What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-20 compared with 2025-02-21 · 71 added, 35 removed, 143 unchanged (43% of the section changed)

15 unchanged sentences

Risk Factors - Our continuing loss of a significant number of members is adversely affecting our business…”.

We generate approximately 94% of our net sales from subsidiaries located outside the Americas, with sales of our Hong Kong subsidiary representing 82% of net sales in the latest fiscal year.

Because of the size of our foreign operations, operating results can be impacted negatively or positively by factors such as foreign currency fluctuations, inflation rates, and economic, political and business conditions around the world.

We generate approximately 93 % of our net sales from subsidiaries located outside the Americas.

Because of the size of our foreign operations, operating results can be impacted negatively or positively by factors such as foreign currency fluctuations, trade policy, inflation rates, and economic, political and business conditions around the world.

In addition, our business is subject to various laws and regulations, in particular, regulations related to direct selling activities that create uncertain risks for our business, including improper claims or activities by our members and our potential inability to obtain necessary product registrations.

1 unchanged sentence

For further information regarding some of the risks associated with the conduct of our business in China and Hong Kong, see “Item 1A.

Risk Factors,” and more specifically under the captions “Risk Factors - Because our Hong Kong operations account for a substantial portion of our overall business...”, “Risk Factors - Hong Kong's political and economic landscape has in recent years undergone significant change...”, and “Risk Factors - Our business in China is subject to compliance with a myriad of applicable laws and regulations...”.

Risk Factors,” and more specif ically under the captions “Risk Factors - Because our Hong Kong operations account for a substantial portion of our overall business...”, “Risk Factors - Hong Kong's political and economic landscape has in recent years undergone significant change...”, and “Risk Factors - Our business in China is subject to compliance with a myriad of applicable laws and regulations...”.

China has been and continues to be our most important business development project.

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We believe that neither of these activities require a direct selling license in China, which we do not currently hold.

We previously submitted a preliminary application for a direct selling license in China, but in 2019 a Chinese governmental authority recommended that we withdraw our application.

We previously submitted a preliminary application for a direct selling license in China, but withdrew our application in 2019 upon the recommendation of a Chinese governmental authority.

We expect to reapply for a direct selling license in China when we believe that circumstances are again ripe for doing so.

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Although it was initially announced as a 100-day campaign, we are not aware of any information indicating that the campaign has ever been formally concluded.

In any case, the business environment in China for health product companies can be challenging, which has from time to time been exacerbated by negative social media sentiment expressed for these types of companies.

In late 2019 or early 2020 an outbreak of COVID-19 was first identified in China and subsequently spread quickly around the world, resulting in a global pandemic.

The pandemic caused the Chinese government to implement powerful measures to control the virus, such as requiring businesses to close throughout various areas of China and restricting public gatherings and certain travel within the country.

Over the course of the pandemic, we took steps to adapt some of our marketing programs, such as relying on certain product promotions and webcast training, to overcome the physical restrictions imposed in response to the pandemic.

In late 2022, the Chinese and Hong Kong governments took comprehensive steps to relax many of their COVID-19 control measures, although the cumulative effect of these disruptions materially negatively impacted our financial results from 2020 through 2022.

This less restrictive business environment in China and Hong Kong continued throughout 2023 and 2024, and we have been able to sponsor in-person member events in China, Hong Kong and/or Macau during each quarter since the first quarter of 2023.

We are continuing to plan and sponsor more such events consistent with normal operations.

See “Item 1A.

Risk Factors - Epidemics, natural disasters, terrorist attacks or acts of war…”.

In any case, the business environment in China for health product companies can be challenging and can change quickly, which has from time to time been exacerbated by negative social media sentiment expressed for these types of companies.

In addition to the fact that our Hong Kong subsidiary generates a substantial portion of our overall business, a significant number of our employees are based in Hong Kong.

6 unchanged sentences

Risk Factors - Hong Kong's political and economic landscape has in recent years undergone significant change...”.

Beginning in the first quarter of 2025, the U.S.

engaged in a series of escalating tariff actions with a wide range of countries, particularly China.

