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 ( CBIZ CPAs P.C. , PCAOB ID No. 199 ) 37 Report of Independent Registered Public Accounting Firm (Marcum LLP, PCAOB ID No. 688) 38 Consolidated Balance Sheets 39 Consolidated Statements of Operations 40 Consolidated Statements of Comprehensive Income (Loss) 41 Consolidated Statements of Stockholders’ Equity 42 Consolidated Statements of Cash Flows 43 Notes to Consolidated Financial Statements 44 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 sheet of Natural Health Trends Corp. (the “Company”) as of December 31, 2025, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, based on our audit, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year then ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. As discussed in Notes 2 and 7 to the financial statements, the Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). We have also audited the adjustments to the 2024 financial statements to retrospectively adjust the disclosures for the adoption of ASU 2023-09 in 2025. In our opinion, such retrospective adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the 2024 financial statements of the Company other than with respect to these retrospective adjustments, and accordingly, we do not express an opinion or any other form of assurance on the 2024 financial statements taken as a whole. 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 audit. 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit 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 audit, 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 audit 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 audit 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 audit provides 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/ CBIZ CPAs P.C. CBIZ CPAs P.C. We have served as the Company’s auditor since 2017 (such date takes into account the acquisition of the attest business of Marcum LLP by CBIZ CPAs P.C. effective November 1, 2024). Los Angeles, CA February 20, 2026 37 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, before the effects of the retrospective adjustments to the disclosures for the adoption of ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) as discussed in Notes 2 and 7 to the consolidated financial statements, the accompanying consolidated balance sheet of Natural Health Trends Corp. (the “Company”) as of December 31, 2024, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”) (the 2024 financial statements before the effects of the adjustments discussed in Notes 2 and 7 to the financial statements are not presented herein). In our opinion the financial statements, before the effects of the retrospective adjustments to the disclosures for the adoption of ASU 2023-09 as discussed in Notes 2 and 7 to the financial statements, present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. We were not engaged to audit, review, or apply any procedures to the retrospective adjustments to the disclosures for the adoption of ASU 2023-09 as discussed in Notes 2 and 7 to the financial statements and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those retrospective adjustments were audited by CBIZ CPAs P.C. 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 audit. 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit 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 audit, 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 audit 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 audit 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 audit provides 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 from 2017 through 2025. Los Angeles, CA February 21, 2025 38 Table of Contents NATURAL HEALTH TRENDS CORP. CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share Data) December 31, 2025 2024 ASSETS Current assets: Cash and cash equivalents $ 6,813 $ 13,533 Marketable securities 22,060 30,407 Inventories 2,047 3,272 Other current assets 3,274 3,771 Total current assets 34,194 50,983 Property and equipment, net 153 190 Operating lease right-of-use assets 1,869 2,498 Restricted cash 7 34 Deferred tax asset 289 382 Other assets 1,916 1,272 Total assets $ 38,428 $ 55,359 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 555 $ 895 Income taxes payable 5 4,908 Accrued commissions 1,958 2,021 Other accrued expenses 1,438 1,425 Deferred revenue 5,574 6,428 Amounts held in eWallets 2,838 3,286 Operating lease liabilities 869 1,127 Other current liabilities 451 709 Total current liabilities 13,688 20,799 Deferred tax liability 180 174 Operating lease liabilities 1,131 1,514 Total liabilities 14,999 22,487 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, 2025 and 2024 13 13 Additional paid-in capital 85,033 84,901 Accumulated deficit ( 36,436 ) ( 26,344 ) Accumulated other comprehensive loss ( 784 ) ( 1,301 ) Treasury stock, at cost; 1,466,339 shares at December 31, 2025 and 2024 ( 24,397 ) ( 24,397 ) Total stockholders’ equity 23,429 32,872 Total liabilities and stockholders’ equity $ 38,428 $ 55,359 See accompanying notes to consolidated financial statements. 39 Table of Contents NATURAL HEALTH TRENDS CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Data) Year Ended December 31, 2025 2024 Net sales $ 39,776 $ 42,963 Cost of sales 10,523 11,178 Gross profit 29,253 31,785 Operating expenses: Commissions expense 16,302 17,571 Selling, general and administrative expenses 14,759 15,513 Total operating expenses 31,061 33,084 Loss from operations ( 1,808 ) ( 1,299 ) Other income, net 1,241 1,919 Income (loss) before income taxes ( 567 ) 620 Income tax provision 315 48 Net income (loss) $ ( 882 ) $ 572 Net income (loss) per common share: Basic $ ( 0.08 ) $ 0.05 Diluted $ ( 0.08 ) $ 0.05 Weighted-average number of common shares outstanding: Basic 11,496 11,467 Diluted 11,496 11,490 See accompanying notes to consolidated financial statements. 40 Table of Contents NATURAL HEALTH TRENDS CORP. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In Thousands) Year Ended December 31, 2025 2024 Net income (loss) $ ( 882 ) $ 572 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments 501 ( 218 ) Unrealized gains (losses) on available-for-sale securities 16 ( 14 ) Comprehensive income (loss) $ ( 365 ) $ 340 See accompanying notes to consolidated financial statements. 41 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, 2023 — $ — 12,979,414 $ 13 $ 84,695 $ ( 17,703 ) $ ( 1,069 ) ( 1,462,641 ) $ ( 24,336 ) $ 41,600 Net income — — — — — 572 — — — 572 Restricted stock forfeiture — — — — 61 — — ( 3,698 ) ( 61 ) — Share-based compensation — — — — 145 — — — — 145 Dividends declared, $ 0.80 /share — — — — — ( 9,213 ) — — — ( 9,213 ) Foreign currency translation adjustments — — — — — — ( 218 ) — — ( 218 ) Unrealized losses on available-for-sale securities — — — — — — ( 14 ) — — ( 14 ) BALANCE, December 31, 2024 — — 12,979,414 13 84,901 ( 26,344 ) ( 1,301 ) ( 1,466,339 ) ( 24,397 ) 32,872 Net loss — — — — — ( 882 ) — — — ( 882 ) Share-based compensation — — — — 132 — — — — 132 Dividends declared, $ 0.80 /share — — — — — ( 9,210 ) — — — ( 9,210 ) Foreign currency translation adjustments — — — — — — 501 — — 501 Unrealized gains on available-for-sale securities — — — — — — 16 — — 16 BALANCE, December 31, 2025 — $ — 12,979,414 $ 13 $ 85,033 $ ( 36,436 ) $ ( 784 ) ( 1,466,339 ) $ ( 24,397 ) $ 23,429 See accompanying notes to consolidated financial statements. 42 Table of Contents NATURAL HEALTH TRENDS CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Year Ended December 31, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ ( 882 ) $ 572 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 109 131 Net accretion of marketable securities ( 375 ) ( 441 ) Share-based compensation 132 145 Noncash lease expense 1,140 1,087 Deferred income taxes 102 17 Changes in assets and liabilities: Inventories 1,274 1,000 Other current assets 1,224 ( 113 ) Other assets ( 640 ) ( 421 ) Accounts payable ( 341 ) ( 94 ) Income taxes payable ( 4,902 ) ( 3,862 ) Accrued commissions ( 111 ) ( 19 ) Other accrued expenses ( 7 ) 271 Deferred revenue ( 854 ) 245 Amounts held in eWallets ( 445 ) ( 672 ) Operating lease liabilities ( 1,142 ) ( 1,151 ) Other current liabilities ( 279 ) ( 62 ) Net cash used in operating activities ( 5,997 ) ( 3,367 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ( 68 ) ( 57 ) Purchases of marketable securities ( 50,742 ) ( 70,431 ) Proceeds from maturities of marketable securities 58,958 40,413 Net cash provided by (used in) investing activities 8,148 ( 30,075 ) CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid ( 9,210 ) ( 9,213 ) Net cash used in financing activities ( 9,210 ) ( 9,213 ) Effect of exchange rates on cash, cash equivalents and restricted cash 312 5 Net decrease in cash, cash equivalents and restricted cash ( 6,747 ) ( 42,650 ) CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period 13,567 56,217 CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period $ 6,820 $ 13,567 SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Right-of-use assets obtained in exchange for operating lease liabilities $ 487 $ 124 See accompanying notes to consolidated financial statements. 43 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, Peru and Colombia; Greater China, which consists of Hong Kong, Taiwan and China; Southeast Asia, which consists of Malaysia and Singapore; 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 The Company considers all highly liquid investments with original maturities of three months or less when purchased and with insignificant interest rate risk to be cash equivalents. 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, 2025, there was $ 603,000 in bank accounts located in the Hong Kong in excess of insured limits. As of December 31, 2025, cash and cash equivalents included $ 2.9 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. 44 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 $ 109,000 and $ 131,000 during 2025 and 2024 , 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 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 $ 90,000 and $ 230,000 was recognized during 2025 and 2024 , respectively. 45 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 (Loss) 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, but withdrew the application in 2019 upon the recommendation of a Chinese governmental authority. 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. 46 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 Enhanced 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 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 are effective for annual periods beginning after December 15, 2024. The Company has adopted this guidance on a retrospective basis, which did not have an impact on its financial position, results of operations, or cash flows, although it did result in expanded disclosures which are included in Note 7 of the Company's consolidated financial statements. In November 2024, the FASB issued ASU 2024 - 03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures . ASU 2024 - 03 is intended to improve disclosures about a public business entity's expenses and provide more detailed information to investors about the types of expenses in commonly presented expense captions. The amendments in this ASU will be applied retrospectively and are effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of implementing this guidance. 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. 47 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 11 % of sales. Sales returns were 1 % of sales for each of 2025 and 2024 . 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, 2025 and 2024, the Company had $ 4.1 million and $ 4.9 million, respectively, of contract liabilities where performance obligations have not yet been satisfied. The decrease in contract liabilities from December 31, 2024 to December 31, 2025 is primarily due to $ 4.1 million of cash received for unshipped product orders and unredeemed product vouchers during the year ended December 31, 2025 offset by $ 5.0 million of revenue recognized during the year ended December 31, 2025 that was included in contract liabilities at December 31, 2024. As of December 31, 2023, the Company had contract liabilities totaling $ 4.4 million which was recognized as revenue during 2024. 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. 48 Table of Contents 3. NET INCOME (LOSS) PER COMMON SHARE The following table illustrates the computation of basic and diluted net income (loss) per common share for the periods indicated (in thousands, except per share data): Year Ended December 31, 2025 2024 Loss Shares Per Share Income Shares Per Share Basic net income (loss) per common share: Net income (loss) available to common stockholders $ ( 882 ) 11,496 $ ( 0.08 ) $ 572 11,467 $ 0.05 Effect of dilutive securities: Non-vested restricted stock — — — 23 Diluted net income (loss) per common share: Net income (loss) available to common stockholders plus assumed dilution $ ( 882 ) 11,496 $ ( 0.08 ) $ 572 11,490 $ 0.05 In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. As such, non-vested restricted stock totaling 8,063 shares were not included for 2025. 4. BALANCE SHEET COMPONENTS The components of certain balance sheet amounts are as follows (in thousands): December 31, 2025 2024 Cash, cash equivalents and restricted cash: Cash $ 5,896 $ 7,925 Cash equivalents 917 5,608 6,813 13,533 Restricted cash 7 34 $ 6,820 $ 13,567 Inventories: Finished goods $ 1,809 $ 2,770 Raw materials 238 502 $ 2,047 $ 3,272 Property and equipment: Office equipment $ 495 $ 477 Office software 1,078 1,029 Furniture and fixtures 171 241 Leasehold improvements 554 753 Property and equipment, at cost 2,298 2,500 Accumulated depreciation and amortization ( 2,145 ) ( 2,310 ) $ 153 $ 190 Other accrued expenses: Sales returns $ 100 $ 85 Employee-related expense 613 656 Warehousing, inventory-related and other 725 684 $ 1,438 $ 1,425 Deferred revenue: Unshipped product and unredeemed product vouchers $ 4,063 $ 4,940 Auto ship advances 1,511 1,488 $ 5,574 $ 6,428 49 Table of Contents 5. FAIR VALUE MEASUREMENTS As of December 31, 2025, cash and cash equivalents and marketable securities include the Company’s investments in money market funds, municipal debt securities and corporate debt securities. Debt securities classified as cash equivalents are required to be accounted for in accordance with FASB Accounting Standards Codification 