NATURAL HEALTH TRENDS CORP 10-K

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA NATURAL HEALTH TRENDS CORP. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (Marcum LLP, PCAOB ID No. 688 ) 37 Consolidated Balance Sheets 38 Consolidated Statements of Operations 39 Consolidated Statements of Comprehensive Income (Loss) 40 Consolidated Statements of Stockholders’ Equity 41 Consolidated Statements of Cash Flows 42 Notes to Consolidated Financial Statements 43 36 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of Natural Health Trends Corp. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Natural Health Trends Corp. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. We determined that there are no critical audit matters. /s/ Marcum LLP Marcum LLP We have served as the Company’s auditor since 2017. Los Angeles, CA February 28, 2024 37 Table of Contents NATURAL HEALTH TRENDS CORP. CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share Data) December 31, 2023 2022 ASSETS Current assets: Cash and cash equivalents $ 56,178 $ 69,667 Inventories 4,293 4,525 Other current assets 3,758 3,359 Total current assets 64,229 77,551 Property and equipment, net 266 394 Operating lease right-of-use assets 3,319 3,992 Restricted cash 39 79 Deferred tax asset 369 195 Other assets 869 606 Total assets $ 69,091 $ 82,817 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 990 $ 810 Income taxes payable 3,716 2,972 Accrued commissions 2,067 2,943 Other accrued expenses 1,170 1,181 Deferred revenue 6,166 5,597 Amounts held in eWallets 3,945 4,895 Operating lease liabilities 1,146 1,135 Other current liabilities 784 905 Total current liabilities 19,984 20,438 Income taxes payable 5,054 9,098 Deferred tax liability 135 141 Operating lease liabilities 2,318 2,989 Total liabilities 27,491 32,666 Commitments and contingencies (Note 8) Stockholders’ equity: Preferred stock, $ 0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding — — Common stock, $ 0.001 par value; 50,000,000 shares authorized; 12,979,414 shares issued at December 31, 2023 and 2022 13 13 Additional paid-in capital 84,695 86,102 Accumulated deficit ( 17,703 ) ( 9,056 ) Accumulated other comprehensive loss ( 1,069 ) ( 1,004 ) Treasury stock, at cost; 1,462,641 and 1,556,875 shares at December 31, 2023 and 2022, respectively ( 24,336 ) ( 25,904 ) Total stockholders’ equity 41,600 50,151 Total liabilities and stockholders’ equity $ 69,091 $ 82,817 See accompanying notes to consolidated financial statements. 38 Table of Contents NATURAL HEALTH TRENDS CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Data) Year Ended December 31, 2023 2022 Net sales $ 43,924 $ 49,134 Cost of sales 11,175 12,661 Gross profit 32,749 36,473 Operating expenses: Commissions expense 18,414 20,747 Selling, general and administrative expenses 16,006 15,996 Total operating expenses 34,420 36,743 Loss from operations ( 1,671 ) ( 270 ) Other income, net 2,416 872 Income before income taxes 745 602 Income tax provision 177 289 Net income $ 568 $ 313 Net income per common share: Basic $ 0.05 $ 0.03 Diluted $ 0.05 $ 0.03 Weighted-average number of common shares outstanding: Basic 11,436 11,362 Diluted 11,456 11,423 See accompanying notes to consolidated financial statements. 39 Table of Contents NATURAL HEALTH TRENDS CORP. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In Thousands) Year Ended December 31, 2023 2022 Net income $ 568 $ 313 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments ( 69 ) ( 514 ) Unrealized gains on available-for-sale securities 4 2 Comprehensive income (loss) $ 503 $ ( 199 ) See accompanying notes to consolidated financial statements. 40 Table of Contents NATURAL HEALTH TRENDS CORP. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In Thousands, Except Share Data) Preferred Stock Common Stock Additional Paid-In Accumulated Accumulated Other Comprehensive Treasury Stock Shares Amount Shares Amount Capital Deficit Loss Shares Amount Total BALANCE, December 31, 2021 — $ — 12,979,414 $ 13 $ 86,102 $ ( 231 ) $ ( 492 ) ( 1,556,875 ) $ ( 25,904 ) $ 59,488 Net income — — — — — 313 — — — 313 Dividends declared, $ 0.80 /share — — — — — ( 9,138 ) — — — ( 9,138 ) Foreign currency translation adjustments — — — — — — ( 514 ) — — ( 514 ) Unrealized gains on available-for-sale securities — — — — — — 2 — — 2 BALANCE, December 31, 2022 — — 12,979,414 13 86,102 ( 9,056 ) ( 1,004 ) ( 1,556,875 ) ( 25,904 ) 50,151 Net income — — — — — 568 — — — 568 Reissuance of treasury shares — — — — ( 1,629 ) — — 97,900 1,629 — Restricted stock forfeiture — — — — 61 — — ( 3,666 ) ( 61 ) — Share-based compensation — — — — 161 — — — — 161 Dividends declared, $ 0.80 /share — — — — — ( 9,215 ) — — — ( 9,215 ) Foreign currency translation adjustments — — — — — — ( 69 ) — — ( 69 ) Unrealized gains on available-for-sale securities — — — — — — 4 — — 4 BALANCE, December 31, 2023 — $ — 12,979,414 $ 13 $ 84,695 $ ( 17,703 ) $ ( 1,069 ) ( 1,462,641 ) $ ( 24,336 ) $ 41,600 See accompanying notes to consolidated financial statements. 41 Table of Contents NATURAL HEALTH TRENDS CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Year Ended December 31, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 568 $ 313 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 164 204 Share-based compensation 161 — Noncash lease expense 1,109 1,172 Deferred income taxes ( 178 ) 90 Changes in assets and liabilities: Inventories 228 680 Other current assets ( 452 ) 992 Other assets ( 270 ) ( 67 ) Accounts payable 181 52 Income taxes payable ( 3,299 ) ( 1,404 ) Accrued commissions ( 866 ) ( 654 ) Other accrued expenses ( 4 ) ( 732 ) Deferred revenue 565 ( 2,901 ) Amounts held in eWallets ( 947 ) ( 1,432 ) Operating lease liabilities ( 1,119 ) ( 1,220 ) Other current liabilities ( 119 ) 55 Net cash used in operating activities ( 4,278 ) ( 4,852 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ( 46 ) ( 143 ) Net cash used in investing activities ( 46 ) ( 143 ) CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid ( 9,215 ) ( 9,138 ) Net cash used in financing activities ( 9,215 ) ( 9,138 ) Effect of exchange rates on cash, cash equivalents and restricted cash 10 ( 486 ) Net decrease in cash, cash equivalents and restricted cash ( 13,529 ) ( 14,619 ) CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period 69,746 84,365 CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period $ 56,217 $ 69,746 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for income taxes, net $ 3,529 $ 1,662 SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Right-of-use assets obtained in exchange for operating lease liabilities $ 147 $ 2,234 See accompanying notes to consolidated financial statements. 