On April 2, 2025, for example, the U.S.

imposed by executive order a 34% reciprocal tariff on Chinese-origin goods.

This was followed by an amended executive order April 8, 2025, raising tariffs to 84% and an April 9, 2025 executive order raising tariffs to 125%.

In response, China raised its duties on imported U.S.

goods to a similar level.

Following negotiations, the U.S.

announced a temporary 90-day reduction in its reciprocal tariff rates from 125% to 10% beginning in May 2025, and China agreed to suspend its retaliatory tariffs during the same period.

The pre-existing 20% U.S.

tariff imposed on all Chinese goods remained in place, along with certain other sector-specific tariffs.

In October 2025, the U.S.

administration announced an additional 100% tariff on all products imported from China in response to certain restrictions imposed by China on rare earth minerals, before announcing an agreement that would, among other things, reduce the general tariff rate on Chinese goods to 47%.

The state of trade discussions between the U.S.

and China (and between the U.S.

and other nations) remains dynamic and unpredictable.

The Company's fiscal 2025 financial results, particularly beginning in the second quarter, were negatively affected by negative consumer sentiment and economic uncertainty in the Company’s largest market.

If substantial tariffs remain in place, or new tariffs are implemented, the Company may see the effect of higher duties on restocking in 2026.

The likely short-term impact of the tariffs is difficult to predict with any certainty, however.

We may need to impose a surcharge on products sold into China, and the imposition of such a surcharge may have a further negative effect on sales volumes into China.

In the longer term, the Company has taken steps to transition production of certain of its products currently manufactured in the United States to other jurisdictions, including in Asia, in order to mitigate the effect of U.S.

and reciprocal tariffs.

If successfully implemented, this transition may result in savings in logistics, freight and manufacturing cost, but may also carry certain short-term expenses, including the cost of reregistration of products in certain jurisdictions.

The Company is actively evaluating its options and the impact of trade policy changes on future quarters remains uncertain.

In addition, it is difficult to predict the further effect of general consumer sentiment in China toward the Company’s products as a result of the trade policies adopted by the United States and China, which has already impacted the Company’s second and third quarters.

See “Item 1A.

Risk Factors - Changes in government trade and economic policies...”.

Recent Developments

During 2025, in response to continued challenging near-term economic conditions in our largest market and continued pressure on consumer sentiment, management implemented a restructuring plan designed to better align our operating cost structure with current business conditions.

The restructuring plan included actions to optimize our workforce, relocate certain product manufacturing activities to Asia, and downsize several offices.

We recognized $283,000 of restructuring-related charges during the fourth quarter of 2025.

As of December 31, 2025, we were substantially complete with the major restructuring initiatives.

We expect these actions to generate approximately $1.5 million in annualized cost savings, though not all of these savings are expected to be realized during 2026 due to the timing of certain facility-related actions.

The amount and timing of savings may differ from our current expectations.

Statement of Operations Presentation

26 unchanged sentences

Members can also earn additional income, trips and other prizes in specific time-limited promotions and contests we hold from time to time.

Member commissions are dependent on the sales mix and, for fiscal 2024 and 2023, represented 41% and 42% of net sales, respectively.

Member commissions are dependent on the sales mix and, for each of fiscal 2025 and 2024, represented 41% net sales.

Occasionally, we make modifications and enhancements to our compensation plan to help motivate members, which can have an impact on member commissions.

22 unchanged sentences

Other income, net

Income before income taxes

Income (loss) before income taxes

Income tax provision

Net income (loss)

The following table sets forth revenue by market for the periods indicated (in thousands):

6 unchanged sentences

Risk Factors.”

Net sales were $43.0 million for the year ended December 31, 2024 compared with $43.9 million a year ago, a decrease of $961,000, or 2%.

Hong Kong net sales, substantially all of which were derived from the sale of products shipped to members residing in China, were almost the same as the prior year, increasing $208,000, or 1%, over the prior year.

