Quarterly report [Sections 13 or 15(d)]

Note 10 - Segment Information

v3.26.3
Note 10 - Segment Information
 9 Months Ended
Sep. 30, 2026
Notes to Financial Statements  
Segment Reporting [Text Block]

10. 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, 2026

    

Three Months Ended September 30, 2025

  
   

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

    

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

  
                                                                 

Net sales

   $ 7,342     $ 136     $ 82     $ 7,560     $ 9,135     $ 237     $ 105     $ 9,477  

Cost of sales

     1,891       26       37       1,954       2,392       50       48       2,490  

Gross profit

     5,451       110       45       5,606       6,743       187       57       6,987  

Less:

                                                                

Commissions expense1

     2,683       —       27       2,710       3,832       —       44       3,876  

Employee-related costs

     856       198       7       1,061       966       224       14       1,204  

Facility costs

     193       34       5       232       311       36       3       350  

Other segment items2

     386       54       10       450       398       58       11       467  

Segment income (loss) from operations

   $ 1,333     $ (176 )   $ (4 )     1,153     $ 1,236     $ (131 )   $ (15 )     1,090  

Reconciliation of loss before income taxes:

                                                                

Unallocated corporate expenses

                             (1,430 )                             (1,585 )

Other income, net

                             112                               206  

Loss before income taxes

                           $ (165 )                           $ (289 )

 

   

Nine Months Ended September 30, 2026

    

Nine Months Ended September 30, 2025

  
   

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

    

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

  
                                                                 

Net sales

   $ 23,558     $ 573     $ 238     $ 24,369     $ 29,034     $ 690     $ 303     $ 30,027  

Cost of sales

     5,904       119       116       6,139       7,564       152       164       7,880  

Gross profit

     17,654       454       122       18,230       21,470       538       139       22,147  

Less:

                                                                

Commissions expense1

     9,592       —       82       9,674       12,240       —       136       12,376  

Employee-related costs

     2,618       644       37       3,299       2,951       677       40       3,668  

Facility costs

     827       105       11       943       890       107       9       1,006  

Other segment items2

     1,160       161       30       1,351       1,335       203       35       1,573  

Segment income (loss) from operations

   $ 3,457     $ (456 )   $ (38 )     2,963     $ 4,054     $ (449 )   $ (81 )     3,524  

Reconciliation of loss before income taxes:

                                                                

Unallocated corporate expenses

                             (4,357 )                             (4,697 )

Other income, net

                             597                               1,019  

Loss before income taxes

                           $ (797 )                           $ (154 )

 

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, 2026

    

December 31, 2025

  
   

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

    

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

  
                                                                 

Inventories

   $ 1,138     $ 149     $ 37     $ 1,324     $ 1,496     $ 142     $ 39     $ 1,677  

Other inventories and inventory-related deposits1

                       867                         444  

Other assets2

                       25,070                         36,307  

Total assets

                     $ 27,261                       $ 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 September 30,

    

Nine Months Ended September 30,

  
   

2026

    

2025

    

2026

    

2025

  

Net sales from external customers:

                                

United States

   $ 168     $ 302     $ 622     $ 887  

Canada

     70       128       231       359  

Peru and Colombia

     289       301       880       870  

Hong Kong1

     6,296       7,715       20,196       24,842  

China

     136       237       573       690  

Taiwan

     283       331       895       1,049  

Japan

     24       111       102       257  

Malaysia and Singapore

     44       67       132       199  

Russia and Kazakhstan

     82       105       238       303  

Europe

     122       130       374       400  

Other foreign countries

     46       50       126       171  

Total net sales

   $ 7,560     $ 9,477     $ 24,369     $ 30,027  

 

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.