Quarterly report [Sections 13 or 15(d)]

Note 11 - Segment Information

v3.26.1
Note 11 - Segment Information
 6 Months Ended
Jun. 30, 2026
Notes to Financial Statements  
Segment Reporting [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 June 30, 2026

    

Three Months Ended June 30, 2025

  
   

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

    

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

  
                                                                 

Net sales

   $ 7,386     $ 139     $ 78     $ 7,603     $ 9,493     $ 219     $ 101     $ 9,813  

Cost of sales

     1,814       29       39       1,882       2,447       53       58       2,558  

Gross profit

     5,572       110       39       5,721       7,046       166       43       7,255  

Less:

                                                                

Commissions expense1

     3,083       —       28       3,111       3,973       —       39       4,012  

Employee-related costs

     887       213       15       1,115       1,026       220       14       1,260  

Facility costs

     341       34       3       378       294       36       3       333  

Other segment items2

     362       54       10       426       414       81       12       507  

Segment income (loss) from operations

   $ 899     $ (191 )   $ (17 )     691     $ 1,339     $ (171 )   $ (25 )     1,143  

Reconciliation of income (loss) before income taxes:

                                                                

Unallocated corporate expenses

                             (1,334 )                             (1,476 )

Other income, net

                             190                               348  

Income (loss) before income taxes

                           $ (453 )                           $ 15  

 

   

Six Months Ended June 30, 2026

    

Six Months Ended June 30, 2025

  
   

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

    

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

  
                                                                 

Net sales

   $ 16,216     $ 437     $ 156     $ 16,809     $ 19,899     $ 453     $ 198     $ 20,550  

Cost of sales

     4,013       93       79       4,185       5,172       102       116       5,390  

Gross profit

     12,203       344       77       12,624       14,727       351       82       15,160  

Less:

                                                                

Commissions expense1

     6,909       —       55       6,964       8,408       —       92       8,500  

Employee-related costs

     1,762       446       30       2,238       1,985       453       26       2,464  

Facility costs

     634       71       6       711       579       71       6       656  

Other segment items2

     774       107       20       901       937       145       24       1,106  

Segment income (loss) from operations

   $ 2,124     $ (280 )   $ (34 )     1,810     $ 2,818     $ (318 )   $ (66 )     2,434  

Reconciliation of income (loss) before income taxes:

                                                                

Unallocated corporate expenses

                             (2,927 )                             (3,112 )

Other income, net

                             485                               813  

Income (loss) before income taxes

                           $ (632 )                           $ 135  

 

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):

 

   

June 30, 2026

    

December 31, 2025

  
   

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

    

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

  
                                                                 

Inventories

   $ 1,581     $ 153     $ 46     $ 1,780     $ 1,496     $ 142     $ 39     $ 1,677  

Other inventories and inventory-related deposits1

                       417                         444  

Other assets2

                       27,013                         36,307  

Total assets

                     $ 29,210                       $ 38,428  

 

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 June 30,

    

Six Months Ended June 30,

  
   

2026

    

2025

    

2026

    

2025

  

Net sales from external customers:

                                

United States

   $ 175     $ 299     $ 454     $ 585  

Canada

     71       130       161       231  

Peru and Colombia

     281       320       591       569  

Hong Kong1

     6,298       8,004       13,900       17,127  

China

     139       219       437       453  

Taiwan

     348       396       612       718  

Japan

     30       82       78       146  

Malaysia and Singapore

     37       82       88       132  

Russia and Kazakhstan

     78       101       156       198  

Europe

     110       120       252       270  

Other foreign countries

     36       60       80       121  

Total net sales

   $ 7,603     $ 9,813     $ 16,809     $ 20,550  

 

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.