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Note 11 - Segment Information
 3 Months Ended
Mar. 31, 2025
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

11. 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. 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):

 

  

Three Months Ended March 31, 2025

  

Three Months Ended March 31, 2024

 
  

Primary Reporting Unit

  

China

  

Russia and Kazakhstan

  

Total

  

Primary Reporting Unit

  

China

  

Russia and Kazakhstan

  

Total

 
                                 

Net sales

 $10,406  $234  $97  $10,737  $10,466  $384  $101  $10,951 

Cost of sales

  2,727   48   57   2,832   2,790   73   49   2,912 

Gross profit

  7,679   186   40   7,905   7,676   311   52   8,039 

Less:

                                

Commissions expense1

  4,435   —   53   4,488   4,428   —   58   4,486 

Employee-related costs

  841   233   12   1,086   940   258   16   1,214 

Facility costs

  285   35   3   323   297   42   4   343 

Other segment items2

  445   64   12   521   385   105   14   504 

Segment income (loss) from operations

 $1,673  $(146) $(40)  1,487  $1,626  $(94) $(40)  1,492 

Reconciliation of income before income taxes:

                                

Unallocated corporate expenses

              (1,832)              (1,857)

Other income, net

              465               563 

Income before income taxes

             $120              $198 

 

1 Our 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):

 

  

March 31, 2025

  

December 31, 2024

 
  

Primary Reporting Unit

  

China

  

Russia and Kazakhstan

  

Total

  

Primary Reporting Unit

  

China

  

Russia and Kazakhstan

  

Total

 
                                 

Inventories

 $1,926  $162  $81  $2,169  $2,422  $159  $36  $2,617 

Other inventories and inventory-related deposits1

           871            971 

Other assets2

           50,139            51,771 

Total assets

          $53,179           $55,359 

 

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):

 

  

Three Months Ended March 31,

 
  

2025

  

2024

 

Net sales from external customers:

        

United States

 $286  $262 

Canada

  101   111 

Peru and Colombia

  249   220 

Hong Kong1

  9,123   9,174 

China

  234   384 

Taiwan

  322   337 

Japan

  64   66 

Malaysia and Singapore

  50   53 

Russia and Kazakhstan

  97   101 

Europe

  150   152 

Other foreign countries

  61   91 

Total net sales

 $10,737  $10,951 

 

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” in our most recent Annual Report on Form 10-K.