320, Investments - Debt and Equity Securities . As such, the Company determined its investments in debt securities held at December 31, 2025 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. Investments by category included in cash equivalents and marketable securities at the end of each period were as follows (in thousands): December 31, 2025 December 31, 2024 Fair Value Level 1 Adjusted Cost Gross Unrealized Losses Fair Value Adjusted Cost Gross Unrealized Losses Fair Value Money market funds Level 1 $ 581 $ — $ 581 $ 2,092 $ — $ 2,092 Municipal debt securities Level 2 4,893 ( 1 ) 4,892 3,458 — 3,458 Corporate debt securities Level 2 17,513 ( 9 ) 17,504 30,491 ( 26 ) 30,465 Total investments $ 22,987 $ ( 10 ) $ 22,977 $ 36,041 $ ( 26 ) $ 36,015 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 4,900 square feet of corporate office space in Rolling Hills Estates, California with a term expiring in September 2030, and 7,300 square feet of corporate office space in Hong Kong with a term expiring in June 2026. In January 2026, the Company executed an agreement to sublease a portion of its corporate office space in Rolling Hills Estates, California for the duration of the lease term, effective February 1, 2026. To help further develop the market for its products in North America, the Company leases 1,600 square feet of retail space in Richmond, British Columbia, and 2,000 square feet of retail space in Metuchen, New Jersey. The Richmond and Metuchen locations have terms expiring in 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, India, Colombia 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. In August 2025, the Company entered into a binding offer to lease 5,300 square feet of office space in Hong Kong to replace its existing corporate office space in Hong Kong. The lease is expected to commence on March 1, 2026 with a term expiring February 28, 2031. Monthly base rent is HKD 141,500 ($ 18,000 ) for years one through three and HKD 149,500 ($ 19,000 ) for years four and five, with base-rent-free periods from March 1, 2026 through April 30, 2026 and from August 1, 2029 through September 30, 2029. In addition, the Company will pay a monthly management fee of HKD 43,979 ( 6,000 ). The lease provides the Company with an early termination right upon not less than three months’ prior written notice, exercisable at any time from March 1, 2029 through February 28, 2031. The related right-of-use asset and lease liability will be recognized on the Company’s consolidated balance sheet at the lease commencement date in accordance with FASB ASC Topic 842, Leases . The components of lease cost were as follows (in thousands): Year Ended December 31, 2025 2024 Operating leases $ 1,248 $ 1,279 Short-term leases 145 143 Total lease cost $ 1,393 $ 1,422 Cash paid for amounts included in the measurement of operating leases liabilities was $ 1.3 million for each of 2025 and 2024. The weighted-average remaining lease term and discount rate related to operating leases as of December 31, 2025 were as follows: Weighted-average remaining lease term (in years) 3.2 Weighted-average discount rate 4.0 % 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, 2025 were as follows (in thousands): 2026 $ 900 2027 474 2028 344 2029 216 2030 162 Total lease payments 2,096 Less: imputed interest ( 96 ) Present value of lease liabilities $ 2,000 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 has chosen not to separate nonlease components from lease components and instead accounts 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 (loss) before income taxes consist of the following (in thousands): Year Ended December 31, 2025 2024 U.S. $ ( 727 ) $ ( 993 ) Foreign 160 1,613 Income (loss) before income taxes $ ( 567 ) $ 620 The components of the income tax provision consist of the following (in thousands): Year Ended December 31, 2025 2024 Current taxes: U.S. federal $ 39 $ ( 24 ) U.S. state and local 13 11 Foreign 165 34 Total current tax expense $ 217 $ 21 Deferred taxes: U.S. federal $ ( 100 ) $ ( 83 ) U.S. state and local ( 1 ) 1 Foreign 199 109 Total deferred tax expense $ 98 $ 27 Total income tax expense: U.S. federal $ ( 61 ) $ ( 107 ) U.S. state and local 12 12 Foreign 364 143 Income tax provision $ 315 $ 48 52 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 (loss) is as follows (in thousands): Year Ended December 31, 2025 Year Ended December 31, 2024 Amount Percent Amount Percent Income tax at U.S. federal statutory tax rate $ ( 119 ) 21.0 % $ 130 21.0 % Domestic federal: Nontaxable and nondeductible items Section 162(m) limitation — — % 58 9.4 % Stock-based compensation 24 ( 4.2 )% 26 4.2 % Other 3 ( 0.5 )% 3 0.5 % Cross-border tax laws Subpart F inclusion 78 ( 13.8 )% 43 6.9 % U.S. foreign income inclusions — — % ( 18 ) ( 2.9 )% Domestic state and local income