Outside of our Hong Kong business, net sales decreased $1.2 million, or 13%, over the prior year primarily due to decreased year-over-year net sales in our business in the Americas and Taiwan which were somewhat offset by an increase in year-over-year net sales in our Chinese e-commerce retail business.

Net sales were $39.8 million for the year ended December 31, 2025 compared with $43.0 million a year ago, a decrease of $3.2 million, or 7%.

Hong Kong net sales, substantially all of which were derived from the sale of products shipped to members residing in China, decreased $2.4 million, or 7%, over the prior year primarily due to the negative consumer sentiment as a result of the heightened economic uncertainty caused by the threat of reciprocal and retaliatory tariffs.

Outside of our Hong Kong business, net sales decreased $752,000, or 10%, over the prior year primarily due to decreased year-over-year net sales in our Chinese e-commerce retail business.

As of December 31, 2025, deferred revenue was $5.6 million, which primarily consisted of $4.1 million pertaining to unshipped product orders and unredeemed product vouchers, as well as $1.5 million in auto ship advances.

Gross profit was 73.6% of net sales for the year ended December 31, 2025 compared with 74.0% of net sales for the year ended December 31, 2024.

The decline in gross profit margin was primarily attributable to higher costs related to our Premium Noni juice product.

The decline in gross profit margin was due to the write off of components inventory related to discontinued products and products whose manufacturing has transitioned outside the United States.

Gross profit margin for the year ended December 31, 2025 would be comparable to the prior year without these write offs.

Commissions Expense

Commissions were 40.9% of net sales for the year ended December 31, 2024 compared with 41.9% of net sales for the year ended December 31, 2023.

The decline in commissions as a percentage of net sales was primarily due to lower weekly commissions earned during 2024.

Commissions were 41.0% of net sales for the year ended December 31, 2025, relatively consistent compared with 40.9% of net sales for the year ended December 31, 2024.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased to $15.5 million for the year ended December 31, 2024, as compared to $16.0 million for the year ended December 31, 2023.

The decrease was primarily due to lower insurance and other general business expenses .

Selling, general and administrative expenses as a percentage of net sales were modestly lower in the current year as compared to the prior year.

Selling, general and administrative expenses decreased $754,000 to $14.8 million for the year ended December 31, 2025 as compared with $15.5 million for the year ended December 31, 2024.

The decrease was primarily due to lower employee-related expenses, professional fees and event costs as compared to the prior year.

Selling, general and administrative expenses as a percentage of net sales increased in the current year as compared with the prior year due to the decrease in net sales in the current year and the one-time restructuring charges recognized in the fourth quarter of 2025.

Other Income, Net

Other income decreased to $1.9 million for the year ended December 31, 2024, as compared to $2.4 million in the prior year.

The decrease in other income was primarily due to less interest earned during 2024 as compared to the prior year.

Other income decreased to $1.2 million for the year ended December 31, 2025 as compared with $1.9 million in the prior year.

The decrease in other income was primarily due to less interest income earned during 2025.

An income tax provision of $315,000 was recognized for the year ended December 31, 2025 compared with $48,000 for the year ended December 31, 2024 .

The tax provision for 2023 primarily resulted from the impact of Subpart F income inclusion, limitations on executive compensation under Internal Revenue Code Section 162(m), and income tax expense from various foreign jurisdictions.

Our effective tax rate for the year ended December 31, 2024 was lower than in the year ended December 31, 2023 primarily because of reduced income in foreign operations during the year ended December 31, 2024.

The tax provision for 2025 primarily resulted from the impact of deferred income tax expense from various foreign jurisdictions, particularly China, resulting in an increase in our effective tax rate for the year ended December 31, 2025.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States.

The OBBBA includes significant tax law changes, including the permanent extension of certain provisions from the U.S.

Tax Cuts and Jobs Act, modifications to the international tax framework, and the reinstatement of favorable business tax provisions.

These include 100% bonus depreciation, immediate expensing of Section 174 domestic research and experimental expenditures, and revised limitations under Section 163(j) on the deductibility of business interest expense.

The legislation has multiple effective dates, with certain provisions effective beginning in 2025, and others implemented through 2027.

We evaluated the impact of the OBBBA and determined it's provisions do not have a material impact on our overall tax liability both for the current year and in the succeeding years.

Liquidity and Capital Resources

At December 31, 2025, our cash, cash equivalents and marketable securities totaled $28.9 million.

Total cash, cash equivalents and marketable securities decreased by $12.2 million from December 31, 2023 to December 31, 2024 due to the dividends paid during 2024 and the payment of the repatriation tax on the deemed repatriation of deferred foreign income as required by the U.S.

Total cash, cash equivalents and marketable securities decreased by $15.1 million from December 31, 2024 to December 31, 2025 due to the dividends paid during 2025 and the final payment of the repatriation tax on the deemed repatriation of deferred foreign income as required by the U.S.

Tax Cuts and Jobs Act.

6 unchanged sentences

Income tax paid during A pril 2025 and 2024 for the repatriation tax on the deemed repatriation of deferred foreign income was $5.1 million and $4.0 million, respectively.

Disregarding these payments, cash flows from operations improved $1.8 million primarily due to improved management of inventories and operating costs during 2024 as compared to the prior year, as well as a timing difference related to weekly commission outflows .

Cash used in investing activities totaled $30.1 million and $46,000 during 2024 and 2023, respectively.

During 2024, were purchased $70.4 million in marketable securities with original maturities greater than three months, and as such, reflect these purchases as an investing activity.

Disregarding these payments, cash flows used in operations was $943,000 during 2025 compared with cash flows provided by operations of $602,000 during 2024.

The decline in operating cash flows during 2025 is primarily due to both the reduction in product orders received during the year, as well as the decrease in interest income earned on marketable securities during the year.

Cash provided by investing activities totaled $8.1 million during 2025 compared with cash used in investing activities of $30.1 million during 2024.

During 2025, we purchased $50.7 million in marketable securities with original maturities greater than three months, and as such, reflect these purchases as an investing activity.

These purchases of marketable securities were offset by $59.0 million of proceeds received from maturities of marketable securities.

Cash used in financing activities during 2025 and 2024 consisted solely of quarterly dividend payments of $0.20 per common share, totaling $9.2 million in each period.

Subsequent to December 31, 2024, on February 3, 2025, the Board of Directors declared another quarterly cash dividend of $0.20 on each share of common stock outstanding.

Subsequent to December 31, 2025, on February 2, 2026, the Board of Directors declared a quarterly cash dividend of $0.10 on each share of common stock outstanding.

The dividend will be payable on February 27, 2026 to stockholders of record on February 17, 2026.

W e expect to continue paying a quarterly cash dividend of $0.20 on each share of common stock outstanding for the foreseeable future .

However, any future cash dividends will be at the sole discretion of the Board of Directors, and will depend on our financial condition, results of operations, capital requirements and other factors considered relevant by the Board of Directors.

Any future cash dividends will be at the sole discretion of the Board of Directors, and will depend on our financial condition, results of operations, capital requirements and other factors considered relevant by the Board of Directors.

In 2016, the Board of Directors authorized an increase to our stock repurchase program first approved in 2015 from $15.0 million to $70.0 million.

4 unchanged sentences

No repurchases were made under the stock repurchase program in 2025 or 2024.

On February 17, 2026, we entered into a share repurchase agreement to repurchase 2,935,227 shares of common stock, representing approximately 25.5% of our outstanding shares, from the George K.

Broady 2012 Irrevocable Trust and the Eleanor Jane Broady 2012 Irrevocable Trust at a price of $2.00 per share, for an aggregate purchase price of approximately $5.9 million.

The repurchase, funded from the Company’s existing cash on hand, was completed pursuant to our previously authorized $70.0 million share repurchase program.

Following completion of the transaction, we have 8,577,848 shares of common stock outstanding and approximately $16.0 million remaining available under the share repurchase program, inclusive of estimated income tax effects.

We believe that our existing internal liquidity, supported by cash and cash equivalents, as well as cash flows from operations should be adequate to fund normal business operations and address our financial commitments for the foreseeable future.

17 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis