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Note 11 - Segment Information
 9 Months Ended
Sep. 30, 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 September 30, 2025

  

Three Months Ended September 30, 2024

 
  

Primary Reporting Unit

  

China

  

Russia and Kazakhstan

  

Total

  

Primary Reporting Unit

  

China

  

Russia and Kazakhstan

  

Total

 
                                 

Net sales

 $9,135  $237  $105  $9,477  $9,951  $601  $139  $10,691 

Cost of sales

  2,396   47   47   2,490   2,599   103   63   2,765 

Gross profit

  6,739   190   58   6,987   7,352   498   76   7,926 

Less:

                                

Commissions expense1

  3,832   —   44   3,876   4,256   —   77   4,333 

Employee-related costs

  859   224   14   1,097   954   220   13   1,187 

Facility costs

  311   36   3   350   301   37   3   341 

Other segment items2

  253   59   12   324   331   80   14   425 

Segment income (loss) from operations

 $1,484  $(129) $(15)  1,340  $1,510  $161  $(31)  1,640 

Reconciliation of income (loss) before income taxes:

                                

Unallocated corporate expenses

              (1,835)              (1,915)

Other income, net

              206               441 

Income (loss) before income taxes

             $(289)             $166 

 

  

Nine Months Ended September 30, 2025

  

Nine Months Ended September 30, 2024

 
  

Primary Reporting Unit

  

China

  

Russia and Kazakhstan

  

Total

  

Primary Reporting Unit

  

China

  

Russia and Kazakhstan

  

Total

 
                                 

Net sales

 $29,034  $690  $303  $30,027  $30,440  $1,321  $356  $32,117 

Cost of sales

  7,573   146   161   7,880   7,963   241   172   8,376 

Gross profit

  21,461   544   142   22,147   22,477   1,080   184   23,741 

Less:

                                

Commissions expense1

  12,240   —   136   12,376   12,841   —   181   13,022 

Employee-related costs

  2,597   677   40   3,314   2,780   694   38   3,512 

Facility costs

  890   107   9   1,006   890   119   11   1,020 

Other segment items2

  1,017   204   36   1,257   1,120   276   42   1,438 

Segment income (loss) from operations

 $4,717  $(444) $(79)  4,194  $4,846  $(9) $(88)  4,749 

Reconciliation of income (loss) before income taxes:

                                

Unallocated corporate expenses

              (5,367)              (5,627)

Other income, net

              1,019               1,523 

Income (loss) before income taxes

             $(154)             $645 

 

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):

 

  

September 30, 2025

  

December 31, 2024

 
  

Primary Reporting Unit

  

China

  

Russia and Kazakhstan

  

Total

  

Primary Reporting Unit

  

China

  

Russia and Kazakhstan

  

Total

 
                                 

Inventories

 $1,475  $143  $45  $1,663  $2,422  $159  $36  $2,617 

Other inventories and inventory-related deposits1

           634            971 

Other assets2

           39,954            51,771 

Total assets

          $42,251           $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 September 30,

  

Nine Months Ended September 30,

 
  

2025

  

2024

  

2025

  

2024

 

Net sales from external customers:

                

United States

 $302  $274  $887  $799 

Canada

  128   134   359   387 

Peru and Colombia

  301   340   870   844 

Hong Kong1

  7,715   8,356   24,842   25,998 

China

  237   601   690   1,321 

Taiwan

  331   454   1,049   1,277 

Japan

  111   81   257   202 

Malaysia and Singapore

  67   58   199   177 

Russia and Kazakhstan

  105   139   303   356 

Europe

  130   164   400   473 

Other foreign countries

  50   90   171   283 

Total net sales

 $9,477  $10,691  $30,027  $32,117 

 

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.