42 Table of Contents NATURAL HEALTH TRENDS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Natural Health Trends Corp., a Delaware corporation (whether or not including its subsidiaries, the “Company”), is an international direct-selling and e-commerce company. Subsidiaries controlled by the Company sell personal care, wellness, and “quality of life” products under the “NHT Global” brand. The Company’s wholly-owned subsidiaries have an active physical presence in the following markets: the Americas, which consists of the United States, Canada, Cayman Islands, Mexico and Peru; Greater China, which consists of Hong Kong, Taiwan and China; Southeast Asia, which consists of Malaysia, Singapore and Thailand; South Korea; Japan; India; and Europe. The Company also operates in Russia and Kazakhstan through an engagement with a local service provider. Principles of Consolidation The consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. The most significant accounting estimates inherent in the preparation of the Company’s financial statements include estimates associated with revenue recognition, as well as those used in the determination of liabilities related to sales returns, commissions and income taxes. Various assumptions and other factors prompt the determination of these significant estimates. The process of determining significant estimates is fact specific and takes into account historical experience and current and expected economic conditions. The actual results may differ materially and adversely from the Company’s estimates. To the extent that there are material differences between the estimates and actual results, future results of operations will be affected. Cash and Cash Equivalents Cash and cash equivalents include the Company’s investments in money market funds, government and municipal debt securities, and corporate debt securities. The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. Debt securities classified as cash equivalents are required to be accounted for in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 320, Investments - Debt and Equity Securities . As such, the Company determined its investments in debt securities held at December 31, 2023 should be classified as available-for-sale and carried at fair value with unrealized gains and losses reported in stockholders’ equity. The cost of debt securities is adjusted for amortization of premiums and discounts to maturity. This amortization is included in other income and expense. Realized gains and losses, as well as interest income, are also included in other income and expense. The fair values of securities are based on quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs. The Company includes credit card receivables due from certain of its credit card processors in its cash and cash equivalents as the cash proceeds are received within two to five days. The Company maintains substantially all of its cash balances at several institutions located in the United States, Hong Kong and China which at times may exceed insured limits. As of December 31, 2023, there was $ 890,000 in bank accounts located in Hong Kong in excess of insured limits. As of December 31, 2023, cash and cash equivalents included $ 3.7 million held in bank accounts located in China subject to foreign currency controls. The Company has not experienced any losses on such accounts. See Note 5 for additional information regarding the Company's investments in cash equivalents held in brokerage accounts. 43 Table of Contents Restricted Cash The Company periodically maintains a cash reserve with certain credit card processing companies to provide for potential uncollectible amounts and chargebacks. Those cash reserves held by credit card processing companies located in South Korea are reflected in noncurrent assets since they require the Company to provide 100 % collateral before processing transactions, which must be maintained indefinitely. Inventories Inventories are stated at the lower of cost or net realizable value, using the first -in, first -out method. The Company reviews its inventory for obsolescence and any inventory identified as obsolete is reserved or written off. The Company’s determination of obsolescence is based on assumptions about the demand for its products, product expiration dates, estimated future sales, and management’s future plans. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally three to five years for office equipment, office software and capitalized internal-use software development costs and five to seven years for furniture and fixtures. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the assets. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation and amortization expenses are included in the statement of operations as selling, general and administrative expenses. Such expense totaled $16 4 ,000 and $ 204,000 during 2023 and 2022 , respectively. The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by comparison of its carrying amounts to future undiscounted cash flows the assets are expected to generate. If property and equipment are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair value. Income Taxes The Company recognizes income taxes under the liability method of accounting for income taxes. Deferred income taxes are recognized for differences between the financial reporting and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which the temporary differences are expected to be recovered or settled. Deferred tax expense or benefit is a result of changes in deferred tax assets and liabilities. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be ultimately realized based on the more likely than not recognition criteria. The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company has evaluated its tax positions and determined that there are no significant uncertain tax positions for the current year or years prior. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. Deferred taxes are not provided for state income tax purposes on the portion of undistributed earnings of subsidiaries outside of the United States when these earnings are considered permanently reinvested. Amounts Held in eWallets The Company requires commission payments of certain members in Hong Kong and other markets to be first recorded into an electronic wallet (eWallet) account in lieu of being paid out directly to members. The eWallet functionality allows members to place new product orders utilizing eWallet available balance and/or request commission payout via multiple payment methods. Amounts held in eWallets are reflected on the balance sheet as a current liability. Foreign Currency The functional currency of the Company’s international subsidiaries is generally their local currency. Local currency assets and liabilities are translated at the rates of exchange on the balance sheet date, and local currency revenues and expenses are translated at average rates of exchange during the period. Equity accounts are translated at historical rates. The resulting translation adjustments are recorded directly into stockholders' equity. Aggregate transaction gains or losses, including gains or losses related to foreign-denominated cash and cash equivalents and the re-measurement of certain intercompany balances, are included in the statement of operations as other income and expense. Loss on foreign exchange totaling $ 292,000 and $ 272,000 was recognized during 2023 and 2022 , respectively. 44 Table of Contents Commissions Expense Independent members earn commissions based on total personal and group bonus volume points per weekly sales period. Each of the Company’s products are designated a specified number of bonus volume points, which is essentially a percentage of the product’s wholesale price. The Company accrues commissions when earned and as the related revenue is recognized and pays commissions on product sales generally two weeks following the end of the weekly sales period. In some markets, the Company also pays certain bonuses on purchases by up to three generations of personally sponsored members, as well as bonuses on commissions earned by up to seven generations of personally sponsored members. Independent members may also earn incentives based on meeting certain qualifications during a designated incentive period, which may range from several weeks to up to a year. The Company estimates and accrues all costs associated with the incentives as the members meet the qualification requirements. From time to time the Company makes modifications and enhancements to the Company’s compensation plan to help motivate members, which can have an impact on member commissions. The Company also enters into performance-based agreements for business or market development, which may result in additional compensation to specific members. Net Income Per Common Share Diluted net income per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. The dilutive effect of non-vested restricted stock is reflected by application of the treasury stock method. Under the treasury stock method, the amount of compensation cost for future service that the Company has not yet recognized, if any, is assumed to be used to repurchase shares. Certain Risks and Concentrations In contrast to the Company’s business in other parts of the world, the Company’s China subsidiary has not implemented a direct sales model in China. The Chinese government permits direct selling only by organizations that have a license and has also adopted anti-pyramid selling and multi-level marketing legislation. The Company previously submitted a preliminary application for a direct selling license in China in August 2015, but in 2019 a Chinese governmental authority recommended that the Company withdraw its application. The Company understands that the governmental authorities recommended that other companies with pending direct selling license applications also withdraw their applications. The Company applied to withdraw its application in November 2019, and the governmental authorities approved the withdrawal of its application shortly thereafter. The Company operates an e-commerce direct selling platform in Hong Kong and recognizes the revenue derived from sales to both Hong Kong and Chinese members as being generated in Hong Kong. Products purchased by members in China are delivered to third parties that act as the importers of record under agreements to pay applicable duties. In addition, through a Chinese entity, the Company sells products in China using an e-commerce retail platform. The Chinese entity operates separately from the Hong Kong entity, and a Chinese member may elect to participate separately or in both. The Company continually evaluates its business in China and Hong Kong for compliance with applicable laws and regulations, including seeking the input of outside professionals and certain Chinese authorities. This process can and has resulted in the identification of certain matters of potential noncompliance. The Company works on a continuing basis to satisfactorily address such matters, however there can be no assurance that adequate steps are taken or that applicable laws and regulations are properly interpreted. Should the government authorities determine that the Company’s activities violate applicable laws and regulations, including China’s direct selling, pyramid selling or multi-level marketing laws and regulations, or should new laws or regulations be adopted, there could be a material adverse effect on the Company’s business, financial condition and results of operations. Although the Company attempts to work closely with both national and local Chinese governmental agencies in conducting its business, the Company’s efforts to comply with national and local laws may be harmed by a rapidly evolving regulatory climate, concerns about activities resembling violations of direct selling, pyramid selling or multi-level marketing legislation, subjective interpretations of laws and regulations, and activities by individual members that may violate laws notwithstanding the Company's policies prohibiting such activities. Any determination that the Company’s operations or activities, or the activities of its individual members or employee sales representatives, or importers of record are not in compliance with applicable laws and regulations could result in the imposition of substantial fines, extended interruptions of business, restrictions on the Company’s future ability to obtain business licenses or expand into new locations, changes to its business model, the termination of required licenses to conduct business, or other actions, any of which could materially harm the Company’s business, financial condition and results of operations. 45 Table of Contents No single market other than Hong Kong had net sales greater than 10% of total sales. Sales are made to the Company’s members and no single customer accounted for 10% or more of its net sales. However, the Company’s business model can result in a concentration of sales to several different members and their network of members. Although no single member accounted for 10% or more of net sales, the loss of a key member or that member’s network could have an adverse effect on the Company’s net sales and financial results. The Company’s Premium Noni Juice and Triotein™ products each account for at least 10% of the Company’s total revenue as well as the Company's line of probiotic products comprised of Enhanced Essential Probiotics and Biotic Trio . The Company currently sources each of these products from a single supplier. If demand decreases significantly, government regulation restricts their sale, the Company is unable to adequately source or deliver the products, or the Company ceases offering the products for any reason without suitable replacements, the Company’s business, financial condition and results of operations could be materially and adversely affected. Fair Value of Financial Instruments The carrying amounts of the Company’s financial instruments, including cash and accounts payable, approximate fair value because of their short maturities. The carrying amount of the noncurrent restricted cash approximates fair value since, absent the restrictions, the underlying assets would be included in cash and cash equivalents. Accounting standards permit companies, at their option, to choose to measure many financial instruments and certain other items at fair value. The Company has elected to not fair value existing eligible items. Recent Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016 - 13, Financial Instruments - Credit Losses (Topic 326 ): Measurement of Credit Losses on Financial Instruments , which introduced an expected credit loss model for the impairment of financial assets measured at amortized cost basis and added Topic 326 to the FASB Accounting Standards Codification (“ASC”). In November 2019, the FASB issued ASU 2019 - 11, Codification Improvements to Topic 326, Financial Instruments - Credit Losses . The amendments to ASU 2019 - 11 clarify, correct and make improvements to Topic 326. ASU 2016 - 13 as well as the updates in ASU 2019 - 11 were effective for interim and annual periods beginning after December 15, 2022. The adoption of this standard did not have a material impact on the Company's financial statements. In November 2023, the FASB issued ASU 2023 - 07, Segment Reporting (Topic 280 ): Improvements to Reportable Segment Disclosures , which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in ASU 2023 - 07 will be applied retrospectively and are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of implementing this guidance, but does not expect adoption to have a material impact on its consolidated financial statements. In December 2023, the FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures , which enhances the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023 - 09 will be applied on a prospective basis and are effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. Other recently issued accounting pronouncements did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements. 46 Table of Contents 2. REVENUE Revenue Recognition All revenue is recognized when the performance obligations under a contract, including any product vouchers sold on a stand-alone basis in Hong Kong, are satisfied. Product sales are recognized when the products are shipped and title passes to independent members. Product sales to members are made pursuant to a member agreement that provides for transfer of both title and risk of loss upon the Company’s delivery to the carrier that completes delivery to the members, which is commonly referred to as “F.O.B. Shipping Point.” The Company’s sales arrangements do not contain right of inspection or customer acceptance provisions other than general rights of return. These contracts are generally short-term in nature. Actual product returns are recorded as a reduction to net sales. The Company estimates and accrues a reserve for product returns based on its return policies and historical experience. The reserve is based upon the return policy of each country, which varies from 14 days to one year, and their historical return rates, which range from 1 % to 4 % of sales. Sales returns were 1 % of sales for each of 2023 and 2022 . No material changes in estimates have been recognized during the periods presented. See Note 4 for additional information. The Company has elected to account for shipping and handling activities performed after title has passed to members as a fulfillment cost, and accrues for the costs of shipping and handling if revenue is recognized before the contractually obligated shipping and handling activities occurs. Shipping charges billed to members are included in net sales. Costs associated with shipments are included in cost of sales. Event and training revenue is deferred and recognized as the event or training occurs. Costs of events and member training are included within selling, general and administrative expenses. Various taxes on the sale of products to members are collected by the Company as an agent and remitted to the respective taxing authority. These taxes are presented on a net basis and recorded as a liability until remitted to the respective taxing authority. Deferred Revenue The Company primarily receives payment by credit card at the time members place orders. Amounts received for unshipped product orders and unredeemed product vouchers are considered a contract liability and are recorded as deferred revenue. As of December 31, 2023 and 2022, the Company had $ 4.4 million and $ 3.8 million, respectively, of contract liabilities where performance obligations have not yet been satisfied. The increase in contract liabilities from December 31, 2022 to December 31, 2023 is primarily due to $ 4.4 million of cash received for unshipped product orders and unredeemed product vouchers during the year ended December 31, 2023 offset by $ 3.8 million of revenue recognized during the year ended December 31, 2023 that was included in contract liabilities at December 31, 2022. As of December 31, 2021, the Company had contract liabilities totaling $ 6.5 million which was recognized as revenue during 2022. The Company expects to satisfy its remaining performance obligations and recognize the revenue within the next twelve months. Disaggregation of Revenue The Company sells products to a member network that operates in a seamless manner from market to market, except for the Chinese market where it sells to some consumers through an e-commerce retail platform and the Russia and Kazakhstan market where the Company operates through the engagement of a third -party service provider. See Note 13 for additional information. Arrangements with Multiple Performance Obligations