Annual report pursuant to Section 13 and 15(d)

Note 13 - Segment Information

v3.25.0.1
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