taxes, net of federal effect 9 ( 1.6 )% 10 1.6 % Foreign tax effects: Cayman Islands ( 143 ) 25.2 % ( 348 ) ( 56.1 )% Hong Kong Nontaxable and nondeductible items 4 ( 0.7 )% ( 18 ) ( 2.9 )% Rate differential ( 43 ) 7.6 % ( 34 ) ( 5.5 )% China Rate differential 70 ( 12.3 )% ( 5 ) ( 0.8 )% Change in tax rate 89 ( 15.7 )% — — % Net operating loss expiration 86 ( 15.2 )% — — % Change in valuation allowance 45 ( 7.9 )% 5 0.8 % Peru Nontaxable and nondeductible items 28 ( 4.9 )% 73 11.8 % Rate differential ( 1 ) 0.2 % ( 9 ) ( 1.5 )% Canada Nontaxable and nondeductible items 93 ( 16.4 )% 113 18.2 % Rate differential ( 26 ) 4.6 % ( 37 ) ( 6.0 )% Change in valuation allowance ( 13 ) 2.3 % — — % Japan — — % 12 1.9 % Italy ( 18 ) 3.2 % ( 9 ) ( 1.5 )% India Rate differential ( 13 ) 2.3 % ( 10 ) ( 1.6 )% Change in valuation allowance 42 ( 7.4 )% 32 5.2 % Colombia Rate differential ( 38 ) 6.7 % ( 8 ) ( 1.3 )% Change in valuation allowance 95 ( 16.8 )% 30 4.8 % Bolivia ( 22 ) 3.9 % 8 1.3 % Russia 100 ( 17.6 )% — — % Other foreign jurisdictions ( 15 ) 2.6 % 1 0.2 % Income tax provision $ 315 ( 55.6 )% $ 48 7.7 % 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 2025 2024 Cayman Islands — % $ 759 $ 1,535 Hong Kong 16.5 % 444 745 China 5.0 % ( 439 ) ( 124 ) 53 Table of Contents Deferred income taxes consist of the following (in thousands): December 31, 2025 2024 Deferred tax assets: Net operating losses $ 843 $ 700 Operating lease liabilities 264 325 Other 73 82 Total deferred tax assets 1,180 1,107 Valuation allowance ( 624 ) ( 391 ) Net deferred tax assets 556 716 Deferred tax liabilities: Operating lease assets ( 236 ) ( 297 ) Foreign deferreds ( 180 ) ( 173 ) Prepaids ( 31 ) ( 35 ) Other — ( 3 ) Total deferred tax liabilities ( 447 ) ( 508 ) Net deferred tax assets $ 109 $ 208 The effective income tax rate for the year ended December 31, 2025 is driven by foreign rate differentials and the increase in valuation allowance on the Company's foreign net operating losses. It also includes estimates for foreign income inclusions such as global intangible low-taxed income (“GILTI”) and Subpart F income, as well as prior year foreign return to provision true-ups. The effect of permanent differences in 2025 and 2024 is mainly due to compensation-related limitations under Internal Revenue Code Section 162 (m) and stock-based compensation expense. As of December 31, 2025, 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 it is more likely than not to realize the tax benefits of their deferred assets. As of December 31, 2025, the Company has a valuation allowance against deferred tax assets in the form of net operating loss carryforwards in certain foreign jurisdictions. 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, 2025 , the Company has $ 884,000 of U.S. federal net operating loss carryforwards. The Company has post-apportioned U.S. state net operating loss carryforwards of $ 467,000 that begin expiring in 2038. At December 31, 2025 , the Company has foreign net operating loss carryforwards of approximately $ 3.2 million in various jurisdictions with various expirations. In April 2025, the Company paid the final installment of $ 5.1 million for the repatriation tax on the deemed repatriation of deferred foreign income required by the U.S. Tax Cuts and Jobs Act (the “Tax Act”), enacted in 2017 by the U.S. government. 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, 2025 , 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, 2025 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, 2025 . 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 2020. The Company is not aware of any jurisdictions that are currently examining any income tax returns of the Company. Cash paid during the year for incomes taxes, net of refunds, were as follows (in thousands): Year Ended December 31, 2025 2024 U.S. federal $ 4,954 $ 3,799 U.S. state and local 12 8 Foreign ( 45 ) 151 Cash paid for income taxes, net $ 4,921 $ 3,958 54 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 In 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, 2025 , 1,129,047 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 vested in equal parts on a quarterly basis over the next three years and were subject to forfeiture in the event of an employee's termination of service to the Company under specified circumstances. No shares of restricted common stock remained outstanding as of December 31, 2025. 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, 2023 62,320 $ 4.84 Vested ( 29,946 ) $ 4.84 Forfeited ( 3,698 ) $ 4.84 Nonvested at December 31, 2024 28,676 $ 4.84 Vested ( 28,676 ) $ 4.84 Nonvested at December 31, 2025 — $ — Share-based compensation expense of $ 132,000 and $ 145,000 was recognized during 2025 and 2024, respectively. Phantom Equity In 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 do 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). 