The Company’s contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenues to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on the prices charged for individual products to similar customers. Practical Expedients The Company generally expenses sales commissions when incurred because the amortization period would be one year or less. These costs are recorded in commissions expense. The Company does not provide certain disclosures about unsatisfied performance obligations for contracts with an original expected length of one year or less. 47 Table of Contents 3. NET INCOME PER COMMON SHARE The following table illustrates the computation of basic and diluted net income per common share for the periods indicated (in thousands, except per share data): Year Ended December 31, 2023 2022 Income Shares Per Share Income Shares Per Share Basic net income per common share: Net income available to common stockholders $ 568 11,436 $ 0.05 $ 313 11,362 $ 0.03 Effect of dilutive securities: Non-vested restricted stock — 20 — 61 Diluted net income per common share: Net income available to common stockholders plus assumed dilution $ 568 11,456 $ 0.05 $ 313 11,423 $ 0.03 48 Table of Contents 4. BALANCE SHEET COMPONENTS The components of certain balance sheet amounts are as follows (in thousands): December 31, 2023 2022 Cash and cash equivalents: Cash $ 8,971 $ 12,834 Cash equivalents 47,207 56,833 56,178 69,667 Restricted cash 39 79 $ 56,217 $ 69,746 Inventories: Finished goods $ 3,473 $ 3,653 Raw materials 855 890 Reserve for obsolescence ( 35 ) ( 18 ) $ 4,293 $ 4,525 Property and equipment: Office equipment $ 456 $ 462 Office software 979 986 Machinery — 20 Furniture and fixtures 243 249 Leasehold improvements 760 981 Construction in progress 40 30 Property and equipment, at cost 2,478 2,728 Accumulated depreciation and amortization ( 2,212 ) ( 2,334 ) $ 266 $ 394 Other accrued expenses: Sales returns $ 81 $ 70 Employee-related expense 668 737 Warehousing, inventory-related and other 421 374 $ 1,170 $ 1,181 Deferred revenue: Unshipped product and unredeemed product vouchers $ 4,417 $ 3,822 Auto ship advances 1,749 1,775 $ 6,166 $ 5,597 49 Table of Contents 5. FAIR VALUE MEASUREMENTS Investments by category included in cash equivalents at the end of each period were as follows (in thousands): December 31, 2023 December 31, 2022 Fair Value Level 1 Adjusted Cost Gross Unrealized Gains (Losses) Fair Value Adjusted Cost Gross Unrealized Losses Fair Value Money market funds Level 1 $ 213 $ — $ 213 $ 2,143 $ — $ 2,143 Government and municipal debt securities Level 2 1,426 1 1,427 6,759 — 6,759 Corporate debt securities Level 2 45,580 ( 13 ) 45,567 47,947 ( 16 ) 47,931 Total investments $ 47,219 $ ( 12 ) $ 47,207 $ 56,849 $ ( 16 ) $ 56,833 1 FASB Topic 820, Fair Value Measurements, establishes a fair value hierarchy that requires the use of observable market data, when available, and prioritizes the inputs to valuation techniques used to measure fair value in the following categories: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs that are not corroborated by market data. 50 Table of Contents 6. LEASES The Company leases 7,300 square feet of corporate office space in Hong Kong with a term expiring in June 2026, and 4,900 square feet of corporate office space in Rolling Hills Estates, California with a term expiring in September 2030. To help further develop the market for its products in North America, the Company leases 1,600 square feet of retail space in each of Rowland Heights, California and Richmond, British Columbia, and 2,000 square feet of retail space in Metuchen, New Jersey. The Rowland Heights, Richmond and Metuchen locations have terms expiring in November 2025, February 2027, and December 2028, respectively. The Company leases seven branch offices throughout China, and additional office space in Peru, Japan, Taiwan, South Korea, Malaysia, Thailand, India, and the Cayman Islands. The Company contracts with third parties for fulfillment and distribution operations in all of its international markets. None of the Company’s third -party logistics contracts contain a lease, as the Company does not have the right to access the warehouses or move its inventories at will. The components of lease cost were as follows (in thousands): Year Ended December 31, 2023 2022 Operating leases $ 1,298 $ 1,286 Short-term leases 150 161 Total lease cost $ 1,448 $ 1,447 Cash paid for amounts included in the measurement of operating leases liabilities was $ 1.3 million for each of 2023 and 2022. The weighted-average remaining lease term and discount rate related to operating leases as of December 31, 2023 were as follows: Weighted-average remaining lease term (in years) 4.2 Weighted-average discount rate 4.5 % As most of the Company’s leases do not provide an implicit rate, the Company used its incremental borrowing rate, or the rate of each of its subsidiaries if available, based on the information available at the lease commencement date to determine the present value of lease payments. The annual scheduled lease payments of the Company's operating lease liabilities as of December 31, 2023 were as follows (in thousands): 2024 $ 1,182 2025 1,039 2026 580 2027 299 2028 304 Thereafter 375 Total lease payments $ 3,779 Less: imputed interest ( 315 ) Present value of lease liabilities $ 3,464 For all asset classes, the Company elected not to recognize assets or liabilities at the acquisition date for leases that, at the acquisition date, have a remaining lease term of 12 months or less. Additionally, for all asset classes, the Company choose not to separate nonlease components from lease components and instead account for the combined lease and nonlease components associated with that lease component as a single lease component. 