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.