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Note 13 - Segment Information
 12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

13.    SEGMENT INFORMATION

 

The Company sells products to a member network that operates in a seamless manner from market to market, except for the China market where it sells to some consumers through an e-commerce retail platform, and the Russia and Kazakhstan market where the Company’s engagement of a third-party service provider results in a different economic structure than its other markets. Otherwise, the Company believes that all of its other operating segments have similar economic characteristics and are similar in the nature of the products sold, the product acquisition process, the types of customers products are sold to, the methods used to distribute the products, and the nature of the regulatory environment. Therefore, the Company aggregates its other operating segments (including its Hong Kong operating segment) into a single reporting segment (the “Primary Reporting Unit”).

 

The Company’s CODM is its President, who reviews financial information presented on a geographic basis. The CODM primarily uses net sales, gross profit and operating profit in assessing segment performance and determining the allocation of resources. The CODM also uses gross profit for evaluating pricing strategy. The CODM is the primary individual in control of resource allocation, and the allocation determinations are generally made in consultation with senior management, which the CODM is a member. Segment operating income is adjusted for certain direct costs and commission allocations. The CODM also regularly reviews inventory information by operating segment in assessing segment performance and determining the allocation of resources.

 

The Company’s financial information by segment is as follows (in thousands):

 

  

Year Ended December 31, 2024

  

Year Ended December 31, 2023

 
  

Primary Reporting Unit

  

China

  

Russia and Kazakhstan

  

Total

  

Primary Reporting Unit

  

China

  

Russia and Kazakhstan

  

Total

 
                                 

Net sales

 $40,893  $1,580  $490  $42,963  $42,209  $1,235  $480  $43,924 

Cost of sales

  10,658   292   228   11,178   10,699   274   202   11,175 

Gross profit

  30,235   1,288   262   31,785   31,510   961   278   32,749 

Less:

                                

Commissions expense1

  17,305   —   266   17,571   18,130   —   284   18,414 

Employee-related costs

  3,629   950   48   4,627   3,458   900   45   4,403 

Facility costs

  1,191   155   14   1,360   1,193   175   13   1,381 

Other segment items2

  1,494   325   57   1,876   1,662   420   70   2,152 

Segment income (loss) from operations

 $6,616  $(142) $(123)  6,351  $7,067  $(534) $(134)  6,399 

Reconciliation of income before income taxes:

                                

Unallocated corporate expenses

           (7,650)           (8,070)

Other income, net

           1,919            2,416 

Income before income taxes

          $620           $745 

 

1Our China subsidiary maintains an e-commerce retail platform and does not pay commissions.

2 Other segment items include credit card fees and assessments, marketing-related costs, professional fees and other business expenses.

 

The Company’s segment assets are as follows (in thousands):

 

  

December 31, 2024

  

December 31, 2023

 
  

Primary Reporting Unit

  

China

  

Russia and Kazakhstan

  

Total

  

Primary Reporting Unit

  

China

  

Russia and Kazakhstan

  

Total

 
                                 

Inventories

 $2,422  $159  $36  $2,617  $2,991  $147  $27  $3,165 

Other inventories and inventory-related deposits1

           971            1,655 

Other assets2

           51,771            64,271 

Total assets

          $55,359           $69,091 

 

1 Other inventories and inventory-related deposits pertain to the Company's trading company and are not specific to any of the Company's operating segments.

2 Other assets primarily include cash, cash equivalents and marketable securities, but also includes all other current and noncurrent assets.

 

The Company’s net sales by geographic area are as follows (in thousands):

 

  

Year Ended December 31,

 
  

2024

  

2023

 

Net sales from external customers:

        

United States

 $1,044  $1,157 

Canada

  535   710 

Peru and Colombia

  1,101   1,497 

Hong Kong1

  35,106   34,898 

China

  1,580   1,235 

Taiwan

  1,591   2,181 

Japan

  292   450 

Russia and Kazakhstan

  490   480 

Europe

  635   733 

Other foreign countries

  589   583 

Total net sales

 $42,963  $43,924 

 

1 Substantially all of the Company's Hong Kong revenues are derived from the sale of products that are delivered to members in China. See “Item 1A. Risk Factors.”

 

The Company’s net sales by product and service are as follows (in thousands):

 

  

Year Ended December 31,

 
  

2024

  

2023

 

Net sales by product and service:

        

Product sales

 $41,729  $42,108 

Administrative fees, freight and other

  1,544   2,014 

Less: sales returns

  (310)  (198)

Total net sales

 $42,963  $43,924 

 

Due to system constraints, it is impracticable for the Company to separately disclose sales by product category for the years presented.

 

The Company’s long-lived tangible assets as well as the Company's operating lease right-of-use assets by geographic area are as follows (in thousands):

 

  

December 31,

 
  

2024

  

2023

 

Long-lived assets:

        

United States

 $1,425  $1,754 

Hong Kong

  828   1,350 

China

  164   216 

Other foreign countries

  271   265 

Total long-lived assets

 $2,688  $3,585