51 Table of Contents 7. INCOME TAXES The components of income before income taxes consist of the following (in thousands): Year Ended December 31, 2023 2022 Domestic $ ( 1,182 ) $ ( 982 ) Foreign 1,927 1,584 Income before income taxes $ 745 $ 602 The components of the income tax provision consist of the following (in thousands): Year Ended December 31, 2023 2022 Current taxes: Federal $ 73 $ ( 16 ) State 13 9 Foreign 269 195 Total current taxes 355 188 Deferred taxes: Federal ( 4 ) 58 State ( 5 ) 4 Foreign ( 169 ) 39 Total deferred taxes ( 178 ) 101 Income tax provision $ 177 $ 289 A reconciliation of the reported income tax provision to the provision that would result from applying the domestic federal statutory tax rate to pretax income is as follows (in thousands): Year Ended December 31, 2023 2022 Income tax at federal statutory rate $ 156 $ 126 Effect of permanent differences 195 154 U.S. foreign income inclusions 90 89 Change in valuation allowance 67 ( 68 ) Foreign rate differential ( 334 ) ( 41 ) Restricted stock shortfall — 22 Other reconciling items 3 7 Income tax provision $ 177 $ 289 Income before income taxes and the statutory tax rate for each country that materially contributed to the foreign rate differential presented above is as follows (in thousands): Year Ended December 31, Statutory Tax Rate 2023 2022 Cayman Islands — % $ 2,005 $ 1,104 Hong Kong 16.5 % 665 1,105 China 25.0 % 48 143 52 Table of Contents Deferred income taxes consist of the following (in thousands): December 31, 2023 2022 Deferred tax assets: Net operating losses $ 600 $ 411 Operating lease liabilities 384 451 Other 83 70 Total deferred tax assets 1,067 932 Valuation allowance ( 302 ) ( 235 ) Net deferred tax assets 765 697 Deferred tax liabilities: Operating lease assets ( 356 ) ( 419 ) Foreign deferreds ( 135 ) ( 141 ) Prepaids ( 35 ) ( 83 ) Other ( 5 ) — Total deferred tax liabilities ( 531 ) ( 643 ) Net deferred tax assets $ 234 $ 54 The effective income tax rate for the year ended December 31, 2023 includes estimates for foreign income inclusions such as global intangible low-taxed income (“GILTI”) and Subpart F income. The effect of permanent differences in 2023 and 2022 is mainly due to compensation-related limitations under Internal Revenue Code Section 162 (m). As of December 31, 2023 , the Company does not have a valuation allowance against its U.S. deferred tax assets. The Company analyzed all sources of available income and determined that they are more likely than not to realize the tax benefits of their deferred assets. As of December 31, 2023 , the Company has a valuation allowance against deferred taxes in certain foreign jurisdictions with an overall net operating loss. The valuation allowance will be reduced at such time as management believes it is more likely than not that the deferred tax assets will be realized. Any reductions in the valuation allowance will reduce future income tax provision. As of December 31, 2023 , the Company has zero U.S. federal net operating loss carryforwards. The Company has post-apportioned U.S. state net operating loss carryforwards of $ 446,000 that begin expiring in 2038. At December 31, 2023 , the Company has foreign net operating loss carryforwards of approximately $ 2.3 million in various jurisdictions with various expirations. As of December 31, 2023, income taxes payable for the repatriation tax on the deemed repatriation of deferred foreign income required the U.S. Tax Cuts and Jobs Act (the “Tax Act”), enacted in 2017 by the U.S. government, totaled $ 9.0 million, of which $ 5.1 million is reflected as a noncurrent liability. As a result of capital return activities, the Company determined that a portion of its current undistributed foreign earnings is no longer deemed reinvested indefinitely by its non-U.S. subsidiaries. For state income tax purposes, the Company will continue to periodically reassess the needs of its foreign subsidiaries and update its indefinite reinvestment assertion as necessary. To the extent that additional foreign earnings are not deemed permanently reinvested, the Company expects to recognize additional income tax provision at the applicable state corporate income tax rate(s). As of December 31, 2023 , the Company has not recorded a state deferred tax liability for earnings that the Company plans to repatriate out of accumulated earnings in future periods because all earnings as of December 31, 2023 have already been repatriated. Due to the Tax Act, repatriation from foreign subsidiaries will be offset with a dividends received deduction, resulting in little to no impact on federal tax expense. All undistributed earnings in excess of 50% of current earnings on an annual basis are intended to be reinvested indefinitely as of December 31, 2023 . The Company and its subsidiaries file tax returns in the United States, California, New Jersey, Texas and various foreign jurisdictions. The Company is no longer subject to state income tax examinations for years prior to 2018. The Company is not aware of any jurisdictions that are currently examining any income tax returns of the Company. 53 Table of Contents 8. COMMITMENTS AND CONTINGENCIES The Company has employment agreements with certain members of its management team that can be terminated by either the employee or the Company upon four weeks’ notice. The employment agreements entered into with the management team contain provisions that guarantee the payments of specified amounts in the event of a change in control, as defined, or if the employee is terminated without cause, as defined, or terminates employment for good reason, as defined. 9. STOCK-BASED INCENTIVE PLANS Restricted Stock At the Company’s annual meeting of stockholders held on April 7, 2016, the Company’s stockholders approved the Natural Health Trends Corp. 2016 Equity Incentive Plan (the “2016 Plan”) to replace its 2007 Equity Incentive Plan. The 2016 Plan allows for the grant of various equity awards including incentive stock options, non-statutory options, stock, stock units, stock appreciation rights and other similar equity-based awards to the Company’s employees, officers, non-employee directors, contractors, consultants and advisors of the Company. Up to 2,500,000 shares of the Company’s common stock (subject to adjustment under certain circumstances) may be issued pursuant to awards granted. At December 31, 2023 , 1,125,349 shares remained available for issuance under the 2016 Plan. On February 6, 2023, the Company granted 97,900 shares of restricted common stock to certain of its employees. The shares vest in equal parts on a quarterly basis over the next three years and are subject to forfeiture in the event of an employee's termination of service to the Company under specified circumstances. The following table summarizes the Company’s restricted stock activity under the 2016 Plan: Shares Wtd. Avg. Price at Date of Issuance Nonvested at December 31, 2021 186,245 $ 7.08 Vested ( 186,245 ) $ 7.08 Nonvested at December 31, 2022 — $ — Granted 97,900 $ 4.84 Vested ( 31,914 ) $ 4.84 Forfeited ( 3,666 ) $ 4.84 Nonvested at December 31, 2023 62,320 $ 4.84 Share-based compensation expense of $ 161,000 was recognized during 2023. As of December 31, 2023 , total unrecognized share-based compensation expense related to non-vested restricted stock was $ 295,000 , which is expected to be recognized over a weighted-average period of 1.1 years. Phantom Equity On March 15, 2021, the Company’s Board of Directors approved and adopted a Phantom Equity Plan (the “Phantom Plan”). Under the terms of the Phantom Plan, the Board of Directors' Compensation Committee may grant to the Company’s employees, officers, directors, contractors, consultants, or advisors awards of phantom shares entitling grantees the right to receive a cash payment equal to the fair market value of an equal number of shares of the Company’s common stock upon the close of a vesting period, subject to any maximum payment value that the Compensation Committee may set. The vesting of phantom shares is subject to such vesting conditions as the Compensation Committee may specify in a grantee’s award agreement. Grantees of phantom shares shall not by virtue of their receipt of phantom shares have any ownership rights in shares of the Company’s common stock. The Phantom Plan shall continue for a period of ten years, after which no further phantom shares may be awarded (although any phantom shares awarded prior to the expiration of such 10 -year period shall be unaffected by the termination of the Phantom Plan). Also on March 15, 2021, awards for 223,307 phantom shares were granted to the Company’s employees and its non-employee directors. The phantom shares vested in eight equal three -month vesting increments, subject to the satisfaction of both a time-based vesting condition and a performance vesting condition. Both of these vesting conditions were deemed satisfied on the grant date for the initial vesting increment, and were satisfied for each of the following three vesting periods in 2021 and the first vesting period in 2022. The time-based vesting condition was also satisfied for the final three vesting periods in 2022. In order for the time-based vesting condition to be satisfied for each vesting period, the grantee must have remained continuously employed by, or be otherwise continuously providing services to, the Company through the end of the vesting period, and in order for the performance vesting condition to be satisfied for each performance period, the performance criteria designated by the Compensation Committee must have been satisfied. The initial performance vesting condition to be applied to measure performance for the period between March 15, 2021 and June 15, 2021 was designated by the Compensation Committee on or before April 14, 2021, and applied to all future performance periods unless the Compensation Committee elected to change the performance vesting condition on a prospective basis. Future changes to the performance vesting condition must have been made on or before the fifteenth day of any future performance period. If either vesting condition was not satisfied for a vesting date, then the phantom shares scheduled to vest on such date would be forfeited. These phantom shares were subject to a maximum payment value of $ 12.00 per phantom share. An additional award with similar vesting conditions for 9,074 phantom shares was granted on May 14, 2021 to the Company's new non-employee director, while unvested 9,074 phantom shares granted to the Company's departing non-employee director were forfeited on or about the same date. On each of May 23, 2022, August 31, 2022, and November 25, 2022 the Compensation Committee determined to amend the outstanding awards to provide that the performance criteria shall be deemed satisfied for the three -month performance periods relating to the June 15, 2022, September 15, 2022 and December 15, 2022 vesting dates, respectively. In making its determination, the Compensation Committee noted that the fact that the performance criteria were not achieved for the relevant performance periods was due to extraordinary business circumstances in China that were clearly beyond the Company’s control. Of the phantom shares awarded in 2021, 223,307 phantom shares vested, no shares remain unvested, and 9,074 shares were forfeited as of the year ended December 31, 2022. On February 7, 2023, the Company granted 212,937 phantom shares to certain of the Company’s employees and its non-employee directors. The phantom shares vest in eight equal three -month vesting increments, subject to the satisfaction of both a time-based vesting condition and a performance vesting condition. Both of these vesting conditions were deemed satisfied on the grant date for the initial vesting increment. In order for the time-based vesting condition to be satisfied for each vesting period, the grantee must remain continuously employed by, or be otherwise continuously providing services to, the Company through the end of the vesting period, and in order for the performance vesting condition to be satisfied for each performance period, the performance criteria designated by the Compensation Committee must be satisfied. The initial performance vesting condition will be designated by the Compensation Committee and will apply to all future performance periods, unless the Compensation Committee elects to change the performance vesting condition on a prospective basis. Future changes to the performance vesting condition must be made on or before the fifteenth day of any future performance period. If either vesting condition is not satisfied for a vesting date, then the phantom shares scheduled to vest on such date will be forfeited. These phantom shares are subject to a maximum payment value of $ 12.00 per phantom share. Of the phantom shares awarded in 2023, 106,468 phantom shares vested and 106,469 remain unvested as of and for the year ended December 31, 2023. The phantom share awards are accounted for as liabilities in accordance with FASB ASC Topic 718, Compensation - Stock Compensation since they require cash settlement. The grant date of each vesting increment will be established when the Company and the grantees reach a mutual understanding of the key terms and conditions of an award, which is the date upon which each performance vesting condition is communicated to the grantees. Compensation expense is recognized over the requisite service period if it is probable that the performance vesting condition will be achieved. The fair value of the liability incurred is remeasured at the end of each reporting period with any changes in fair value recognized as compensation expense over the requisite service period. As a result of phantom shares, the Company recognized compensation expense related to the cash settlement of such shares of $ 551,000 and $ 575,000 during each of 2023 and 2022, respectively. 54 Table of Contents 10. STOCKHOLDERS’ EQUITY Authorized Shares The Company is authorized to issue two classes of capital stock consisting of up to 5,000,000 shares of preferred stock, $ 0.001 par value, and 50,000,000 shares of common stock, $ 0.001 par value. Dividends The Company declared and paid cash dividends of $ 0.20 per common share during each quarter of 2023 and 2022, totaling an aggregate of $ 9.2 million and $ 9.1 million during 2023 and 2022, respectively. Declaration and payment of any future dividends on shares of common stock will be at the sole discretion of the Company’s Board of Directors. Stock Repurchases On January 12, 2016, the Board of Directors authorized an increase to the Company’s stock repurchase program first approved on July 28, 2015 from $ 15.0 million to $ 70.0 million. Any repurchases will be made in accordance with all applicable securities laws and regulations, including Rule 10b - 18 of the Exchange Act. For all or a portion of the authorized repurchase amount, the Company may enter into one or more plans that are compliant with Rule 10b5 - 1 of the Exchange Act that are designed to facilitate these purchases. The stock repurchase program does not require the Company to acquire a specific number of shares, and may be suspended from time to time or discontinued. As of December 31, 2023 , $ 21.9 million of the $ 70.0 million stock repurchase program remained available for future purchases, inclusive of related estimated income tax. Accumulated Other Comprehensive Loss The changes in accumulated other comprehensive loss by component for 2023 were as follows (in thousands): Foreign Currency Translation Adjustments Unrealized Gains (Losses) on Available-For-Sale Investments Total Balance, December 31, 2022 $ ( 988 ) $ ( 16 ) $ ( 1,004 ) Other comprehensive income (loss) ( 69 ) 4 ( 65 ) Balance, December 31, 2023 $ ( 1,057 ) $ ( 12 ) $ ( 1,069 ) 55 Table of Contents 11. RELATED PARTY TRANSACTIONS The Company is a party to a Royalty Agreement and License with Broady Health Sciences, L.L.C., a Texas limited liability company, (“BHS”) regarding the manufacture and sale of a product called ReStor™. George K. Broady, a former director of the Company and beneficial owner of more than 5 % of its outstanding common stock, is an indirect owner of BHS. Brunde E. Broady, also a former director of the Company and daughter of Mr. Broady, is the President and Chief Executive Officer of BHS. Under this agreement (as amended), the Company agreed to pay BHS a royalty based on a price per unit in return for the right to manufacture (or have manufactured), market, import, export and sell this product worldwide by or through multi-level marketing or network marketing. The Company recognized royalties of $ 46,000 and $ 51,000 during 2023 and 2022 , respectively, under this agreement. The Company is not required to purchase any product under the agreement, and the agreement may be terminated under certain circumstances with no notice. The agreement terminates March 31, 2025, after which it shall be automatically renewed for successive one -year terms unless notice is given by either party at least 90 days in advance of the expiration of the then-current term. 12. EMPLOYEE BENEFIT PLANS The Company has a 401 (k) defined contribution plan which permits participating employees in the United States to defer up to a maximum of 90 % of their compensation, subject to limitations established by the Internal Revenue Service. Employees age 21 and older are eligible to contribute to the plan starting the first day of the month following the date of employment. Participating employees are eligible to receive discretionary matching contributions and profit sharing, subject to certain conditions, from the Company. In 2023 and 2022 , the Company matched employee deferral contributions up to 4.5 % of salary, which vested 100 % immediately. No profit sharing has been paid under the plan. The Company recorded compensation expense of $ 75,000 and $ 71,000 for 2023 and 2022 , respectively, related to its matching contributions to the plan. Certain of the Company’s employees located outside the United States participate in employee benefit plans that are statutory in nature. 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 Segment”). The Company reviews its net sales and operating income (loss) by operating segment, and reviews its assets and capital expenditures on a consolidated basis and not by operating segment. As such, net sales and operating income (loss) are presented by reportable segment and assets and capital expenditures by operating segment are not presented. Segment operating income is adjusted for certain direct costs and commission allocation. 56 Table of Contents The Company’s operating information by geographic area are as follows (in thousands): Year Ended December 31, 2023 2022 Net sales: Primary Reporting Segment $ 42,209 $ 46,558 China 1,235 2,017 Russia and Kazakhstan 480 559 Total net sales $ 43,924 $ 49,134 Income (loss) from operations: Primary Reporting Segment $ 7,067 $ 7,783 China ( 534 ) 139 Russia and Kazakhstan ( 134 ) ( 166 ) Income from operations for reportable segments, net 6,399 7,756 Unallocated corporate expenses ( 8,070 ) ( 8,026 ) Other income, net 2,416 872 Income before income taxes $ 745 $ 602 The Company’s net sales by geographic area are as follows (in thousands): Year Ended December 31, 2023 2022 Net sales from external customers: United States $ 1,157 $ 1,175 Canada 710 664 Peru 1,497 1,417 Hong Kong 1 34,898 38,436 China 1,235 2,017 Taiwan 2,181 2,493 Japan 450 676 Russia and Kazakhstan 480 559 Europe 733 891 Other foreign countries 583 806 Total net sales $ 43,924 $ 49,134 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, 2023 2022 Net sales by product and service: Product sales $ 42,108 $ 44,159 Administrative fees, freight and other 2,014 5,193 Less: sales returns ( 198 ) ( 218 ) Total net sales $ 43,924 $ 49,134 Due to system constraints, it is impracticable for the Company to separately disclose sales by product category for the years presented. 57 Table of Contents The Company’s long-lived assets by geographic area are as follows (in thousands): December 31, 2023 2022 Long-lived assets: United States $ 121 $ 186 Hong Kong 54 111 China 77 78 Other foreign countries 14 19 Total long-lived assets $ 266 $ 394 14. SUBSEQUENT EVENT On February 5, 2024, the Board of Directors declared a quarterly cash dividend of $ 0.20 on each share of common stock outstanding. The dividend will be payable on March 1, 2024 to stockholders of record on February 20, 2024. Declaration and payment of any future dividends on shares of common stock will be at the sole discretion of the Company’s Board of Directors. 58 Table of Contents Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable.