Using Mouse Two-Stage Skin Carcinogenesis as a Model,” investigated whether Protandim® could suppress tumor formation in mice through a dietary approach. At the end of a two-stage skin carcinogenesis, the mice on the Protandim®-supplemented diet showed a reduction in both skin tumor incidence and multiplicity by 33% and 57% respectively, compared to those that did not receive Protandim® supplementation.
A study at Virginia Commonwealth University study was published in Circulation, vol. 120, pp. 1951-1960 (2009), a journal published by the American Heart Association. This study, entitled “Chronic Pulmonary Artery Pressure Elevation Is Insufficient to Explain Right Heart Failure,” investigated the ability of Protandim® to protect the heart in a laboratory model of pulmonary hypertension in rats. The researchers concluded that Protandim® prevented the death of heart cells in rats and significantly lowered osteopontin (OPN-1) levels by more than 50%, and that Protandim® effectively activated the transcription factor Nrf2, a signal to the cell’s DNA to increase expression of a network of antioxidants, anti-inflammatory, and anti-fibrotic genes.
The study, "The Dietary Supplement Protandim® Decreases Plasma Osteopontin and Improves Markers of Oxidative Stress in Muscular Dystrophy Mdx Mice," was published in the Journal of Dietary Supplements vol. 7: 159-78 (2010), and concluded that Protandim® caused a decrease in the production of the pro-fibrotic gene product osteopontin. It also concluded that Protandim® decreases markers of lipid peroxidation in a model of Duchenne Muscular Dystrophy (DMD). The study was published by Dr. Brian Tseng and his colleagues at Massachusetts General Hospital, Harvard Medical School, and the University of Colorado Denver.
Another study, titled “The Chemopreventive Effects of Protandim®: Modulation of p53 Mitochondrial Translocation and Apoptosis during Skin Carcinogenesis,” was conducted by researchers at Louisiana State University and published in the

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scientific journal PloS ONE, vol. 5: e11902 (2010). This study further investigated Protandim®’s ability to increase production of Nrf2-regulated protective genes. This study examined the biochemical mechanisms that underlie the ability of Protandim® to suppress tumors in mice.
The study titled “Protandim® attenuates intimal hyperplasia in human saphenous veins cultured ex vivo via a catalase-dependent pathway” was conducted by researchers at The Ohio State University and published in the journal Free Radical Biology and Medicine, vol. 50: 700-9 (2011). This study modeled the conditions that cause graft failure due to intimal hyperplasia when saphenous veins are used in surgeries to bypass blocked coronary arteries. Treatment with Protandim® significantly increased antioxidant enzyme activity in veins cultured at high oxygen, while reducing free radical levels, lipid peroxidation, and, importantly, reducing intimal proliferation to the level seen in normal healthy saphenous vein.
Researchers at Louisiana State University have authored a review paper titled “The role of manganese superoxide dismutase in skin cancer” in the journal Enzyme Research, vol. 2011, Article ID 409295 (2011). This paper reviews their findings with Protandim® (as described above) in the context of published research by others in the field.
A study we sponsored entitled “Oxidative stress in health and disease: the therapeutic potential of Nrf2 activation” was published in the journal Molecular Aspects of Medicine, Aug;32(4-6):234-46 (2011). This study compared in vitro the Nrf2-activating ability of Protandim® to those of the pharmaceutical Nrf2 activators bardoxolone methyl and BG12. It also analyzed the gene expression profile induced by Protandim® vis-à-vis those produced by atherosclerosis, colon cancer, and Alzheimer’s disease.
Results of a human clinical trial of Protandim® in withdrawing alcoholics were published in the American Journal of Physiology: Lung Cell Mol Physiol. Apr;302(7):L688-99 (2012). The subjects, whether treated or untreated, failed to show the anticipated detrimental changes in alveolar epithelial permeability or intrapulmonary oxidative stress thought to accompany alcohol withdrawal, precluding any observations of efficacy. The study did, however, provide an additional study of safety in humans at an elevated dosage of Protandim®. No adverse events were observed.
Researchers at Colorado State University have authored papers titled “Phytochemical activation of Nrf2 protects human coronary artery endothelial cells against an oxidative challenge” in the journal Oxidative Medicine and Cellular Longevity 2012:132931 (2012) and “Upregulation of phase II enzymes through phytochemical activation of Nrf2 protects cardiomyocytes against oxidant stress” in the journal Free Radical Biology and Medicine, vol. 56, pp. 102-11 (2013). These papers report their findings that Protandim® causes nuclear translocation of Nrf2 in the cells that line human coronary arteries, and that Protandim® upregulates cell protective genes in cultured mouse heart muscle cells, in both cases providing substantial protection when these cells were exposed to oxidative stress in vitro.
Researchers at the University of Colorado have authored a paper titled “Nrf2 activation: A potential strategy for the prevention of acute mountain sickness” in the journal Free Radical Biology and Medicine, vol. 63C, pp. 264-73 (2013). This paper reports findings that Protandim® and other selected agents activate Nrf2 and that Nrf2 activation correlates with protection against high altitude-induced cerebral vascular leak in rodent and cell culture experiments.
LifeVantage TrueScience® 
LifeVantage TrueScience® is our science-based anti-aging skin care product which includes natural and effective ingredients. This product was formulated to protect the skin from a variety of factors that contribute to aging and the symptoms of unhealthy skin. This proprietary skin care formula was clinically tested by a board certified dermatologist.
Our LifeVantage TrueScience® product includes some of the same ingredients found in our Protandim® product. LifeVantage TrueScience® has been formulated to improve skin tone and even skin coloring, diminish the appearance of fine lines and wrinkles, and provide a vibrant, healthy and glowing appearance. LifeVantage TrueScience® is also designed to improve skin smoothness and pigmentation, while increasing skin moisture.
The LifeVantage TrueScience® formula offers:
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Hydration/Moisturizing: LifeVantage TrueScience® features a Lamellar Phase Emulsion System that forms a liquid emulsion barrier for moisturizing. This is accomplished by delivering exotic fatty acids to retain the body’s natural moisture and produce a moisturizing effect. It also features sodium hyaluronate, a moisture-binding agent that can balance moisture levels at the surface of the skin.
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Toning/Brightening: The turmeric extract in LifeVantage TrueScience® is specially modified to remove yellow compounds in the skin without reducing the effectiveness of its potent curcuminoids. Curcuminoids have been shown to produce skin lightening that evens dispigmentation. Additionally, the ingredient leucojum aestivum bulb extract is believed to slow the spread of pigment-producing cells that contribute to uneven skin coloring.

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•
Minimizing Wrinkles/Fine Lines: The palm peptides and leucojum aestivum bulb extract in LifeVantage TrueScience® have been shown to visibly reduce signs of wrinkles and fine lines and to promote improved skin tone and texture.
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Lipid Rejuvenation: LifeVantage TrueScience® delivers multiple ingredients intended to mimic the naturally occurring lipid structure in the skin and retain the body’s own moisturizing lipids.

Canine Health® 
We introduced Canine Health® in fiscal 2013. Canine Health® is a supplement specially formulated to combat oxidative stress in dogs through Nrf2 activation. Canine Health® builds upon the active ingredients in Protandim® to reduce oxidative stress, and support joint function, mobility and flexibly in dogs. Canine Health® received the Quality Seal from the National Animal Supplement Council.
Distribution of Products
We implemented a direct selling business model during the fiscal year ended June 30, 2009. We believe our products are well-suited for person-to-person sales through our direct selling model. This model allows our independent distributors to educate our customers regarding the benefits of our unique products more thoroughly than other business models. Our direct selling model also allows our independent distributors to offer personalized customer service to our customers and encourage regular use of our products.
Product Return Policy
All products purchased directly from us include a customer satisfaction guarantee. Customers may return unopened product to us within 30 days of purchase for a refund of the purchase price less shipping and handling. In addition, our inventory repurchase program allows independent distributors who terminate their distributorship to return certain amounts of unopened, unexpired product purchased within the prior twelve months for a refund of the purchase price less a 10% restocking fee. The amount of inventory we will repurchase from an independent distributor is subject to specified consumption limitations.
Customers
We categorize our customers in three groups: independent distributors, preferred customers, and retail customers.
Independent Distributors
An independent distributor is someone who has purchased a business starter pack and who intends to sell product to, and actively enroll, other independent distributors and/or preferred customers. Our plan requires the purchase of product to participate in our compensation plan. Currently independent distributors can purchase a basic or advanced starter kit. We believe our independent distributors are typically entrepreneurs who believe in our products and desire to earn income by building a business of their own. Many of our independent distributors are attracted by the opportunity to sell unique, scientifically-validated products without incurring significant start-up costs. Independent distributors sign a contract with us that includes a requirement that they adhere to strict policies and procedures. Independent distributors purchase product from us for individual consumption, but also purchase small quantities of product from us to use for demonstrations and one-off, person-to-person retailing opportunities.
While we provide support, product samples, brochures, magazines, and other sales and marketing materials, independent distributors are primarily responsible for attracting, enrolling and educating new independent distributors with respect to our products and compensation plan. An independent distributor creates multiple levels of compensation by enrolling new independent distributors. These newly enrolled independent distributors form a “downline” for the independent distributor who enrolled them. If downline independent distributors enroll new independent distributors who purchase our products, they create additional levels of compensation and their downline independent distributors remain in the same downline network as the original enrolling independent distributor. Enrolling new independent distributors is not required and we do not pay commissions for enrolling independent distributors. Rather we pay commissions only upon the sale of our products.
We define “active independent distributors” as those independent distributors who have purchased product from us for retail or personal consumption during the prior three months. As of June 30, 2013, we had approximately 67,000 active independent distributors compared to approximately 46,000 active independent distributors as of June 30, 2012.



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Independent Distributor Compensation
We believe our compensation plan is one of the more financially rewarding in the direct selling industry. Some elements of our compensation plan are paid weekly. We believe this gives us a competitive advantage and helps retain new distributors by allowing them to experience success quickly from their efforts. Our compensation plan is intended to appeal to a broad cross-section of people, particularly those seeking to supplement family income, start a home-based business or pursue entrepreneurial opportunities full or part-time. Our independent distributors earn compensation on product sales to independent distributors and preferred customers within their sales organization, or "downline." Our independent distributors can also earn money by purchasing product from us at our wholesale cost and selling that product to to others at the retail cost. We generally pay commissions in the local currency of the independent distributor’s home country.
Independent Distributor Motivation and Training
In addition to our compensation plan, we have established a broad array of programs and tools to support, motivate and train our independent distributors, including:
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professionally-designed training materials independent distributors can utilize in their sales efforts;
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a wide variety of incentive programs and promotions; and
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local, national and worldwide company-sponsored events.
We and our independent distributors conduct thousands of events to educate and motivate our independent distributors each year. We have an on-line media channel, LVN Media, through which we deliver educational and motivational content to our independent distributors.
We introduced LifeVantage University in fiscal 2013. LifeVantage University is an on-line training system consisting of interactive modules designed to create a personalized learning experience for our independent distributors. We believe the personalized learning created by LifeVantage University will be an important development tool for our beginning, mid-level, and experienced independent distributors.
Distributor Compliance Activities
We monitor independent distributor activity in each market as part of our efforts to enforce our policies and procedures. These policies and procedures require that our independent distributors comply with federal, state and local laws. The policies and procedures also establish other rules that our independent distributors must follow. We require our independent distributors to present products and business opportunities ethically, professionally and in compliance with applicable laws and regulations. Independent distributors further agree that their presentations to customers must be consistent with, and limited to, the product claims and representations made in our literature for each country.
Independent distributors must represent to us that their receipt of commissions is based on retail sales and substantial personal sales efforts. We must produce or pre-approve all sales aids used by distributors such as brochures and online materials. Products may be promoted only by personal contact or by collateral materials produced or approved by us. Independent distributors may not use our trademarks or other intellectual property without our consent.
We systematically review alleged independent distributor misbehavior through our internal compliance department. If we determine one of our independent distributors has violated any of our policies or procedures, we may discipline the independent distributor and may terminate the independent distributor’s rights to distribute our products. Short of termination, we may impose sanctions, such as warnings, probation, withdrawal or denial of an award, suspension of privileges of a distributorship, fines and/or withholding of commissions until specified conditions are satisfied, or other appropriate injunctive relief.
Preferred Customers
Preferred customers are customers who purchase products directly from us at our wholesale price on a monthly auto-ship basis for personal consumption, without the intent to resell or earn commissions from the sale of products. A preferred customer may enroll as an independent distributor at any time if they become interested in reselling the product. We believe our preferred customers are a great source of word-of-mouth advertising for our products. We also believe our large base of preferred customers validates the benefits of our products, separate from the direct selling business opportunity.
We define an “active preferred customer” as a preferred customer who has purchased product from us within the prior three months. As of June 30, 2013, we had approximately 138,000 active preferred customers compared to approximately 119,000 active preferred customers as of June 30, 2012.


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Retail Customers
A small portion of our total customer base is made up of retail customers who purchase product for individual consumption on a one-time or sporadic basis at the suggested retail price. Retail customers can purchase product from us or one of our independent distributors. We do not track product sales from our independent distributors to retail customers and these sales are not included in our financial numbers.
Sales of our Products
We accept orders for our products through our own website at www.lifevantage.com and through personalized websites we provide to our independent distributors, which we refer to as “Virtual Offices”. Orders placed through Virtual Offices and through our website are processed daily at our fulfillment centers, where orders are shipped directly to the consumer.
We offer toll-free numbers for our independent distributors and other customers to order product or ask questions. Our customer service representatives assist customers in placing orders through our web order processing system, answer questions, track packages, and initiate refunds. The customer service representatives receive extensive training about our products and our direct selling business model. Independent distributors and preferred customers generally pay for products by credit card, prior to shipment, and as a result, we carry minimal accounts receivable.
Marketing
We have a sales, marketing, public relations and customer service group consisting of 46 full-time employees as of June 30, 2013. We utilize our network of independent distributors located throughout the United States, Australia, Hong Kong, Japan, Mexico and Canada to market and sell our products.
Manufacturing
We outsource the primary manufacturing, fulfillment, and shipping components of our business to companies we believe possess a high degree of expertise. We believe outsourcing provides us access to advanced manufacturing process capabilities and expertise without incurring fixed costs associated with manufacturing our own products.
In July 2008, we entered into a contract manufacturing agreement with Cornerstone Research & Development, Inc., or Cornerstone, under which Cornerstone manufactures and packages Protandim. Our sales growth in fiscal year 2011 led us to secure a second manufacturer, Deseret Laboratories International, or Deseret. Deseret manufactures both Protandim® and Canine Health® for us. In addition, in 2013, we entered into a contract manufacturing agreement with Arizona Nutritional Supplements LLC, or AZN, under which AZN will also manufacture and package Protandim®. Having relationships with multiple contract manufacturers reduces our dependence on a single manufacturer for Protandim®.
Cornerstone, Deseret and AZN, as the contract manufacturers of Protandim®, have a legal obligation to comply with the current Good Manufacturing Practices regulations that are applicable to those who manufacture, package, label and hold dietary supplements. Additionally, we are subject to regulations that, among other things, obligate us to know what and how manufacturing activities are performed so that we can make decisions related to whether the packaged and labeled product conforms to our established specifications and whether to approve and release product for distribution. We maintain and qualify other manufacturing options in order to keep our costs low, maintain the quality of our products, and be prepared for unanticipated spikes in demand or manufacturing failure. Our contract manufacturers deliver products to our fulfillment centers based on our purchase orders.
We have outsourced the manufacturing of LifeVantage TrueScience® to Wasatch Product Development, LLC, or Wasatch. Wasatch’s core competency is sourcing and manufacturing cosmetics for both U.S. and international customers.
Product Liability and Other Insurance
We have product liability insurance coverage for our products that we believe is adequate for our needs. We have also obtained commercial property and liability coverage, as well as directors’ and officers’ liability insurance.
Intellectual Property
Protandim® is a proprietary, patented dietary supplement formulation for enhancing antioxidant enzymes including superoxide dismutase and catalase. The patents and patent applications protecting this formulation are held by our wholly-owned subsidiary, Lifeline Nutraceuticals Corporation.
We use commercially reasonable efforts to protect our intellectual property and license rights through patent protection, trade secrets, and contractual protections, and intend to continue to develop a strong brand identity in the Protandim® trademark.

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Our intellectual property is covered, in part, by six issued U.S. patents and three issued foreign patents in Australia, China and India. Corresponding foreign patent applications are pending in Canada, Europe and Japan. Our patents and patent applications claim the benefit of priority of seven U.S. provisional patent applications, the earliest of which was filed on March 23, 2004, and relate to compositions, methods of use, and methods of manufacture of various compositions, including those embodied by the Protandim® formulation. The expected duration of our patent protection via granted patents is through March 23, 2025.
Protandim® is a registered trademark in the United States, Australia, Canada, China, Costa Rica, the European Community, Japan, Mexico, New Zealand and Taiwan, with a pending application in Hong Kong.
We have applied for registration of the trademark LifeVantage® through the World Intellectual Property Organization, or WIPO. We have registered the mark LifeVantage® in the United States, Canada, New Zealand and Mexico, and through WIPO in Australia, China, Japan, and the European Community, with a pending application in Hong Kong. The LifeVantage TrueScience® mark is registered in the United States, the European Community, Australia, China, Colombia, Japan, New Zealand, Norway, Mexico, Singapore, Switzerland and the Russian Federation, and is pending in Canada and Hong Kong.
In order to protect the confidentiality of our intellectual property, including trade secrets and know-how and other proprietary technical and business information, it is our policy to limit access to such information to those who require access in order to perform their functions and to enter into agreements with employees, consultants and vendors to contractually protect such information.
Competition
Direct Selling Companies
We compete with other direct selling companies, many of which have longer operating histories and greater visibility, name recognition and financial resources than we do. We compete for new independent distributors with these companies on the strength of our business opportunity, product offerings, compensation plan, management and our operations. In order to successfully compete in the direct selling industry and attract and retain independent distributors, we must maintain the attractiveness of our business opportunity, product offerings and compensation plan.
Dietary Supplement Market
We compete with other companies that sell dietary supplements. We believe the dietary supplement market is a highly fragmented and competitive market. We believe competition in the dietary supplement market is based primarily on quality, price, efficacy of products, brand name and recognition of product benefits. In the dietary supplement industry, our competition includes numerous nutritional supplement companies, pharmaceutical companies and packaged food and beverage companies. Many of these companies have broader product lines, larger sales volumes and greater financial resources than we do. Additionally, some of these companies are able to compete more effectively due to greater vertical integration. Increased competition in the dietary supplement market could have a material adverse effect on our results of operations and financial condition.
Nrf2 Activators
Protandim® is one of a few products designed and marketed to activate the transcription factor Nrf2. In the dietary supplement market, we are aware of at least two other dietary supplement products that claim Nrf2 activation.
Direct Antioxidants
Vitamin C, Vitamin E, Coenzyme Q-10, and other sources of externally derived antioxidants may be considered competitors of Protandim® but they are mechanistically distinct from Protandim®. These other sources of antioxidants do not increase the body’s elimination of oxidants using internal antioxidant enzymes. Our research indicates that Protandim® increases production of hundreds of stress-related anti-inflammatory, and anti-fibrotic gene products including antioxidant enzymes, such as superoxide dismutase and catalase, within the cells of the body. We believe that the body’s internally produced antioxidant enzymes provide a better defense against oxidative stress than externally derived sources of antioxidants.
Oral Superoxide Dismutase and Catalase
There are many companies performing research into antioxidants. Several companies sell oral forms of superoxide dismutase and catalase. Although we believe Protandim® is a superior alternative to oral forms of superoxide dismutase and catalase, these products do compete with Protandim® in the marketplace. We anticipate additional companies will likely develop, purchase or in-license products that are competitive with Protandim®.


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Personal Skin Care Market
In the personal skin care market, we compete principally with large, well-known cosmetics companies that manufacture and sell broad product lines through retail establishments. Many of these competitors have greater financial resources and brand recognition than we do. We believe, however, we can compete with these larger companies by leveraging our direct selling model and emphasizing our unique, science-based skin care product.
Animal Supplement Market
We compete principally with large, well-known companies in the animal supplement market. Most of the companies we compete with in the animal supplement market have broad distribution channels that include retail establishment. Many of these competitors have greater financial resources and brand recognition than we do. We believe, however, we can compete with these larger companies by leveraging our direct selling model and emphasizing our unique, science-based animal supplement product.
Regulatory Environment
FDA Regulations
The formulation, manufacturing, packaging, labeling, and advertising of our Protandim®, LifeVantage TrueScience® and Canine Health® products in the United States are subject to regulation by the Food and Drug Administration, or FDA, and the Federal Trade Commission, or FTC, as well as comparable state laws. We are not required to obtain FDA pre-market approval to sell our products in the United States under the current set of laws.
We market Protandim® as a “dietary supplement” as defined in the Dietary Supplement Health and Education Act of 1994, or DSHEA. DSHEA is intended to promote access to safe, quality dietary supplements, and information about dietary supplements. DSHEA established a new framework governing the composition and labeling of dietary supplements. DSHEA does not apply to animal supplements like Canine Health®.
DSHEA permits statements of nutritional support, called “structure-function” statements, to be included in labeling for dietary supplements without FDA marketing approval. Such statements may claim a benefit related to a classical nutrient deficiency disease and disclose the prevalence of such disease in the United States, describe the role of a nutrient or dietary ingredient intended to affect the structure or function in humans, characterize the documented mechanism by which a nutrient or dietary ingredient acts to maintain such structure or function, or describes general well-being from consumption of a nutrient or dietary ingredient. Such statements may not expressly or impliedly claim that a dietary supplement is intended to diagnose, cure, mitigate, treat, or prevent a disease. A company that uses a statement of nutritional support in labeling must possess evidence substantiating that the statement is truthful and not misleading and is supported by competent and reliable scientific evidence. The FDA may assert that a particular statement of nutritional support that a company is using is an illegal claim; that assertion, normally, is in the form of a warning letter to that company. We have a duty to send to the FDA a notice that lists each new structure-function statement made by us; we are obligated to send that notice within 30 days after the first marketing of a supplement with such a statement.
DSHEA also permits certain scientific literature, for example a reprint of a peer-reviewed scientific publication, to be used in connection with the sale of a dietary supplement to consumers without the literature being subject to regulation as labeling. However, such literature must not be false or misleading, the literature may not promote a particular manufacturer, or brand of dietary supplement and it must include a balanced view of the available scientific information on the subject matter, among other requirements.
The FDA's Center for Veterinary Medicine, or CVM, is responsible for enforcing the portion of the Federal Food, Drug, and Cosmetic Act, or the Act, that relates to animal supplements, like our Canine Health® product. CVM primary responsibility in enforcing the ACT is to ensure that animal supplements are safe, effective, and can be manufactured to a consistent standard.
While we exercise care in our formulation, manufacturing, packaging, labeling, and advertising of our products, we cannot guarantee the FDA will never inform us that the FDA believes some violation of law has occurred either by us or by our independent distributors. Any allegations of our non-compliance may result in time-consuming and expensive defense of our activities. The FDA’s normal course of action is to issue a warning letter if it believes that a product is misbranded or adulterated. The responsive action requested by the FDA differs depending upon the nature of the product and claims in question. Typically, the FDA expects a written response within fifteen working days of the receipt of a warning letter. The warning letter is public information posted on the FDA’s web site. That information could affect our relationships with our investors, independent distributors, vendors, and consumers. The FDA could also order compliance activities, such as an inspection of our facilities and products, and could file a civil lawsuit in which an arrest warrant (seizure) could be issued as to some or all of our products. In extraordinary cases, we could be named a defendant and sued for declaratory and injunctive relief.

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FTC Regulations
Advertising and marketing of our products in the United States are also subject to regulation by the FTC under the Federal Trade Commission Act, or FTC Act. Among other things, the FTC Act prohibits unfair methods of competition and unfair false or deceptive acts or practices in or affecting commerce. The FTC Act also makes it illegal to disseminate or cause to be disseminated any false advertisement. The FTC Act provides that disseminating any false advertisement pertaining to foods, which would include dietary supplements, is an unfair or deceptive act or practice. An advertiser is required to have competent and reliable scientific evidence for all express and implied health-related product claims at the time the claims are first made. We are required to have adequate scientific substantiation for all material advertising claims made for our products in the United States. The FTC routinely reviews websites to identify questionable advertising claims and practices. Competitors sometimes inform the FTC when they believe other competitors are violating the FTC Act and consumers also notify the FTC of what they believe may be wrongful advertising. The FTC may initiate a non-public investigation that focuses on our advertising claims which usually involves non-public pre-lawsuit extensive formal discovery. Such an investigation may be very expensive to defend, be lengthy, and result in a publicly disclosed Consent Decree, which is a settlement agreement. If no settlement can be reached, the FTC may start an administrative proceeding or a federal court lawsuit against us or our principal officers. The FTC often seeks to recover from the defendants, whether in a Consent Decree or a proceeding, any or all of the following: (i) consumer redress in the form of monetary relief or disgorgement of profits; (ii) significant reporting requirements for several years; and (iii) injunctive relief. In addition, most, if not all, states have statutes prohibiting deceptive and unfair acts and practices. The requirements under these state statutes are similar to those of the FTC Act.
The National Advertising Division, or NAD, of the national BBB, a non-governmental not-for-profit organization through its Electronic Retailing Self-Regulation Program, or ERSP, is also actively engaged in conducting investigations, called inquiries, which are focused on determining whether the requisite FTC claim substantiation standard exists for specific structure-function claims. Although the results of each inquiry or proceeding are not binding on the recipient, they are posted on NAD’s website. We have been the subject of such a proceeding in 2008 and 2009, which was concluded in 2009.
Regulation of Direct Selling Activities
Direct selling activities are regulated by the FTC, as well as various federal, state and local governmental agencies in the United States and foreign countries. These laws and regulations are generally intended to prevent fraudulent or deceptive schemes, often referred to as “pyramid” schemes, which compensate participants primarily for recruiting additional participants without significant emphasis on product sales. The laws and regulations often:
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impose order cancellation, product return, inventory buy-backs and cooling-off rights for consumers and distributors;
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require us or our distributors to register with governmental agencies;
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impose caps on the amount of commission we can pay;
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impose reporting requirements; and
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require that we ensure, among other things, that our distributors maintain levels of product sales to qualify to receive commissions and that our distributors are being compensated primarily for sales of products and not primarily for recruiting additional participants.
The laws and regulations governing direct selling are modified from time to time, and, like other direct selling companies, we may be subject from time to time to government investigations related to our direct selling activities. This may require us to make changes to our business model and our compensation plan.
State Regulations
In addition to U.S. federal regulation, each state has enacted its own food and drug laws. We may receive requests to supply information regarding our sales or advertising to state regulatory agencies. We remain subject to the risk that, in one or more of our present or future markets, our products, sales, and advertising could be found non-compliant with state laws and regulations. If we fail to comply with these laws and regulations, it could have a material adverse effect on our business in a particular market or in general. In addition, these laws and regulations could affect our ability to enter new markets.
The FDA Food Safety Modernization Act
The FDA Food Safety Modernization Act, or FSMA, was enacted in 2011 and is now part of the Federal Food, Drug and Cosmetic Act, or FFDCA. The FSMA is a comprehensive set of laws that gives the FDA considerable authority with respect to the prevention of food contamination and the serious problems associated with such contamination. Among other things, it does the following:

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gives FDA explicit authority to inspect and copy certain records related to any food and to compel a recall if the FDA believes there is a reasonable probability of serious adverse health consequences or death;
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places strict obligations on food and dietary supplement importers to verify that food from foreign suppliers is not adulterated or misbranded; and
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provides whistle blower protection for employees of conventional food or dietary supplement companies who provide information to governmental authorities about violations of the FFDCA.
International Regulations
In addition to the regulations applicable to our activities in the United States, all other markets in which we operate our business regulate our products under a variety of regulatory schemes. We typically market Protandim® in international markets as foods or health foods under applicable regulatory regimes. However, because of varied regulations, some products or ingredients that are recognized as a “food” in certain markets may be treated as a “pharmaceutical” in other markets. In the event a product, or an ingredient in a product, is classified as a drug or pharmaceutical product in any market, we will generally not be able to distribute that product through our distribution channel because of pre-marketing approval requirements and strict regulations applicable to drug and pharmaceutical products. In Japan, for example, ashwagandha was determined to be inappropriate for inclusion in food products. Ashwagandha is one of the ingredients in Protandim®. While we disagree with the assessment of ashwagandha, we are restricted from selling a formulation of Protandim® that contains ashwagandha into Japan. As such, we reformulated Protandim® for the Japan market to exclude ashwagandha. This reformulated Protandim® was introduced into Japan in fiscal 2013.
Similarly, our other markets outside the United States regulate advertising and product claims regarding the efficacy of our products and require adequate substantiation of claims. As such, we are unable to claim that any of our products will diagnose, cure, mitigate, treat or prevent diseases. For example, in Japan, Protandim® is considered a food product, which significantly limits our ability to make claims regarding the product. If marketing materials make claims that exceed the scope of allowed claims for dietary supplements, regulatory authorities could deem our products to be unapproved drugs and we could experience substantial harm.
Potential FDA and Other Regulation
We could become subject to additional laws or regulations administered by the FDA, FTC, or other federal, state, local or international regulatory authorities, to the repeal of laws or regulations that we consider favorable, such as DSHEA, or to more stringent interpretations of current laws or regulations. Because of negative publicity associated with some adulterated or misbranded supplements, including pharmaceutical drugs marketed as dietary supplements, there has been an increased movement in the United States and other markets to expand the regulation of dietary supplements, which could impose additional restrictions or requirements in the future. In general, the regulatory environment is becoming more complex with increasingly strict regulations.
The Dietary Supplement and Nonprescription Drug Consumer Protection Act requires us to report to the FDA all serious adverse events and to maintain for six years records of all adverse events, whether or not serious. An adverse event is defined as any health-related event associated with the use of a dietary supplement that is adverse. In addition, this law requires the label of each dietary supplement, including our Protandim® product, to include a domestic address or telephone number by which the company selling the product may receive a report of a serious adverse event with such product. The label of Protandim® complies with that statutory provision.
Legislation known as the Dietary Supplement Labeling Act has recently been introduced in the United States. This proposed legislation purports to help consumers distinguish between dietary supplements that are safe and those that have potentially serious side-effects or drug interactions. The Dietary Supplement Labeling Act would require dietary supplement manufacturers to disclose known ingredient risks and display mandatory warnings if a product contains an ingredient that could cause potentially serious adverse events. Although it is not currently known if, or in what form, the Dietary Supplement Labeling Act will be enacted, it could create additional regulatory burdens on our business and increase our cost of goods sold.
Employees
As of June 30, 2013, we had 238 full time employees: 180 of our employees are based in the United States, 55 of our employees are based in Japan, and 3 of our employees are based in Hong Kong. This number does not include our independent distributors, who are independent contractors and not employees. We outsource our manufacturing and distribution operations.
Available Information
The potential tender offer described above has not yet commenced. The related disclosure in this report is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any shares of our common stock. The solicitation

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and offer to buy our common stock will only be made pursuant to the offer to purchase and related materials that we will make available to our shareholders. Shareholders should read those materials carefully because they will contain important information, including the various terms and conditions of the potential tender offer.  Shareholders will be able to obtain copies of the offer to purchase, related materials filed by us as part of the statement on Schedule TO and other documents filed with the SEC from the SEC, without charge, as described below when these documents become available.  Shareholders and investors may also obtain a copy of these documents, as well as any other documents we have filed with the SEC, without charge, by contacting us or at our website listed below.  Shareholders are urged to carefully read these materials, when available, prior to making any decision with respect to the offer.
Our principal offices are located at 9815 S. Monroe Street, Suite 100, Sandy, UT 84070. Our telephone number is (801) 432-9000 and our fax number is (801) 880-0699. Our website address is www.lifevantage.com; however, information found on our website is not incorporated by reference into this report. Our web site address is included in this annual report as an inactive textual reference only.
The reports filed with the Securities and Exchange Commission, or SEC, by us and by our officers, directors, and significant shareholders are available for review on the SEC’s website at www.sec.gov. You may also read and copy materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
ITEM 1A — RISK FACTORS
Because of the following risks, as well as other risks affecting our financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods. The risks described below are those we currently believe could materially affect us. The following risks are not necessarily all of the important factors that could cause our actual results of operations to differ materially from those expressed in the forward-looking statements in this report.
Risk Factors Relating to Our Company
We may not be successful in expanding our operations.
Our fiscal year that ended June 30, 2009 was the first year since fiscal 2005 that we were able to achieve operating profits. Although we experienced significant growth in each of the last four fiscal years, our growth significantly slowed in fiscal 2013 and we may not be successful in expanding our operations in future periods. Compared to other companies in our industry, we have limited experience selling products through direct selling, particularly outside the United States. As such, we may have limited insight into trends and other factors that may emerge and affect our business. Additionally, we may not be successful in keeping our leading independent distributors focused and motivated or in aligning their goals with the goals of our company. We also have limited experience expanding into new geographic markets. Although we are seeking to continue our expansion, if we fail to effectively expand our operations into additional markets, we may be unable to generate consistent operating profit growth.

Because our Japanese operations account for a significant part of our business, an inability to strengthen our business and work with evolving government regulations in Japan could harm our business.
Approximately 33% of our fiscal 2013 revenue was generated in Japan. The Japanese market has changed significantly since we began selling into the market in fiscal 2010 and its regulatory framework continues to change. In 2011, for example, the Ministry of Health, Labour and Welfare, or MHLW, made the determination that ashwagandha, one of the ingredients in Protandim®, is inappropriate for inclusion in a food product in Japan. In January 2013, we announced the release for the Japanese market of a new formulation of Protandim® that does not contain ashwagandha. Our revenue in Japan was harmed significantly in fiscal 2013 in part because of the concern among customers that the new formula was not as effective as our original Protandim® formula. Our business in Japan could be substantially harmed in the longer term if we determine, or if the market continues to perceive, that this formulation of Protandim® does not have the same effect as the original formulation or if the formulation faces additional challenges from regulatory agencies in Japan. Other factors that could impact our results in Japan include:
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continued or increased levels of regulatory or media scrutiny and any regulatory actions, or any adoption of more restrictive regulations, in response to such scrutiny;
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our inability to galvanize our leading independent distributors in Japan;
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significant weakening of the Japanese yen;

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increased regulatory constraints with respect to the claims we can make regarding the efficacy of Protandim® , which could limit our ability to effectively market that product;
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the initiatives we have implemented in Japan, which are patterned after successful initiatives implemented in the U.S., may not generate renewed growth or increased productivity among our independent distributors in Japan, and may cost more or require more time to implement than we have anticipated;
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inappropriate activities by our independent distributors and any resulting regulatory actions against us or our independent distributors;
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discord among our top leaders within our independent distributor ranks or the loss of these leaders to other network marketing companies or otherwise;
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improper practices of other direct selling companies or their independent distributors that increase regulatory or media scrutiny of our industry; and
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weakness in the economy or consumer confidence.
In January 2013, we transitioned our operations in Japan from a “not-for-resale” model to our traditional direct selling model. We believe our transition to a direct selling model in Japan, the introduction of a new formulation of Protandim® into the market and our global recall of Protandim® contributed significantly to our slower sales growth in Japan during the third and fourth quarters of fiscal 2013. Our slower sales growth in sales could continue, and we could experience a decline in sales, if the transition to a direct selling model is less successful than anticipated or if distributors in Japan do not accept our products and business opportunity as anticipated. Additionally, there is a high level of regulatory scrutiny of the direct selling industry in Japan; several direct selling companies have been penalized for actions of distributors that violated applicable regulations. Such penalties have included suspension from sponsoring activities in Japan. If our distributors fail to comply with applicable regulations in Japan, regulators could take action against us, including a suspension of our sponsoring activities, or we could receive negative media attention, either of which could harm our business significantly.
We may not succeed in growing existing markets or opening new markets.
In fiscal 2013 we launched international operations in Hong Kong and Canada. We now have international operations in Japan, Hong Kong, Canada, Australia and Mexico. In fiscal 2013 we derived approximately 37% of our revenues from our international operations. We believe that our ability to achieve future growth is dependent in part on our ability to continue our international expansion efforts. However, despite our efforts to do so, we may not succeed in growing our existing international markets, entering new international markets on a timely basis, or achieving profitability in new markets. We must overcome significant regulatory and legal barriers before we can begin marketing in any international market. Also, before marketing commences in a new country or market, it is difficult to assess the extent to which our products and sales techniques will be accepted or successful in any given country. In addition to significant regulatory barriers, we may also encounter problems conducting operations in new markets with different cultures and legal systems from those encountered elsewhere. We may be required to reformulate one or more of our products, including Protandim®, before commencing sales in a given country. Once we have entered a market, we must adhere to the regulatory and legal requirements of that market. We may not be able to obtain and retain necessary permits and approvals in new markets, or we may have insufficient capital to finance our expansion efforts in a timely manner.
If we are able to expand our operations, we may be unable to successfully manage our future growth.
Our business has grown significantly from fiscal 2009, the year we we initiated our direct selling model, through fiscal 2013. This growth placed substantial strain on our management, operational, financial and other resources. If we are able to continue expanding our operations in the United States and in other countries where we believe our products will be successful, we may experience periods of rapid growth, which will require additional resources. Any such growth could place increased strain on our management, operational, financial and other resources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, and other professionals. In addition, we will need to expand the scope of our infrastructure and our physical resources. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with our business objectives could have a material adverse effect on our business and results of operations.
We rely on our information technology systems to manage numerous aspects of our business, and a disruption in these systems could adversely affect our business.
We depend on our information technology, or IT, systems to manage numerous aspects of our business, including our finance and accounting transactions, to manage our independent distributor compensation plan and to provide analytical information to management. Our IT systems are an essential component of our business and growth strategies, and a serious

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disruption to our IT systems could significantly limit our ability to manage and operate our business efficiently. These systems are vulnerable to, among other things, damage and interruption from power loss or natural disasters, computer system and network failures, loss of telecommunications services, physical and electronic loss of data, security breaches and computer viruses. Any disruption could cause our business and competitive position to suffer and adversely affect our business and operating results. In addition, if we experience future growth, we will need to scale or change some of our systems to accommodate the increasing number of independent distributors and other customers. For example, we are in the process of implementing a new back office system to be used by our independent distributors. Our business could be harmed if we are unable to successfully make that change or if our independent distributors do not adapt well to the new system.
Our independent distributors could fail to comply with applicable legal requirements or our distributor policies and procedures, which could result in claims against us that could harm our business.
Our distributors are independent contractors and, accordingly, we are not in a position to directly provide the same direction, motivation and oversight as we would if distributors were employees. As a result, there can be no assurance that our distributors will participate in our marketing strategies or plans, accept our introduction of new products, or comply with our distributor policies and procedures.
Extensive federal, state, local and international laws regulate our business, products and direct selling activities. Because we have expanded into foreign countries, our policies and procedures for our independent distributors differ due to the different legal requirements of each country in which we do business. While our distributor policies and procedures are designed to govern distributor conduct, it can be difficult to enforce these policies and procedures because of the large number of distributors and their independent status. Violations by our independent distributors of applicable law or of our policies and procedures in dealing with customers could reflect negatively on our products and operations and harm our business reputation. In addition, it is possible that a court could hold us civilly or criminally accountable based on vicarious liability because of the actions of our independent distributors.
Inability of new products to gain distributor and market acceptance could harm our business.
In fiscal 2013 we introduced Canine Health® to our independent distributors and other customers. We may seek to further expand our product portfolio. However, any new products we introduce may not gain distributor and market acceptance to the extent we anticipate or project. Factors that could affect our ability to introduce new products include, among others, government regulations, the inability to attract and retain qualified research and development staff, the termination of third-party research and collaborative arrangements, proprietary protections of competitors that may limit our ability to offer comparable products and the difficulties in anticipating changes in consumer tastes and buying preferences. In addition, new products we introduce may not be successful or generate substantial revenue. The introduction of a new product could also negatively impact other product lines to the extent our distributor leaders focus their efforts on the new product instead of an existing product. If any of our products fail to gain distributor acceptance, we could see an increase in product returns.
A substantial portion of our business is conducted in foreign markets, exposing us to the risks of trade or foreign exchange restrictions, increased tariffs, foreign currency fluctuations, disruptions or conflicts with our third party importers and similar risks associated with foreign operations.
A substantial portion of our sales are generated outside the United States. If we are successful in entering additional foreign markets, we anticipate that the percentage of our sales generated outside the United States will increase. There are substantial risks associated with foreign operations. For example, a foreign government may impose trade or foreign exchange restrictions or increased tariffs, which could negatively impact our operations and financial results. We are also exposed to risks associated with foreign currency fluctuations. For instance, purchases from suppliers are generally made in U.S. dollars while sales to distributors are generally made in local currencies. Accordingly, strengthening of the U.S. dollar versus a foreign currency could have a negative impact on us. Specifically, because a significant percentage of our revenues are generated in Japan, strengthening of the U.S. dollar versus the Japanese yen could have an adverse impact on our financial results. Additionally, we may be negatively impacted by conflicts with or disruptions caused or faced by third party importers, as well as conflicts between such importers and local governments or regulatory agencies. Our operations in some markets also may be adversely affected by political, economic and social instability in foreign countries.
Global economic conditions could harm our business.
Global economic conditions continue to be challenging and unpredictable. Consumer confidence and spending have declined in recent years and the global credit crisis has limited access to capital for many companies and consumers. The global economic downturn could adversely impact our business by causing a decline in demand for our products, particularly if the economic conditions are prolonged or worsen. In addition, poor global economic conditions may adversely impact access to capital for us and our suppliers, may decrease our independent distributors’ ability to obtain or maintain credit, and may otherwise adversely impact our operations and overall financial condition.

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In the past, we had material weaknesses in our internal control over financial reporting. If we are unable to maintain our level of internal controls in the future, our shareholders could lose confidence in our financial reporting and our stock price could suffer.
In connection with the preparation of our financial statements included in our Form 10-K for fiscal year 2011, as well as certain other previously issued financial statements, we concluded that there were material weaknesses in our internal control over financial reporting. While we were able to remedy these material weaknesses during fiscal 2012 and fiscal 2013, as we expand our business, especially outside of the United States, if we fail to maintain our control procedures, or otherwise comply with Section 404 of the Sarbanes-Oxley Act of 2002, it could negatively affect our business, the price of our common stock and market confidence in our reported financial information.
If we are to expand our product offerings, we may need to raise additional capital.
We primarily depend on Protandim® for our revenue. We may decide to expand our product portfolio and may seek to do so by acquiring products by license or through product or company acquisitions. If cash generated from operations is insufficient to satisfy our requirements in this regard, we may need to raise additional capital, which may be dilutive to our existing shareholders. If we are unable to raise additional required capital in a timely manner, we could be forced to reduce our growth plans.
We could be exposed to certain environmental liabilities due to our past operations and property ownership.
During the 1990s, we owned mining properties in the Yaak River mining district of Montana. We never conducted any mining operations or ore processing on these properties, nor have we performed on-site environmental studies on these properties. The State of Montana Department of Environmental Quality believed that the properties may contain residues from past mining. We may be liable for material environmental liabilities associated with these properties.
In addition, until November 2004, we owned land in Lawrence, Colorado. We are not aware of any environmental liabilities with respect to this land. The party that acquired the land from us assumed any environmental liability related to the land. Nonetheless, a governmental agency or a private party could seek to hold us accountable for such environmental liabilities, if any.
Risk Factors Relating to our Business and Industry
We primarily depend on a single product for our revenue.
Although we generate revenue through the sale of LifeVantage TrueScience® and Canine Health®, we primarily rely on the sale of Protandim® for our revenue. We do not have a broad portfolio of other products that we could rely on to support our operations if we were to experience any difficulty with the manufacture, marketing, sale or distribution of Protandim®. For example, our revenue was adversely impacted because sales of Protandim® slowed following our voluntary product recall during fiscal 2013. If we have similar problems in the future, our results could be negatively affected. In addition, we may be unable to sustain or increase the price or sales levels for Protandim®, which could harm our business.
High quality material for our products may be difficult to obtain or expensive.
Raw materials account for a significant portion of our manufacturing costs. Suppliers may be unable or unwilling to provide the raw materials our manufacturers need in the quantities requested, at a price we are willing to pay, or that meet our quality standards. We are also subject to potential delays in the delivery of raw materials caused by events beyond our control, including labor disputes, transportation interruptions and changes in government regulations. Any significant delay in or disruption of the supply of raw materials could, among other things, substantially increase the cost of such materials, require reformulation or repackaging of products, require the qualification of new suppliers, or result in our inability to meet customer demands.
In December 2012 we commenced a voluntary recall of certain lots of Protandim® to alleviate concerns that some Protandim® tablets may have included small metal fragments. We discovered these small metal fragments in certain batches of turmeric extract, one of the raw materials used to manufacture Protandim®. We purchase turmeric extract from third party suppliers. Our business could be adversely affected if we are unable to obtain a reliable source of turmeric extract or any other raw material used in the manufacturing of our products that meets our quality standards.
Although our independent distributors are independent contractors, improper distributor actions that violate laws or regulations could harm our business.
Our independent distributors are not employees and act independent of us. However, activities by our independent distributors that violate applicable laws or regulations could result in government or third party actions against us, which could

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harm our business. Our independent distributors agree to abide by our strict policies and procedures designed to ensure our independent distributors will comply with legal requirements. We have a compliance department that addresses violations of our independent distributors when they become known to us. However, given the size of our independent distributor force, we experience problems with independent distributors violating our policies and procedures from time to time and are not always able to discover such violations.
One of our most significant areas of risk with respect to independent distributor activities relates to improper product claims and claims regarding the business opportunity of being an independent distributor. Any determination by the Federal Trade Commission or other similar governmental agency outside the United States that we or our independent distributors are not in compliance with applicable laws could harm our business. Even if governmental actions do not result in rulings or orders against us, they could create negative publicity that could detrimentally affect our efforts to recruit or motivate independent distributors and attract customers. As we experience growth in the number of our independent distributors, we have seen an increase in sales aids and promotional material being produced by distributors and distributor groups in some markets. This places an increased burden on us to monitor compliance of such materials and increases the risk that such materials could contain problematic product or marketing claims in violation of our policies and applicable regulations. As we expand internationally, our distributors sometimes attempt to anticipate additional new markets that we may enter in the future and begin marketing and sponsoring activities in markets where we are not qualified to conduct business. We could face fines or other legal action if our distributors violate applicable laws and regulations.
If we are unable to retain our existing independent distributors and recruit additional independent distributors, our revenue will not increase and may even decline.
Our independent distributors may terminate their services at any time, and, like most direct selling companies, we have experienced and are likely to continue to experience turnover among independent distributors. Independent distributors who join our company to purchase our products for personal consumption or for short-term income goals may only stay with us for a short time. While we take steps to help train, motivate, and retain independent distributors, we cannot accurately predict the number or productivity of our independent distributors.
Our operating results will be harmed if we and our independent distributor leaders do not generate sufficient interest in our business to retain existing independent distributors and attract new independent distributors. The number and productivity of our independent distributors could be harmed by several factors, including:
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any adverse publicity regarding us, our products, our distribution channel, or our competitors;
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lack of interest in existing or new products or their failure to achieve desired results;
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lack of a compelling business opportunity sufficient to generate the interest and commitment of new independent distributors;
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any changes we might make to our independent distributor compensation plan;
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any negative public perception of our products or their ingredients;
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any negative public perception of our independent distributors and direct selling businesses in general;
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our actions to enforce our policies and procedures;
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any efforts to sell our products through competitive channels;
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any regulatory actions or charges against us or others in our industry; and
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general economic and business conditions.
We are dependent upon third parties to manufacture our product.
We currently rely on third parties to manufacture the products we sell. We are dependent on the uninterrupted and efficient operation of third party manufacturers' facilities. If any of our current manufacturers are unable or unwilling to fulfill our manufacturing requirements or seek to impose unfavorable terms, we will likely have to seek out other manufacturers, which could disrupt our operations and we may not be successful in finding alternative manufacturing resources. In addition, competitors who perform their own manufacturing may have an advantage over us with respect to pricing, availability of product, and in other areas through their control of the manufacturing process.



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We are subject to risks related to product recalls.
We have implemented measures in our manufacturing process that are designed to prevent and detect defects in our products, including the inclusion of foreign contaminants. However, such measures may not prevent or reveal defects or detect contaminants in our products and such defects and contaminants may not become apparent until after our products have been sold into the market. Accordingly, there is a risk that product defects will occur, or that our products will contain foreign contaminants, and that such defects and contaminants will require a product recall. We do not maintain product recall insurance. In December 2012, we commenced a voluntary recall of certain lots of Protandim® to alleviate concerns that some tablets may have included small metal fragments. We discovered these small metal fragments in certain batches of turmeric extract, an ingredient in Protandim® we purchase from third party suppliers. Product recalls and subsequent remedial actions can be expensive to implement and could have a material adverse effect on our business, results of operations and financial condition. In addition, product recalls could result in negative publicity and public concerns regarding the safety of our products, either of which could harm the reputation of our products and our business and could cause the market value of our common stock to decline. The ultimate costs of the recall we commenced in December 2012, including financial costs, injury to our reputation, liability and reduced growth prospects, are not yet known to us.
The events that lead to and followed our voluntary product recall in December 2012 strained our relationships with some of our third party manufacturers. Additionally, following the voluntary recall we implemented more stringent measures, including several redundant measures, in our manufacturing process to detect contaminates. Third party manufacturers may be reluctant to implement these redundant measures, may refuse to manufacture our products and these additional measures may increase our cost of goods sold and further strain our relationships with manufacturers.
Network Marketing is heavily regulated.
Various government agencies throughout the world regulate network marketing practices. These laws and regulations are generally intended to prevent fraudulent or deceptive schemes, often referred to as “pyramid” schemes, which compensate participants for recruiting additional participants irrespective of product sales, use high pressure recruiting methods and/or do not involve legitimate products. Complying with these rules and regulations can be difficult and requires the devotion of significant resources on our part. We may not be able to continue business in existing markets or commence operations in new markets if we are unable to comply with these laws or adjust to changes in these laws.
Unfavorable publicity could materially harm our business.
We are highly dependent upon consumers' perceptions of the safety, quality, and efficacy of our products, as well as competitive products distributed by other companies. In the past we have experienced negative publicity that has harmed our business. Critics of our industry and other individuals whose interests are not aligned with our interests, have in the past and may in the future utilize the Internet, the press and other means to publish criticism of the industry, our company, our products and our competitors, or make allegations regarding our business and operations, or the business and operations of our competitors. For instance, several prominent companies in our industry have been targeted by short sellers who profit if a company's stock price decreases. One such company was recently targeted by a short seller who, after taking a significant short position, publicly made allegations regarding the legality of the company's network marketing model. Short sellers have an incentive to publicly criticize our industry and business model and any such criticism may adversely affect our stock price.
Future scientific research or publicity may not be favorable to our industry or any particular product, including Protandim®. Because of our dependence upon consumer perceptions, adverse publicity associated with illness or other adverse effects resulting or claimed to have resulted from the consumption or use of our products or any similar products distributed by other companies could have a material adverse impact on us. Such adverse publicity could arise even if the claims are unsubstantiated or if the adverse effects associated with such products resulted from failure to consume or use such products as directed. Adverse publicity could also increase our product liability exposure, result in increased regulatory scrutiny and lead to the initiation of private lawsuits.
Our direct selling program could be found to be not in compliance with current or newly adopted laws or regulations in one or more markets, which could prevent us from conducting our business in these markets and harm our financial condition and operating results.
Some of the legal and regulatory requirements concerning the direct selling business model are ambiguous and subject to interpretation. As a result, regulators and courts have discretion in their application of these laws and regulations, and the enforcement or interpretation of these laws and regulations by governmental agencies or courts can change. Recent allegations by short sellers regarding the legality of multi-level marketing companies have also created intense public scrutiny of our industry and could cause governmental agencies to change their enforcement and interpretation of applicable laws and regulations. The failure of our business to comply with current or newly adopted regulations or interpretations could negatively impact our business in a particular market or in general and may adversely affect our share price.

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We may become involved in legal proceedings that are expensive, time consuming and, if adversely adjudicated or settled, could adversely affect our financial results.
Litigation claims can be expensive and time consuming to bring or defend against and could result in settlements or damages that could significantly affect our financial results. It is not possible to predict the final resolution of litigation which we may in the future become party to; the impact of certain of these matters on our business, results of operations and financial condition could be material.
We are currently involved in various lawsuits, both as a plaintiff and as defendant. While we believe the suits against us are without merit, they are quite costly to defend and we cannot be assured that we will ultimately prevail. If we do not prevail and are required to pay damages, it could harm our business.
Regulations governing the production and marketing of our skin care product could harm our business.
LifeVantage TrueScience®, our anti-aging skin care product, is subject to various domestic and foreign laws and regulations that regulate cosmetic products and set forth regulations for determining whether a product can be marketed as a “cosmetic” or requires further approval as an over-the-counter drug. A determination that LifeVantage TrueScience® impacts the structure or function of the human body, or improper marketing claims by our distributors may lead to a determination that LifeVantage TrueScience® requires pre-market approval as a drug. Such regulations in any given market can limit our ability to import products and can delay product launches as we go through the registration and approval process for those products. Furthermore, if we fail to comply with these regulations, we could face enforcement action against us and we could be fined, forced to alter or stop selling LifeVantage TrueScience® and/or be required to adjust our operations. Our operations also could be harmed if new laws or regulations are enacted that restrict our ability to market or distribute LifeVantage TrueScience® or impose additional burdens or requirements on the contents of our personal care product or require us to reformulate our product.
Our business is subject to strict government regulations.
The manufacturing, packaging, labeling, advertising, sale and distribution of our products are subject to federal laws and regulation by one or more federal agencies, including, in the United States, the FDA, the FTC, the Consumer Product Safety Commission, the United States Department of Agriculture, and the Environmental Protection Agency. These activities are also regulated by various state, local, and international laws and agencies of the states and localities in which our products are sold. Government regulations may prevent or delay the introduction, or require the reformulation, of our products, which could result in lost revenues and increased costs to us. For instance, the FDA regulates, among other things, the composition, safety, labeling, and marketing of dietary supplements (including vitamins, minerals, herbs, and other dietary ingredients for human use).
The FDA may determine that a particular dietary supplement or ingredient is adulterated or misbranded or both, and may determine that a particular claim or statement of nutritional value that we make to support the marketing of a dietary supplement is an impermissible drug claim, is not substantiated, or is an unauthorized version of a “health claim.” Any of these actions could prevent us from marketing that particular dietary supplement product, or making certain claims for that product. The FDA could also require us to remove a particular product from the market. Any future recall or removal would result in additional costs to us, including lost revenues from any product that we are required to remove from the market, which could be material. Any product recalls or removals could also lead to liability, substantial costs, and reduced growth prospects.
Additional or more stringent regulations of dietary supplements and other products have been considered from time to time. In recent years, there has been increased pressure in the United States and other markets to increase regulation of dietary supplements. New regulations could impose additional restrictions, including requiring reformulation of some products to meet new standards, recalls or discontinuance of some products not able to be reformulated, additional record-keeping requirements, increased documentation of the properties of some products, additional or different labeling, additional scientific substantiation, adverse event reporting, or other new requirements. Any of these developments could increase our costs significantly. In the United States, for example, some legislators and industry critics continue to push for increased regulatory authority by the FDA over nutritional supplements. Our business could be harmed if more restrictive legislation is successfully introduced and adopted in the future. In the United States, the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising, or Guides, require disclosure of material connections between an endorser and the company they are endorsing and do not allow marketing using atypical results. Our independent distributors have historically used testimonials to market and sell Protandim®. Producing marketing materials that conform to the requirements and restrictions of the Guides may diminish the impact of our marketing efforts and negatively impact our sales results. If we or our distributors fail to comply with these Guides, the FTC could bring an enforcement action against us and we could be fined and/or forced to alter our marketing materials. Our operations also could be harmed if new laws or regulations are enacted that restrict our ability to

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market or distribute nutritional supplements or impose additional burdens or requirements on nutritional supplement companies or require us to reformulate our products.
In addition, the Dietary Supplement and Nonprescription Drug Consumer Protection Act, which was passed by Congress in 2006, imposes significant regulatory requirements on dietary supplements, packers and distributors including the reporting of “serious adverse events” to the FDA and record keeping requirements. Complying with this legislation could raise our costs and negatively impact our business. We and our suppliers are also required to comply with FDA regulations with respect to current Good Manufacturing Procedures in manufacturing, packaging, or holding dietary ingredients and dietary supplements. These regulations require dietary supplements to be prepared, packaged, and held in compliance with procedures that we and our subcontractors must develop and make available for inspection by the FDA. These regulations could raise our costs and negatively impact our business. Additionally, our third-party suppliers or vendors may not be able to comply with these rules without incurring substantial expenses. If our third-party suppliers or vendors are not able to comply with these rules, we may experience increased cost or delays in obtaining certain raw materials and third-party products. In 2011, the FDA published draft guidance which is intended, among other things, to help manufacturers and distributors of dietary supplement products determine when they are required to file with the FDA a New Dietary Ingredient, or NDI, notification with respect to a dietary supplement product. In this draft guidance, the FDA highlighted the necessity for marketers of dietary supplements to submit NDI notifications as an important preventive control to ensure that consumers are not exposed to potential unnecessary public health risks in the form of new ingredients with unknown safety profiles. Although we do not believe that Protandim® contains an NDI, if the FDA were to conclude that we should have filed an NDI notification for Protandim®, then we could be subject to enforcement actions by the FDA. Such enforcement actions could include product seizures and injunctive relief being granted against us, any of which would harm our business.
Legislation known as the Dietary Supplement Labeling Act was recently introduced in the United States Senate. This proposed legislation purports to help consumers distinguish between dietary supplements that are safe and those that have potentially serious side-effects or drug interactions. The Dietary Supplement Labeling Act, if passed and enacted as law, would require dietary supplement manufacturers to disclose known ingredient risks and display mandatory warnings if a product contains an ingredient that could cause potentially serious adverse events. Although it is not currently known if, or in what form, the Dietary Supplement Labeling Act will be enacted, it could create additional regulatory burdens on our business, increase our costs and harm our operations.
We are subject to the risk of investigatory and enforcement action by the FTC.
We are subject to the risk of investigatory and enforcement action by the FTC based on our advertising claims and marketing practices. The FTC routinely reviews product advertising, including websites, to identify significant questionable advertising claims and practices. The FTC has brought many actions against dietary supplement companies based upon allegations that applicable advertising claims or practices were deceptive or not substantiated. If the FTC initiates an investigation, the FTC can initiate pre-complaint discovery that may be nonpublic in nature. Any investigation may be very expensive to defend and may result in an adverse ruling or in a consent decree.
Government authorities may question our tax positions or transfer pricing policies or change their laws in a manner that could increase our effective tax rate or otherwise harm our business.
As a U.S. company doing business in international markets through subsidiaries, we are subject to various tax and intercompany pricing laws, including those relating to the flow of funds between our company and our subsidiaries. From time to time, we are audited by tax regulators in the United States and in our foreign markets. If regulators challenge our tax positions, corporate structure, transfer pricing mechanisms or intercompany transfers, we may be subject to fines and payment of back taxes, our effective tax rate may increase and our operations may be harmed. Tax rates vary from country to country, and, if tax authorities determine that our profits in one jurisdiction may need to be increased, we may not be able to fully utilize all foreign tax credits that are generated, which will increase our effective tax rate. For example, our federal corporate income tax rate in the United States is 35%. If our profitability in a higher tax jurisdiction, such as Japan where our tax rate in fiscal 2013 was approximately 38%, increases disproportionately to the rest of our business, our effective tax rate may increase. The various customs, exchange control and transfer pricing laws are continually changing and are subject to the interpretation of government agencies. We may experience increased efforts by customs authorities in foreign countries to reclassify our products or otherwise increase the level of duties we pay on our products. Despite our efforts to be aware of and comply with such laws, and changes to and interpretations thereof, there is a risk that we may not continue to operate in compliance with such laws. We may need to adjust our operating procedures in response to such changes, and as a result, our business may suffer. In addition, due to the international nature of our business, we are subject from time to time to reviews and audits by foreign taxing authorities of other jurisdictions in which we conduct business throughout the world.



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Non-compliance with anti-corruption laws could harm our business.
Our international operations are subject to anti-corruption laws, including the Foreign Corrupt Practices Act, also known as the FCPA. Any allegations that we are not in compliance with anti-corruption laws may require us to dedicate time and resources to an internal investigation of the allegations or may result in a government investigation. Any determination that our operations or activities are not in compliance with existing anti-corruption laws or regulations could result in the imposition of substantial fines, and other penalties. Although we have implemented anti-corruption policies and controls to protect against violation of these laws, we cannot be certain that these efforts will be effective.
The loss of key personnel could negatively impact our business.
Our future performance will depend upon our ability to attract, retain, and motivate our executive and senior management team and scientific staff. Our success depends to a significant extent both upon the continued services of our current executive and senior management team and scientific staff, as well as our ability to attract, hire, motivate, and retain additional qualified management and scientific staff in the future. In addition, competition for executive and senior staff in the dietary supplement market is intense, and our operations could be adversely affected if we cannot attract and retain qualified personnel.
All of our employees are “at will” employees, which means any employee may quit at any time and we may terminate any employee at any time. We do not carry “key person” insurance covering members of senior management or our employees.
We may be held responsible for certain taxes or assessments relating to the activities of our distributors, which could harm our financial condition and operating results.
Our distributors are subject to taxation, and in some instances, legislation or governmental agencies impose an obligation on us to collect taxes, such as value added taxes, and to maintain appropriate records. In the event that local laws and regulations or the interpretation of local laws and regulations change to require us to treat our independent distributors as employees, or that our distributors are deemed by local regulatory authorities in one or more of the jurisdictions in which we operate to be our employees rather than independent contractors under existing laws and interpretations, we may be held responsible for social security and related taxes in those jurisdictions, plus any related assessments and penalties, which could harm our financial condition and operating results. If our distributors were deemed to be employees rather than independent contractors, we would also face the threat of increased vicarious liability for their actions.
The dietary supplement market is highly competitive.
Our flagship product, Protandim®, competes in the dietary supplements market, which is large, highly competitive and fragmented. Participants include specialty retailers, supermarkets, drugstores, mass merchants, multi-level marketing organizations, on-line merchants, mail-order companies, and a variety of other smaller participants. Many of our competitors have greater financial and other resources available to them and possess better manufacturing, independent distribution and marketing capabilities than we do. We believe that the market is also highly sensitive to the introduction of new products, including various prescription drugs, which may rapidly capture a significant share of the market. Moreover, because of regulatory restrictions concerning claims about the efficacy of dietary supplements, we may have difficulty differentiating our products from our competitors’ products, and competing products entering the dietary supplements market could harm our revenue. In the United States and Japan, we also compete for sales with heavily advertised national brands manufactured by large pharmaceutical and food companies, as well as other retailers. In addition, as some products become more mainstream, we experience increased competition for those products as more participants enter the market. Our international competitors include large international pharmacy chains, major international supermarket chains, and other large U.S.-based companies with international operations. We may not be able to compete effectively and our attempt to do so may result in increased pricing pressure, which may result in lower margins and have a material adverse effect on our results of operations and financial condition.
Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products and brand.
The loss of our intellectual property rights in our products could permit our competitors to manufacture their own version of our products. We have attempted to protect our intellectual property rights in our products through a combination of patents, patent applications, confidentiality agreements, non-compete agreements and other contractual protection mechanisms, and we will continue to do so. While we intend to defend against any threats to our intellectual property, our patents or various contractual protections may not adequately protect our intellectual property. In addition, we could be required to expend significant resources to defend our rights to proprietary information, and may not be successful in such defense.
Moreover, our intellectual property rights are more limited outside of the United States than they are in the United States. As such, we may not be successful in preventing third parties from copying or misappropriating our intellectual property. There can also be no assurance that pending patent applications owned by us will result in patents being issued to us, that patents

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issued to or licensed by us in the past or in the future will not be challenged or circumvented by competitors or that such patents will be found to be valid or sufficiently broad to protect our products or to provide us with any competitive advantage. Third parties could also obtain patents that may require us to negotiate to obtain licenses to conduct our business, and any required licenses may not be available on reasonable terms or at all. We also rely on confidentiality and non-compete agreements with certain employees, independent distributors, consultants and other parties to protect, in part, trade secrets and other proprietary rights. There can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach, that others will not independently develop substantially equivalent proprietary information or that third parties will not otherwise gain access to our trade secrets or proprietary knowledge.
Third parties might claim that we infringe on their intellectual property rights.
Although the dietary supplement industry has historically been characterized by products with naturally occurring ingredients, recently it is becoming more common for suppliers and competitors to apply for patents or develop proprietary technologies and processes. Third parties may assert intellectual property infringement claims against us despite our efforts to avoid such infringement. Such claims could prevent us from offering competitive products or result in litigation or threatened litigation.
Our business is susceptible to product liability claims.
The manufacture and sale of any product for human consumption raises the risk of product liability claims. These claims may derive from the product itself or a contaminant found in the product from the manufacturing, packaging, sales process or even due to tampering by unauthorized third parties. Our products consist of vitamins, minerals, herbs, and other ingredients that are classified as foods or dietary supplements and are not subject to pre-market regulatory approval in the United States. Our products could contain contaminated substances, and some of our products contain ingredients that do not have long histories of human consumption. Previously unknown adverse reactions resulting from human consumption of these ingredients could occur. In addition, third-party manufacturers produce all of the products we sell. As a distributor of products manufactured by third parties, we may also be liable for various product liability claims for these products despite not manufacturing them. We may be subject to various product liability claims, including, among others, that our products include inadequate instructions for use or inadequate warnings concerning possible side effects and interactions with other substances. Any product liability claim against us could result in increased costs and could adversely affect our reputation with our customers, which in turn could adversely affect our revenues and operating income. Although we maintain insurance coverage, there is a risk that our insurance will not cover our potential exposure completely or would fail to cover a particular claim, in which case we may not have the financial resources to satisfy such claim. In addition, certain types of damages, such as punitive damages, are not covered by our insurance policy.
Economic, political, and other risks associated with our international operations could adversely affect our revenues and international growth prospects.
As part of our business strategy, we intend to continue to expand our international presence. Our international operations are subject to a number of risks inherent to operating in foreign countries, and any expansion of our international operations will increase the effects of these risks. These risks include, among others:
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political and economic instability of foreign markets;
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foreign governments’ restrictive trade policies;
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inconsistent product regulation or sudden policy changes by foreign agencies or governments;
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the imposition of, or increase in, duties, taxes, government royalties, or non-tariff trade barriers;
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difficulty in collecting international accounts receivable and potentially longer payment cycles;
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increased costs in maintaining international marketing efforts;
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problems entering international markets with different cultural bases and consumer preferences; and
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fluctuations in foreign currency exchange rates.
Any of these risks could have a material adverse effect on our international operations and our growth strategy.




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Risks Related to Ownership of Our Common Stock
If the holders of our outstanding warrants and options exercise their securities for shares of common stock, we will issue up to 15,251,342 shares, which will materially dilute the voting power of our currently outstanding common stock and could cause our stock price to decline.
As of June 30, 2013, we had 117,088,257 shares of common stock outstanding. As of June 30, 2013, we also had outstanding warrants that are exercisable for an aggregate of 8,241,390 shares of common stock and stock options outstanding for an aggregate of 7,009,952 shares of common stock. The issuance of these shares will dilute the voting power of our currently outstanding common stock and could cause our stock price to decline.
Our stock price may experience future volatility.
The trading price of our common stock has historically been subject to wide fluctuations. The price of our common stock may fluctuate in the future in response to quarter-to-quarter variations in operating results, material announcements by us or competitors, governmental regulatory action, conditions in the dietary supplement industry, or other events or factors, many of which are beyond our control, and some of which do not have a strong correlation to our operating performance.
Substantial sales of shares may impact the market price of our common stock.
If our shareholders sell substantial amounts of our common stock, the market price of our common stock may decline. These sales also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we consider appropriate.
We have never paid dividends on our capital stock, and we do not currently anticipate paying any cash dividends in the foreseeable future.
We have paid no cash dividends on any of our classes of capital stock to date. Although during fiscal 2013 we paid an aggregate of $7.1 million to repurchase 2,972,080 shares of our common stock, we currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, the terms of any future debt or credit facility, if any, may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock is likely to be your sole source of gain for the foreseeable future.
When considering the forgoing risk factors, you should keep in mind the cautionary statements in this report and the documents incorporated by reference. We have no obligation and do not undertake to update or revise any such forward-looking statements to reflect events or circumstances after the date of this report.
ITEM 1B — UNRESOLVED STAFF COMMENTS
We do not have any unresolved comments issued by the SEC staff.
ITEM 2 — PROPERTIES
Corporate Offices
The term of the lease for our corporate headquarters in Sandy, Utah is for 66 months and includes approximately 20,900 square feet of office space. The lease term began in January 2012 and expires in June 2017. We also lease approximately 7,200 square feet located at 4516 South 700 East in Murray, Utah that we use for our call center. We entered into the lease agreement for our call center in August 2012, and the term of the lease runs through September 2015. We also lease lab space in Aurora, Colorado. This lease commenced in September 2011 and is scheduled to terminate in September 2013.
In September 2012, we entered into a lease agreement for office space currently being constructed adjacent to our current corporate headquarters in Sandy, Utah. This lease is for a term of ten years and includes approximately 44,353 square feet with options to occupy additional space in the future if needed. We anticipate construction of this space will be completed in the third quarter of fiscal 2014, at which time we plan to move our headquarters, call center and lab to this new location. This lease will supersede and replace the lease for our current headquarters and call center.
We lease approximately 3,200 square feet of office space in San Diego, California under a 5-year lease which commenced in November of 2008. The term of the lease will expire during the second quarter of fiscal 2014, and we do not intend to extend or renew the lease.
Our subsidiary, LifeVantage Japan K.K., leases approximately 10,400 square feet of office space in Tokyo, Japan. The term of the lease is for five years commencing on August 1, 2012.


- 27-


Warehouse Facilities
In September 2009 we entered into an agreement with Integracore, LLC, under which Integracore provides fulfillment services to us, including services relating to procurement, warehousing, ordering, processing and shipping. We recently expanded our arrangement with Integracore and we now use a second regional location in Atlanta, Georgia for shipping efficiencies. We have also entered into arrangements to receive similar services in some of our international markets. For example, in December 2012 we entered into an agreement with Suzuyo & Co., Ltd. for warehouse and order fulfillment services.
ITEM 3 — LEGAL PROCEEDINGS
On April 9, 2013, we were sued in state court in Salt Lake County, Utah. The plaintiff in the lawsuit is Ronald Jones, an independent distributor with our company. The lawsuit alleges that we entered into an agreement with Mr. Jones related to his distributor activities in Hong Kong and that we subsequently breached that agreement. It also alleges that we misappropriated trade secrets that purportedly belong to Mr. Jones. The lawsuit seeks over $20 million in damages. We believe the allegations made by Mr. Jones are completely without merit and we intend to vigorously defend the lawsuit.
ITEM 4 — MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5 — MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information and Holders
Our common stock began trading on the NASDAQ Capital Market ("NASDAQ") under the symbol "LFVN" during the first quarter of fiscal 2013. Our common stock was previously quoted on the OTC Bulletin Board under the symbol “LFVN.”
The table below sets forth for the fiscal quarters indicated the reported high and low prices of our common stock, as quoted on NASDAQ or the OTC Bulletin Board, as applicable. These prices were reported by an online service, reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. Our fiscal year-end is June 30.
 
Fiscal year
 
2013
 
2012
 
High
 
Low
 
High
 
Low
First Quarter
$
3.85

 
$
2.46

 
$
1.69

 
$
1.28

Second Quarter
$
3.42

 
$
1.60

 
$
1.60

 
$
1.32

Third Quarter
$
3.07

 
$
2.15

 
$
3.98

 
$
1.33

Fourth Quarter
$
2.50

 
$
2.04

 
$
3.88

 
$
2.25

Our common stock is issued in registered form and the following information is taken from the records of our current transfer agent, Computershare Trust Company, Inc., located in Golden, Colorado. As of June 30, 2013, we had 349 shareholders of record and 117.1 million shares of common stock outstanding. This does not include an unknown number of persons who hold shares in street name through brokers and dealers and who are not listed on our shareholder records.
Stock Performance Graph
The following line graph and table compares the cumulative total shareholder return on our common stock with the cumulative total return of (i) the NASDAQ total composite index and (ii) a market-weighted index of publicly traded peer companies (the "Peer Group") for the period from June 30, 2008 through June 30, 2013. The data shown assumes an investment on June 30, 2008 of $100 and reinvestment of all dividends into additional shares of the same class of equity, if applicable, to the stock or index. There is no expectation that the rate of return achieved in the prior 5 years will be acheivable in the upcoming years.
The Peer Group consists of the following companies, which compete in our industry and product categories: Nature's Sunshine Products, Inc., Nu Skin Enterprises, Inc., Mannatech, Incorporated, Herbalife LTD., Reliv International, Inc., Avon Products, Inc., USANA Health Sciences, Inc. and Tupperware Brands Corporation.
    

- 28-


Measured Period
LFVN
NASDAQ Composite
Peer Group
June 30, 2008
$
100.00

$
100.00

$
100.00

June 30, 2009
$
268.00

$
80.87

$
77.77

June 30, 2010
$
204.00

$
93.85

$
93.22

June 30, 2011
$
600.00

$
124.68

$
132.52

June 30, 2012
$
1,132.00

$
133.46

$
103.61

June 30, 2013
$
928.00

$
157.28

$
129.90


Dividends
We have not declared any dividends on any class of our equity securities since incorporation and we do not currently anticipate declaring any dividends in the foreseeable future. We currently intend to retain our future earnings, if any, for use in our operations and the expansion of our business.
Purchases of Equity Securities
The following table provides information with respect to purchases we made of shares of our common stock during the quarter ended June 30, 2013.
Period
(a) Total
Number of
Shares
(or Units)
Purchased
 
(b) Average Price
Paid per Share (or
Unit) (1)
 
(c) Total Number
of Shares
(or Units) Purchased
as Part of Publicly
Announced Plans or
Programs (2)
 
(d) Maximum Number
(or Approximate Dollar
Value) of Shares (or
Units) that May Yet Be
Purchased Under the
Plans or Programs
April 1, 2013 to April 30, 2013
40,226

 
$
2.39

 
40,226

 
$
4,999,807

May 1, 2013 to May 31, 2013
106,010

 
$
2.39

 
106,010

 
$
4,746,443

June 1, 2013 to June 30, 2013
821,192

 
$
2.29

 
821,192

 
$
2,865,913

Total
967,428

 
$
2.31

 
967,428

 
 
(1)
Average price paid per share of common stock repurchased is the execution price, including commissions paid to brokers.

- 29-


(2)
On March 22, 2013, we announced that our board of directors authorized us to repurchase an aggregate amount of up to $5 million of shares of our common stock. As part of that repurchase program, we entered into a pre-arranged stock repurchase plan that operated in accordance with guidelines specified under Rule 10b5-1 of the Securities Exchange. We had previously announced on December 14, 2012 a repurchase program of $5 million shares of our common stock, of which $0.1 million was remaining at April 1, 2013.
ITEM 6 — SELECTED FINANCIAL DATA
The following table summarizes certain historical financial information at the dates and for the periods indicated prepared in accordance with GAAP. The consolidated statement of operations data for each of the years ended June 30, 2013, 2012 and 2011, and the consolidated balance sheet data as of June 30, 2013, and 2012, have been derived from our consolidated financial statements audited by EKS&H LLLP, an independent registered public accounting firm, included elsewhere in this Annual Report on Form 10-K. The consolidated statement of operations data for each of the years ended June 30, 2010 and 2009 and the consolidated balance sheet data as of June 30, 2011, 2010 and 2009 have been derived from our financial statements not included herein. The selected consolidated financial data should be read in conjunction with “Management's Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto, which are included elsewhere in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of operating results to be expected in the future.
 
Years Ended June 30,
 
2013
 
2012
 
2011
 
2010
 
2009
(In thousands, except per share data)
 
 
 
 
 
 
 
 
 
Statement of Operations Data:
 
 
 
 
 
 
 
 
 
Sales, net
$
208,178

 
$
126,183

 
$
38,919

 
$
11,478

 
$
4,141

Cost of sales
31,845

 
18,052

 
5,917

 
1,906

 
853

Product recall costs
4,798

 
—

 
—

 
—

 
—

          Gross profit
171,535

 
108,131

 
33,002

 
9,572

 
3,288

Operating expenses:

 
 
 
 
 
 
 
 
           Sales and marketing
122,389

 
68,397

 
21,060

 
8,481

 
4,108

           General and administrative
32,471

 
16,397

 
7,516

 
7,765

 
6,588

           Research and development
2,948

 
1,359

 
509

 
393

 
224

           Depreciation and amortization
1,659

 
521

 
215

 
255

 
173

                    Total operating expenses
159,467

 
86,674

 
29,300

 
16,894

 
11,093

Operating income
12,068

 
21,457

 
3,702

 
(7,322
)
 
(7,805
)
Other expense, net:
 
 
 
 
 
 
 
 
 
         Interest and other expense, net
(915
)
 
(44
)
 
(5,948
)
 
(6,828
)
 
(1,310
)
        Change in fair value of derivative liabilities
—

 
(6,741
)
 
(48,454
)
 
3,102

 
 
        Total other expense
(915
)
 
(6,785
)
 
(54,402
)
 
(3,726
)
 
(1,310
)
Net income (loss) before income taxes
11,153

 
14,672

 
(50,700
)
 
(11,048
)
 
(9,115
)
         Income tax expense
(3,545
)
 
(2,203
)
 
(92
)
 
—

 
—

Net income (loss)
$
7,608

 
$
12,469

 
$
(50,792
)
 
$
(11,048
)
 
$
(9,115
)
Net income (loss) per share:
 
 
 
 
 
 
 
 
 
Basic
$
0.07

 
$
0.12

 
$
(0.69
)
 
$
(0.19
)
 
$
(0.23
)
Diluted
$
0.06

 
$
0.11

 
$
(0.69
)
 
$
(0.19
)
 
$
(0.23
)
Weighed average shares outstanding:
 
 
 
 
 
 
 
 
 
Basic
112,276

 
102,696

 
73,173

 
57,373

 
40,361

Diluted
122,888

 
118,331

 
73,173

 
57,373

 
40,361



- 30-


 
As of June 30,
 
2013
 
2012
 
2011
 
2010
 
2009
(In thousands)
 
 
 
 
 
 
 
 
 
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
26,299

 
$
24,648

 
$
6,721

 
$
1,978

 
$
1,389

Working capital
25,375

 
22,800

 
(3,105
)
 
(2,104
)
 
(748
)
Total assets
55,484

 
44,528

 
12,499

 
6,227

 
5,716

Current liabilities
20,566

 
16,028

 
13,380

 
5,131

 
3,734

Derivative liabilities
—

 
—

 
19,905

 
17,123

 
8,430

Total liabilities
21,539

 
16,245

 
33,307

 
22,402

 
12,570

Total stockholders equity (deficit)
33,945

 
28,283

 
(20,808
)
 
(16,175
)
 
(6,854
)

ITEM 7 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis in connection with our financial statements and related notes beginning on page F-1 following Part III of this report.
Overview
We are a company dedicated to helping people achieve their health, wellness and financial independence goals. We provide quality, scientifically validated products and a financially rewarding network marketing business opportunity to customers and independent distributors who seek a healthy lifestyle and financial freedom. We sell our products in the United States, Japan, Hong Kong, Australia, Canada and Mexico through a network of independent distributors, and to preferred and retail customers.
We engage in the identification, research, development and distribution of advanced nutraceutical dietary supplements and skin care products, including, Protandim®, our scientifically-validated dietary supplement, LifeVantage TrueScience® , our anti-aging skin care product, and Canine Health®, our companion pet supplement formulated to fight oxidative stress in dogs. We currently focus our internal research efforts on oxidative stress solutions, particularly the activation of Nuclear factor (erythroid-derived 2)-like 2, also known as Nrf2, as it relates to health-related disorders. We also evaluate healthy living products developed by third party research companies that we believe are scientifically-validated and compatible with our current product offerings.
Our Products
Our products are Protandim®, LifeVantage TrueScience® and Canine Health®. Protandim® contains a proprietary blend of ingredients and has been shown to combat oxidative stress by increasing the body’s natural antioxidant protection at the genetic level, inducing the production of naturally-occurring protective antioxidant enzymes including superoxide dismutase, catalase, and glutathione synthase. LifeVantage TrueScience® is our science-based anti-aging skin care product, which incorporates some of the ingredients found in our Protandim® product with other proprietary ingredients. We introduced Canine Health® in fiscal 2013 as a supplement specially formulated to combat oxidative stress in dogs through Nrf2 activation.
We sell our Protandim®, LifeVantage TrueScience® and Canine Health® products through a direct selling model to independent distributors and to our preferred and customers.
Customers
        
Because we utilize a direct selling model for the distribution of our products the success and growth of our business is primarily based on our ability to attract new and retain existing independent distributors. Changes in our product sales are typically the result of variations in product sales volume relating to fluctuations in the number of active independent distributors and preferred customers purchasing our products. The number of active independent distributors and preferred customers is, therefore, used by management as a key non-financial measure.

The following tables summarize the changes in our active customer base by geographic region. These numbers have been rounded to the nearest thousand as of the dates indicated. For purposes of this report, we only count as active customers those independent distributors and preferred customers who have purchased from us at any time during the most recent three-month period, either for personal use or for resale.


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Active Independent Distributors By Region
 
 
 
 
 
As of June 30, 2013
 
As of June 30, 2012
 
Change from Prior Year
 
Percent Change
Americas
43,000

 
64.2
%
 
32,000

 
69.6
%
 
11,000

 
34.4
%
Asia/Pacific
24,000

 
35.8
%
 
14,000

 
30.4
%
 
10,000

 
71.4
%
 
67,000

 
100.0
%
 
46,000

 
100.0
%
 
21,000

 
45.7
%

 
Active Preferred Customers By Region
 
 
 
 
 
As of June 30, 2013
 
As of June 30, 2012
 
Change from Prior Year
 
Percent Change
Americas
115,000

 
83.3
%
 
101,000

 
84.9
%
 
14,000

 
13.9
%
Asia/Pacific
23,000

 
16.7
%
 
18,000

 
15.1
%
 
5,000

 
27.8
%
 
138,000

 
100.0
%
 
119,000

 
100.0
%
 
19,000

 
16.0
%


Results of Operations
We commenced sales of Protandim® in 2005, LifeVantage TrueScience® in 2009 and Canine Health® in fiscal 2013. For the fiscal years ended June 30, 2013, 2012 and 2011, we generated net revenues of $208.2 million , $126.2 million and $38.9 million, respectively, recognized operating profit of $12.1 million, $21.5 million and $3.7 million, respectively, and recognized net income (loss) of $7.6 million, $12.5 million and $(50.8) million, respectively.
Our expenditures consist primarily of independent distributor commissions, operating expenses, payroll and professional fees, customer service, research and development and product manufacturing for the marketing and sale of our products.
The following table presents certain consolidated earnings data as a percentage of net sales:
 
For the years ended,
 
June 30, 2013
 
June 30, 2012
 
June 30, 2011
Sales, net
100.0
 %
 
100.0
 %
 
100.0
 %
Cost of sales
15.3

 
14.3

 
15.2

Product recall costs
2.3

 
—

 
—

Gross profit
82.4

 
85.7

 
84.8

Operating expenses:
 
 
 
 
 
Sales and marketing
58.8

 
54.2

 
54.1

General and administrative
15.6

 
13.0

 
19.3

Research and development
1.4

 
1.1

 
1.3

Depreciation and amortization
0.8

 
0.4

 
0.6

Total operating expenses
76.6

 
68.7

 
75.3

Operating income
5.8

 
17.0

 
9.5

Other expense:
 
 
 
 
 
Interest expense, net
(0.4
)
 
—

 
(15.3
)
Change in fair value of derivative liabilities
—

 
(5.4
)
 
(124.5
)
Total other expense
(0.4
)
 
(5.4
)
 
(139.8
)
Net income (loss) before income taxes
5.4

 
11.6

 
(130.3
)
Income tax expense
(1.7
)
 
(1.7
)
 
(0.2
)
Net income (loss)
3.7
 %
 
9.9
 %
 
(130.5
)%
Comparison of Fiscal Years Ended June 30, 2013 and 2012
Sales. We generated net sales of $208.2 million during the year ended June 30, 2013 and $126.2 million during the year ended June 30, 2012 primarily from the sale of our Protandim® and LifeVantage TrueScience® products. The increase in sales of $82.0 million in fiscal 2013 was primarily due to significant growth in the number of independent distributors and preferred customers and included an increase in sales in the Americas of $42.9 million and sales in Asia/Pacific of $39.1 million. We

- 32-


expect in sales to grow, but at a reduced rate, in fiscal 2014 year as we continue to add new independent distributors and preferred customers and expand into additional international markets.
Gross Margin. Cost of sales were $36.6 million for the year ended June 30, 2013, and $18.1 million for the year ended June 30, 2012, resulting in a gross margin of $171.5 million, or 82%, and $108.1 million, or 86%, respectively. The decrease in gross margin was caused by our voluntary recall which occurred in December 2012. We expect the gross margin percentage to be in the 84-85% range for the foreseeable future based on our expected inventory and manufacturing costs. Economic conditions and changes in the supply of raw materials and additional manufacturing process costs could negatively impact our gross margins in the future.
Operating Expenses. Total operating expenses for the year ended June 30, 2013 were $159.5 million as compared to operating expenses of $86.7 million for the year ended June 30, 2012. Operating expenses consist of sales and marketing expenses, general and administrative, research and development, and depreciation and amortization. The majority of the increase of $72.8 million in operating expenses is due to independent distributor commissions on our increased sales and increased headcount and infrastructure expenses to support our growth.
Sales and Marketing. Sales and marketing expense for the year ended June 30, 2013 was $122.4 million compared to $68.4 million for the fiscal year ended June 30, 2012 representing an increase of $54.0 million in fiscal year 2013. This increase was due primarily to commissions incurred on increased sales as well as increased event and promotion costs and increased headcount-related costs. We expect sales and marketing expenses to continue to increase as sales increase, but to remain relatively stable as a percentage of net sales.
General and Administrative. Our general and administrative expense for the year ended June 30, 2013 was $32.5 million compared to $16.4 million for the fiscal year ended June 30, 2012. The increase of $16.1 million was primarily due to an increase in headcount-related costs as well as increased professional fees, lease and related infrastructure costs, stock compensation expenses, insurance and travel.
Research and Development. Our research and development expense for the year ended June 30, 2013 was $2.9 million compared to $1.4 million for the year ended June 30, 2012. The increase of $1.6 million was due primarily to increased headcount-related costs.
Depreciation and Amortization. Depreciation and amortization for the year ended June 30, 2013 was $1.7 million compared to $0.5 million for the year ended June 30, 2012. The increase of $1.1 million primarily relates to depreciation associated with fixed asset acquisitions during the year ended June 30, 2013.
Net Other Expense. We recognized net other expense for the year ended June 30, 2013 of $0.9 million as compared to $6.8 million for the year ended June 30, 2012. Other expense decreased by $5.9 million, primarily due to a decrease in fair value expense related to derivative liabilities as the instruments were either exercised or the derivative provision was removed during the year ended June 30, 2012. As of June 30, 2013, we had no derivative liability instruments outstanding and do not expect to recognize expense or income relating to derivative liability in future periods.
Income Tax Expense. Our income tax expense for the year ended June 30, 2013 was $3.5 million as compared to income tax expense of $2.2 million for the year ended June 30, 2012. The increase in tax expense is primarily due to the release of our valuation allowance against deferred tax assets in the second quarter of the fiscal year ended June 30, 2012. We expect our income tax expense and effective tax rate to increase as our taxable income increases and our effective rate approaches normal statutory rates in future periods.
Net Income. Our net income for the year ended June 30, 2013 was $7.6 million as compared to net income of $12.5 million for the year ended June 30, 2012. This represents a decrease in net income of $4.9 million which is comprised of a decrease in operating income of $9.4 million, a decrease in other expense of $5.9 million and an increase in tax expense of $1.3 million.
Comparison of Fiscal Years Ended June 30, 2012 and 2011
Sales. We generated net sales of $126.2 million during the year ended June 30, 2012 and $38.9 million during the year ended June 30, 2011 primarily from the sale of our Protandim® and LifeVantage TrueScience® products. The increase in sales of $87.3 million was primarily due to significant growth in the number of independent distributors and preferred customers and included an increase in sales in the Americas of $58.5 million and sales in Asia/Pacific of $28.8 million.
Gross Margin. Cost of sales were $18.1 million for the year ended June 30, 2012, and $5.9 million for the year ended June 30, 2011, resulting in a gross margin of $108.1 million, or 86%, and $33.0 million, or 85%, respectively. The increase in gross margin percentage was due to slightly decreased inventory-related expenses and adjustments to our sales return reserve estimate.

- 33-


Operating Expenses. Total operating expenses for the year ended June 30, 2012 were $86.7 million as compared to operating expenses of $29.3 million for the year ended June 30, 2011. Operating expenses consist of sales and marketing expenses, general and administrative, research and development, and depreciation and amortization. The majority of the increase of $57.4 million in operating expenses was due to independent distributor commissions on our increased sales.
Sales and Marketing. Sales and marketing expense for the year ended June 30, 2012 was $68.4 million compared to $21.1 million for the fiscal year ended June 30, 2011 representing an increase of $47.3 million in fiscal year 2012. This increase was due primarily to commissions incurred on increased sales as well as increased event and promotion costs and increased headcount-related costs.
General and Administrative. Our general and administrative expense for the year ended June 30, 2012 was $16.4 million compared to $7.5 million for the fiscal year ended June 30, 2011. The increase of $8.9 million was primarily due to an increase in headcount-related costs as well as increased professional fees, stock compensation expenses, insurance and travel.
Research and Development. Our research and development expense for the year ended June 30, 2012 was $1.4 million compared to $0.5 million for the year ended June 30, 2011. The increase of $0.9 million was due primarily to increased headcount-related costs.
Depreciation and Amortization. Depreciation and amortization for the year ended June 30, 2012 was $0.5 million compared to $0.2 million for the year ended June 30, 2011. The increase of $0.3 million primarily relates to depreciation associated with fixed asset acquisitions during the year ended June 30, 2012.
Net Other Expense. We recognized net other expense for the year ended June 30, 2012 of $6.8 million as compared to $54.4 million for the year ended June 30, 2011. Other expense decreased by $47.6 million, primarily due to a decrease in fair value expense related to derivative liabilities as the instruments were either exercised or the derivative provision was removed during the year ended June 30, 2012.
Income Tax Expense. Our income tax expense for the year ended June 30, 2012 was $2.2 million as compared to income tax expense of $0.1 million for the year ended June 30, 2011. The increase in tax expense was due to the increase in taxable income and was partially offset by the release of our valuation allowance against deferred tax assets in the second quarter of the fiscal year ended June 30, 2012.
Net Income (Loss). Our net income for the year ended June 30, 2012 was $12.5 million as compared to a net loss of $50.8 million for the year ended June 30, 2011. This represented an increase in net income of $63.3 million which was comprised of an increase in operating income of $17.8 million, a decrease in other expense of $47.6 million and an increase in tax expense of $2.1 million.

Liquidity and Capital Resources
Our primary liquidity and capital resource requirements are to finance the cost of our planned sales and marketing efforts, the manufacture and sale of our products and to pay our general and administrative expenses. Our primary sources of liquidity are cash flow from the sales of our products.
At June 30, 2013, our cash and cash equivalents were $26.3 million. This represented an increase of $1.7 million from the $24.6 million in cash and cash equivalents as of June 30, 2012. During the fiscal year ended June 30, 2013, our net cash provided by operating activities was $10.7 million as compared to net cash provided by operating activities of $19.4 million during the fiscal year ended June 30, 2012. The decrease in cash provided by operating activities during the fiscal year ended June 30, 2013 is primarily due to a decrease in net operating income for the fiscal year ended June 30, 2013.
During the fiscal year ended June 30, 2013, our net cash used in investing activities was $5.1 million, primarily due to purchases of fixed assets to support our continued growth. During the fiscal year ended June 30, 2012, our net cash used in investing activities was $1.9 million, primarily due to the purchases of equipment and intangible assets offset by the redemption of available-for-sale marketable securities.
Cash used in financing activities during the fiscal year ended June 30, 2013 was $4.0 million, compared to cash provided by financing activities of $0.7 million during the fiscal year ended June 30, 2012. Cash used in financing activities during the fiscal year ended June 30, 2013 was due to $7.1 million of repurchases of Company stock partially offset by $3.1 million of proceeds from exercises of options and warrants. Cash provided by financing activities during the fiscal year ended June 30, 2012 was primarily due to the exercise of options and warrants.

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At June 30, 2013 and June 30, 2012, the total amount of our foreign subsidiary cash was $4.2 million and $1.3 million, respectively.  For earnings considered to be indefinitely reinvested, we have not accrued taxes.  If we were to remit the cash and cash equivalents from our foreign subsidiaries to our U.S. consolidated group for the purpose of repatriation of undistributed earnings, we would need to accrue and pay taxes.  As of June 30, 2013, our U.S. consolidated group had approximately $0.1 million of permanently reinvested unremitted earnings from our subsidiaries, and if these earnings were remitted, the impact of any tax consequences on our overall liquidity position would not be material.  We do not have any plans to repatriate these unremitted earnings to our parent; therefore, we do not have any liquidity concerns relating to these unremitted earnings and related cash and cash equivalents. 

At June 30, 2013, we had working capital (current assets minus current liabilities) of $25.4 million compared to working capital of $22.8 million at June 30, 2012. The increase in working capital was due primarily to increases in cash, income tax receivable, prepaid and deferred tax assets. These increases were partially offset by increases in accrued expenses including commissions payable. We believe that our cash and cash equivalents balances and our ongoing cash flow from operations will be sufficient to satisfy our cash requirements for at least the next 12 months. The majority of our historical expenses have been variable in nature and as such, a potential reduction in the level of revenue would reduce our cash flow needs. In the event that our current cash balances and future cash flow from operations are not sufficient to meet our obligations or strategic needs, we would consider raising additional funds in the debt or equity markets. There is no guarantee that we would be able to raise additional capital or that the terms would be advantageous to shareholders.  Additionally, we would consider realigning our strategic plans including a reduction in capital spending.
Off-Balance Sheet Arrangements
At June 30, 2013 and 2012, we had no off-balance sheet arrangements.
Critical Accounting Policies
We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America. As such, we are required to make certain estimates, judgments, and assumptions that we believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results could differ from these estimates. Our significant accounting policies are described in Note 2 to our financial statements. Certain of these significant accounting policies require us to make difficult, subjective, or complex judgments or estimates. We consider an accounting estimate to be critical if (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
There are other items within our financial statements that require estimation, but are not deemed critical as defined above. Changes in estimates used in these and other items could have a material impact on our financial statements. Management has discussed the development and selection of these critical accounting estimates with the audit committee of our board of directors, and the audit committee has reviewed the following disclosures.
Allowances for Product Returns
We record allowances for product returns at the time we ship the product based on estimated return rates. Customers may return unopened product to us within 30 days of purchase for a refund of the purchase price less shipping and handling. As of June 30, 2013, our shipments of products sold totaling approximately $16 million were subject to our return policy. In addition, we allow terminating distributors to return up to 30% of unopened, unexpired product that they purchased within the prior twelve months.
We monitor our return estimate on an ongoing basis and revise the allowances to reflect our experience. Our allowance for product returns was $0.6 million at June 30, 2013, compared with $0.9 million at June 30, 2012. To date, product expiration dates have not played any role in product returns, and we do not expect they will in the future because it is unlikely that we will ship product with an expiration date earlier than the latest allowable product return date.
Inventory Valuation
We value our inventory at the lower of cost or market value on a first-in, first-out basis. Accordingly, we reduce our inventories for the diminution of value resulting from product obsolescence, damage or other issues affecting marketability equal to the difference between the cost of the inventory and its estimated market value. Factors utilized in the determination of estimated market value include (i) current sales data and historical return rates, (ii) estimates of future demand, (iii)

- 35-


competitive pricing pressures, (iv) new production introductions, (v) product expiration dates, and (vi) component and packaging obsolescence.
We have recorded $3.9 million of inventory write-downs as of June 30, 2013, primarily related to our voluntary recall in December 2012. As of June 30, 2012 we had recorded $35,000 of inventory write-downs primarily for obsolete marketing materials.
Revenue Recognition
We ship the majority of our product directly to the consumer through network marketing sales via UPS and we receive substantially all payment for these sales in the form of credit card charges. We recognize revenue from product sales to customers upon passage of title and risk of loss to customers when product ships from the fulfillment facility. Sales revenue and estimated returns are recorded when product is shipped.
Stock-Based Compensation
We use the fair value approach to account for stock-based compensation in accordance with current accounting guidance.
Research and Development Costs
We expense all of our payments related to research and development activities.
Commitments and Obligations
(in thousands)
Payments due by period
 
 
Contractual Obligations
Total
 
Less than
1 year
 
1-3 years
 
3-5 years
 
Thereafter
Operating Lease Obligations
$
19,022

 
$
2,337

 
$
8,129

 
$
3,819

 
$
4,737

Other
577

 
577

 
—

 
—

 
—

Total
$
19,599

 
$
2,914

 
$
8,129

 
$
3,819

 
$
4,737

Recently Issued Accounting Standards
Refer to “Item 8. Financial Statements and Supplementary Data” and Note 2 to our consolidated financial statements included in Item 15 of this report for discussion regarding the impact of accounting standards that were recently issued but not yet effective, on our consolidated financial statements.
ITEM 7A — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We conduct business in several countries and intend to continue to grow our international operations. Net sales, operating, and net income are affected by fluctuations in currency exchange rates and other uncertainties in doing business and selling products in more than one currency. In addition, our operations are exposed to risks associated with changes in social, political and economic conditions inherent in international operations, including changes in the laws and policies that govern international investment in countries where we have operations, as well as, to a lesser extent, changes in U. S. laws and regulations relating to international trade and investment.
Foreign Currency Risk
During the year ended June 30, 2013, approximately 37 percent of our net sales were realized outside of the United States. The local currency of each international subsidiary is generally the functional currency. All revenues and expenses are translated at average exchange rates for the periods reported. Therefore, our reported revenue and earnings will be positively impacted by a weakening of the U.S. dollar and will be negatively impacted by a strengthening of the U.S. dollar. Given the large portion of our business derived from Japan, any weakening of the Japanese Yen will negatively impact our reported revenue and profits, whereas a strengthening of the Japanese Yen will positively impact our reported revenue and profits. Because of the uncertainty of exchange rate fluctuations, it is difficult to predict the effect of these fluctuations on our future business, product pricing and results of operations or financial condition. Changes in various currency exchange rates affect the relative prices at which we sell our products. We regularly monitor our foreign currency risks and periodically take measures to reduce the risk of foreign exchange rate fluctuations on our operating results. Additionally, we may seek to reduce our exposure to fluctuations in foreign currency exchange rates through the use of foreign currency exchange contracts. We do not use derivative financial instruments for trading or speculative purposes. At June 30, 2013 we did not have any derivative instruments.

- 36-


Following are the weighted-average currency exchange rates of U.S. $1 into local currency for each of our international or foreign markets:
 
Year ended June 30, 2013
 
Year ended June 30, 2012
 
1st Quarter
 
2nd Quarter
 
3rd Quarter
 
4th Quarter
 
1st Quarter
 
2nd Quarter
 
3rd Quarter
 
4th Quarter
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Japan
78.70

 
81.04

 
92.25

 
98.77

 
77.80

 
77.35

 
79.27

 
80.16

Australia
0.96

 
0.96

 
0.96

 
1.01

 
0.95

 
0.99

 
0.95

 
0.99

Hong Kong
7.75

 
7.75

 
7.76

 
7.76

 
7.79

 
7.78

 
7.76

 
7.76

Mexico
13.17

 
12.95

 
12.65

 
12.47

 
12.30

 
13.66

 
13.00

 
13.54

Canada
0.99

 
0.99

 
1.01

 
1.02

 
0.98

 
1.02

 
1.00

 
1.01


Interest Rate Risks
As of June 30, 2013, we had no outstanding debt, and therefore, had no direct exposure to interest rate risk.
ITEM 8 — FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item 8 is set forth in the consolidated financial statements included in Item 15 of this report and is incorporated into this Item 8 by reference.
ITEM 9 — CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A — CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. The term disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time period specified by the SEC’s rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:
1.
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
2.
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and

- 37-


3.
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2013. Such evaluation was based on the framework set forth in the report entitled Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Based on this evaluation, our management, including our Chief Executive Officer and Chief Financial Officer has concluded that our internal control over financial reporting was effective as of June 30, 2013.
The effectiveness of our internal control over financial reporting as of the end of the period covered by this report has been audited by EKS&H LLLP, an independent registered public accounting firm, as stated in their report which appears herein.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the evaluation required by Exchange Act Rules 13a-15(d) or 15d-15(d) that occurred during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B — OTHER INFORMATION
None.
PART III
Certain information required by Part III of this report is omitted from this report pursuant to General Instruction G(3) of Form 10-K because we will file a definitive proxy statement pursuant to Regulation 14A for our 2013 annual meeting of shareholders (the “Proxy Statement”) not later than 120 days after the end of the fiscal year covered by this report, and the information included in the Proxy Statement that is required by Part III of this report is incorporated herein by reference.
ITEM 10 — DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Incorporated herein by reference to the information to be set forth in the Proxy Statement.
ITEM 11 — EXECUTIVE COMPENSATION
Incorporated herein by reference to the information to be set forth in the Proxy Statement.
ITEM 12 — SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Incorporated herein by reference to the information to be set forth in the Proxy Statement.
ITEM 13 — CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS, AND DIRECTORS INDEPENDENCE
Incorporated herein by reference to the information to be set forth in the Proxy Statement.
ITEM 14 — PRINCIPAL ACCOUNTING FEES AND SERVICES
Incorporated herein by reference to the information to be set forth in the Proxy Statement.
PART IV
ITEM 15 — EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following documents are being filed as part of this report:
Financial Statements
See the information beginning on page F-1 of this report.


- 38-


Exhibits
See the Exhibit Index following the signature page of this report.

- 39-


SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
LifeVantage Corporation.
a Colorado corporation
 
 
By:
/s/    Douglas C. Robinson
 
Douglas C. Robinson
Its:
President and Chief Executive Officer
Date:
September 12, 2013
Each person whose individual signature appears below hereby constitutes and appoints Douglas C. Robinson, David S. Colbert and Robert H. Cutler, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
 
Date
 
Title
 
 
 
 
 
/s/    Douglas C. Robinson
 
September 12, 2013
 
President and Chief Executive Officer; Director
(Principal Executive Officer)
Douglas C. Robinson
 
 
 
 
 
 
 
 
/s/    David S. Colbert
 
September 12, 2013
 
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
David S. Colbert
 
 
 
 
 
 
 
 
/s/    Elwood Spedden
 
September 12, 2013
 
Chairman of the Board
Elwood Spedden
 
 
 
 
 
 
 
 
 
/s/    Dave Manovich
 
September 12, 2013
 
Director
Dave Manovich
 
 
 
 
 
 
 
 
 
/s/    Richard Okumoto
 
September 12, 2013
 
Director
Richard Okumoto
 
 
 
 
 
 
 
 
 
/s/    Garry Mauro
  
September 12, 2013
 
Director
Garry Mauro
 
 
 
 
 
 
 
 
 
/s/    George E. Metzger
  
September 12, 2013
 
Director
George E. Metzger
 
 
 
 
 
 
 
 
 
/s/    Michael A. Beindorff
  
September 12, 2013
 
Director
Michael A. Beindorff
 
 
 
 


- 40-


EXHIBIT INDEX
Exhibit
No.
 
Document Description
 
Filed Herewith or Incorporated by Reference From
 
 
 
 
 
3.1
 
Amended and Restated Articles of Incorporation
 
Exhibit to Form 10-K for the fiscal year ended June 30, 2011 filed on September 28, 2011.
 
 
 
 
 
3.2(a)
 
Amended and Restated Bylaws
 
Exhibit to Form 10-K for the fiscal year ended June 30, 2011, filed on September 28, 2011.
 
 
 
 
 
3.2(b)
 
First Amendment of the Amended and Restated Bylaws
 
Exhibit to Form 8-K filed on May 31, 2012
 
 
 
 
 
4.1
 
Form of Warrant issued in connection with November 2009 Financing
 
Exhibit to Form 8-K filed on November 18, 2009.
 
 
 
 
 
4.2
 
Amendment to Debentures and Warrants, dated as of December 11, 2009
 
Exhibit to Form 10-Q for the fiscal quarter ended December 31, 2010 filed on February 16, 2010.
 
 
 
 
 
4.3
 
Form of Restated Warrant issued pursuant to Amended and Restated Securities Purchase Agreement dated December 11, 2009
 
Exhibit to Form 10-Q for the fiscal quarter ended December 31, 2009 filed on February 16, 2010.
 
 
 
 
 
4.4
 
Form of Common Stock Purchase Warrant issued on each of December 31, 2009, January 20, 2010, February 4, 2010 and February 26, 2010
 
Exhibit to Form 10-Q for the fiscal quarter ended March 31, 2010 filed on May 14, 2010.
 
 
 
 
 
4.5
 
Form of LifeVantage Corporation Amendment to Warrant
 
Exhibit to Schedule TO filed on November 29, 2011.
 
 
 
 
 
10.1
 
Manufacturing and Supply Agreement dated July 1, 2008 between Cornerstone Research and Development and LifeVantage Corporation
 
Exhibit to Form 10-K/A for the fiscal year ended June 30, 2009 filed October 28, 2009.
 
 
 
 
 
10.2#
 
LifeVantage Distributor Compensation Plan
 
Exhibit to Form 10-K for the fiscal year ended June 30, 2010 filed on September 15, 2010.
 
 
 
 
 
10.3#
 
Form of Securities Purchase Agreement entered into in connection with November 2009 Financing
 
Exhibit to Form 8-K filed on November 18, 2009.
 
 
 
 
 
10.4
 
Form of Amended and Restated Securities Purchase Agreement originally dated December 11, 2009
 
Exhibit to Form 10-Q for the fiscal quarter ended December 31, 2009 filed on February 16, 2010.
 
 
 
 
 
10.5
 
Amended and Restated Securities Purchase Agreement dated December 31, 2009, among LifeVantage Corporation and the purchaser parties thereto
 
Exhibit to Form 10-Q for the fiscal quarter ended March 31, 2010 filed on May 14, 2010.
 
 
 
 
 
10.6
 
Amended and Restated Securities Purchase Agreement dated January 20, 2010, among LifeVantage Corporation and the purchaser parties thereto
 
Exhibit to Form 10-Q for the fiscal quarter ended March 31, 2010 filed on May 14, 2010.
 
 
 
 
 
10.7
 
Amended and Restated Securities Purchase Agreement dated February 4, 2010, among LifeVantage Corporation and the purchaser parties thereto
 
Exhibit to Form 10-Q for the fiscal quarter ended March 31, 2010 filed on May 14, 2010.
 
 
 
 
 
10.8
 
Amended and Restated Securities Purchase Agreement dated February 26, 2010, among LifeVantage Corporation and the purchaser parties thereto
 
Exhibit to Form 10-Q for the fiscal quarter ended March 31, 2010 filed on May 14, 2010.

- 41-


Exhibit
No.
 
Document Description
 
Filed Herewith or Incorporated by Reference From
 
 
 
 
 
10.9#
 
LifeVantage Corporation 2007 Long-Term Incentive Plan
 
Appendix B to Proxy Statement filed on Schedule 14A filed on October 20, 2006.
 
 
 
 
 
10.10(a)#
 
LifeVantage Corporation 2010 Long-Term Incentive Plan effective as of September 27, 2010 and as amended on January 10, 2012
 
Exhibit to Form 8-K filed on January 17, 2012.
 
 
 
 
 
10.10(b)#
 
Form of Nonstatutory Stock Option Agreement for the LifeVantage Corporation 2010 Long-Term Incentive Plan
 
Exhibit to Registration Statement on Form S-8 (File No. 333-175104) filed on June 23, 2011.
 
 
 
 
 
10.10(c)#
 
Form of Incentive Stock Option Agreement for the LifeVantage Corporation 2010 Long-Term Incentive Plan
 
Exhibit to Registration Statement on Form S-8 (File No. 333-175104) filed on June 23, 2011.
 
 
 
 
 
10.11#
 
LifeVantage Corporation Annual Incentive Plan effective as of July 1, 2012
 
Exhibit to Form 10-K for the fiscal year ended June 30, 2012 filed on September 10, 2012.
 
 
 
 
 
10.12#
 
LifeVantage Corporation FY2014 Annual Incentive Plan
 
Filed herewith.
 
 
 
 
 
10.13#
 
LifeVantage Corporation FY2014 Sales Incentive Plan
 
Filed herewith.
 
 
 
 
 
10.14#
 
LifeVantage Corporation Cash Settled Performance Based Long Term Incentive Plan
 
Filed herewith.
 
 
 
 
 
10.15#
 
Form of Performance Unit Agreement
 
Filed herewith.
 
 
 
 
 
10.13(a)#
 
Separation Agreement and General Release effective as of June 18, 2013 between LifeVantage Corporation and Dr. Joe McCord
 
Exhibit to Form 8-K filed on June 25, 2013.
 
 
 
 
 
10.13(b)#
 
Employment Agreement between LifeVantage Corporation and Douglas C. Robinson, dated March 11, 2011 and effective as of March 15, 2011
 
Exhibit to Form 10-Q for the fiscal quarter ended March 31, 2011 filed on May 16, 2011.
 
 
 
 
 
10.13(c)#
 
Amendment to Employment Agreement dated March 23, 2012 by and between LifeVantage Corporation and Douglas C. Robinson
 
Exhibit to Form 8-K filed on March 27, 2012.
 
 
 
 
 
10.13(d)#
 
Forms of incentive stock option and nonqualifying stock option agreements with Mr. Douglas Robinson dated March 15, 2011
 
Exhibit to Form 10-K for the fiscal year ended June 30, 2011 filed on September 28, 2011.
 
 
 
 
 
10.14(a)#
 
Employment Agreement by and between Lifevantage Corporation and David W. Brown, dated May 4, 2011 and effective as of April 1, 2011
 
Exhibit to Form 8-K filed on May 10, 2011.
 
 
 
 
 
10.14(b)#
 
Employment Agreement between David Colbert and Lifevantage Corporation effective August 1, 2012
 
Exhibit to Form 8-K filed on August 6, 2012
 
 
 
 
 

- 42-


Exhibit
No.
 
Document Description
 
Filed Herewith or Incorporated by Reference From
10.14(c)#
 
Employment Agreement by and between Robert Urban and Lifevantage Corporation effective as of May 29, 2012
 
Exhibit to Form 8-K filed on May 31, 2012
 
 
 
 
 
10.15#
 
Agreement between Donny Osmond Concerts, Inc. and LifeVantage Corporation dated September 1, 2011
 
Exhibit to Form 10-Q for the fiscal quarter ended September 30, 2011 filed on November 14, 2011.
 
 
 
 
 
10.16
 
Lease dated September 22, 2011 between Sandy Park I L.L.C. and LifeVantage Corporation
 
Exhibit to Form 10-Q for the fiscal quarter ended September 30, 2011 filed on November 14, 2011.
 
 
 
 
 
10.17#
 
Employment Agreement by and between Rob Cutler and LifeVantage Corporation effective March 21, 2012
 
Filed herewith.
 
 
 
 
 
10.18

Lease dated September 20, 2012 between Sandy Park II L.L.C. and LifeVantage Corporation

 
Exhibit to Form 10-Q for the fiscal quarter ended September 30, 2012 filed on November 8, 2012.
 
 
 
 
 
10.19#
 
Key Executive Benefit Package by and between Kirby Zenger and LifeVantage Corporation effective as of October 2, 2012

 
Exhibit to Form 8-K filed on October 3, 2012.

 
 
 
 
 
10.20**
 
Software Service Agreement with JIA, Inc. dated September 28, 2012
 
Exhibit to Form 10-Q/A for the fiscal quarter ended March 31, 2013 filed on May 24, 2013.
 
 
 
 
 
10.21**
 
Software Service Agreement with JIA, Inc. dated September 28, 2012
 
Exhibit to Form 10-Q/A for the fiscal quarter ended March 31, 2013 filed on May 24, 2013.
 
 
 
 
 
21.1
 
List of Subsidiaries.
 
Filed herewith.
 
 
 
 
 
23.1
 
Consent of Ehrhardt Keefe Steiner & Hottman PC.
 
Filed herewith.
 
 
 
 
 
24.1
 
Power of Attorney
 
Signature page to this report
 
 
 
 
 
31.1
 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
Filed herewith.
 
 
 
 
 
31.2
 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
Filed herewith.
 
 
 
 
 
32.1
 
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
Furnished herewith.
 
 
 
 
 
32.2
 
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
Furnished herewith.
 
 
 
 
 

- 43-


Exhibit
No.
 
Document Description
 
Filed Herewith or Incorporated by Reference From
101*
 
The following financial information from the registrant’s Annual Report on Form 10-K for the year ended June 30, 2012 formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations and Other Comprehensive Income; (iii) Condensed Consolidated Statement of Stockholders’ Deficit; (iv) Condensed Consolidated Statements of Cash Flows; and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.
 
Furnished herewith.
#
Management contract or compensatory plan.
*
Users of this data are advised that pursuant to Rule 406T of Regulation S-T, this XBRL information is being furnished and not filed herewith for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and Sections 11 or 12 of the Securities Act of 1933, as amended, and is not to be incorporated by reference into any filing, or part of any registration statement or prospectus, of LifeVantage Corporation, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
**
Confidential treatment has been granted by the SEC with respect to certain portions of these exhibits.



- 44-


LIFEVANTAGE CORPORATION
Index to Consolidated Financial Statements
 
 
 
 
 
 

F - 1


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
LifeVantage Corporation
Sandy, Utah


We have audited the accompanying consolidated balance sheets of LifeVantage Corporation and subsidiaries (the “Company”) as of June 30, 2013 and 2012, and the related consolidated statements of operations and comprehensive income (loss), changes in stockholders' equity (deficit), and cash flows for each of the years in the three-year period ended June 30, 2013. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of LifeVantage Corporation and subsidiaries as of June 30, 2013 and 2012, and the consolidated results of their operations and their cash flows for each of the years in the three-year period ended June 30, 2013, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), LifeVantage Corporation and subsidiaries internal control over financial reporting as of June 30, 2013, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated September 12, 2013 expressed an unqualified opinion thereon.


EKS&H LLLP
Denver, Colorado
September 12, 2013


F - 2


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
LifeVantage Corporation
Sandy, Utah


We have audited LifeVantage Corporation and subsidiaries' (the “Company”) internal control over financial reporting as of June 30, 2013, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, LifeVantage Corporation and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of June 30, 2013, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of LifeVantage Corporation and subsidiaries as of June 30, 2013 and 2012, and the related consolidated statements of operations and comprehensive income (loss), changes in stockholders' equity (deficit), and cash flows for each of the years in the three-year period ended June 30, 2013, and our report dated September 12, 2013 expressed an unqualified opinion thereon.


EKS&H LLLP
Denver, Colorado
September 12, 2013


F - 3


LIFEVANTAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
June 30,
 
2013
 
2012
(In thousands, except per share data)
 
 
 
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
26,299

 
$
24,648

Accounts receivable, net
1,789

 
333

Income tax receivable
2,150

 
—

Inventory
10,524

 
11,353

Current deferred income tax asset
2,885

 
1,244

Prepaid expenses and deposits
2,294

 
1,250

Total current assets
45,941

 
38,828

Long-term assets
 
 
 
Property and equipment, net
5,692

 
1,997

Intangible assets, net
1,747

 
1,882

Long-term deferred income tax asset
730

 
1,479

Deposits
1,374

 
342

TOTAL ASSETS
$
55,484

 
$
44,528

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities
 
 
 
Accounts payable
$
5,171

 
$
3,615

Commissions payable
7,564

 
5,631

Reserve for sales returns
648

 
863

Accrued bonuses
50

 
2,287

Income tax payable
—

 
546

Other accrued expenses
7,009

 
2,932

Customer deposits
124

 
154

Total current liabilities
20,566

 
16,028

Long-term liabilities
 
 
 
Other long-term liabilities
973

 
217

Total liabilities
21,539

 
16,245

Commitments and contingencies- Note 6

 

Stockholders’ equity
 
 
 
Preferred stock — par value $0.001, 50,000 shares authorized, no shares issued or outstanding
—

 
—

Common stock — par value $0.001, 250,000 shares authorized and 117,088 and 110,174 issued and outstanding as of June 30, 2013 and 2012, respectively
121

 
111

Additional paid-in capital
110,413

 
105,154

Accumulated deficit
(76,476
)
 
(76,961
)
Accumulated other comprehensive loss
(113
)
 
(21
)
Total stockholders’ equity
33,945

 
28,283

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
55,484

 
$
44,528

The accompanying notes are an integral part of these consolidated financial statements.

F - 4


LIFEVANTAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
 
For the years ended June 30,
 
2013
 
2012
 
2011
(In thousands, except per share data)
 
 
 
 
 
Sales, net
$
208,178

 
$
126,183

 
$
38,919

Cost of sales
31,845

 
18,052

 
5,917

Product recall costs
4,798

 
—

 
—

Gross profit
171,535

 
108,131

 
33,002

Operating expenses:
 
 
 
 
 
Sales and marketing
122,389

 
68,397

 
21,060

General and administrative
32,471

 
16,397

 
7,516

Research and development
2,948

 
1,359

 
509

Depreciation and amortization
1,659

 
521

 
215

Total operating expenses
159,467

 
86,674

 
29,300

Operating income
12,068

 
21,457

 
3,702

Other expense, net:
 
 
 
 
 
Interest and other expense, net
(915
)
 
(44
)
 
(5,948
)
Change in fair value of derivative liabilities
—

 
(6,741
)
 
(48,454
)
Total other expense
(915
)
 
(6,785
)
 
(54,402
)
Net income (loss) before income taxes
11,153

 
14,672

 
(50,700
)
Income tax expense
(3,545
)
 
(2,203
)
 
(92
)
Net income (loss)
$
7,608

 
$
12,469

 
$
(50,792
)
Net income (loss) per share:
 
 
 
 
 
Basic
$
0.07

 
$
0.12

 
$
(0.69
)
Diluted
$
0.06

 
$
0.11

 
$
(0.69
)
Weighted average shares outstanding:
 
 
 
 
 
Basic
112,276

 
102,696

 
73,173

Diluted
122,888

 
118,331

 
73,173

Other comprehensive income (loss), net of tax:
 
 
 
 
 
Foreign currency translation adjustment
(92
)
 
38

 
(28
)
Other comprehensive income (loss), net of tax:
(92
)
 
38

 
(28
)
Comprehensive income (loss)
$
7,516

 
$
12,507

 
$
(50,820
)
The accompanying notes are an integral part of these consolidated financial statements.

F - 5


LIFEVANTAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
For the years ended June 30, 2013, 2012 and 2011
 
Common Stock
 
Additional
Paid-In Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Total
 
Shares
 
Amount
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
Balances, June 30, 2010
61,495

 
$
61

 
$
21,457

 
$
(37,662
)
 
$
(31
)
 
$
(16,175
)
Exercise of options and warrants
9,448

 
10

 
13,091

 
—

 
—

 
13,101

Conversion of debt to equity
27,851

 
28

 
32,292

 
—

 
—

 
32,320

Stock-based compensation
—

 
—

 
766

 
—

 
—

 
766

Net loss
—

 
—

 
—

 
(50,792
)
 
—

 
(50,792
)
Currency translation adjustment
—

 
—

 
—

 
—

 
(28
)
 
(28
)
Balances, June 30, 2011
98,794

 
$
99

 
$
67,606

 
$
(88,454
)
 
$
(59
)
 
$
(20,808
)
Exercise of options and warrants
11,909

 
12

 
19,747

 
—

 
—

 
19,759

Stock-based compensation
—

 
—

 
1,323

 
—

 
—

 
1,323

Issuance of restricted stock
149

 
—

 
—

 
—

 
—

 
—

Repurchase of company stock
(678
)
 
—

 
—

 
(976
)
 
—

 
(976
)
Reclassification of liability awards
—

 
—

 
16,478

 
—

 
—

 
16,478

Net income
—

 
—

 
—

 
12,469

 
—

 
12,469

Currency translation adjustment
—

 
—

 
—

 
—

 
38

 
38

Balances, June 30, 2012
110,174

 
$
111

 
$
105,154

 
$
(76,961
)
 
$
(21
)
 
$
28,283

Exercise of options and warrants
7,270

 
7

 
3,093

 
—

 
—

 
3,100

Stock-based compensation
—

 
—

 
2,169

 
—

 
—

 
2,169

Issuance of restricted stock
2,616

 
3

 
(3
)
 
—

 
—

 
—

Repurchase of company stock
(2,972
)
 
—

 
—

 
(7,123
)
 
—

 
(7,123
)
Net income
—

 
—

 
—

 
7,608

 
—

 
7,608

Currency translation adjustment
—

 
—

 
—

 
—

 
(92
)
 
(92
)
Balances, June 30, 2013
117,088

 
$
121

 
$
110,413

 
$
(76,476
)
 
$
(113
)
 
$
33,945

The accompanying notes are an integral part of these consolidated financial statements.

F - 6


LIFEVANTAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the years ended June 30,
 
2013
 
2012
 
2011
(In thousands)
 
 
 
 
 
Cash Flows from Operating Activities:
 
 
 
 
 
Net income (loss)
$
7,608

 
$
12,469

 
$
(50,792
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
 
Depreciation and amortization
1,659

 
521

 
215

Loss on disposal of equipment
—

 
37

 
—

Stock-based compensation
2,169

 
1,323

 
767

Impairment of inventory
3,923

 
—

 
—

Deferred income tax benefit
(892
)
 
(2,723
)
 
—

Non-cash interest expense from convertible debentures
—

 
—

 
4,747

Non-cash interest expense from amortization of deferred offering costs
—

 
—

 
845

Change in fair value of derivative liabilities
—

 
6,741

 
48,454

Changes in operating assets and liabilities:
 
 
 
 
 
Decrease/(increase) in accounts receivable and income tax receivable
(3,653
)
 
609

 
(540
)
(Increase) in inventory
(3,356
)
 
(9,228
)
 
(1,631
)
(Increase) in prepaid expenses and deposits
(1,065
)
 
(762
)
 
(334
)
(Increase) in long-term deposits
(1,168
)
 
(310
)
 
(4
)
Increase in accounts payable
1,606

 
2,816

 
28

Increase/(decrease) in customer deposits
(13
)
 
120

 
(1
)
Increase in accrued expenses
3,403

 
7,581

 
2,933

Increase/(decrease) in other long-term liabilities
441

 
195

 
(6
)
Net Cash Provided by Operating Activities
10,662

 
19,389

 
4,681

Cash Flows from Investing Activities:
 
 
 
 
 
Redemption of marketable securities
—

 
350

 
75

Purchase of equipment
(5,080
)
 
(2,194
)
 
(122
)
Purchase of intangible assets
—

 
(52
)
 
(42
)
Net Cash Used in Investing Activities
(5,080
)
 
(1,896
)
 
(89
)
Cash Flows from Financing Activities:
 
 
 
 
 
Net payments on revolving line of credit and accrued interest
—

 
(434
)
 
—

Excess tax benefits from stock based compensation
1,406

 
388

 
—

Exercise of options and warrants
1,694

 
1,768

 
169

Repurchase of company stock
(7,123
)
 
(976
)
 
—

Net Cash (Used In) Provided by Financing Activities
(4,023
)
 
746

 
169

Foreign Currency Effect on cash
92

 
38

 
(28
)
Increase in cash and cash equivalents
1,651

 
18,277

 
4,733

Cash and Cash Equivalents — beginning of period
24,648

 
6,371

 
1,638

Cash and Cash Equivalents — end of period
$
26,299

 
$
24,648

 
$
6,371

The accompanying notes are an integral part of these consolidated financial statements.

F - 7


LIFEVANTAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the years ended June 30,
 
2013
 
2012
 
2011
Non Cash Investing and Financing Activities:
 
 
 
 
 
Conversion of debt to common stock
$
—

 
$
—

 
$
5,570

Conversion of derivative to common stock
$
—

 
$
—

 
$
26,749

Exercise of warrant liabilities
$
—

 
$
17,604

 
$
12,931

Increase in property and equipment/other long-term liabilities
$
359

 
$
—

 
$
—

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
 
 
 
 
 
Cash paid for interest expense
$
3

 
$
—

 
$
385

Cash paid for income taxes
$
6,090

 
$
3,701

 
$
56

              Common shares issued upon cashless warrant exercises
3,793

 
10,297

 
8,834

              Total cashless exercise price of warrants
$
2,147

 
$
5,995

 
$
6,395

              Gross warrants underlying cashless exercises
4,564

 
12,563

 
12,930

The accompanying notes are an integral part of these consolidated financial statements.


F - 8


LIFEVANTAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1 — The Company:
LifeVantage Corporation is a company dedicated to helping people achieve their health, wellness and financial independence goals. We provide quality, scientifically-validated products and a financially rewarding network marketing business opportunity to customers and independent distributors who seek a healthy lifestyle and financial freedom. We sell our products in the United States, Japan, Hong Kong, Australia, Mexico and Canada through a network of independent distributors, and to preferred and retail customers.
LifeVantage Corporation (“LifeVantage” or the “Company”) was incorporated in Colorado in 1988 under the nam Andraplex Corporation. The Company changed its name to Yaak River Resources, Inc. in 1992, to Lifeline Therapeutics, Inc. in 2004 and to LifeVantage Corporation in 2006. The Company is in the business of marketing and selling its proprietary products, primarily Protandim®, to individuals throughout the United States and in Japan, Canada, Australia, Hong Kong, and Mexico. LifeVantage is a Colorado corporation with its corporate office in Sandy, Utah.
In October 2004, the Company consummated an Agreement and Plan of Reorganization with Lifeline Nutraceuticals Corporation (“LNC”), a privately held Colorado corporation, formed on July 1, 2003. In October 2004 and March 2005 the shareholders of LNC exchanged 81% of their outstanding shares of common stock for 15,385,110 shares of common stock of the Company, which represented 94% of the then issued and outstanding shares of the Company. The Company assumed the obligations of LNC note holders as part of the transaction.
In July 2009 the Company formed the subsidiaries LifeVantage de México, S. de R.L. de C.V. (Limited Liability Company), Importadora LifeVantage, S. de R.L. de C.V. (Limited Liability Company), and Servicios Administrativos para la Importación de Productos Body & Skin, S.C. to conduct business in Mexico.
In January 2012, the Company formed LifeVantage Asia Pte. Ltd. (“LifeVantage Asia”) and LifeVantage Australia Pty. Ltd. (“LifeVantage Australia”). LifeVantage Asia is a wholly-owned subsidiary of the Company and LifeVantage Australia is a wholly-owned subsidiary of LifeVantage Asia. In February 2012, the Company formed LifeVantage Hong Kong Pte. Ltd. (“LifeVantage Hong Kong”) and LifeVantage Japan K.K. (“LifeVantage Japan”). LifeVantage Hong Kong and LifeVantage Japan are both wholly-owned subsidiaries of LifeVantage Asia.
In July 2012, the Company formed LifeVantage Canada Ltd. to conduct business in Canada. In May 2013, the Company formed LifeVantage Commission Services Limited under the laws of Hong Kong. LifeVantage Canada Ltd. and LifeVantage Commission Services Limited are wholly-owned subsidiaries of the Company.
Note 2 — Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation.
Use of Estimates
We prepare our consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (GAAP). In preparing these statements, we are required to use estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates and assumptions. On an ongoing basis, we review our estimates, including those related to inventory obsolescence, sales returns, income taxes and tax valuation reserves, share-based compensation, derivative liabilities and loss contingencies.
Fair Value of Financial Instruments
Accounting guidance on fair value measurements and disclosures requires disclosures about the fair value for all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about fair value of financial instruments are based on pertinent information available to management as of June 30, 2013 and 2012. Accordingly, the estimates presented

F - 9


in these consolidated financial statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments.
Management has estimated the fair values of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses to approximate their respective carrying values reported in these consolidated financial statements because of their short maturities.
Cash and Cash Equivalents
The Company considers only its monetary liquid assets with original maturities of three months or less to be cash and cash equivalents.
Accounts Receivable
The Company’s accounts receivable for the years ended June 30, 2013 and 2012 consist primarily of credit card receivables. Based on the Company’s verification process for customer credit cards and historical information available, management has determined that an allowance for doubtful accounts on credit card sales related to its independent distributor and preferred customer sales as of June 30, 2013 is not necessary. No bad debt expense has been recorded for the years ended June 30, 2013, 2012, and 2011.
Inventory
Inventory is stated at the lower of cost or market value. Cost is determined using the first-in, first-out method. The Company has capitalized payments to its contract manufacturer for the acquisition of raw materials and commencement of the manufacturing, bottling and labeling of the Company’s product. As of June 30, 2013 and 2012, inventory consisted of (in thousands):
 
June 30,
 
2013
 
2012
Finished goods
$
5,273

 
$
5,964

Raw materials
5,251

 
5,389

Total inventory
$
10,524

 
$
11,353

We have recorded $3.9 million of inventory write-downs as of June 30, 2013, primarily related to our voluntary recall in December 2012.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the straight-line method over the following useful lives:
 
Years
Equipment (includes computer hardware and software)
3
Furniture and fixtures
5
Leasehold improvements
*
Vehicles
5
*Leasehold improvements are depreciated over the shorter of estimated useful life of the related asset or the lease term.
The cost of normal maintenance and repairs is charged to expense as incurred. When an asset is sold or otherwise disposed of, the cost and associated accumulated depreciation are removed from the accounts and the resulting gain or loss is recognized in the Consolidated Statements of Operations and Comprehensive Income. Significant expenditures that increase the useful life of an asset are capitalized and depreciated over the estimated useful life of the asset. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. An impairment loss is recognized if the carrying amount of the asset exceeds its fair value.




F - 10


Property and equipment consist of (in thousands):
 
June 30,
 
2013
 
2012
Equipment (includes computer hardware and software)
$
5,501

 
$
1,913

Furniture and fixtures
976

 
732

Leasehold improvements
1,220

 
15

Vehicles
142

 
—

Accumulated depreciation
(2,147
)
 
(663
)
Property and equipment, net
$
5,692

 
$
1,997

Depreciation expense totaled $1.5 million, $0.4 million, and $0.1 million for the years ended June 30, 2013, 2012, and 2011, respectively.
Intangible Assets
The costs of applying for patents are capitalized and, once the patent is granted, will be amortized on a straight-line basis over the lesser of the patent’s economic or legal life. Capitalized costs will be expensed if patents are not granted or it is determined that the patent is impaired. The Company reviews the carrying value of its patent costs periodically to determine whether the patents have continuing value and such reviews could result in impairment of the recorded amounts. Trademarks are not amortized, rather they are subject to annual impairment tests. Annual impairment tests were completed resulting in no impairment charges for any of the periods shown. As of June 30, 2013 and June 30, 2012, intangible assets consisted of (in thousands):
 
June 30,
 
2013
 
2012
Patent costs
$
2,321

 
$
2,321

Trademark costs
202

 
202

Accumulated amortization
(776
)
 
(641
)
Intangible assets, net
$
1,747

 
$
1,882

Amortization expense totaled $0.1 million, $0.1 million, and $0.1 million for the years ended June 30, 2013, 2012, and 2011 respectively. Annual estimated amortization expense is expected to approximate $0.1 million for each of the five succeeding fiscal years.
Impairment of Long-Lived Assets
Pursuant to guidance established for impairment or disposal of assets, the Company assesses impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. When an assessment for impairment of long-lived assets, long-lived assets to be disposed of, and certain identifiable intangibles related to those assets is performed, the Company is required to compare the net carrying value of long-lived assets on the lowest level at which cash flows can be determined on a consistent basis to the related estimates of future undiscounted net cash flows for such assets. If the net carrying value exceeds the net cash flows, then an impairment is recognized to reduce the carrying value to the estimated fair value, generally equal to the future discounted net cash flow. For the years ended June 30, 2013 and 2012 management has concluded that there are no indications of impairment.









F - 11


Other Accrued Expenses
Other accrued expenses consist of the following (in thousands):        
 
June 30,
 
2013
 
2012
Accrued severance
$
1,602

 
$
—

Accrued incentives and promotions to distributors
1,122

 
320

Accrued payroll and payroll taxes
725

 
433

Deferred revenue
421

 
210

Accrued sales and use tax
742

 
727

Other accrued employee expenses
663

 
384

Accrued other expenses
1,734

 
858

 
$
7,009

 
$
2,932

Concentration of Credit Risk
Accounting guidance for financial instruments requires disclosure of significant concentrations of credit risk regardless of the degree of such risk. Financial instruments with significant credit risk include cash and cash equivalents. At June 30, 2013, the Company had $12.0 million in cash accounts at one financial institution, $4.2 million in foreign banks and $10.0 million in an investment management account at another financial institution. As of June 30, 2013 and 2012 and throughout the year the Company’s cash balances exceeded federally insured limits.
Revenue Recognition
The Company ships the majority of its product directly to the consumer via UPS and receives substantially all payment for these sales in the form of credit card receipts. Revenue from direct product sales to customers is recognized upon passage of title and risk of loss to customers when product is shipped from the fulfillment facility. Estimated returns are recorded when product is shipped. The Company’s return policy is to provide a 30-day money back guarantee on orders placed by customers. After 30 days, the Company does not issue refunds to direct sales customers for returned product. In the network marketing sales channel, the Company allows terminating distributors to return unopened, unexpired product that they have purchased within the prior twelve months, subject to certain consumption limitations. The Company establishes the returns reserve based on historical experience. The returns reserve is evaluated on a quarterly basis. As of June 30, 2013 and June 30, 2012, the Company’s reserve balance for returns and allowances was $0.6 million and $0.9 million, respectively.
Shipping and Handling
Shipping and handling costs associated with inbound freight and freight out to customers including independent distributors are included in cost of sales. Shipping and handling fees charged to all customers are included in sales.
Research and Development Costs
The Company expenses all costs related to research and development activities as incurred. Research and development expenses for the years ended June 30, 2013, 2012, and 2011 were $2.9 million, $1.4 million, and $0.5 million respectively.
Stock-Based Compensation
All share-based payments, including grants of stock options and restricted stock, are required to be recognized in the Company's financial statements based upon their respective grant date fair values. The Black-Scholes option pricing model is used to estimate the fair value of stock options. The determination of the fair value of stock options is affected by the Company's stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. The Company uses historical volatility as the expected volatility assumption required in the Black-Scholes model. The Company utilizes a simplified method for estimating the expected life of the options. The Company uses this method because it believes that it provides a better estimate than the Company’s historical data as post vesting exercises have been limited. The risk-free interest rate assumption is based on observed interest rates appropriate for the expected terms of the stock options.  The fair value of restricted stock grants is based on the closing market price of the Company's stock on the date of grant less the Company's expected dividend yield. The Company recognizes stock-based compensation net of any estimated forfeitures on a straight-line basis over the requisite service period of the award.




F - 12


Interest and Other Expense, net
Interest and other expense, net for the years ended June 30, 2013 , 2012 and 2011 was as follows (in thousands):
 
Year ended June 30,
 
2013
 
2012
 
2011
Interest expense
$
(3
)
 
$
(8
)
 
$
(5,993
)
Business development incentive, net
695

 
—

 
—

Foreign currency gain (loss), net
(1,689
)
 
(102
)
 
15

Gain on settlement of forward contract
42

 
—

 
—

Other income (expense), net
40

 
66

 
30

  Total interest and other expense, net
$
(915
)
 
$
(44
)
 
$
(5,948
)
In January 2013, the Company began operations of a foreign subsidiary that qualifies for a government-sponsored business development incentive. Under the incentive program, the Company's foreign subsidiary is allowed to retain certain non-income based taxes during the twelve month period ending December 31, 2013, rather than remit such taxes to the government.

Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using statutory tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income in the period that includes the effective date of the change. In December 2011, we determined it was more likely than not that the deferred tax asset would be realized and as a result we released the valuation allowance we had established resulting in a net benefit of $2.8 million which represents the benefit expected to be realized in future years.
The Company recognizes tax benefits from an uncertain position only if it is more likely than not that the position will be sustained upon examination by taxing authorities based on the technical merits of the issue. The amount recognized is the largest benefit that the Company believes has greater than a 50% likelihood of being realized upon settlement.
Income (Loss) Per Share
Basic income (loss) per share is computed by dividing the net income or loss by the weighted average number of common shares outstanding during the period. Diluted income (loss) per common share is computed by dividing net income (loss) by the weighted average common shares and potentially dilutive common share equivalents. The effects of approximately 36 million common shares issuable as of June 30, 2011 pursuant to the convertible debentures and warrants issued in the Company’s private placement offerings, compensation based warrants issued by the Company and the Company’s 2007 and 2010 Long-Term Incentive Plans are not included in the computations as their effect was antidilutive. Because the Company incurred a net loss for the year ended June 30, 2011 the basic and diluted average outstanding shares are the same.










F - 13


The following is a reconciliation of earnings per share and the weighted-average common shares outstanding for purposes of computing basic and diluted net income per share (in thousands, except per share amounts):
 
Year ended June 30,
 
2013
 
2012
 
2011
Numerator:
 
 
 
 
 
Net income (loss)
$
7,608

 
$
12,469

 
$
(50,792
)
Denominator:
 
 
 
 
 
Basic weighted-average common shares outstanding
112,276

 
102,696

 
73,173

Effect of dilutive securities:
 
 
 
 
 
Stock awards and options
3,832

 
5,516

 
—

Warrants
6,780

 
10,119

 
—

Diluted weighted-average common shares outstanding
122,888

 
118,331

 
73,173

Basic
$
0.07

 
$
0.12

 
$
(0.69
)
Diluted
$
0.06

 
$
0.11

 
$
(0.69
)
Foreign Currency Translation
A portion of the Company’s business operations occurs outside the United States. The local currency of each of the Company’s subsidiaries is considered its functional currency. All assets and liabilities are translated into U.S. dollars at exchange rates existing at the balance sheet dates, revenue and expenses are translated at weighted-average exchange rates and stockholders’ equity is recorded at historical exchange rates. The resulting foreign currency translation adjustments are recorded as a separate component of stockholders’ equity in the consolidated balance sheets and transaction gains and losses are included in other income and expense in the consolidated financial statements.
Segment Information
The Company operates in a single operating segment by selling products to a global network of independent distributors that operates in a seamless manner from market to market. Selling expenses are the Company’s largest expense comprised of the commissions paid to its worldwide independent distributors. The Company manages its business primarily by managing its global network of independent distributors. The Company reports revenue in two geographic regions: Americas and Asia/Pacific. Revenues by geographic area are as follows (in thousands):
 
Years ended June 30,
 
2013
 
2012
 
2011
Americas
$
133,046

 
$
90,122

 
$
31,625

Asia/Pacific
75,132

 
36,061

 
7,294

Total revenues
$
208,178

 
$
126,183

 
$
38,919

Additional information as to the Company’s operations in the most significant geographical areas is set forth below (in thousands):
 
Years ended June 30,
 
2013
 
2012
 
2011
United States
$
131,508

 
$
89,230

 
31,218

Japan
69,492

 
35,449

 
7,294

As of June 30, 2013 long-lived assets were $4.8 million in the U.S. and $3.0 million in Japan. As of June 30, 2012 long-lived assets were $3.8 million in the U.S. and $0 in Japan.
New Accounting Pronouncements
In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2012-2 “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment,” which permits an entity to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired before performing quantitative impairment testing. The amendments do not change the

F - 14


measurement of impairment losses. This update is effective for fiscal years beginning after September 15, 2012, with early adoption permitted. Management does not expect adoption of this ASU to have a material impact on the Company’s results of operations, financial position or cash flow.
In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This pronouncement was issued to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments in this update seek to attain that objective by requiring an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. GAAP to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is reclassified to a balance sheet account (i.e. inventory) instead of directly to income or expense in the same reporting period. This pronouncement is effective prospectively for reporting periods beginning after December 15, 2012. The adoption of ASU 2013-02 is not expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows.
Note 3 — Stockholders’ Equity
During the year ended June 30, 2013 the Company issued 7,269,942 shares of common stock as a result of the exercise of options and warrants. In addition, the Company issued 2,616,366 shares of restricted common stock to employees and directors.
The Company’s Articles of Incorporation authorize the issuance of preferred shares. However, as of June 30, 2013, none have been issued nor have any rights or preferences been assigned to the preferred shares by the Company’s Board of Directors.
Note 4 — Share-Based Compensation
Equity Incentive Plans
The Company adopted and the shareholders approved the Company’s 2007 Long-Term Incentive Plan (the “2007 Plan”), effective November 21, 2006, to provide incentives to certain employees, officers, directors and consultants who contribute to the strategic and long-term performance objectives and growth of the Company. A maximum of 10 million shares of the Company’s common stock can be issued under the 2007 Plan in connection with the grant of awards. Awards to purchase common stock have been granted pursuant to the 2007 Plan and are outstanding to various employees, officers, directors, Scientific Advisory Board members and independent distributors at prices between $0.21 and $1.50 per share, with initial vesting periods that ranged from one to three years. Awards expire in accordance with the terms of each award and the shares subject to the award are added back to the 2007 Plan upon expiration of the award. The contractual term of stock options granted is generally ten years. As of June 30, 2013 there were awards outstanding, net of awards expired, for the purchase in aggregate of 3,950,976 shares of the Company’s common stock. As of June 30, 2013 there were 27,269 shares available for issuance under the 2007 Plan.
The Company adopted and the shareholders approved the Company’s 2010 Long-Term Incentive Plan (the “2010 Plan”), effective November 19, 2010, to provide incentives to certain employees, officers, directors and consultants who contribute to the strategic and long-term performance objectives and growth of the Company. A maximum of 6,900,000 shares of the Company’s common stock can be issued under the 2010 Plan in connection with the grant of awards. Awards to purchase common stock have been granted pursuant to the 2010 Plan and are outstanding to various employees, officers and directors. Outstanding stock options awarded under the 2010 Plan have exercise prices between $0.63 and $3.53 and vest over one to four year periods. Awards expire in accordance with the terms of each award and the shares subject to the award are added back to the 2010 Plan upon expiration of the award. The contractual term of stock options granted is generally ten years. As of June 30, 2013 there were awards outstanding, net of awards expired, for an aggregate of 3,058,976 shares of the Company’s common stock. As of June 30, 2013 there were 370,000 shares available for issuance under the 2010 Plan.
Stock-Based Compensation
In accordance with accounting guidance on stock based compensation, payments in equity instruments for goods or services are accounted for by the fair value method. For the fiscal years ended June 30, 2013, 2012 and 2011, stock based compensation of $2.2 million, $1.3 million and $0.8 million, respectively, was reflected as an increase to additional paid in capital. Of the $2.2 million stock-based compensation for the fiscal year ended June 30, 2013, $2.2 million was employee related and $0 was non-employee related. Of the $1.3 million stock-based compensation for the fiscal year ended June 30, 2012, $1.2 million was employee related and $0.1 million was non-employee related. Of the $0.8 million stock-based compensation for the fiscal year ended June 30, 2011, $0.7 million was employee related and $0.1 million was non-employee related.

F - 15


The fair value of stock option awards was estimated using the Black-Scholes option-pricing model with the following assumptions and weighted-average fair values:
 
June 30,
 
2013
 
2012
 
2011
Risk-free interest rate
0.82
%
 
0.59% - 1.41%

 
1.33% - 2.64%

Dividend yield
—
%
 
—
%
 
—
%
Expected life in years
5.0 - 6.08

 
3.0 - 6.65

 
3.0 - 6.65

Expected volatility
127
%
 
119% - 137%

 
125% - 129%

The following is a summary of stock option activity for the years ended June 30, 2013, 2012 and 2011:
 
Options (in thousands)
 
Weighted
Average
Exercise Price
 
Weighted
Average Remaining
Contractual Term (in years)
 
Aggregate Intrinsic Value (in thousands)
Outstanding at June 30, 2010
8,536

 
$
0.50

 
8.39
 
$
820

Granted
2,632

 
$
1.04

 
9.65
 
$
1,336

Exercised
(470
)
 
$
0.32

 
7.54
 
$
252

Forfeited
(200
)
 
$
0.74

 

 
 
Expired or Cancelled
—

 
$
—

 

 
 
Outstanding at June 30, 2011
10,498

 
$
0.64

 
7.93
 
$
9,139

Granted
2,086

 
$
1.89

 
9.61
 
$
2,122

Exercised
(1,612
)
 
$
0.45

 
6.97
 
$
2,038

Forfeited
(27
)
 
$
1.36

 

 
 
Expired or Cancelled
—

 
$
—

 

 
 
Outstanding at June 30, 2012
10,945

 
$
0.91

 
7.43
 
$
21,219

Granted
152

 
$
2.82

 
9.03
 
$
—

Exercised
(3,319
)
 
$
0.49

 
5.46
 
$
7,128

Forfeited
(768
)
 
$
1.54

 

 
 
Expired or Cancelled
—

 
 
 
 
 
 
Outstanding at June 30, 2013
7,010

 
$
1.08

 
6.71
 
$
9,211

Exercisable at June 30, 2013
5,609

 
$
0.81

 
6.30
 
$
8,574

The Company also granted 50,000 Stock Appreciation Rights (SARs) to an employee during the year ended June 30, 2012 which are all outstanding at June 30, 2013.
The following is a summary of restricted shares granted during the years ended June 30, 2013 and 2012:
Nonvested Shares
 
Shares (in thousands)
 
Weighted Average Grant Date Fair Value
Nonvested at June 30, 2011
 
—

 
—

Granted
 
164

 
$
3.34

Vested
 
—

 
—

Forfeited
 
(2
)
 
$
3.36

Nonvested at June 30, 2012
 
162

 
3.34

Vested at June 30, 2012
 
—

 
—

 
 


 
 
Granted
 
2,808

 
2.62

Vested
 
(37
)
 
—

Forfeited
 
(196
)
 
3.25

Nonvested at June 30, 2013
 
2,737

 
2.61

Vested at June 30, 2013
 
—

 
—


F - 16


At June 30, 2013 there was $7.4 million of unrecognized compensation cost related to nonvested share-based compensation arrangements under the 2010 Plan, based on management's estimate of the shares that will ultimately vest. The Company expects to recognize such costs over a weighted average period of 3.0 years.
Warrants
As of June 30, 2013 the Company had outstanding warrants which were issued in conjunction with convertible debentures between November 2009 and February 2010.
The following is a summary of the warrant activity for the years ended June 30, 2013, 2012 and 2011 (in thousands):
 
Common
Stock
Warrants
Outstanding and exercisable, June 30, 2010
38,580

Issued
108

Cancelled
—

Exercised
(13,228
)
Expired
—

Outstanding and exercisable at June 30, 2011
25,460

Issued
270

Cancelled
—

Exercised
(12,563
)
Expired
(203
)
Outstanding and exercisable at June 30, 2012
12,964

Issued
—

Cancelled
—

Exercised
(4,723
)
Expired
—

Outstanding and exercisable at June 30, 2013
8,241

As of June 30, 2013 and 2012, the Company had no warrants classified as derivative liabilities.
As of June 30, 2011, the Company classified warrants to acquire an aggregate of 8,360,000 shares issued in conjunction with the 2009 private placement of common stock as a short-term derivative liability. The Company estimated the fair value of the liability at June 30, 2011 as $7.4 million using the Black-Scholes Merton model adjusted for dilution with the following assumptions:
1)
risk free rate of 1.33 percent;
2)
dividend yield of -0- percent;
3)
expected life of 0.72 years to 0.78 years; and
4)
a volatility factor of the expected market price of the Company’s common stock of 106 percent.
As of June 30, 2011, the Company classified warrants to acquire an aggregate of 15,168,052 shares issued in conjunction with the 2009 and 2010 convertible debentures as a long-term derivative liability. The Company estimated the fair value of the liability at June 30, 2011 as $19.9 million using the Black-Scholes Merton model adjusted for dilution with the following assumptions:
1)
risk free rate of 0.81 to 2.13 percent;
2)
dividend yield of -0- percent;
3)
expected life of 3.43 to 5.68 years; and
4)
a volatility factor of the expected market price of the Company’s common stock of between 137 and 138 percent.



F - 17


Note 5 — Income Taxes
As of June 30, 2013, the Company had a Federal net operating loss (“NOL”) carry-forward of approximately $3.3 million. The net operating losses expire in 2029 and are subject to review by the Internal Revenue Service, and are subject to U.S. Internal Revenue Code Section 382 limitations. State NOLs are $9.9 million. Foreign NOLs are $1.0 million. The income tax expense (benefit) for the years ended June 30, 2013, 2012, and 2011 consists of the following (in thousands):
 
2013
 
2012
 
2011
Income / (Loss) Before Income Taxes:
 
 
 
 
 
Domestic
$
11,250

 
$
14,556

 
$
(50,535
)
International
(97
)
 
116

 
(165
)
 
$
11,153

 
$
14,672

 
$
(50,700
)
Current Taxes:
 
 
 
 
 
Federal
$
4,087

 
$
3,758

 
$
—

State
383

 
1,121

 
92

Foreign
(33
)
 
47

 
—

Total Current Income Tax Provision
$
4,437

 
$
4,926

 
$
92

Deferred Taxes:
 
 
 
 
 
Federal
(706
)
 
(2,110
)
 
—

State
(77
)
 
(601
)
 
—

Foreign
(109
)
 
(12
)
 
—

Total Deferred Income Tax Provision
$
(892
)
 
$
(2,723
)
 
$
—

Net Income Tax Provision
$
3,545

 
$
2,203

 
$
92

The effective income tax rate for the years ended June 30, 2013 , 2012 and 2011 differs from the U.S. Federal statutory income tax rate due to the following:
 
2013
 
2012
 
2011
Federal statutory income tax rate
35.00
 %
 
35.00
 %
 
(34.00
)%
State income taxes, net of federal benefit
1.76
 %
 
5.50
 %
 
0.24
 %
Tax return to provision true-up
(2.51
)%
 
(1.01
)%
 
(1.35
)%
Permanent differences:
 
 
 
 
 
— interest on convertible debt
0.00
 %
 
0.00
 %
 
3.44
 %
— change in derivative liability
0.00
 %
 
16.14
 %
 
32.44
 %
— stock option compensation
0.78
 %
 
0.30
 %
 
0.21
 %
       — domestic production activities deduction
(2.73
)%
 
0.00
 %
 
0.00
 %
       — credit for increasing research activities
(0.67
)%
 
0.00
 %
 
0.00
 %
— other
0.08
 %
 
(0.44
)%
 
0.12
 %
Decrease in valuation allowance
0.00
 %
 
(39.45
)%
 
(0.91
)%
Net income tax provision (benefit)
31.71
 %
 
16.04
 %
 
(0.18
)%
The components of the deferred tax assets and liabilities as of June 30, 2013 and 2012 are as follows (in thousands):

F - 18


 
2013
 
2012
Deferred tax assets:
 
 
 
Federal, state, and foreign net operating loss carryovers
$
1,768

 
$
2,453

Stock option compensation
1,212

 
988

Accrued vacation, allowance for returns, bonuses & other
2,493

 
600

Gross deferred tax asset
$
5,473

 
$
4,041

 
 
 
 
Deferred tax liabilities:
 
 
 
Patents and trademarks
(536
)
 
(587
)
Change in tax accounting methods
(297
)
 
(44
)
Property & equipment
(824
)
 
(540
)
Gross deferred tax liabilities
(1,657
)
 
(1,171
)
Less: valuation allowance
(201
)
 
(147
)
Deferred tax assets, net
$
3,615

 
$
2,723

The Company has adopted accounting guidance for uncertain tax positions which provides that in order to recognize an uncertain tax benefit, the taxpayer must be more likely than not of sustaining the position, and the measurement of the benefit is calculated as the largest amount that is more than 50% likely to be realized upon recognition of the benefit. We believe the Company has no material uncertain tax positions and do not expect significant changes within the next twelve months in the amount of unrecognized tax benefits. Accordingly, we have not reserved for interest or penalties. The tax years open for examination by the Internal Revenue Service (“IRS”) include returns for fiscal years June 30, 2010 through present and the open tax years by state tax authorities include returns for fiscal years June 30, 2009 through present. In addition, the IRS and state tax authorities may examine NOLs for any previous years if utilized by the Company.
The total recognized tax benefit from settlement of stock based awards for the period ending June 30, 2013 was $1.7 million.
The Company conducts its business globally. As a result, the Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions, and are subject to examination for the open tax years of June 30, 2009 through June 30, 2012.

The Company recognizes interest expense and penalties related to income tax matters in income tax expense. No significant amounts were recorded related to interest expense and penalties related to income tax matters by the Company during the years ended June 30, 2013, 2012, or 2011, respectively.

Note 6 — Commitments and Contingencies
Operating Leases

The Company leases its facilities under non-cancelable operating leases, which expire at various dates through 2023. The facilities' leases contain renewal options and are subject to cost increases. Future minimum annual payments under non-cancelable operating leases at June 30, 2013 are as follows (in thousands):

Year ending June 30,
 
2014
$
2,337

2015
2,714

2016
2,688

2017
2,727

2018
1,284

Thereafter
7,272

Total future minimum Lease payments
$
19,022

Rent expense totaled $1.8 million, $0.4 million, and $0.3 million for the years ended June 30, 2013, 2012, and 2011, respectively.

F - 19


Contingencies
The Company is occasionally involved in lawsuits and disputes arising in the normal course of business. In the opinion of management, based upon advice of counsel, the likelihood of an adverse outcome against the Company is remote. As such, management believes that the ultimate outcome of these lawsuits will not have a material impact on the Company's financial position or results of operations.


-F - 20-


Note 7 — Interim Financial Results (Unaudited)
The following summarizes selected quarterly financial information for quarterly periods during the years ended June 30, 2013 and 2012:
LIFEVANTAGE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED QUARTERLY RESULTS
(in thousands except per share data)
 
Quarter
 
Year ended June 30, 2013
Year ended June 30, 2013
First
 
Second
 
Third
 
Fourth
 
Sales, net
$
52,859

 
$
53,438

 
$
50,370

 
$
51,511

 
$
208,178

Gross profit
45,052

 
38,760

 
43,501

 
44,222

 
171,535

Net income (loss)
$
4,165

 
$
209

 
$
3,416

 
$
(182
)
 
$
7,608

Per common share:
 
 
 
 
 
 
 
 
 
Income (loss) per share, basic
$
0.04

 
$
—

 
$
0.03

 
$
—

 
$
0.07

Income (loss) per share diluted
$
0.03

 
$
—

 
$
0.03

 
$
—

 
$
0.06

  
Quarter
 
Year ended June 30, 2012
Year ended June 30, 2012
First
 
Second
 
Third
 
Fourth
 
Sales, net
$
20,083

 
$
25,284

 
$
36,212

 
$
44,604

 
$
126,183

Gross profit
17,127

 
21,604

 
31,223

 
38,177

 
$
108,131

Net income (loss)
$
3,724

 
$
8,759

 
$
(4,846
)
 
$
4,832

 
$
12,469

Per common share:
 
 
 
 
 
 
 
 
 
Income (loss) per share, basic
$
0.04

 
$
0.09

 
$
(0.05
)
 
$
0.04

 
$
0.12

Income (loss) per share, diluted
$
0.02

 
$
0.05

 
$
(0.05
)
 
$
0.04

 
$
0.11

Note 8 — Subsequent Events
We recently announced our intention to conduct a self-tender offer to purchase up to $40 million of our common stock.


F - 21
Ex. 10.12 FY 2014 Incentive Plan


 
 
LIFEVANTAGE CORPORATION
FY2014 ANNUAL INCENTIVE PLAN

SECTION 1.
INTRODUCTION.
The Board adopted this Lifevantage Corporation FY2014 Annual Incentive Plan as of the Adoption Date.
The purpose of this Plan is to provide appropriate incentives to Participants to grow Company revenues and EBITDA and to manage Company department investment and expense and achieve employee developmental and strategic personal goals.
The Plan seeks to achieve its purpose by granting Awards which provide for discretionary Performance Bonus payments for the Fiscal Year that are based on the respective achievements of Company Performance Metrics and Individual Performance Metrics. Performance Bonus amounts will be determined by a percent-of-goal approach and measured and paid after the end of the Fiscal Year. Performance Bonus payments may only be made with cash. No Shares will ever be issued under this Plan.
Capitalized terms shall have the meaning provided in Section 2 unless otherwise provided in this Plan or any applicable Award Agreement.
SECTION 2.
DEFINITIONS. If a Participant's Award Agreement (or other written agreement executed by and between Participant and the Company) expressly includes defined terms that expressly are different from and/or conflict with the defined terms contained in this Plan then the defined terms contained in the Award Agreement (or other written agreement executed by and between Participant and the Company) shall govern and shall supersede the definitions provided in this Plan.
(a)“Adoption Date” means June 24, 2013.
(b)“Affiliate” means any entity other than a Subsidiary, if the Company and/or one or more Subsidiaries own not less than 50% of such entity. For purposes of determining an individual's “Service,” this definition shall include any entity other than a Subsidiary, if the Company, a Parent and/or one or more Subsidiaries own not less than 50% of such entity.
(c)“Award” means an opportunity for a Participant to earn a discretionary cash Performance Bonus for the Fiscal Year. No payment underlying an Award is earned until it has been paid to the Participant and all payments remain subject to the Committee's discretion at all times based on all relevant factors, including but not limited to business conditions, performance issues, employment status, and/or any equitable considerations. A Participant may have at most one outstanding Award under the Plan. A Participant's Award will cease to be outstanding once the Participant is no longer an Eligible Employee.
(d)“Award Agreement” means an agreement between the Company and a Participant evidencing an Award.
(e)“Base Salary” means, with respect to a Participant, the annual base salary that such Participant is receiving as of July 1, 2013.
(f)“Board” means the Board of Directors of the Company, as constituted from time to time.
(g)“Change in Control” means the occurrence of any one or more of the following: (i) any merger, consolidation or business combination in which the shareholders of the Company immediately prior to the merger, consolidation or business combination do not own at least a majority of the outstanding equity interests of the surviving parent entity, (ii) the sale of all or substantially all of the Company's assets, (iii) the




acquisition of beneficial ownership or control of (including, without limitation, power to vote) a majority of the outstanding Shares by any person or entity (including a "group" as defined by or under Section 13(d)(3) of the Exchange Act), (iv) the dissolution or liquidation of the Company, (v) a contested election of directors, as a result of which or in connection with which the persons who were directors of the Company before such election or their nominees cease to constitute a majority of the Board, or (vi) any other event specified by the Board or the Committee.
A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company's incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company's securities immediately before such transactions.
(h)“Code” means the Internal Revenue Code of 1986, as amended, and the regulations and interpretations promulgated thereunder.
(i)“Committee” means the Compensation Committee of the Board.
(j)“Company” means Lifevantage Corporation, a Colorado corporation.
(k)“Company Performance Metrics” means the two separate Company financial performance goals for the Fiscal Year and these two goals consist of (i) Company revenue and (ii) EBITDA. Achievement of Company Performance Metrics will comprise 70% of a Participant's Performance Bonus opportunity. The Company Performance Metrics will have four hurdle levels (Threshold, Probable, Stretch and Super Stretch) and corresponding hurdle dollar amounts which will be reflected in the Performance Bonus Schedule. The hurdle dollar amounts will be appropriately adjusted by the Committee if a Change in Control occurs during the Fiscal Year.
(l)“Department Budget” means the department budget established for the Fiscal Year for a Participant. All of the Company's Department Budgets collectively are referred to in this Plan as the “Company Department Budgets”. Department Budgets can be adjusted by the Company during the first eleven (11) months of the Fiscal Year to accommodate changes in business needs provided the aggregate budget amount for Company Department Budgets does not change from the Company's approved Fiscal Year plan as of July 1, 2013.
(m)“EBITDA” means the Company's Fiscal Year earnings before interest, taxes, depreciation and amortization.
(n)“Eligible Employee” means an Employee who:
(i)
is not on a leave of absence for any reason for ninety calendar days or more in the Fiscal Year;
(ii)
is not on any type of corrective action plan; and
(iii)
is not a participant in the Company's FY2014 Sales Incentive Plan.
(o)“Employee” means any individual who is a common-law employee of the Company, or of a Parent, or of a Subsidiary or of an Affiliate.
(p)“Exchange Act” means the Securities Exchange Act of 1934, as amended.
(q)“Fiscal Year” means the Company's fiscal year for 2014 which runs from July 1, 2013 through June 30, 2014.
(r)“GAAP” means United States generally accepted accounting principles as established by the Financial Accounting Standards Board.
(s)“Individual Performance Metrics” means the specific, measureable developmental objectives for a Participant established in writing by a Participant's supervisor before July 2013 (or within 30 days of




the Eligible Employee becoming a Participant if such participation in the Plan commences after July 1, 2013). Achievement of Individual Performance Metrics will comprise 30% of a Participant's Performance Bonus opportunity.
For all Participants, the Performance Bonus amount for the Individual Performance Metrics will be based upon the Participant's supervisor's written assessment of the Participant's performance in the Fiscal Year and the degree of Participant's achievement of his/her Individual Performance Metrics. This assessment of performance must be reviewed and concurred with by the supervisor's manager prior to review with the Participant. The Participant's immediate supervisor and his/her supervisor will determine the magnitude of the Participant's Individual Performance Metrics Performance Bonus based on the Participant's individual performance and subject to the limits on payment imposed by the Performance Bonus Schedule. No individual Performance Bonus payment amount will be communicated or paid to the Participant until the review process is completed and the Participant, his/her supervisor, and the next level manager have acknowledged their review of the performance assessment document in writing.
In addition, the Individual Performance Metrics will have four hurdle levels (Threshold, Probable, Stretch and Super Stretch) and corresponding hurdle dollar amounts which will be reflected in the Performance Bonus Schedule. The hurdle dollar amounts will be appropriately adjusted by the Committee if a Change in Control occurs during the Fiscal Year.
(t)“Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the Adoption Date shall be considered a Parent commencing as of such date.
(u)“Participant” means an Eligible Employee who has been selected by the Committee to participate in this Plan and receive an Award. An individual will cease to be a Participant once such individual is no longer an Eligible Employee.
(v)“Performance Bonus” means the discretionary cash incentive bonuses that a Participant can separately earn for achievement of Company Performance Metrics and Individual Performance Metrics pursuant to his/her Award.
(w) “Performance Bonus Percentage” means, except as expressed otherwise in an Award Agreement, the percentages identified in the Performance Bonus Schedule which are based on the Participant's job level and the degree of actual achievement of the Performance Metrics. In no case can a Participant's Performance Bonus amount for a Performance Metric exceed the product of the Performance Bonus Percentage obtained from the Performance Bonus Schedule multiplied by the Participant's Base Salary.
(x)“Performance Bonus Schedule” means the schedule that the Committee will establish which will specify the hurdle dollar amounts for each of the four hurdle levels along with the Performance Bonus Percentages for each job level and hurdle level.
(y)“Performance Metrics” means the Company Performance Metrics and the Individual Performance Metrics. Each of the two Performance Metrics will be evaluated and measured separately and each can generate a potential Performance Bonus payment based on the respective degrees of achievement of each.
(z)“Plan” means this Lifevantage Corporation FY2014 Annual Incentive Plan as it may be amended by the Board in its discretion.
(aa)“Reduction Percentage” means the reduction that may be applied to a Participant's Performance Bonus portion for Company Performance Metrics. For Senior Staff Participants, the Performance Bonus portion for Company Performance Metrics shall be reduced by 5% for every 10% that




Company Department Budgets exceed their Fiscal Year budget plan. For Participants who are not Senior Staff, the Performance Bonus portion for Company Performance Metrics shall be reduced by 5% for every 10% that the Participant's Department Budget exceeds its Fiscal Year budget plan.
(ab)“Senior Staff” means the Company's Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Science Officer, General Counsel, most senior Human Resources executive, President of Lifevantage Japan K.K., General Manager Asia Pacific, and any other senior management position designated by the Committee.
(ac)“Separation From Service” has the meaning provided to such term under Code Section 409A and the regulations promulgated thereunder.
(ad)“Service” means uninterrupted service as an Employee. Service will be deemed terminated as soon as the entity to which Service is being provided is no longer either (i) the Company, (ii) a Parent, (iii) a Subsidiary or (iv) an Affiliate.
(ae)“Share” means a share of Company common stock (which has a par value of $0.001 per Share).
(af)“Specified Employee” means a Participant who is considered a “specified employee” within the meaning of Code Section 409A.
(ag)“Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the Adoption Date shall be considered a Subsidiary commencing as of such date.
SECTION 3. ADMINISTRATION.
(a)Committee Composition. A Committee shall administer the Plan. Unless the Board provides otherwise, the Board's Compensation Committee (or a comparable committee of the Board) shall be the Committee. The Board may also at any time terminate the functions of the Committee and reassume all powers and authority previously delegated to the Committee.
(b)Authority of the Committee. Subject to the provisions of the Plan, the Committee shall have full authority and discretion to take any actions it deems necessary or advisable for the administration of the Plan. Such actions shall include without limitation:
(i) determining Eligible Employees who are to receive Awards under the Plan and the amount of payments provided to a Participant (if any) with respect to an Award;
(ii) determining the terms, conditions, Performance Metrics (or other objective/subjective goals (if any)) and their degree of satisfaction, and other features and conditions of such Awards, and amending such Awards;
(iii) correcting any defect, supplying any omission, or reconciling or clarifying any inconsistency in the Plan or any Award Agreement;
(iv) waiving restrictions of Awards at any time and under such terms and conditions as it deems appropriate;
(v) interpreting any extenuating circumstances and modifying the Plan or Award Agreement in its discretion as needed;
(vi) accepting or canceling an order or discontinuing service to a customer;
(vii) disallowing sales that are determined not to be in the normal course of business;




(viii) interpreting the Plan and any Award Agreements;
(ix) making such modifications to the Plan as are necessary to effectuate the intent of the Plan as a result of any changes in applicable laws or accounting treatment;
(x) modifying, amending or revoking the Plan, or discontinuing (either temporarily or permanently) the distribution of any payment at any time and for any reason and making appropriate adjustments to revenues, EBITDA or compensation targets due to favorable or unfavorable events unrelated to a Participant's efforts of performance; and
(xi) making all other decisions relating to the operation of the Plan;
(xii) granting Awards to Eligible Employees who are foreign nationals on such terms and conditions different from those specified in the Plan, which may be necessary or desirable to foster and promote achievement of the purposes of the Plan, and adopting such modifications, procedures, and/or subplans (with any such subplans attached as appendices to the Plan) and the like as may be necessary or desirable to comply with provisions of the laws or regulations of other countries or jurisdictions to ensure the viability of the benefits from Awards granted to Participants employed in such countries or jurisdictions, or to meet the requirements that permit the Plan to operate in a qualified or tax efficient manner, and/or comply with applicable foreign laws or regulations.
The Committee may adopt such rules or guidelines, as it deems appropriate to implement the Plan. The Committee's determinations under the Plan shall be final, conclusive and binding on all persons. The Committee's decisions and determinations need not be uniform and may be made selectively among Participants in the Committee's sole discretion. The Committee's decisions and determinations will be afforded the maximum deference provided by applicable law.
The Company shall effect the granting of Awards under the Plan in accordance with the determinations made by the Committee, by execution of instruments in writing in such form as approved by the Committee.
(c)Indemnification. To the maximum extent permitted by applicable law, each member of the Committee, or of the Board, or any persons (including without limitation Employees and officers) who are delegated by the Board or Committee to perform administrative functions in connection with the Plan, shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan or any Award Agreement, and (ii) from any and all amounts paid by him or her in settlement thereof, with the Company's approval, or paid by him or her in satisfaction of any judgment in any such claim, action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or under any power that the Company may have to indemnify them or hold them harmless.
SECTION 4. GENERAL.
(a)General Eligibility. Only Eligible Employees shall be eligible for designation as Participants.
(b)No Rights as a Shareholder. A Participant shall have no rights as a shareholder with respect to any Award.




(c)Termination of Service. Except as otherwise provided in the applicable Award Agreement, a Participant's outstanding Award shall terminate without consideration upon termination of such Participant's Service.
(d)Code Section 409A. Notwithstanding anything in the Plan to the contrary, the Plan and Awards granted hereunder are intended to be exempt from the requirements of Code Section 409A and shall be interpreted in a manner consistent with such intention. In the event that any provision of the Plan or an Award Agreement is determined by the Committee to not comply with the applicable requirements of Code Section 409A or the applicable regulations and other guidance issued thereunder, the Committee shall have the authority to take such actions and to make such changes to the Plan or an Award Agreement as the Committee deems necessary to comply with such requirements. Any payment made pursuant to any Award shall be considered a separate payment and not one of a series of payments for purposes of Code Section 409A.
Notwithstanding the foregoing or anything elsewhere in the Plan or an Award Agreement to the contrary, if upon a Participant's Separation From Service he/she is then a Specified Employee, then solely to the extent necessary to comply with Code Section 409A and avoid the imposition of taxes under Code Section 409A, the Company shall defer payment of “nonqualified deferred compensation” subject to Code Section 409A payable as a result of and within six (6) months following such Separation From Service under this Plan until the earlier of (i) the first business day of the seventh month following the Participant's Separation From Service, or (ii) ten (10) days after the Company receives written confirmation of the Participant's death. Any such delayed payments shall be made without interest.
While it is intended that all payments and benefits provided under the Plan or an Award will be exempt from (or comply with) Code Section 409A, the Company makes no representation or covenant to ensure that the payments under the Plan or an Award are exempt from or compliant with Code Section 409A. In no event whatsoever shall the Company be liable if a payment or benefit under the Plan or an Award is challenged by any taxing authority or for any additional tax, interest or penalties that may be imposed on a Participant by Code Section 409A or any damages for failing to comply with Code Section 409A. The Participant will be entirely responsible for any and all taxes on any benefits payable to such Participant as a result of the Plan or an Award.
(e)Electronic Communications. Subject to compliance with applicable law and/or regulations, an Award Agreement or other documentation or notices relating to the Plan and/or Awards may be communicated to Participants (and executed by Participants) by electronic media.
(f)Unfunded Plan. The Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Participants who are granted Awards under this Plan, any such accounts will be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets which may at any time be represented by Awards, nor shall this Plan be construed as providing for such segregation, nor shall the Company or the Board or Committee be deemed to be a trustee of cash to be awarded under the Plan.
(g)Liability of Company. The Company (or members of the Board or Committee) shall not be liable to a Participant or other persons as to any unexpected or adverse tax consequence or any tax consequence expected, but not realized, by any Participant or other person due to the grant, receipt, or settlement of any Award granted hereunder.
(h)Reformation. In the event any provision of this Plan shall be held illegal or invalid for any reason, such provisions will be reformed by the Board if possible and to the extent needed in order to be held legal and valid. If it is not possible to reform the illegal or invalid provisions then the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.




(i)Successor Provision. Any reference to a statute, rule or regulation, or to a section of a statute, rule or regulation, is a reference to that statute, rule, regulation, or section as amended from time to time, both before and after the Adoption Date and including any successor provisions.
(j)Governing Law. This Plan and (unless otherwise provided in the Award Agreement) all Awards shall be construed in accordance with and governed by the laws of the State of Utah, but without regard to its conflict of law provisions. The Committee may provide that any dispute as to any Award shall be presented and determined in such forum as the Committee may specify, including through binding arbitration. Unless otherwise provided in the Award Agreement, recipients of an Award under the Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of Utah to resolve any and all issues that may arise out of or relate to the Plan or any related Award Agreement.
(k)Assignment or Transfer of Awards. No Award shall be transferable by the Participant. No Award or interest therein may be transferred, assigned, pledged or hypothecated by the Participant during his or her lifetime, whether by operation of law or otherwise, nor may an Award be anticipated, assigned, attached, garnished, optioned, transferred or made subject to any creditor's process, whether voluntarily, involuntarily or by operation of law, nor may an Award be made subject to execution, attachment or similar process. Any act in violation of this Section 4(k) shall be null and void.
(l)Company Rights. The Company reserves the right at any time to assign accounts, or remove accounts, or to accept or reject orders from customers, and to refrain from paying incentive on draw fees the Company receives, freight charges to customers or with respect to similar or dissimilar transactions..
SECTION 5. TERMS AND CONDITIONS OF AWARDS.
(a)Award Agreement. Each grant of an Award under the Plan shall be evidenced by an executed Award Agreement between the Participant and the Company in the form attached as Exhibit A or such other form that the Committee adopts. Such Award shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various Award Agreements entered into under the Plan need not be identical.
(b)Eligibility for Payments. An individual must be a Participant on the date of any Performance Bonus payment in order to receive such payment.
(c)Determination of Performance Bonus Amounts. After the Fiscal Year (or within 15 days before a Change in Control that occurs during the Fiscal Year), the Committee will determine the actual Company revenues and EBITDA for the Fiscal Year (in the case of a Change in Control, the actual Company revenues and EBITDA will be measured as of through the end of the month prior to the month of the Change in Control). These revenue and EBITDA figures will derive the Performance Bonus Percentages from the Performance Bonus Schedule with the lowest degree of performance between revenue and EBITDA determining which hurdle level (if any) was attained. If the actual revenue and EBITDA fall between two hurdle levels then there will be proportionate scaling between the two hurdle levels to determine the Performance Bonus Percentage (and such scaling shall be based upon the lowest degree of performance between revenue or EBITDA). The achieved Performance Bonus Percentages will then be multiplied by the Participant's Base Salary to determine the potential Performance Bonus amount for each of the Company Performance Metrics and Individual Performance Metrics. The Performance Bonus amount for the Company Performance Metrics will then be reduced by the Reduction Percentage if applicable as described in Section 2(y). The Performance Bonus amount for the Individual Performance Metrics will then be reduced by the Participant's supervisor if applicable as described in Section 2(s). The Committee may also apply its discretion to reduce any Participant's Performance Bonus. After taking into account the forgoing process of this Section 5(c) and subject to the other terms of this Plan and the Award Agreement, a Participant will then be eligible to receive the resulting Performance Bonus amounts for the Company Performance Metrics and/or Individual Performance Metrics in accordance with Section 5(d).




(d)Form and Time of Settlement of Awards. Payment of any Performance Bonuses shall be made solely in the form of cash and in the time frames set forth in this Section 5(d). Subject to the following sentence, any Performance Bonuses shall be paid out to Participants during the first 2.5 months after the end of the Fiscal Year. Notwithstanding the foregoing, all Performance Bonuses payments will be paid earlier upon the consummation of a Change in Control (and performance will be measured on a pro-rated basis).
(e)Creditors' Rights. A holder of an Award shall have no rights other than those of a general creditor of the Company. Awards represent an unfunded and unsecured obligation of the Company.
SECTION 6. ADJUSTMENTS.
Notwithstanding satisfaction of any Company Performance Metrics or Individual Performance Metrics, the value of a Participant's Award or Performance Bonus or any other benefits granted, issued, retainable, vested and/or to be paid under an Award on account of satisfaction of such Performance Metrics may be reduced by the Committee on the basis of such further considerations as the Committee in its sole discretion shall determine. In other words, this Plan is a discretionary plan and a Participant has no rights to any payment and has not earned any payment under this Plan unless and until the Company has actually provided the Participant with the applicable payment.
SECTION 7. LIMITATIONS ON RIGHTS.
(a)Retention Rights. Neither the Plan nor any Award granted under the Plan shall be deemed to give any individual a right to remain in Service or to continued participation in the Plan. The Company and its Parents and Subsidiaries and Affiliates reserve the right to terminate the Service of any person at any time, and for any reason, subject to applicable laws, the Company's Articles of Incorporation and Bylaws, and a written employment agreement (if any).
(b)Other Company Benefit and Compensation Programs. Payments and other benefits received by a Participant under an Award made pursuant to the Plan shall not be deemed a part of a Participant's regular, recurring compensation for purposes of the termination indemnity or severance pay law of any state. Furthermore, such benefits shall not be included in, nor have any effect on, the determination of benefits under any other employee benefit plan or similar arrangement provided by the Company or a Subsidiary or Affiliate unless expressly so provided by such other plan or arrangement, or except where the Committee expressly determines that inclusion of an Award or portion of an Award should be included. Awards under the Plan may be made in combination with or in addition to, or as alternatives to, grants, awards or payments under any other Company or Subsidiary or Affiliate plans. The Company or any Subsidiary or any Affiliate may adopt such other compensation programs and additional compensation arrangements (in addition to this Plan) as it deems necessary to attract, retain, and motivate officers, directors, employees or independent contractors for their service with the Company and its Subsidiaries and its Affiliates.
(c)Clawback Policy. The Company may (i) cause the cancellation of any Award, (ii) require reimbursement of any Award by a Participant and (iii) effect any other right of recoupment of equity or other compensation provided under this Plan or otherwise in accordance with Company policies as may be adopted and/or modified from time to time by the Company and/or applicable law (each, a “Clawback Policy”). In addition, a Participant may be required to repay to the Company certain previously paid compensation, whether provided under this Plan or an Award Agreement or otherwise, in accordance with the Clawback Policy. By accepting an Award, a Participant is also agreeing to be bound by the Company's Clawback Policy which may be amended from time to time by the Company in its discretion (including without limitation to comply with applicable laws or stock exchange requirements) and is further agreeing that all of the Participant's Awards may be unilaterally amended by the Company to the extent needed to comply with the Clawback Policy.
SECTION 8. TAXES.




A Participant shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations (including without limitation federal, state, local and foreign taxes) that arise in connection with his or her Award. The Company shall not be required to make any payment under the Plan until such obligations are fully satisfied and the Company shall, to the maximum extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant.
SECTION 9. DURATION AND AMENDMENTS.
(a)Term of the Plan. The Plan is effective on July 1, 2013 and may be terminated by the Board on any date pursuant to Section 10(b). No further Awards may be granted after the earlier of the Board's termination of the Plan under Section 10(b), the date of a Change in Control, or June 30, 2014. This Plan will terminate after the Company has provided all payments (if any) to Participants. This Plan will not in any way affect outstanding awards that were issued under any other Company compensation plans.
(b)Right to Amend or Terminate the Plan. The Board may amend or terminate the Plan or any outstanding Awards at any time and for any reason. In the event of any conflict in terms between the Plan and any Award Agreement, the terms of the Plan shall prevail and govern.
SECTION 10. EXECUTION.
To record the adoption of this Plan by the Board, the Company has caused its duly authorized officer to execute this Plan on behalf of the Company.
 
LIFEVANTAGE CORPORATION

 
By:
 
 
Title:
 

 





 
EXHIBIT A
LIFEVANTAGE CORPORATION FY2014 ANNUAL INCENTIVE PLAN
AWARD AGREEMENT

Pursuant to the Lifevantage Corporation FY2014 Annual Incentive Plan (“AIP”), the Company hereby informs the Participant named below that he/she has been selected to be a Participant subject to Participant timely executing and delivering to the Company this Award Agreement (the "Agreement"). The governing terms and conditions of Participant's participation in the AIP are set forth herein and in the AIP and Participant agrees to be bound by such terms and conditions. The entire text of the AIP is incorporated in this Agreement by reference. Certain capitalized terms used in this Agreement are defined in the AIP. This Agreement and the AIP and its Exhibits A and B constitute the entire understanding between the Participant and the Company regarding this incentive compensation opportunity. Any prior agreements, commitments or negotiations concerning this incentive compensation opportunity are superseded except as provided in the AIP. As a condition of participation in the AIP and receiving payments under the AIP and notwithstanding any obligation that the Company has to make certain public disclosures about the AIP and its Awards, Participant agrees never to disclose any information regarding the existence or contents of the AIP or this Agreement or Participant's participation in the AIP to any third party (including without limitation other Company employees) except for Participant's spouse, Participant's financial/tax advisors, and/or Participant's legal counsel, each of whom will be informed by Participant of the foregoing confidentiality obligations and each of whom will similarly agree to also maintain such confidentiality.
Name of Participant: ___________________________________________
Date of Becoming Participant: ______, 201_
Job Level: __________________________________________________
Annual Base Salary: ____________________________________________
Name of Department: ___________________________________________
Individual Performance Metrics:


This Agreement will be interpreted and enforced under the laws of the State of Utah.
By signing below, the Participant agrees to all of the terms and conditions described in this Agreement and in the AIP and its exhibits.
Participant:    ________________________            _______________________
(Signature)                        (Date)
Company:    ________________________            _______________________    
(Signature)                         (Date)
Title:         ________________________                



Ex. 10.13 FY2014 Sales Incentive Plan



 
LIFEVANTAGE CORPORATION
FY2014 SALES INCENTIVE PLAN

SECTION 1.
INTRODUCTION.
The Board adopted this Lifevantage Corporation FY2014 Sales Incentive Plan as of the Adoption Date.
The purpose of this Plan is to align Company sales personnel with the Company's business strategy and key objectives. Specifically, the Plan is designed to:
•
Ensure alignment of expectations between the sales organization and individual Participants;
•
Focus on growth in enrollment and Company revenues;
•
Support reductions in distributor attrition; and
•
Ensure a pay for performance philosophy where a Participant is recognized and rewarded for achieving results.
The Plan seeks to achieve its purpose by granting Awards which provide for discretionary Performance Bonus payments that are based on achievement of Performance Metrics and with actual payment of any earned bonus determined as a percentage of a Participant's Base Salary. Annual performance targets (from the Company's approved Fiscal Year 2014 Plan) have been divided into quarterly performance expectations for three discrete Performance Metrics. Annual incentives paid will be determined by a percent-of-goal approach and measured and paid on a quarterly basis. No Shares will ever be issued under this Plan. Award payments may only be made with cash.
Capitalized terms shall have the meaning provided in Section 2 unless otherwise provided in this Plan or any applicable Award Agreement.
SECTION 2. DEFINITIONS. If a Participant's Award Agreement (or other written agreement executed by and between Participant and the Company) expressly includes defined terms that expressly are different from and/or conflict with the defined terms contained in this Plan then the defined terms contained in the Award Agreement (or other written agreement executed by and between Participant and the Company) shall govern and shall supersede the definitions provided in this Plan.
(a)“Adoption Date” means June 24, 2013.
(b)“Affiliate” means any entity other than a Subsidiary, if the Company and/or one or more Subsidiaries own not less than 50% of such entity. For purposes of determining an individual's “Service,” this definition shall include any entity other than a Subsidiary, if the Company, a Parent and/or one or more Subsidiaries own not less than 50% of such entity.
(c)“Award” means an opportunity for a Participant to earn a discretionary cash Performance Bonus for each Quarter that the Award remains outstanding based on achievement of Performance Metrics for such Quarter. No payment underlying an Award is earned until it has been paid to the Participant and all payments remain subject to the Committee's discretion at all times based on all relevant factors, including but not limited to business conditions, performance issues, employment status, and/or any equitable considerations. A Participant may have at most one




outstanding Award under the Plan. A Participant's Award will cease to be outstanding once the Participant is no longer an Eligible Employee.
(d)“Award Agreement” means an agreement between the Company and a Participant evidencing an Award. The Award Agreement may specify the terms and conditions for one or more Quarters, including for the entire Fiscal Year.
(e)“Base Salary” means, with respect to a Participant, the annual base salary that such Participant is receiving as of July 1, 2013.
(f)“Board” means the Board of Directors of the Company, as constituted from time to time.
(g)“Cause” means, except as may otherwise be provided in a Participant's Award Agreement, (i) dishonesty or fraud, (ii) serious willful misconduct, (iii) unauthorized use or disclosure of confidential information or trade secrets, (iv) conviction or confession of a felony, or (v) any other act or omission by a Participant that, in the opinion of the Company, could reasonably be expected to adversely affect the Company's or a Subsidiary's or an Affiliate's business, financial condition, prospects and/or reputation. In each of the foregoing subclauses (i) through (v), whether or not a “Cause” event has occurred will be determined by the Committee whose determination shall be final, conclusive and binding. A Participant's Service shall be deemed to have terminated for Cause if, after the Participant's Service has terminated, facts and circumstances are discovered that would have justified a termination for Cause, including, without limitation, violation of material Company policies or breach of confidentiality or other restrictive covenants that may apply to the Participant.
(h)“Change in Control” means the occurrence of any one or more of the following: (i) any merger, consolidation or business combination in which the shareholders of the Company immediately prior to the merger, consolidation or business combination do not own at least a majority of the outstanding equity interests of the surviving parent entity, (ii) the sale of all or substantially all of the Company's assets, (iii) the acquisition of beneficial ownership or control of (including, without limitation, power to vote) a majority of the outstanding Shares by any person or entity (including a "group" as defined by or under Section 13(d)(3) of the Exchange Act), (iv) the dissolution or liquidation of the Company, (v) a contested election of directors, as a result of which or in connection with which the persons who were directors of the Company before such election or their nominees cease to constitute a majority of the Board, or (vi) any other event specified by the Board or the Committee.
A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company's incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company's securities immediately before such transactions.
(i)“Code” means the Internal Revenue Code of 1986, as amended, and the regulations and interpretations promulgated thereunder.
(j)“Committee” means the committee described in Section 3.
(k)“Company” means Lifevantage Corporation, a Colorado corporation.
(l)“Compensation Committee” means the Compensation Committee of the Board.
(m)“Eligible Employee” means an Employee who:
(1)is responsible for sales targets within the sales organization (must be a sales manager or above);




(2)is not on a leave of absence for any reason for thirty calendar days or more in a Quarter;
(3)is not on any type of corrective action plan; and
(4)is not a participant in the Company's FY2014 Annual Incentive Plan.
(n)“Employee” means any individual who is a common-law employee of the Company, or of a Parent, or of a Subsidiary or of an Affiliate.
(o)“Exchange Act” means the Securities Exchange Act of 1934, as amended.
(p)“Fiscal Year” means the Company's fiscal year for 2014 which runs from July 1, 2013 through June 30, 2014.
(q)“GAAP” means United States generally accepted accounting principles as established by the Financial Accounting Standards Board.
(r)“Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the Adoption Date shall be considered a Parent commencing as of such date.
(s)“Participant” means an Eligible Employee who has been selected by the Committee to participate in this Plan and receive an Award. An individual will cease to be a Participant once such individual is no longer an Eligible Employee.
(t)“Performance Bonus” means the discretionary cash incentive bonuses that a Participant can earn pursuant to his/her Award.
(u)“Performance Expectation” means, with respect to a Performance Metric, the target quantitative expected performance that is enumerated in a Participant's Award Agreement.
(v)“Performance Metrics” means the three separate performance goals in each Quarter for an Award and these three goals consist of (i) Company revenue, (ii) enrollment, and (iii) distributor attrition rate as described further below.
Performance Metrics
 
Description
Revenue
 
Based on achievement of Company revenue goals for assigned geography/territory/accounts
Enrollment
 
Based on achievement of enrollment goals for assigned geography/territory/accounts
Distributor Attrition Rate
 
Based on achievement of attrition rate goals assigned by management for assigned geography
(w)“Performance Metric Measurement” means, except as otherwise provided in an Award Agreement, the following potential payments for a Performance Metric based on the below degree of achievement of the Performance Metric in a Quarter. The degree of achievement of each Performance Metric shall be determined by the Committee in accordance with GAAP and/or internal Company financial reporting to the extent applicable. Each Performance Metric, and its related payment that can be earned, is measured and evaluated separately in each Quarter. The threshold level of performance in order to be eligible for a quarterly payment for a Performance Metric is 90% of Performance Expectation. However, after the Fiscal Year, the Committee may in its discretion provide for additional compensation for a Participant with respect to a Performance Metric




if there was below 90% achievement of the Performance Expectation in one or more Quarters for such Performance Metric but the overall annual Performance Expectation for the Performance Metric was exceeded.
Degree of Achievement
 
Potential Payment for Performance Metric
Less than 90% of Performance Expectation
 
None
Between 90% and 100% of Performance Expectation
 
Proportionate scaling between 50% and 100% of Target Amount
Above 100% of Performance Expectation
 
Proportionate scaling such at for each additional 1% achievement over Performance Expectation, potential payment increases by 4% of Target Amount
(x)“Plan” means this Lifevantage Corporation FY2014 Sales Incentive Plan as it may be amended by the Board in its discretion.
(y)“Quarter” means a fiscal quarter that is contained within the Fiscal Year. There are four Quarters in the Fiscal Year.
(z)“Relative Weight” means a percentage between 0% and 100% that is assigned to each Performance Metric in an Award Agreement to determine the relative weight of a Performance Metric. The sum of the Relative Weights in each Award shall equal 100%.
(aa)“Separation From Service” has the meaning provided to such term under Code Section 409A and the regulations promulgated thereunder.
(ab)“Service” means uninterrupted service as an Employee. Service will be deemed terminated as soon as the entity to which Service is being provided is no longer either (i) the Company, (ii) a Parent, (iii) a Subsidiary or (iv) an Affiliate.
(ac)“Share” means a share of Company common stock (which has a par value of $0.001 per Share).
(ad)“Specified Employee” means a Participant who is considered a “specified employee” within the meaning of Code Section 409A.
(ae)“Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the Adoption Date shall be considered a Subsidiary commencing as of such date.
(af)“Target Amount” means, except as expressed otherwise in an Award Agreement, the following target payment amounts for the Fiscal Year for a Performance Metric,. The Target Amount would be attained, for example, if 100% of a Performance Metric's Performance Expectation was achieved in each of the four Quarters. The below figures are for the full Fiscal Year but the Award Agreement will apportion such amounts to each Quarter (and such allocation need not be uniform between the Quarters and will be further adjusted if an Eligible Employee is not a Participant for the entire Fiscal Year).




Participant Job Level
 
Annual Target Amount in Dollars
Senior Vice President or above
 
50% multiplied by Relative Weight multiplied by Base Salary
Vice President
 
35% multiplied by Relative Weight multiplied by Base Salary
Below Vice President
 
20% multiplied by Relative Weight multiplied by Base Salary
(ag)“Termination Date” means the date on which a Participant's Service terminates.
SECTION 3. ADMINISTRATION.
(a)Committee Composition. A Committee shall administer the Plan. Unless the Board or the Compensation Committee provides otherwise (which either may do in their discretion), the Company's Chief Executive Officer shall constitute the “Committee” for purposes of this Plan. The Board may also at any time terminate the functions of the Committee and reassume all powers and authority previously delegated to the Committee.
(b)Authority of the Committee. Subject to the provisions of the Plan, the Committee shall have full authority and discretion to take any actions it deems necessary or advisable for the administration of the Plan. Such actions shall include without limitation:
(i) determining Eligible Employees who are to receive Awards under the Plan and the amount of payments provided to a Participant (if any) with respect to an Award;
(ii) determining the terms, conditions, Performance Metrics (or other objective/subjective goals (if any)) and their degree of satisfaction, and other features and conditions of such Awards, and amending such Awards;
(iii) correcting any defect, supplying any omission, or reconciling or clarifying any inconsistency in the Plan or any Award Agreement;
(iv) waiving restrictions of Awards at any time and under such terms and conditions as it deems appropriate;
(v) interpreting any extenuating circumstances and modifying the Plan or Award Agreement in its discretion as needed;
(vi) accepting or canceling an order or discontinuing service to a customer;
(vii) disallowing sales that are determined not to be in the normal course of business;
(viii) interpreting the Plan and any Award Agreements;
(ix) making such modifications to the Plan as are necessary to effectuate the intent of the Plan as a result of any changes in applicable laws or accounting treatment;
(x) modifying, amending or revoking the Plan, or discontinuing (either temporarily or permanently) the distribution of any payment at any time and for any reason and making appropriate adjustments to sales or compensation targets due to favorable or unfavorable events unrelated to a Participant's efforts of performance; and
(xi) making all other decisions relating to the operation of the Plan;




(xii) granting Awards to Eligible Employees who are foreign nationals on such terms and conditions different from those specified in the Plan, which may be necessary or desirable to foster and promote achievement of the purposes of the Plan, and adopting such modifications, procedures, and/or subplans (with any such subplans attached as appendices to the Plan) and the like as may be necessary or desirable to comply with provisions of the laws or regulations of other countries or jurisdictions to ensure the viability of the benefits from Awards granted to Participants employed in such countries or jurisdictions, or to meet the requirements that permit the Plan to operate in a qualified or tax efficient manner, and/or comply with applicable foreign laws or regulations.
The Committee may adopt such rules or guidelines, as it deems appropriate to implement the Plan. The Committee's determinations under the Plan shall be final, conclusive and binding on all persons. The Committee's decisions and determinations need not be uniform and may be made selectively among Participants in the Committee's sole discretion. The Committee's decisions and determinations will be afforded the maximum deference provided by applicable law.
The Company shall effect the granting of Awards under the Plan in accordance with the determinations made by the Committee, by execution of instruments in writing in such form as approved by the Committee.
(c)Indemnification. To the maximum extent permitted by applicable law, each member of the Committee, or of the Board, or any persons (including without limitation Employees and officers) who are delegated by the Board or Committee to perform administrative functions in connection with the Plan, shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan or any Award Agreement, and (ii) from any and all amounts paid by him or her in settlement thereof, with the Company's approval, or paid by him or her in satisfaction of any judgment in any such claim, action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or under any power that the Company may have to indemnify them or hold them harmless.
SECTION 4. GENERAL.
(a)General Eligibility. Only Eligible Employees shall be eligible for designation as Participants.
(b)No Rights as a Shareholder. A Participant shall have no rights as a shareholder with respect to any Award.
(c)Termination of Service. Except as otherwise provided in this Plan or in the applicable Award Agreement, a Participant's outstanding Award shall terminate without consideration upon termination of such Participant's Service.
(d)Code Section 409A. Notwithstanding anything in the Plan to the contrary, the Plan and Awards granted hereunder are intended to be exempt from the requirements of Code Section 409A and shall be interpreted in a manner consistent with such intention. In the event that any provision of the Plan or an Award Agreement is determined by the Committee to not comply with




the applicable requirements of Code Section 409A or the applicable regulations and other guidance issued thereunder, the Committee shall have the authority to take such actions and to make such changes to the Plan or an Award Agreement as the Committee deems necessary to comply with such requirements. Any payment made pursuant to any Award shall be considered a separate payment and not one of a series of payments for purposes of Code Section 409A.
Notwithstanding the foregoing or anything elsewhere in the Plan or an Award Agreement to the contrary, if upon a Participant's Separation From Service he/she is then a Specified Employee, then solely to the extent necessary to comply with Code Section 409A and avoid the imposition of taxes under Code Section 409A, the Company shall defer payment of “nonqualified deferred compensation” subject to Code Section 409A payable as a result of and within six (6) months following such Separation From Service under this Plan until the earlier of (i) the first business day of the seventh month following the Participant's Separation From Service, or (ii) ten (10) days after the Company receives written confirmation of the Participant's death. Any such delayed payments shall be made without interest.
While it is intended that all payments and benefits provided under the Plan or an Award will be exempt from (or comply with) Code Section 409A, the Company makes no representation or covenant to ensure that the payments under the Plan or an Award are exempt from or compliant with Code Section 409A. In no event whatsoever shall the Company be liable if a payment or benefit under the Plan or an Award is challenged by any taxing authority or for any additional tax, interest or penalties that may be imposed on a Participant by Code Section 409A or any damages for failing to comply with Code Section 409A. The Participant will be entirely responsible for any and all taxes on any benefits payable to such Participant as a result of the Plan or an Award.
(e)Electronic Communications. Subject to compliance with applicable law and/or regulations, an Award Agreement or other documentation or notices relating to the Plan and/or Awards may be communicated to Participants (and executed by Participants) by electronic media.
(f)Unfunded Plan. The Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Participants who are granted Awards under this Plan, any such accounts will be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets which may at any time be represented by Awards, nor shall this Plan be construed as providing for such segregation, nor shall the Company or the Board or Committee be deemed to be a trustee of cash to be awarded under the Plan.
(g)Liability of Company. The Company (or members of the Board or Committee) shall not be liable to a Participant or other persons as to any unexpected or adverse tax consequence or any tax consequence expected, but not realized, by any Participant or other person due to the grant, receipt, or settlement of any Award granted hereunder.
(h)Reformation. In the event any provision of this Plan shall be held illegal or invalid for any reason, such provisions will be reformed by the Board if possible and to the extent needed in order to be held legal and valid. If it is not possible to reform the illegal or invalid provisions then the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
(i)Successor Provision. Any reference to a statute, rule or regulation, or to a section of a statute, rule or regulation, is a reference to that statute, rule, regulation, or section as amended from time to time, both before and after the Adoption Date and including any successor provisions.
(j)Governing Law. This Plan and (unless otherwise provided in the Award Agreement) all Awards shall be construed in accordance with and governed by the laws of the State of Utah, but without regard to its conflict of law provisions. The Committee may provide that any dispute




as to any Award shall be presented and determined in such forum as the Committee may specify, including through binding arbitration. Unless otherwise provided in the Award Agreement, recipients of an Award under the Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of Utah to resolve any and all issues that may arise out of or relate to the Plan or any related Award Agreement.
(k)Assignment or Transfer of Awards. No Award shall be transferable by the Participant. No Award or interest therein may be transferred, assigned, pledged or hypothecated by the Participant during his or her lifetime, whether by operation of law or otherwise, nor may an Award be anticipated, assigned, attached, garnished, optioned, transferred or made subject to any creditor's process, whether voluntarily, involuntarily or by operation of law, nor may an Award be made subject to execution, attachment or similar process. Any act in violation of this Section 4(k) shall be null and void.
(l)Company Rights. The Company reserves the right at any time to assign accounts, or remove accounts, or to accept or reject orders from customers, and to refrain from paying incentive on draw fees the Company receives, freight charges to customers or with respect to similar or dissimilar transactions. The Company further reserves the right to adjust quotas under the Plan as it deems appropriate. .
SECTION 5. TERMS AND CONDITIONS OF AWARDS.
(a)Award Agreement. Each grant of an Award under the Plan shall be evidenced by an executed Award Agreement between the Participant and the Company. Such Award shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various Award Agreements entered into under the Plan need not be identical.
(b)Eligibility for Payments. An individual must generally be a Participant on the date of any Award payment in order to receive such payment. However, the Committee may in its discretion provide a Participant, whose Termination Date preceded the date of payment for a Performance Metric(s), with a pro-rated payment (based on the amount of time in the Quarter(s) that the Participant was providing Service) if such Participant was terminated for any reason other than by the Company for Cause and if the threshold for the Performance Metric(s) was exceeded. Similarly, if a Participant's job level or position changes during a Quarter then the Committee shall address such circumstance on a case-by-case basis and the Committee may in its discretion determine that the Participant continues to be eligible for certain payments under this Plan if threshold performance for a Performance Metric(s) in the applicable Quarter was exceeded.
(c)Form and Time of Settlement of Awards. Payment of any Performance Bonuses shall be made solely in the form of cash and in the time frames set forth in this section. Performance Bonuses for Awards covering the first three Quarters of the Fiscal Year shall be paid out to Participants within 45 days after the end of the Quarter. Performance Bonuses for Awards covering the last Quarter of the Fiscal Year shall be paid out to Participants during the first 2.5 months after the end of the Fiscal Year. Notwithstanding the foregoing, all Performance Bonus payments will be made earlier upon the consummation of a Change in Control (and performance will be measured by the Committee on a pro-rated basis for the Quarter in which the Change in Control occurred).
(d)Creditors' Rights. A holder of an Award shall have no rights other than those of a general creditor of the Company. Awards represent an unfunded and unsecured obligation of the Company.




SECTION 6. ADJUSTMENTS.
Notwithstanding satisfaction of any Performance Metric(s), the value of a Participant's Award or Performance Bonus or any other benefits granted, issued, retainable, vested and/or to be paid under an Award on account of satisfaction of such Performance Metrics may be reduced by the Committee on the basis of such further considerations as the Committee in its sole discretion shall determine. In other words, this Plan is a discretionary plan and a Participant has no rights to any payment and has not earned any payment under this Plan unless and until the Company has actually provided the Participant with the applicable payment.
SECTION 7. LIMITATIONS ON RIGHTS.
(a)Retention Rights. Neither the Plan nor any Award granted under the Plan shall be deemed to give any individual a right to remain in Service or to continued participation in the Plan. The Company and its Parents and Subsidiaries and Affiliates reserve the right to terminate the Service of any person at any time, and for any reason, subject to applicable laws, the Company's Articles of Incorporation and Bylaws, and a written employment agreement (if any).
(b)Other Company Benefit and Compensation Programs. Payments and other benefits received by a Participant under an Award made pursuant to the Plan shall not be deemed a part of a Participant's regular, recurring compensation for purposes of the termination indemnity or severance pay law of any state. Furthermore, such benefits shall not be included in, nor have any effect on, the determination of benefits under any other employee benefit plan or similar arrangement provided by the Company or a Subsidiary or Affiliate unless expressly so provided by such other plan or arrangement, or except where the Committee expressly determines that inclusion of an Award or portion of an Award should be included. Awards under the Plan may be made in combination with or in addition to, or as alternatives to, grants, awards or payments under any other Company or Subsidiary or Affiliate plans. The Company or any Subsidiary or any Affiliate may adopt such other compensation programs and additional compensation arrangements (in addition to this Plan) as it deems necessary to attract, retain, and motivate officers, directors, employees or independent contractors for their service with the Company and its Subsidiaries and its Affiliates.
(c)Clawback Policy. The Company may (i) cause the cancellation of any Award, (ii) require reimbursement of any Award by a Participant and (iii) effect any other right of recoupment of equity or other compensation provided under this Plan or otherwise in accordance with Company policies as may be adopted and/or modified from time to time by the Company and/or applicable law (each, a “Clawback Policy”). In addition, a Participant may be required to repay to the Company certain previously paid compensation, whether provided under this Plan or an Award Agreement or otherwise, in accordance with the Clawback Policy. By accepting an Award, a Participant is also agreeing to be bound by the Company's Clawback Policy which may be amended from time to time by the Company in its discretion (including without limitation to comply with applicable laws or stock exchange requirements) and is further agreeing that all of the Participant's Awards may be unilaterally amended by the Company to the extent needed to comply with the Clawback Policy.
SECTION 8. TAXES.
A Participant shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations (including without limitation federal, state, local and foreign taxes) that arise in connection with his or her Award. The Company shall not be required to make any payment under the Plan until such obligations are fully satisfied and the Company shall, to the maximum extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant.
SECTION 9. DURATION AND AMENDMENTS.




(a)Term of the Plan. The Plan is effective on July 1, 2013 and may be terminated by the Board on any date pursuant to Section 10(b). No further Awards may be granted after the earlier of the Board's termination of the Plan under Section 10(b), the date of a Change in Control, or June 30, 2014. This Plan will terminate after the Company has provided all payments (if any) to Participants. This Plan will not in any way affect outstanding awards that were issued under any other Company compensation plans.
(b)Right to Amend or Terminate the Plan. The Board may amend or terminate the Plan or any outstanding Awards at any time and for any reason. In the event of any conflict in terms between the Plan and any Award Agreement, the terms of the Plan shall prevail and govern.
SECTION 10. EXECUTION.
To record the adoption of this Plan by the Board, the Company has caused its duly authorized officer to execute this Plan on behalf of the Company.
 
LIFEVANTAGE CORPORATION

 
By:
 
 
Title:
 

 


Performance Incentive Plan


 
LIFEVANTAGE CORPORATION
PERFORMANCE INCENTIVE PLAN

SECTION 1.
INTRODUCTION.
The Board adopted this Lifevantage Corporation Performance Incentive Plan as of the Effective Date.
The purpose of the Plan is to promote the long-term success of the Company and the creation of shareholder value by offering Selected Employees an opportunity to earn performance-based cash bonuses whose value is based upon the Company's stock value and to encourage such Selected Employees to continue to provide services to the Company and to attract new individuals with outstanding qualifications.
The Plan seeks to achieve this purpose by providing for Awards in the form of Performance Units. No Shares will ever be issued under this Plan. Awards may be settled only with cash.
Capitalized terms shall have the meaning provided in Section 2 unless otherwise provided in this Plan or any applicable Award Agreement.
SECTION 2.
DEFINITIONS. If a Participant's employment agreement or Award Agreement (or other written agreement executed by and between Participant and the Company) expressly includes defined terms that expressly are different from and/or conflict with the defined terms contained in this Plan then the defined terms contained in the employment agreement or Award Agreement (or other written agreement executed by and between Participant and the Company) shall govern and shall supersede the definitions provided in this Plan.
(a)“Affiliate” means any entity other than a Subsidiary, if the Company and/or one or more Subsidiaries own not less than 50% of such entity. For purposes of determining an individual's “Service,” this definition shall include any entity other than a Subsidiary, if the Company, a Parent and/or one or more Subsidiaries own not less than 50% of such entity.
(b)“Award” means an award of Performance Units issued under the Plan.
(c)“Award Agreement” means an agreement between the Company and a Selected Employee evidencing an Award.
(d)“Board” means the Board of Directors of the Company, as constituted from time to time.
(e)“Change in Control” means the occurrence of any one or more of the following: (i) any merger, consolidation or business combination in which the shareholders of the Company immediately prior to the merger, consolidation or business combination do not own at least a majority of the outstanding equity interests of the surviving parent entity, (ii) the sale of all or substantially all of the Company's assets, (iii) the acquisition of beneficial ownership or control of (including, without limitation, power to vote) a majority of the outstanding Shares by any person or entity (including a "group" as defined by or under Section 13(d)(3) of the Exchange Act), (iv) the dissolution or liquidation of the Company, (v) a contested election of directors, as a result of which or in connection with which the persons who were directors of the Company before such election or their nominees cease to constitute a majority of the Board, or (vi) any other event specified by the Board or the Committee.
A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company's incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company's securities immediately before such transactions.
(f)“Code” means the Internal Revenue Code of 1986, as amended, and the regulations and interpretations promulgated thereunder.




(g)“Committee” means a committee described in Section 3.
(h)“Common Stock” means the Company's common stock, $0.001 par value per Share, and any other securities into which such shares are changed, for which such shares are exchanged or which may be issued in respect thereof.
(i)“Company” means Lifevantage Corporation, a Colorado corporation.
(j)“Disability” means that the Participant is classified as disabled under a long-term disability policy of the Company or, if no such policy applies, the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.
(k)“Effective Date” means July 1, 2013.
(l)“Employee” means any individual who is a common-law employee of the Company, or of a Parent, or of a Subsidiary or of an Affiliate. An employee who is also a Section 16 Person will not be eligible to be granted Awards under this Plan.
(m)“Exchange Act” means the Securities Exchange Act of 1934, as amended.
(n)“Fair Market Value” means the market price of a Share, determined by the Committee as follows:
(i)If the Shares were traded on a stock exchange (such as the NYSE, NYSE Amex, the NASDAQ Global Market or NASDAQ Capital Market) at the time of determination, then the Fair Market Value shall be equal to the regular session closing price for such stock as reported by such exchange (or the exchange or market with the greatest volume of trading in the Shares) on the date of determination, or if there were no sales on such date, on the last date preceding such date on which a closing price was reported;
(ii)If the Shares were traded on the OTC Bulletin Board at the time of determination, then the Fair Market Value shall be equal to the last-sale price reported by the OTC Bulletin Board for such date, or if there were no sales on such date, on the last date preceding such date on which a sale was reported; and
(iii)If neither of the foregoing provisions is applicable, then the Fair Market Value shall be determined by the Committee in good faith using a reasonable application of a reasonable valuation method as the Committee deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee shall be based on the prices reported by the applicable exchange or the OTC Bulletin Board, as applicable, or a nationally recognized publisher of stock prices or quotations (including an electronic on-line publication). Such determination shall be conclusive and binding on all persons.
(o)“Fiscal Year” means the Company's fiscal year which ends on June 30th of each year.
(p)“GAAP” means United States generally accepted accounting principles as established by the Financial Accounting Standards Board.
(q)“NYSE” means the New York Stock Exchange.
(r)“Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the Effective Date shall be considered a Parent commencing as of such date.




(s)“Participant” means an individual or estate or other entity that holds an Award.
(t)“Performance Goals” means for a Performance Period, one or more goals established in writing by the Committee for the Performance Period. Performance Goals may be expressed in terms of overall Company performance or the performance of a Parent, Subsidiary, Affiliate, division, business unit, or an individual, or other criteria established by the Committee. The achievement of each Performance Goal shall be determined in accordance with GAAP to the extent applicable.
(u)“Performance Period” means one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant's right to, and/or the payment of, an Award. A Performance Period shall generally cover three Fiscal Years although the Committee may in its discretion provide for Performance Periods with a different duration or period of time.
(v)“Performance Unit” means a bookkeeping entry representing the equivalent of one Share, as awarded under the Plan, as provided in the applicable Award Agreement.
(w)“Plan” means this Lifevantage Corporation Performance Incentive Plan as it may be amended from time to time.
(x)“SEC” means the Securities and Exchange Commission.
(y)“Section 16 Persons” means those persons who are subject to the reporting requirements of Section 16 of the Exchange Act with respect to the Common Stock.
(z)“Selected Employee” means an Employee who has been selected by the Committee to receive an Award under the Plan.
(aa)“Separation From Service” has the meaning provided to such term under Code Section 409A and the regulations promulgated thereunder.
(ab)“Service” means uninterrupted service as an Employee. Service will be deemed terminated as soon as the entity to which Service is being provided is no longer either (i) the Company, (ii) a Parent, (iii) a Subsidiary or (iv) an Affiliate. A Participant's Service does not terminate if he or she is a common-law employee and goes on a bona fide leave of absence that was approved by the Company in writing and the terms of the leave provide for continued service crediting, or when continued service crediting is required by applicable law. Service terminates in any event when the approved leave ends, unless such Employee immediately returns to active work. The Committee determines which leaves count toward Service, and when Service commences and terminates for all purposes under the Plan. For avoidance of doubt, a Participant's Service shall not be deemed terminated if the Committee determines that a transition of employment to service with a partnership, joint venture or corporation not meeting the requirements of a Subsidiary or Parent or Affiliate in which the Company or a Subsidiary or Parent or Affiliate is a party is not considered a termination of Service. The Committee may determine whether any Company transaction, such as a sale or spin-off of a division or subsidiary that employs a Participant, shall be deemed to result in termination of Service for purposes of any affected Awards, and the Committee's decision shall be final, conclusive and binding.
(ac)“Share” means one share of Common Stock.
(ad)“Specified Employee” means a Participant who is considered a “specified employee” within the meaning of Code Section 409A.
(ae)“Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of




all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the Effective Date shall be considered a Subsidiary commencing as of such date.
(af)“Termination Date” means the date on which a Participant's Service terminates.
SECTION 3. ADMINISTRATION.
(a)Committee Composition. A Committee (or Committees) appointed by the Board (or the Board's Compensation Committee) shall administer the Plan. Unless the Board provides otherwise, the Board's Compensation Committee (or a comparable committee of the Board) shall be the Committee. The Board may also at any time terminate the functions of the Committee and reassume all powers and authority previously delegated to the Committee.
(b)Authority of the Committee. Subject to the provisions of the Plan, the Committee shall have full authority and discretion to take any actions it deems necessary or advisable for the administration of the Plan. Such actions shall include without limitation:
(i) determining Selected Employees who are to receive Awards under the Plan;
(ii) determining the type, number, vesting requirements, Performance Goals (or other objective/subjective goals (if any)) and their degree of satisfaction, and other features and conditions of such Awards, and amending such Awards;
(iii) correcting any defect, supplying any omission, or reconciling or clarifying any inconsistency in the Plan or any Award Agreement;
(iv) accelerating the vesting or waiving restrictions, of Awards at any time and under such terms and conditions as it deems appropriate;
(v) interpreting the Plan and any Award Agreements;
(vi) making all other decisions relating to the operation of the Plan;
(vii) making such modifications to the Plan as are necessary to effectuate the intent of the Plan as a result of any changes in the income tax, accounting, or securities law treatment of Participants and the Plan; and
(viii) granting Awards to Selected Employees who are foreign nationals on such terms and conditions different from those specified in the Plan, which may be necessary or desirable to foster and promote achievement of the purposes of the Plan, and adopting such modifications, procedures, and/or subplans (with any such subplans attached as appendices to the Plan) and the like as may be necessary or desirable to comply with provisions of the laws or regulations of other countries or jurisdictions to ensure the viability of the benefits from Awards granted to Participants employed in such countries or jurisdictions, or to meet the requirements that permit the Plan to operate in a qualified or tax efficient manner, and/or comply with applicable foreign laws or regulations.
The Committee may adopt such rules or guidelines, as it deems appropriate to implement the Plan. The Committee's determinations under the Plan shall be final, conclusive and binding on all persons. The Committee's decisions and determinations need not be uniform and may be made selectively among Participants in the Committee's sole discretion. The Committee's decisions and determinations will be afforded the maximum deference provided by applicable law.
The Company shall effect the granting of Awards under the Plan in accordance with the determinations made by the Committee, by execution of instruments in writing in such form as approved by the Committee.
(c)Indemnification. To the maximum extent permitted by applicable law, each member of the Committee, or of the Board, or any persons (including without limitation Employees and officers) who are




delegated by the Board or Committee to perform administrative functions in connection with the Plan, shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan or any Award Agreement, and (ii) from any and all amounts paid by him or her in settlement thereof, with the Company's approval, or paid by him or her in satisfaction of any judgment in any such claim, action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or under any power that the Company may have to indemnify them or hold them harmless.
SECTION 4. GENERAL.
(a)General Eligibility. Only Employees (who are not Section 16 Persons) shall be eligible for designation as Selected Employees by the Committee. However, if a Participant becomes a Section 16 Person after receiving an Award(s), the mere fact of becoming a Section 16 Person will not affect any such outstanding Award(s).
(b)No Rights as a Shareholder. A Participant shall have no rights as a shareholder (including without limitation voting rights or dividend or distribution rights) with respect to any Common Stock covered by an Award.
(c)Termination of Service. Unless the applicable Award Agreement or employment agreement provides otherwise (and in such case, the Award Agreement or employment agreement shall govern as to the consequences of a termination of Service for such Awards), a Participant's outstanding unvested Awards shall terminate without consideration upon termination of such Participant's Service.
(d)Code Section 409A. Notwithstanding anything in the Plan to the contrary, the Plan and Awards granted hereunder are intended to be exempt from or comply with the requirements of Code Section 409A and shall be interpreted in a manner consistent with such intention. In the event that any provision of the Plan or an Award Agreement is determined by the Committee to not comply with the applicable requirements of Code Section 409A or the applicable regulations and other guidance issued thereunder, the Committee shall have the authority to take such actions and to make such changes to the Plan or an Award Agreement as the Committee deems necessary to comply with such requirements. Any payment made pursuant to any Award shall be considered a separate payment and not one of a series of payments for purposes of Code Section 409A.
Notwithstanding the foregoing or anything elsewhere in the Plan or an Award Agreement to the contrary, if upon a Participant's Separation From Service he/she is then a Specified Employee, then solely to the extent necessary to comply with Code Section 409A and avoid the imposition of taxes under Code Section 409A, the Company shall defer payment of “nonqualified deferred compensation” subject to Code Section 409A payable as a result of and within six (6) months following such Separation From Service under this Plan until the earlier of (i) the first business day of the seventh month following the Participant's Separation From Service, or (ii) ten (10) days after the Company receives written confirmation of the Participant's death. Any such delayed payments shall be made without interest.
While it is intended that all payments and benefits provided under the Plan or an Award will be exempt from or comply with Code Section 409A, the Company makes no representation or covenant to ensure that the payments under the Plan or an Award are exempt from or compliant with Code Section 409A. In no event whatsoever shall the Company be liable if a payment or benefit under the Plan or an Award is challenged by any taxing authority or for any additional tax, interest or penalties that may be imposed on a Participant




by Code Section 409A or any damages for failing to comply with Code Section 409A. The Participant will be entirely responsible for any and all taxes on any benefits payable to such Participant as a result of the Plan or an Award.
(e)Electronic Communications. Subject to compliance with applicable law and/or regulations, an Award Agreement or other documentation or notices relating to the Plan and/or Awards may be communicated to Participants (and executed by Participants) by electronic media.
(f)Unfunded Plan. The Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Participants who are granted Awards under this Plan, any such accounts will be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets which may at any time be represented by Awards, nor shall this Plan be construed as providing for such segregation, nor shall the Company or the Board or Committee be deemed to be a trustee of cash to be awarded under the Plan.
(g)Liability of Company. The Company (or members of the Board or Committee) shall not be liable to a Participant or other persons as to any unexpected or adverse tax consequence or any tax consequence expected, but not realized, by any Participant or other person due to the grant, receipt, or settlement of any Award granted hereunder.
(h)Reformation. In the event any provision of this Plan shall be held illegal or invalid for any reason, such provisions will be reformed by the Board if possible and to the extent needed in order to be held legal and valid. If it is not possible to reform the illegal or invalid provisions then the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
(i)Successor Provision. Any reference to a statute, rule or regulation, or to a section of a statute, rule or regulation, is a reference to that statute, rule, regulation, or section as amended from time to time, both before and after the Effective Date and including any successor provisions.
(j)Governing Law. This Plan and (unless otherwise provided in the Award Agreement) all Awards shall be construed in accordance with and governed by the laws of the State of Utah, but without regard to its conflict of law provisions. The Committee may provide that any dispute as to any Award shall be presented and determined in such forum as the Committee may specify, including through binding arbitration. Unless otherwise provided in the Award Agreement, recipients of an Award under the Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of Utah to resolve any and all issues that may arise out of or relate to the Plan or any related Award Agreement.
(k)Dividend Equivalents. Dividend equivalents will not be paid (or accrue) on any Awards.
(l)Assignment or Transfer of Awards. No Award shall be transferable by the Participant other than by will or by the laws of descent and distribution. No Award or interest therein may be transferred, assigned, pledged or hypothecated by the Participant during his or her lifetime, whether by operation of law or otherwise, nor may an Award be anticipated, assigned, attached, garnished, optioned, transferred or made subject to any creditor's process, whether voluntarily, involuntarily or by operation of law, nor may an Award be made subject to execution, attachment or similar process. Any act in violation of this Section 4(l) shall be null and void.
SECTION 5. TERMS AND CONDITIONS OF PERFORMANCE UNITS.
(a)Award Agreement. Each grant of Performance Units under the Plan shall be evidenced by an Award Agreement between the Participant and the Company. Such Performance Units shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan (including without limitation any Performance Goals). The provisions of the various Award Agreements




entered into under the Plan need not be identical. Performance Units may be granted in consideration of a reduction in the Participant's other compensation.
(b)Number of Shares and Payment. An Award Agreement shall specify the number of Shares to which the Performance Unit Award pertains and is subject to adjustment of such number in accordance with Section 6. No Participant may in any one Fiscal Year receive Performance Units that in the aggregate cover more than 75,000 Shares, subject to adjustment of such number in accordance with Section 6.
(c)Vesting Conditions. Each Award of Performance Units may or may not be subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Award Agreement. An Award Agreement may provide for accelerated vesting in the event of the Participant's death, or Disability, or Change in Control or other events.
(d)Form and Time of Settlement of Performance Units. Settlement of vested Performance Units shall be made solely in the form of cash. The actual number of Performance Units eligible for settlement may be larger or smaller than the number included in the original Award. Methods of converting Performance Units into cash may include (without limitation) a method based on the average Fair Market Value of Shares over a series of trading days. Except as otherwise provided in an Award Agreement, vested Performance Units shall be settled within thirty days after vesting. The Award Agreement may provide that distribution may occur or commence when all vesting conditions applicable to the Performance Units have been satisfied or have lapsed, or it may be deferred, in accordance with applicable law, to a later specified date. Until an Award of Performance Units is settled, the number of such Performance Units shall be subject to adjustment pursuant to Section 6.
(e)Creditors' Rights. A holder of Performance Units shall have no rights other than those of a general creditor of the Company. Performance Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Award Agreement.
SECTION 6. ADJUSTMENTS.
(a)Adjustments. In the event of a subdivision of the outstanding Shares, a declaration of a dividend payable in Shares, a declaration of a dividend payable in a form other than Shares in an amount that has a material effect on the value of Shares, a combination or consolidation of the outstanding Shares (by reclassification or otherwise) into a lesser number of Shares, a stock split, a reverse stock split, a reclassification or other distribution of the Shares without the receipt of consideration by the Company, of or on the Common Stock, a recapitalization, a combination, a spin-off or a similar occurrence, the Committee shall make equitable and proportionate adjustments, taking into consideration the accounting and tax consequences, to:
(1)the number and kind of securities available for Awards and the numerical limit set forth in Section 5(b); and
(2)the number and kind of securities covered by each outstanding Award.
(b)Reduction. Notwithstanding satisfaction of any Performance Goal(s), the value of a Participant's Award or any other benefits granted, issued, retainable, vested and/or to be paid under an Award on account of satisfaction of such Performance Goals may be reduced by the Committee on the basis of such further considerations as the Committee in its sole discretion shall determine. In other words, this Plan is a discretionary plan and a Participant has no rights to any payment and has not earned any payment under this Plan unless and until the Company has actually provided the Participant with the applicable payment.
(c)Participant Rights. A Participant shall have no rights by reason of any issue by the Company of stock of any class or securities convertible into stock of any class, any subdivision or consolidation of shares of stock of any class, the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class. If by reason of an adjustment pursuant to this Section 6, a Participant's




Award covers additional or different shares of stock or securities, then such additional or different shares and the Award in respect thereof shall be subject to all of the terms, conditions and restrictions which were applicable to the Award and the Shares subject to the Award prior to such adjustment.
SECTION 7. EFFECT OF A CHANGE IN CONTROL.
In the event that there is a Change in Control and/or the Company is a party to a merger or acquisition or reorganization or similar transaction, outstanding Awards shall be subject to the merger agreement or other applicable transaction agreement. Such agreement may provide, without limitation, that subject to the consummation of the applicable transaction, for the assumption (or substitution) of outstanding Awards by the surviving entity or its parent, for their continuation by the Company (if the Company is a surviving corporation), for accelerated vesting, or for their cancellation either with or without consideration, in all cases without the consent of the Participant and outstanding Awards do not have to all be uniformly treated the same way.
SECTION 8. LIMITATIONS ON RIGHTS.
(a)Retention Rights. Neither the Plan nor any Award granted under the Plan shall be deemed to give any individual a right to remain in Service or to receive any other Awards under the Plan. The Company and its Parents and Subsidiaries and Affiliates reserve the right to terminate the Service of any person at any time, and for any reason, subject to applicable laws, the Company's Articles of Incorporation and Bylaws and a written employment agreement (if any).
(b)Dissolution. To the extent not previously settled, all Performance Units shall terminate immediately prior to the dissolution or liquidation of the Company and shall be forfeited to the Company.
(c)Other Company Benefit and Compensation Programs. Payments and other benefits received by a Participant under an Award made pursuant to the Plan shall not be deemed a part of a Participant's regular, recurring compensation for purposes of the termination indemnity or severance pay law of any state. Furthermore, such benefits shall not be included in, nor have any effect on, the determination of benefits under any other employee benefit plan or similar arrangement provided by the Company or a Subsidiary or Affiliate unless expressly so provided by such other plan or arrangement, or except where the Committee expressly determines that inclusion of an Award or portion of an Award should be included. Awards under the Plan may be made in combination with or in addition to, or as alternatives to, grants, awards or payments under any other Company or Subsidiary or Affiliate plans. The Company or any Subsidiary or any Affiliate may adopt such other compensation programs and additional compensation arrangements (in addition to this Plan) as it deems necessary to attract, retain, and motivate officers, directors, employees or independent contractors for their service with the Company and its Subsidiaries and its Affiliates.
(d)Clawback Policy. The Company may (i) cause the cancellation of any Award, (ii) require reimbursement of any Award by a Participant and (iii) effect any other right of recoupment of equity or other compensation provided under this Plan or otherwise in accordance with Company policies as may be adopted and/or modified from time to time by the Company and/or applicable law (each, a “Clawback Policy”). In addition, a Participant may be required to repay to the Company certain previously paid compensation, whether provided under this Plan or an Award Agreement or otherwise, in accordance with the Clawback Policy. By accepting an Award, a Participant is also agreeing to be bound by the Company's Clawback Policy which may be amended from time to time by the Company in its discretion (including without limitation to comply with applicable laws or stock exchange requirements) and is further agreeing that all of the Participant's Awards may be unilaterally amended by the Company to the extent needed to comply with the Clawback Policy.
SECTION 9. TAXES.




A Participant shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations (including without limitation federal, state, local and foreign taxes) that arise in connection with his or her Award. The Company shall not be required to make any payment under the Plan until such obligations are satisfied and the Company shall, to the maximum extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant.
SECTION 10. DURATION AND AMENDMENTS.
(a)Term of the Plan. The Plan is effective on the Effective Date and may be terminated by the Board on any date pursuant to Section 10(b). No Awards may be granted after the earlier of the Board's termination of the Plan under Section 10(b) or the day before the tenth anniversary of the Effective Date. This Plan will not in any way affect outstanding awards that were issued under any other Company equity compensation plans.
(b)Right to Amend or Terminate the Plan. The Board may amend or terminate the Plan at any time and for any reason. No such amendment or termination shall be made which would impair the rights of any Participant, without such Participant's written consent, under any then-outstanding Award, provided that no such Participant consent shall be required with respect to any amendment or alteration if the Committee determines in its sole discretion that such amendment or alteration either (i) is required or advisable in order for the Company, the Plan or the Award to satisfy or conform to any law or regulation or to meet the requirements of any accounting standard, or (ii) is not reasonably likely to significantly diminish the benefits provided under such Award, or that any such diminishment has been adequately compensated. In the event of any conflict in terms between the Plan and any Award Agreement, the terms of the Plan shall prevail and govern.
SECTION 11. EXECUTION.
To record the adoption of this Plan by the Board, the Company has caused its duly authorized officer to execute this Plan on behalf of the Company.
 
LIFEVANTAGE CORPORATION

 
By:
 
 
Title:
 

 




Performance Unit Agreement


 
LIFEVANTAGE CORPORATION
PERFORMANCE INCENTIVE PLAN
PERFORMANCE UNIT AGREEMENT - FY2014 THROUGH FY2016
The Company hereby awards Performance Units to the Participant named below. This Award is a one-time non-recurring award that is issued only to first-time Plan Participants. The terms and conditions of the Award are set forth in this cover sheet, in the attached Performance Unit Agreement and in the Lifevantage Corporation Performance Incentive Plan as it may be amended from time to time (the “Plan”). This cover sheet is incorporated into and a part of the attached Performance Unit Agreement (together, the “Agreement”).

Date of Award: ___________________
Name of Participant (“you”): _____________________________________
Total Number of Performance Units Awarded:     
Total Performance Units Consist of Following Three Groupings:
Performance Units Fiscal Year 2014: _____________________________________
Performance Units Fiscal Year 2015: _____________________________________
Performance Units Fiscal Year 2016: _____________________________________

By signing this cover sheet, you agree to all of the terms and conditions described in the Agreement and in the Plan. You are also acknowledging receipt of this Agreement and a copy of the Plan.

Participant: _____________________________________
(Signature)

Company: _____________________________________
(Signature)

Title: _____________________________________


Attachment





LIFEVANTAGE CORPORATION
PERFORMANCE INCENTIVE PLAN
PERFORMANCE UNIT AGREEMENT
1.
The Plan and Other Agreements
The text of the Plan is incorporated in this Agreement by reference. You and the Company agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement. Unless otherwise defined in this Agreement, certain capitalized terms used in this Agreement are defined in the Plan.
This Agreement and the Plan constitute the entire understanding between you and the Company regarding this Award of Performance Units. Any prior agreements, commitments or negotiations are superseded.
For purposes of this Agreement, the following terms have the below defined meanings:
“Performance Period” means the time period from July 1, 2013 (which is the beginning of Fiscal Year 2014) through June 30, 2016 (which is the end of Fiscal Year 2016) provided however that the Performance Period shall end earlier upon the date of any Change in Control.
“Qualifying Termination” means that Participant's Service was terminated after July 1, 2014 due to either Participant's death or Disability.
“Settlement Amount” means, with respect to a Fiscal Year in the Performance Period, a cash amount that is equal to the product (rounded to the nearest whole dollar) of the Settlement Price for such Fiscal Year multiplied by the Vested Performance Units for such Fiscal Year.
“Settlement Price” means, with respect to a Fiscal Year in the Performance Period, the average of the Fair Market Values of a Share for the first ten trading days following the end of such Fiscal Year; provided however that if a Change in Control occurs on or before the tenth such trading day then “Settlement Price” shall instead be the Fair Market Value of a Share as of the last trading day before the Change in Control.
“Settlement Time” means the time when a Vested Performance Unit for a Fiscal Year is exchanged for cash and such exchange (if any) shall occur upon any date in the fourth calendar month after the end of such Fiscal Year or upon an earlier Change in Control.
“Vested Performance Unit” means, with respect to a Performance Unit designated to a Fiscal Year, that such Performance Unit has become both Service-Based Vested and Performance-Based Vested as described below.
2.
Award of Performance Units
The Company awards Participant the number of Performance Units shown on the cover sheet of this Agreement. The Award is subject to the terms and conditions of this Agreement and the Plan.




3.
Vesting
As of the Date of Award, none of the Performance Units subject to this Agreement are Vested Performance Units. Only Vested Performance Units are eligible to be exchanged for cash consideration. Whether or not a Performance Unit designated to a Fiscal Year in the Performance Period becomes a Vested Performance Unit will be determined by the Committee on an annual basis after such Fiscal Year. For any Performance Unit to become a Vested Performance Unit, two separate vesting requirements must each be satisfied as specified below.
Service-Based Vested Requirement: Subject to the next sentence, the Service-Based Vested requirements for a Fiscal Year in the Performance Period will be satisfied upon the end of the such Fiscal Year only if Participant has continuously remained in Service from the Date of Award through the end of such Fiscal Year. If there is a Qualifying Termination before the end of the Performance Period then the following number of Performance Units (rounded to the nearest whole number) shall become Service-Based Vested at the end of the Fiscal Year of the Qualifying Termination (and those Performance Units that do not become Service-Based Vested shall be forfeited without consideration): the product of (i) quotient of the number of days elapsed in the Fiscal Year of the Qualifying Termination (determined as of the Termination Date) divided by the total number of days in that Fiscal Year (provided that if the Performance Period ends before the end of that Fiscal Year then only the total number of days in that Fiscal Year that occurred before the end of the Performance Period shall be used in the denominator), multiplied by (ii) the total number of Performance Units designated to the Fiscal Year of the Termination Date. No unvested Performance Units can become Service-Based Vested after Participant's Service has terminated for any reason and any Performance Units that are not Service-Based Vested shall be forfeited without consideration on the Participant's Termination Date. No unvested Performance Units for a future Fiscal Year can become Service-Based Vested after a Change in Control and any Performance Units that are not Service-Based Vested shall be forfeited without consideration upon such Change in Control.
Performance-Based Vested Requirement: The Performance-Based Vested requirements are described in this section. The Performance Units shall be subject to achievement of Performance Goals that will annually be prescribed by the Committee for one or more of each of the then remaining Fiscal Years that are contained within the Performance Period. The Performance Goals for Fiscal Year 2014 are set forth below and it is expected that the Performance Goals for Fiscal Years 2015 and 2016, respectively, will be provided by the Company to you in writing within the first 90 days of each such Fiscal Year (and you must timely execute such writing as a condition of this Award and such writing will then become a part of this Agreement). Each respective set of annual Performance Goals will apply to the number of Performance Units designated above for the corresponding Fiscal Year in the Performance Period. After the end of each Fiscal Year in the Performance Period, the Committee will determine the degree of satisfaction for that Fiscal Year's Performance Goals and will determine what number of the Performance Units subject to that Fiscal Year's Performance Goals will no longer be eligible to become Performance-Based Vested and which are therefore forfeited without consideration upon such Committee determination. Additionally, after the end of each Fiscal Year, the Committee will make a separate determination as to what number (if any) of then outstanding Performance Units designated to such Fiscal Year will be forfeited without consideration based on overall considerations and factors that the Committee elects to apply in its discretion notwithstanding the degree of attainment of the various Performance Goals for that Fiscal Year. Notwithstanding the foregoing, the Committee will make all such performance vesting determinations no later than immediately before the occurrence of any Change in Control. The number of remaining Performance Units (if any) that have not been forfeited after the Committee's final determinations under this section shall then become Performance-Based Vested.
Fiscal Year 2014 Performance Goals: _________________




4.
Settlement
To the extent any Performance Units designated to a Fiscal Year become Vested Performance Units and subject to satisfaction of any tax withholding obligations as discussed below, such Vested Performance Units will entitle you to receive a cash payment equal to the Settlement Amount with payment occurring at the Settlement Time. Payment of the Settlement Amount shall be in complete satisfaction of such Vested Performance Units. Such settled Vested Performance Units shall be immediately cancelled and no longer outstanding and you shall have no further rights or entitlements related to those settled Performance Units.
5.
Leaves of Absence
For purposes of this Award, your Service does not terminate when you go on a bona fide leave of absence that was approved by the Company in writing, if the terms of the leave provide for Service crediting, or when Service crediting is required by applicable law. Your Service terminates in any event when the approved leave ends unless you immediately return to active work.
The Company determines which leaves count for this purpose (along with determining the effect of a leave of absence on vesting of the Award), and when your Service terminates for all purposes under the Plan.
6.
Withholding Taxes
You will be solely responsible for payment of any and all applicable taxes, including without limitation any penalties or interest based upon such tax obligations, associated with this Award.
Any payments to be provided to you under this Agreement shall be subject to applicable tax withholding as determined by the Company and the Company shall have the right to effect withholding from such payments in amounts that it determines in accordance with applicable laws.
7.
Code Section 409A
This Award will be administered and interpreted to comply with Code Section 409A. Section 4(d) of the Plan will apply to this Award to the extent needed.
8.
Transfer of Award
You cannot gift, transfer, assign, alienate, pledge, hypothecate, attach, sell, or encumber this Award. If you attempt to do any of these things, this Award will immediately become invalid. You may, however, dispose of this Award in your will or it may be transferred by the laws of descent and distribution. Regardless of any marital property settlement agreement, the Company is not obligated to recognize your spouse's interest in your Award in any other way.
9.
Retention Rights
Your Award or this Agreement does not give you the right to be retained by the Company (or any Parent or any Subsidiaries or Affiliates) in any capacity. The Company (or any Parent and any Subsidiaries or Affiliates) reserves the right to terminate your Service at any time and for any reason.
This Award is not intended to replace any compensation and is not to be considered compensation of a continuing or recurring nature, or part of your normal or expected compensation, and in no way represents any portion of your salary, compensation or other remuneration for any purpose.
10.
Shareholder Rights
As a holder of Performance Units, you shall have no rights other than those of a general creditor of the Company. A holder of outstanding Performance Units has none of the rights and privileges of a shareholder of the Company, including no right to vote or to receive dividends (if any). Performance Units create no fiduciary duty of the Company to you and only represent an unfunded and unsecured contractual obligation of the Company. The Performance Units shall not be treated as property or as a trust fund of any kind.
11.
Adjustments
In the event of a stock split, a stock dividend or a similar change in the Company stock, the number of outstanding Performance Units covered by this Award may be adjusted (and rounded down to the nearest whole number) pursuant to the Plan. Your Performance Units shall be subject to the terms of the agreement of merger, liquidation or reorganization in the event the Company is subject to such corporate activity.




12.
Clawback Policy
The Company may (i) cause the cancellation of this Award, (ii) require reimbursement of this Award and (iii) effect any other right of recoupment of equity or other compensation provided under the Plan or otherwise in accordance with the Company's Clawback Policy and/or applicable law. In addition, you may be required to repay to the Company certain previously paid compensation, whether provided under the Plan or this Agreement or otherwise, in accordance with the Clawback Policy. By accepting this Award, you are also agreeing to be bound by the Company's Clawback Policy which may be amended from time to time by the Company in its discretion (including without limitation to comply with applicable laws or stock exchange requirements) and are further agreeing that this Award may be unilaterally amended by the Company to the extent needed to comply with the Clawback Policy.
13.
Applicable Law
This Agreement will be interpreted and enforced under the laws of the State of Utah without reference to the conflicts of law provisions thereof and any action relating to this Agreement must be brought in state or federal courts located in Salt Lake County, Utah.
14.
Binding Effect; No Third Party Beneficiaries

This Agreement shall be binding upon and inure to the benefit of the Company and you and any respective heirs, representatives, successors and permitted assigns. This Agreement shall not confer any rights or remedies upon any person other than the Company and you and any respective heirs, representatives, successors and permitted assigns. The parties agree that this Agreement shall survive the settlement or termination of the Award.
15.
Voluntary Participant
You acknowledge that you are voluntarily participating in the Plan.
16.
No Rights to Future Awards
Your rights, if any, in respect of or in connection with this Award or any other Awards are derived solely from the discretionary decision of the Company to permit you to participate in the Plan and to benefit from a discretionary future Award. By accepting this Award, you expressly acknowledge that there is no obligation on the part of the Company to continue the Plan and/or grant any additional Awards to you or benefits in lieu of other Awards even if Awards have been granted repeatedly in the past. All decisions with respect to future Awards, if any, will be at the sole discretion of the Committee.
17.
Future Value
The future value of the underlying Shares is unknown and cannot be predicted with certainty. If the underlying Shares do not increase in value after the Date of Award or if the Shares decrease in value, the Award could have little or no value.
18.
No Advice Regarding Award
The Company has not provided any tax, legal or financial advice, nor has the Company made any recommendations regarding your participation in the Plan. You are hereby advised to consult with your own personal tax, legal and financial advisors regarding your participation in the Plan.
19.
No Right to Damages
You will have no right to bring a claim or to receive damages if any portion of the Award is cancelled or expires. The loss of existing or potential profit in the Award will not constitute an element of damages in the event of the termination of your Service for any reason, even if the termination is in violation of an obligation of the Company or a Parent or a Subsidiary or an Affiliate to you.
20.
Data Privacy
You hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this document by the Company for the exclusive purpose of implementing, administering and managing your participation in the Plan. You understand that the Company holds certain personal information about you, including, but not limited to, name, home address and telephone number, date of birth, social security or insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all Awards for the purpose of implementing, managing and administering the Plan (“Data”). You understand that the Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in your country or elsewhere and that the recipient country may have different data privacy laws and protections than your country. You authorize the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data.
21.
Other Information
You agree to receive shareholder information, including copies of any annual report, proxy statement and periodic report, from the Company's website at www.lifevantage.com, if the Company wishes to provide such information through its website.




22.
Nondisclosure of Confidential Information
You acknowledge that the businesses of the Company is highly competitive and that the Company's strategies, methods, books, records, and documents, technical information concerning their products, equipment, services, and processes, procurement procedures and pricing techniques, the names of and other information (such as credit and financial data) concerning former, present or prospective customers and business affiliates, all comprise confidential business information and trade secrets which are valuable, special, and unique assets which the Company uses in their business to obtain a competitive advantage over competitors. You further acknowledge that protection of such confidential business information and trade secrets against unauthorized disclosure and use is of critical importance to the Company in maintaining its competitive position. You acknowledge that by reason of your duties to and association with the Company, you have had and will have access to and have and will become informed of confidential business information which is a competitive asset of the Company. You hereby agree that you will not, at any time during or after employment, make any unauthorized disclosure of any confidential business information or trade secrets of the Company, or make any use thereof, except in the carrying out of services responsibilities. You shall take all necessary and appropriate steps to safeguard confidential business information and protect it against disclosure, misappropriation, misuse, loss and theft. Confidential business information shall not include information in the public domain (but only if the same becomes part of the public domain through a means other than a disclosure prohibited hereunder). The above notwithstanding, a disclosure shall not be unauthorized if (i) it is required by law or by a court of competent jurisdiction or (ii) it is in connection with any judicial, arbitration, dispute resolution or other legal proceeding in which your legal rights and obligations as a service provider or under this Agreement are at issue; provided, however, that you shall, to the extent practicable and lawful in any such events, give prior notice to the Company of your intent to disclose any such confidential business information in such context so as to allow the Company an opportunity (which you will not oppose) to obtain such protective orders or similar relief with respect thereto as may be deemed appropriate. Any information not specifically related to the Company would not be considered confidential to the Company.

The Company will be entitled to enforce its rights under this Agreement specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights to which it may be entitled. You agree and acknowledge that money damages may not be an adequate remedy for breach of the provisions of this Agreement and that the Company may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement.
23.
Further Assistance
You agree to provide assistance reasonably requested by the Company in connection with actions taken by you while providing services to the Company, including but not limited to assistance in connection with any lawsuits or other claims against the Company arising from events during the period in which you rendered service to the Company.
24.
Notice
All notices, requests, demands, claims, and other communications under this Agreement shall be in writing. Any notice, request, demand, claim, or other communication under this Agreement shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient at the address set forth below the recipient's signature to this Agreement. Either party to this Agreement may send any notice, request, demand, claim, or other communication under this Agreement to the intended recipient at such address using any other means (including personal delivery, expedited courier, messenger service, telecopy, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Either party to this Agreement may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other party notice in the manner set forth in this section.

In consideration of the Company granting you this Award, please acknowledge your agreement to fully comply with all of the terms and conditions described above and in the Plan by signing this Agreement in the space provided in the cover sheet and returning it promptly to:




LIFEVANTAGE CORPORATION
Attention: Vice President of Human Resources
9815 S. MONROE STREET, STE. 100
SANDY, UT 84070



R. Cutler Employment Agreement


EMPLOYMENT AGREEMENT
This employment agreement (the “Agreement”) is entered into by and between Rob Cutler (“you” or “your”) and LifeVantage Corporation, a Colorado corporation, (the “Company”). This Agreement has an effective date of March 21, 2012 (the “Effective Date”). In consideration of the mutual covenants and promises made in this Agreement, you and the Company agree as follows:
1.Position and Responsibilities. As of the Effective Date, you will commence serving as a full-time employee of the Company as the Company’s General Counsel. You shall report directly to the Company’s President and CEO. You shall have the duties, responsibilities and authority that are customarily associated with such position and such other senior management duties as may reasonably be assigned. You will devote your full time, efforts, abilities, and energies to promote the general welfare and interests of the Company and any related enterprises of the Company. Your primary workplace will be located at the Company’s Utah office, located at 9815 South Monroe Street, Suite 100, Sandy, Utah 84070. Nothing herein shall preclude you from (i) serving, with the prior consent of the President and CEO, as a member of the board of directors or advisory boards (or their equivalents in the case of a non-corporate entity) of non-competing businesses and charitable organizations, (ii) engaging in charitable activities and community affairs, and (iii) managing your personal investments and affairs; provided, however, that the activities set out in clauses (i), (ii) and (iii) shall be limited by you so as not to materially interfere, individually or in the aggregate, with the performance of your duties and responsibilities hereunder.
2.    Base Salary. You will be paid an annual base salary of $250,000 (the “Base Salary”) for your services, payable in the time and manner that the Company customarily pays its employees and subject to increase or decrease at the discretion of the President and CEO and Board of Directors.
3.    Bonuses. During your employment as General Counsel and while this Agreement is in effect, you will be eligible to participate in the Employee Bonus Program at the Officer Level. Any fiscal year 2012 bonus will be prorated for the portion of the fiscal year you were employed. Any such bonus shall be paid to you during the first three months of the fiscal year that follows the applicable performance fiscal year. The bonus will be deemed to have been earned on the date of payment of such bonus and you must remain an employee of the Company through the date of payment in order to receive the bonus.
4.    Stock Options and Compensatory Equity. While you are an employee of the Company, you will be eligible to receive grants of stock options (or other grants of Company equity) to purchase shares of the Company’s common stock. Such equity grants, if any, will be made in the sole discretion of the Board of Directors and will be subject to the terms and conditions specified by the Board of Directors, the Company’s stock plan, the award agreement that you must execute as a condition of any grant and the Company’s insider trading policy. If required by applicable law with respect to transactions involving Company equity securities, you agree that you shall use your best efforts to comply with any duty that you may have to (i) timely report any such transactions and (ii) to refrain from engaging in certain transactions from time to




time. The Company has no duty to register under (or otherwise obtain an exemption from) the Securities Act of 1933 (or applicable state securities laws) with respect to any Company equity securities that may be issued to you. Any equity compensation awards that were granted to you before the Effective Date shall continue to be governed by their applicable terms and conditions.
Upon the Effective Date, subject to approval of the Board of Directors and subject to your being a Company employee on the Effective Date, you shall be granted a stock option under the Company's 2010 Long Term Incentive Plan ("2010 LTIP") to purchase up to 150,000 common shares of the Company (the "Option"). To the maximum extent permitted by applicable law, the Option shall constitute an "incentive stock option", as provided under Internal Revenue Code (the “Code”) Section 422, and the balance of the Option shall be a nonstatutory stock option. Before the grant of the Option, the number of shares subject to the Option (and exercise prices referenced below) shall be proportionately adjusted to the extent necessary under 2010 LTIP Section 11(a). As a condition of the grant of the Option, you must timely execute an Option agreement(s) prescribed by the Company which will provide the terms and conditions of the Option. However, the Option and the Option agreement will provide for the following terms: One year cliff vest and monthly over three years thereafter.
5.    Expense Reimbursement. During your employment and while this Agreement is in effect, you will be reimbursed for all reasonable business expenses (including, but without limitation, travel expenses) upon the properly completed submission of requisite forms and receipts to the Company in accordance with the Company’s expense reimbursement policy.
6.    Employee Benefit Programs. During your employment with the Company, and except as may be provided under an employee stock purchase plan, you will be entitled to participate, on the same terms as generally provided to senior executives, in all Company employee benefit plans and programs at the time or thereafter made available to Company senior executive officers including, without limitation, any savings or profit sharing plans, deferred compensation plans, stock option incentive plans, group life insurance, accidental death and dismemberment insurance, hospitalization, surgical, major medical and dental coverage, vacation, sick leave (including salary continuation arrangements), long-term disability, holidays and other employee benefit programs sponsored by the Company. The Company may amend, modify or terminate these benefits at any time and for any reason. Any change in any employee benefit program or programs applicable to all covered employees shall not constitute a material breach of the terms of the Agreement.
7.    Termination of Employment. Unless the Company requests otherwise in writing, upon termination of your employment for any reason, you understand and agree that you shall be deemed to have also immediately resigned from all positions as an officer (and/or director, if applicable) with the Company (and its affiliates) as of your last day of employment (the “Termination Date”). Upon termination of your employment for any reason, you shall receive payment or benefits from the Company covering the following: (i) all unpaid salary and unpaid vacation accrued pursuant to the paid time off policy through the Termination Date, (ii) any payments/benefits to which you are entitled under the express terms of any applicable Company employee benefit plan, (iii) any unreimbursed valid business expenses for which you have

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submitted properly documented reimbursement requests, and (iv) your then outstanding equity compensation awards as governed by their applicable terms (collectively, (i) through (iv) are the “Accrued Pay”). You may also be eligible for other post-employment payments and benefits as provided in this Agreement. Termination shall not be made until on or after the date of a “separation from service” within the meaning of Code Section 409A.
(a)    At-Will Employment. Your employment with the Company is at-will and either you or the Company may terminate your employment at any time and for any reason (or no reason), with or without Cause (as defined below), in each case subject to the terms and provisions of this Agreement.
(b)    For Cause. For purposes of this Agreement, your employment may be terminated by the Company for “Cause” as a result of the occurrence of one or more of the following: a charge, through indictment or criminal complaint, entry of pretrial diversion or sentencing agreement, or your conviction of, or a plea of guilty or nolo contendere to, a felony or other crime involving moral turpitude, dishonesty or fraud, or any other criminal arrest (for example D.U.I.) which the Company, in its discretion considers inappropriate or harmful to its interests;
(i)    your refusal to perform in any material respect your duties and responsibilities for the Company or your failure to comply in any material respect with the terms of this Agreement and the Confidentiality Agreement and the polices and procedures of the Company;
(ii)    fraud or deceptive or illegal conduct in your performance of duties for the Company;
(iii)    your material breach of any material term of this Agreement; or
(iv)    any conduct by you which materially injurious to the Company or materially injurious to the business reputation of the Company or a Company affiliate.
In the event your employment is terminated by the Company for Cause you will be entitled only to your Accrued Pay and you will be entitled to no other compensation from the Company.
(c)    Without Cause. The Company may terminate your employment Without Cause at any time and for any reason with notice. If your employment is terminated Without Cause then in addition to your Accrued Pay, you will be eligible to receive the following: payments equal in the aggregate to your then annualized Base Salary. The payments shall be paid to you in cash, in substantially equal monthly installments payable over the twelve (12) month period following your Termination Date, provided, however, the first payment (in an amount equal to two (2) months of Base Salary) shall be made on the sixtieth (60th) day following the Termination Date. As a condition to receiving (and continuing to receive) the payments provided in this Section you must: (i) within not later than forty-five (45) days after your Termination Date, execute (and not revoke) and deliver to the Company a Separation

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Agreement in a form prescribed by the Company and such Separation Agreement shall include without limitation a release of all claims against the Company and its affiliates along with a covenant not to sue and (ii) remain in full compliance with such Separation Agreement.
(d)    Voluntary Termination. In the event you voluntarily terminate your employment with the Company, you will be entitled to receive only your Accrued Pay. You will be entitled to no other compensation from the Company.
(e)    Death or Disability. In the event your employment with the Company is terminated due to your Disability, death or presumed death, then you or your estate will be entitled to receive your Accrued Pay. For purposes of this Agreement, “Disability” is defined to occur when you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months.
(f)    Termination Within Twelve (12) Months of a Change of Control. The provisions of this Section set forth certain terms of an agreement reached between you and the Company regarding your rights and obligations upon the occurrence of a Change in Control of Company. These provisions are intended to assure and encourage in advance your continued attention and dedication to your assigned duties and your objectivity during the pendency and after the occurrence of any such event. These provisions shall terminate and be of no further force or effect beginning twelve (12) months after each occurrence of a Change of Control.
(i)    “Change in Control” shall mean an event which shall be deemed to have occurred if (a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly wner, of securities of Company representing 60% or more of the combined voting power of Company’s then outstanding securities; or (b) the stockholders of the Company approve a merger or consolidation of the Company with or into any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least sixty percent (60%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets.
(ii)    If within twelve (12) months after the occurrence of an event constituting a Change in Control, your employment terminates for any reason other than for Cause, Disability, death or presumed death, or voluntary termination, then Company shall pay you those benefits described in Section 7 (b) above, entitled Without Cause; and

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(iii)    unless otherwise provided in the applicable option agreement or award agreement, all stock options and other stock-based awards granted to you by Company shall immediately accelerate and become exercisable or non-forfeitable as of the date of Change in Control, and you shall be entitled to any other rights and benefits with respect to stock-related awards, to the extent and upon the terms provided in the employee stock option or incentive plan or any agreement or other instrument attendant thereto pursuant to which such options or awards were granted.
(g)    Resignation for Good Reason. You may resign your employment from the Company for “Good Reason” only if there is a Change in Control as defined in 3(f)(i) above and within ninety (90) days after the date that any one of the following events described in the below subparts (g)(i) through (g)(ii) (any one of which will constitute “Good Reason”) has first occurred without your written consent. Your resignation for Good Reason will only be effective if the Company has not cured or remedied the Good Reason event within 30 days after its receipt of your written notice (such notice shall describe in detail the basis and underlying facts supporting your belief that a Good Reason event has occurred). Failure to timely provide such written notice to the Company or failure to timely resign your employment for Good Reason means that you will be deemed to have consented to and waived the Good Reason event. If the Company does timely cure or remedy the Good Reason event, then you may either resign your employment without Good Reason or you may continue to remain employed subject to the terms of this Agreement.
(i)    You have incurred a material diminution in your responsibilities, duties or authority;
(ii)    You have incurred a material diminution in your Base Salary; or
(iii)    The Company has materially breached a material term of this Agreement.
If you resign for good reason, then in addition to your Accrued Pay, you will be eligible to receive the following: payments equal in the aggregate to your then annualized Base Salary. The payments shall be paid to you in cash, in substantially equal monthly installments payable over the twelve (12) month period following your Termination Date, provided, however, the first payment (in an amount equal to two (2) months of Base Salary) shall be made on the sixtieth (60th) day following the Termination Date. As a condition to receiving (and continuing to receive) the payments provided in this Section you must: (i) within not later than forty-five (45) days after your Termination Date, execute (and not revoke) and deliver to the Company a Separation Agreement in a form prescribed by the Company and such Separation Agreement shall include without limitation a release of all claims against the Company and its affiliates along with a covenant not to sue and (ii) remain in full compliance with such Separation Agreement.
8.    Limitation on Golden Parachute Payments. Notwithstanding any other provision of this Agreement or any such other agreement or plan, if any portion of the Total Payments (as defined below) would constitute an Excess Parachute Payment (as defined below)

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and therefore would be nondeductible to the Company by reason of the operation of Code Section 280G relating to golden parachute payments and/or would be subject to the golden parachute excise tax (“Excise Tax”) by reason of Section 4999 of the Code, then the full amount of the Total Payments shall not be provided to you and you shall instead receive the Reduced Total Payments (as defined below).
If the Total Payments must be reduced to the Reduced Total Payments, the reduction shall occur in the following order: (1) reduction of cash payments for which the full amount is treated as a Parachute Payment; (2) cancellation of accelerated vesting (or, if necessary, payment) of cash awards for which the full amount is not treated as a parachute payment; (3) cancellation of any accelerated vesting of equity awards; and (4) reduction of any continued employee benefits. In selecting the equity awards (if any) for which vesting will be reduced under clause (3) of the preceding sentence, awards shall be selected in a manner that maximizes the after-tax aggregate amount of Reduced Total Payments provided to you, provided that if (and only if) necessary in order to avoid the imposition of an additional tax under Section 409A of the Code, awards instead shall be selected in the reverse order of the date of grant.
For the avoidance of doubt, for purposes of measuring an equity compensation award’s value to you when performing the determinations under the preceding paragraph, such award’s value shall equal the then aggregate fair market value of the vested shares underlying the award less any aggregate exercise price less applicable taxes. Also, if two or more equity awards are granted on the same date, each award will be reduced on a pro-rata basis. In no event shall (i) you have any discretion with respect to the ordering of payment reductions or (ii) the Company be required to gross up any payment or benefit to you to avoid the effects of the Excise Tax or to pay any regular or excise taxes arising from the application of the Excise Tax.
All mathematical determinations and all determinations of whether any of the Total Payments are Parachute Payments that are required to be made under this Section shall be made by a nationally recognized independent audit firm selected by the Company (the “Accountants”), who shall provide their determination, together with detailed supporting calculations regarding the amount of any relevant matters, both to the Company and to you. Such determination shall be made by the Accountants using reasonable good faith interpretations of the Code. The Company shall pay the fees and costs of the Accountants which are incurred in connection with this Section.
“Excess Parachute Payment” has the same meaning provided to such term by Treasury Regulations section 1.280G-1 Q/A-3.
“Parachute Payment” has the same meaning provided to such term by Treasury Regulations section 1.280G-1 Q/A-2.
“Reduced Total Payments” means the lesser portion of the Total Payments that may be provided to you instead of the Total Payments. The Reduced Total Payments shall be the maximum amount from the Total Payments that can be provided to you without incurring Excess Parachute Payments.

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“Total Payments” means collectively the benefits or payments provided by the Company (or by any person who acquires ownership or effective control of the Company or ownership of a substantial portion of the Company's assets within the meaning of Section 280G of the Code and the regulations thereunder) to or for the benefit of you under this Agreement or any other agreement or plan.
9.    Proprietary Information and Inventions Agreement; Confidentiality. You will be required, as a condition of your employment with the Company, to timely execute the Company’s form of proprietary information and inventions agreement as may be amended from time to time by the Company (“Confidentiality Agreement”).
10.    Assignability; Binding Nature. Commencing on the Effective Date, this Agreement will be binding upon you and the Company and your respective successors, heirs, and assigns. This Agreement may not be assigned by you except that your rights to compensation and benefits hereunder, subject to the limitations of this Agreement, may be transferred by will or operation of law. No rights or obligations of the Company under this Agreement may be assigned or transferred except in the event of a merger or consolidation in which the Company is not the continuing entity, or the sale or liquidation of all or substantially all of the assets of the Company provided that the assignee or transferee is the successor to all or substantially all of the assets of the Company and assumes the Company’s obligations under this Agreement contractually or as a matter of law. The Company will require any such purchaser, successor or assignee to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such purchase, succession or assignment had taken place. Your rights and obligations under this Agreement shall not be transferable by you by assignment or otherwise provided, however, that if you die, all amounts then payable to you hereunder shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there be no such designee, to your estate.
11.    Governing Law; Arbitration. To the extent not preempted by federal law, this Agreement will be deemed a contract made under, and for all purposes shall be construed in accordance with, the laws of Utah. Any controversy or claim relating to this Agreement or any breach thereof, and any claims you may have arising from or relating to your employment with the Company, will be settled solely and finally by arbitration in Salt Lake City, Utah before a single arbitrator and judgment upon such award rendered by the arbitrator may be entered in any court having jurisdiction thereof, provided that this Section shall not be construed to eliminate or reduce any right the Company or you may otherwise have to obtain a temporary restraining order or a preliminary or permanent injunction to enforce any of the covenants contained in this Agreement before the matter can be heard in arbitration.
12.    Taxes. The Company shall have the right to withhold and deduct from any payment hereunder any federal, state or local taxes of any kind required by law to be withheld with respect to any such payment. The Company shall not be liable to you or other persons as to any unexpected or adverse tax consequence realized by you and you shall be solely responsible for the timely payment of all taxes arising from this Agreement that are imposed on you. This Agreement is intended to comply with the applicable requirements of Code Section 409A and

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shall be limited, construed and interpreted in a manner so as to comply therewith. Each payment made pursuant to any provision of this Agreement shall be considered a separate payment and not one of a series of payments for purposes of Code Section 409A. While it is intended that all payments and benefits provided under this Agreement to you will be exempt from or comply with Code Section 409A, the Company makes no representation or covenant to ensure that the payments under this Agreement are exempt from or compliant with Code Section 409A. The Company will have no liability to you or any other party if a payment or benefit under this Agreement is challenged by any taxing authority or is ultimately determined not to be exempt or compliant. In addition, if upon your Termination Date, you are then a “specified employee” (as defined in Code Section 409A), then solely to the extent necessary to comply with Code Section 409A and avoid the imposition of taxes under Code Section 409A, the Company shall defer payment of “nonqualified deferred compensation” subject to Code Section 409A payable as a result of and within six (6) months following your Termination Date until the earlier of (i) the first business day of the seventh (7th) month following your Termination Date or (ii) ten (10) days after the Company receives written confirmation of your death. Any such delayed payments shall be made without interest. Additionally, the reimbursement of expenses or in-kind benefits provided pursuant to this Agreement shall be subject to the following conditions: (1) the expenses eligible for reimbursement or in-kind benefits in one taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits in any other taxable year; (2) the reimbursement of eligible expenses or in-kind benefits shall be made promptly, subject to the Company’s applicable policies, but in no event later than the end of the year after the year in which such expense was incurred; and (3) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.
13.    Entire Agreement. Except as otherwise specifically provided in this Agreement, this Agreement (and the agreements referenced herein) contains all the legally binding understandings and agreements between you and the Company pertaining to the subject matter of this Agreement and supersedes all such agreements, whether oral or in writing, previously discussed or entered into between the parties including without limitation any term sheets regarding your potential employment with the Company. As a material condition of this Agreement, you represent that by entering into this Agreement or by becoming a Company employee you are not violating the terms of any other contract or agreement or other legal obligations that would prohibit you from performing your duties for the Company. You further agree and represent that in providing your services to the Company you will not utilize or disclose any other entity's trade secrets or confidential information or proprietary information. You represent that you are not resigning employment or relocating any residence in reliance on any promise or representation by the Company regarding the kind, character, or existence of such work, or the length of time such work will last, or the compensation therefor.
14.    Non-Competition and Non-Solicitation.
(a)    Non-solicitation of employees and consultants. During your employment and for a period of two years after your employment terminates, you will not directly or indirectly solicit or induce, or attempt to solicit or induce, any employee or consultant

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of the Company to quit their employment or cease rendering services to the Company, unless you are specifically authorized to do so by the Company.
(b)    Non-solicitation of Customers. To the extent permitted under applicable law, and in order to protect the Confidential Information and preserve the Company’s relationships with its prospects and customers, you agree that for a period of two (2) years after your employment with the Company ends for any reason, you will not directly or indirectly solicit any business consisting of nutritional supplements or any other product or service of the Company at the time of your termination with any prospect or customer of the Company.
(c)    Non-Competition. You shall not, for a period of one (1) year after your employment with the Company ends for any reason, engage in, advise or consult with, or accept employment with any company, business or any entity, or contribute your knowledge to any work or activity that involves a product, process, provision of services or distribution channel (network marketing) as offered by the company, the development and/or sales of nutritional supplements, or any other product or service of the Company which is competitive with and the same as or similar to a product, process, or provision of services or distribution channel (network marketing) on which you worked or with respect to which you had access to confidential information while with the Company. Following expiration of said one-year period, you shall continue to be obligated under the confidential provisions of this Agreement and of your proprietary information and inventions agreement not to disclose and/or use confidential information so long as it shall remain proprietary or protectable as confidential or trade secret information. You acknowledge that this restraint is reasonable as to time and geographic limits and is necessary to protect the Company’s Confidential Information, and that it will not unduly restrict your ability to secure suitable employment after leaving the Company.
(d)    Modification By Court. If any court or arbitrator determines that any post-employment restrictive covenant is unreasonable in any respect, you agree that the Court may modify any unreasonable terms and enforce the agreement as modified.
(e)    Extension of Non-Compete. For any period of time in which you are found to be in violation of any of the above non-compete or non-solicitation agreements, that period of time shall be added on to the length of the restriction or period of protection for the Company.
(f)    Notice to Subsequent Employers. You agree that the Company may provide notice of your obligations under any provision of this Agreement to any company or future employer of yours should the Company consider it necessary for the enforcement of those obligations.
15.    Covenants. As a condition of this Agreement and to your receipt of any post-employment benefits, you agree that you will fully and timely comply with all of the covenants set forth in this subsection (which shall survive your termination of employment and termination or expiration of this Agreement):

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(i)    You will fully comply with all obligations under the Confidentiality Agreement and further agree that the provisions of the Confidentiality Agreement shall survive any termination or expiration of this Agreement or termination of your employment or any subsequent service relationship with the Company;
(ii)    Within five (5) days of the Termination Date, you shall return to the Company all Company confidential information including, but not limited to, intellectual property, etc., and you shall not retain any copies, facsimiles or summaries of any Company proprietary information;
(iii)    You will not at any time make (or direct anyone to make) any disparaging statements (oral or written) about the Company, or any of its affiliated entities, officers, directors, employees, stockholders, representatives or agents, or any of the Company’s products or services or work-in-progress, that are harmful to their businesses, business reputations or personal reputations.;
(iv)    You agree that during the period of your employment with the Company and thereafter, you will not utilize any trade secrets of the Company in order to solicit, either on behalf of yourself or any other person or entity, the business of any client or customer of the Company, whether past, present or prospective. The Company considers the following, without limitation, to be its trade secrets: Financial information, administrative and business records, analysis, studies, governmental licenses, employee records (including but not limited to counts and goals), prices, discounts, financials, electronic and written files of Company policies, procedures, training, and forms, written or electronic work product that was authored, developed, edited, reviewed or received from or on behalf of the Company during period of employment, Company developed technology, software, or computer programs, process manuals, products, business and marketing plans and or projections, Company sales and marketing data, Company technical information, Company strategic plans, Company financials, vendor affiliations, proprietary information, technical data, trade secrets, know-how, copyrights, patents, trademarks, intellectual property, and all documentation related to or including any of the foregoing; and
(v)    You agree that, upon the Company’s request and without any payment therefore, you shall reasonably cooperate with the Company (and be available as necessary) after the Termination Date in connection with any matters involving events that occurred during your period of employment with the Company.
(b)    You also agree that you will fully and timely comply with all of the covenants set forth in this subsection (which shall survive your termination of employment and termination or expiration of this Agreement):
(i)    You will fully pay off any outstanding amounts owed to the Company no later than their applicable due date or within thirty days of your Termination Date (if no other due date has been previously established);

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(ii)    Within five (5) days of the Termination Date, you shall return to the Company all Company property including, but not limited to, computers, cell phones, pagers, keys, business cards, etc.;
(iii)    Within thirty (30) days of the Termination Date, you will submit any outstanding expense reports to the Company on or prior to the Termination Date; and
(iv)    As of the Termination Date, you will no longer represent that you are an officer, director or employee of the Company and you will immediately discontinue using your Company mailing address, telephone, facsimile machines, voice mail and e-mail;
(c)    You agree that you will strictly adhere to and obey all Company rules, policies, procedures, regulations and guidelines, including but not limited to those contained in the Company’s employee handbook, as well any others that the Company may establish including without limitation any policy the Company adopts on the recoupment of compensation (“Clawback Policy”).
16.    Offset. Any severance or other payments or benefits made to you under this Agreement may be reduced, in the Company’s discretion, by any amounts you owe to the Company provided that any such offsets do not violate Code Section 409A.
17.    Notice. Any notice that the Company is required to or may desire to give you shall be given by personal delivery, recognized overnight courier service, email, telecopy or registered or certified mail, return receipt requested, addressed to you at your address of record with the Company, or at such other place as you may from time to time designate in writing. Any notice that you are required or may desire to give to the Company hereunder shall be given by personal delivery, recognized overnight courier service, email, telecopy or by registered or certified mail, return receipt requested, addressed to the Company’s General Counsel at its principal office, or at such other office as the Company may from time to time designate in writing. The date of actual delivery of any notice under this Section shall be deemed to be the date of delivery thereof.
18.    Waiver; Severability. No provision of this Agreement may be amended or waived unless such amendment or waiver is agreed to by you and the Company in writing and such amendment or waiver expressly references this Section. No waiver by you or the Company of the breach of any condition or provision of this Agreement will be deemed a waiver of a similar or dissimilar provision or condition at the same or any prior or subsequent time. Except as expressly provided herein to the contrary, failure or delay on the part of either party hereto to enforce any right, power, or privilege hereunder will not be deemed to constitute a waiver thereof. In the event any portion of this Agreement is determined to be invalid or unenforceable for any reason, the remaining portions shall be unaffected thereby and will remain in full force and effect to the fullest extent permitted by law.
19.    Voluntary Agreement. You acknowledge that you have been advised to review this Agreement with your own legal counsel and other advisors of your choosing and that prior to entering into this Agreement, you have had the opportunity to review this Agreement with your

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attorney and other advisors and have not asked (or relied upon) the Company or its counsel to represent you or your counsel in this matter. You further represent that you have carefully read and understand the scope and effect of the provisions of this Agreement and that you are fully aware of the legal and binding effect of this Agreement. This Agreement is executed voluntarily by you and without any duress or undue influence on the part or behalf of the Company.
20.    Key-Man Insurance. The Company shall have the right to insure your life for the sole benefit of the Company, in such amounts, and with such terms, as it may determine. All premiums payable thereon shall be the obligation of the Company. You shall have no interest in any such policy, but you agree to cooperate with the Company in taking out such insurance by submitting to physical examinations, supplying all information required by the insurance company, and executing all necessary documents, provided that no financial obligation is imposed on you by any such documents.
ACKNOWLEDGED AND AGREED:

This 21st day of March, 2012.        This 21st day of March, 2012.

LIFEVANTAGE CORPORATION


/s/ Elwood Spedden                    /s/ Rob Cutler        
BY: Elwood Spedden                    Rob Cutler
TITLE: Chairman

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Subsidiaries


SUBSIDIARIES OF LIFEVANTAGE CORPORATION
Set forth below is a list of all subsidiaries of LifeVantage Corporation, a Colorado corporation, and the state or country of incorporation of each as of June 30, 2013.
Name
 
State or Country of Incorporation
LifeLine Nutraceuticals Corporation
 
Colorado
LifeVantage Asia Pte. Ltd.
 
Singapore
LifeVantage Japan KK
 
Japan
LifeVantage Australia Pty. Ltd.
 
Australia
LifeVantage Hong Kong Limited
 
Hong Kong
Importadora LifeVantage
 
Mexico
LifeVantage de Mexico
 
Mexico
Servicios Administrativos para la importacion de Productos Body & Skin, S.C.
 
Mexico
LifeVantage Canada Ltd.
 
Canada
LifeVantage Commission Services Limited
 
Hong Kong


EKSH Consent 2013


Exhibit 23.1




CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


We hereby consent to the incorporation by reference in this Registration Statement on Form S-8 (No. 333-183461) of LifeVantage Corporation and subsidiaries (the “Company”) of our report dated September 12, 2013 with respect to the consolidated balance sheets of the Company as of June 30, 2013 and 2012, and the related consolidated statements of operations and comprehensive income (loss), changes in stockholders' equity (deficit), and cash flows for each of the years in the three-year period ended June 30, 2013, which report appears in the Company's annual report on Form 10-K filed with the Securities and Exchange Commission on September 12, 2013.


/s/EKS&H LLLP
Denver, Colorado
September 12, 2013



CEO Sec. 302 Certification


EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15(d)-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Douglas C. Robinson, certify that:
1.
I have reviewed this Annual Report on Form 10-K of LifeVantage Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
September 12, 2013
/s/ Douglas C. Robinson
 
Douglas C. Robinson
 
President & Chief Executive Officer
(Principal Executive Officer)


CFO Sec. 302 Certification


EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15(d)-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David S. Colbert, certify that:
1.
I have reviewed this Annual Report on Form 10-K of LifeVantage Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
September 12, 2013
/s/ David S. Colbert
 
David S. Colbert
Chief Financial Officer
(Principal Financial Officer)


CEO Sec 906 Certification


EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing of this annual report on Form 10-K of LifeVantage Corporation (the “Company”) for the period ended June 30, 2013, with the Securities and Exchange Commission on the date hereof (the “Report”), I, Douglas C. Robinson, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: September 12, 2013
/s/ Douglas C. Robinson
 
Douglas C. Robinson
President & Chief Executive Officer
(Principal Executive Officer)


CFO Sec. 906 Certification


EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing of this annual report on Form 10-K of LifeVantage Corporation (the “Company”) for the period ended June 30, 2013, with the Securities and Exchange Commission on the date hereof (the “Report”), I, David S. Colbert, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 
Date: September 12, 2013
/s/ David S. Colbert
 
David S. Colbert
Chief Financial Officer
(Principal Financial Officer)