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 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. 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 was designated by the Compensation Committee and applied to all future performance periods. If either vesting condition was not satisfied for a vesting date, then the phantom shares scheduled to vest on such date were forfeited. These phantom shares were subject to a maximum payment value of $ 12.00 per phantom share. Of the phantom shares awarded in 2023, 186,320 phantom shares vested and 26,617 were forfeited. On April 1, 2025, awards for 223,307 phantom shares were granted to the Company’s employees and its non-employee directors. Each award has a vesting period of two years, with 12.5 % of the award eligible to vest in each of the eight calendar quarters during the vesting period, beginning with the second quarter of 2025, subject to satisfaction of the conditions outlined below. For awards to vest as to a particular quarter, the employee or director must be continuously employed by (or in the case of directors, providing services to) the Company for the entire quarter. The awards are subject to a maximum payment value of $ 12.00 per phantom share, and the grantees are not entitled to any dividend or dividend equivalent payments with respect to the awards. As a condition to the grant of the awards to each employee grantee, the grantee agreed not to sell or otherwise transfer any shares of the Company’s common stock held by him or her until all phantom shares subject to the award are vested or forfeited. 55 One-half of the award eligible to vest in each calendar quarter (the “Financial Results-Based Award”, representing 6.25 % of the aggregate award amount) will vest if the service condition is met for the quarter and if the Company attains positive operating profit for the quarter of at least $ 150,000 . If these conditions are not met, the Financial Results-Based Award for the quarter will be forfeited. The other half of the award eligible to vest in each calendar quarter (the “Stock Appreciation-Based Award”, or 6.25 % of the aggregate award amount) will vest if the service condition is met for the quarter and if two additional conditions are satisfied: (a) a stock appreciation condition, which will be satisfied if the average closing price of the Company’s common stock over the last month of the applicable quarter exceeds the average closing price of the Company’s common stock over the last month of the previous calendar year; and (b) an additional financial performance condition, which will be satisfied if the Company attains positive operating profit for the quarter of at least $ 300,000 . If the stock appreciation condition is not met for the applicable quarter, the Stock Appreciation-Based Award for the quarter will be forfeited. If the stock appreciation condition is met for this portion of the award but the additional financial performance condition is not met for the quarter, the Stock Appreciation-Based Award for the quarter will not be forfeited but will be carried forward to a future quarter during the two -year vesting period of the award. Any portion of an award carried forward may vest at the end of a subsequent quarter during the two -year vesting period if the Company’s operating profit for that quarter exceeds by $ 150,000 the sum of (a) the amount necessary to satisfy the Financial Results-Based Award for the quarter (i.e. $ 150,000 ), (b) the additional amount, if any, used to satisfy the additional financial performance condition for a Stock Appreciation-Based Award that vests for the quarter (i.e., $ 150,000 if the current quarter’s Stock Appreciation-Based Award vests, or $0 if it does not vest) and (c) the additional amount, if any used to satisfy the vesting conditions of any other carried-forward awards to which this test is previously applied. Of the phantom shares awarded in 2025, 83,739 phantom shares were forfeited and 139,568 shares remain unvested as of December 31, 2025. The phantom share awards are accounted for as liabilities in accordance with FASB ASC Topic 718, Compensation – Stock Compensation since they require cash settlement. 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 the vesting of phantom shares, the Company recognized compensation expense related to the cash settlement of such shares of $ 475,000 during 2024. No compensation expense was recognized related to the cash settlement of such shares during 2025. 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 2025 and 2024, totaling an aggregate of $ 9.2 million for each of 2025 and 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. Stock Repurchases In 2016, the Board of Directors authorized an increase to the Company’s stock repurchase program first approved in 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, 2025 , $ 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 2025 were as follows (in thousands): Foreign Currency Translation Adjustments Unrealized Gains (Losses) on Available-For-Sale Investments Total Balance, December 31, 2024 $ ( 1,275 ) $ ( 26 ) $ ( 1,301 ) Other comprehensive income 501 16 517 Balance, December 31, 2025 $ ( 774 ) $ ( 10 ) $ ( 784 ) 56 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. Lucy Nduati, a director of the Company, has since 2013 served a number of companies controlled by George K. Broady and other Broady family members in a variety of roles focused on administration, accounting, finance, tax strategy and office management. 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 $ 37,000 and $ 36,000 during 2025 and 2024 , 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 was set to terminate on March 31, 2025; however, as neither party provided the required 90 -day advance notice, it has automatically renewed for an additional one -year term in accordance with its provisions. 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 2025 and 2024 , 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 $ 76,000 and $ 78,000 for 2025 and 2024 , 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. 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. 57 Table of Contents The Company’s financial information by segment is as follows (in thousands): Year Ended December 31, 2025 Year Ended December 31, 2024 Primary Reporting Unit China Russia and Kazakhstan Total Primary Reporting Unit China Russia and Kazakhstan Total Net sales $ 38,386 $ 946 $ 444 $ 39,776 $ 40,893 $ 1,580 $ 490 $ 42,963 Cost of sales 10,117 195 211 10,523 10,658 292 228 11,178 Gross profit 28,269 751 233 29,253 30,235 1,288 262 31,785 Less: Commissions expense 1 16,111 — 191 16,302 17,305 — 266 17,571 Employee-related costs 3,506 973 55 4,534 3,629 950 48 4,627 Facility costs 1,180 144 12 1,336 1,191 155 14 1,360 Other segment items 2 1,294 261 53 1,608 1,494 325 57 1,876 Segment income (loss) from operations $ 6,178 $ ( 627 ) $ ( 78 ) 5,473 $ 6,616 $ ( 142 ) $ ( 123 ) 6,351 Reconciliation of income before income taxes: Unallocated corporate expenses ( 7,281 ) ( 7,650 ) Other income, net 1,241 1,919 Income (loss) before income taxes $ ( 567 ) $ 620 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): December 31, 2025 December 31, 2024 Primary Reporting Unit China Russia and Kazakhstan Total Primary Reporting Unit China Russia and Kazakhstan Total Inventories $ 1,496 $ 142 $ 39 $ 1,677 $ 2,422 $ 159 $ 36 $ 2,617 Other inventories and inventory-related deposits 1 444 971 Other assets 2 36,307 51,771 Total assets $ 38,428 $ 55,359 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): Year Ended December 31, 2025 2024 Net sales from external customers: United States $ 1,153 $ 1,044 Canada 475 535 Peru and Colombia 1,205 1,101 Hong Kong 1 32,671 35,106 China 946 1,580 Taiwan 1,542 1,591 Japan 333 292 Russia and Kazakhstan 444 490 Europe 530 635 Other foreign countries 477 589 Total net sales $ 39,776 $ 42,963 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.” 58 Table of Contents The Company’s net sales by product and service are as follows (in thousands): Year Ended December 31, 2025 2024 Net sales by product and service: Product sales $ 39,017 $ 41,729 Administrative fees, freight and other 1,080 1,544 Less: sales returns ( 321 ) ( 310 ) Total net sales $ 39,776 $ 42,963 Due to system constraints, it is impracticable for the Company to separately disclose sales by product category for the years presented. The Company’s long-lived tangible assets as well as the Company's operating lease right-of-use assets by geographic area are as follows (in thousands): December 31, 2025 2024 Long-lived assets: United States $ 1,093 $ 1,425 Hong Kong 325 828 China 281 164 Other foreign countries 323 271 Total long-lived assets $ 2,022 $ 2,688 14. SUBSEQUENT EVENTS 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. 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. On February 17, 2026, the Company entered into a share repurchase agreement to repurchase 2,935,227 shares of its common stock, representing approximately 25.5 % of the Company’s outstanding shares, from the George K. Broady 2012 Irrevocable Trust and the Eleanor Jane Broady 2012 Irrevocable Trust at a purchase price of $ 2.00 per share, or an aggregate purchase price of approximately $ 5.9 million. The repurchase, funded from the Company’s existing cash on hand, was completed pursuant to the Company’s previously authorized share repurchase program. Following completion of the transaction, the Company has 8,577,848 shares of common stock outstanding. 59 Table of Contents Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable.