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What changed in NATURAL HEALTH TRENDS CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of NATURAL HEALTH TRENDS CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+109 added−145 removedSource: 10-K (2025-02-21) vs 10-K (2024-02-28)

Top changes in NATURAL HEALTH TRENDS CORP's 2024 10-K

109 paragraphs added · 145 removed · 96 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe understand that the look-back review continued after September 2019, and we are not aware that this review has been completed. As a result, the business environment in China for health product companies continues to be challenging, which has been exacerbated by negative social media sentiment expressed for these types of companies.
Biggest changeIn 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. See “Item 1A. Risk Factors - Adverse publicity associated with our products, ingredients or network marketing program, or those of similar companies...”.
While we provide informational brochures and other sales materials, members are primarily responsible for enrolling and educating their new members with respect to products, the compensation plan and how to build a successful membership network. Members are not required to enroll other members as their down-line, and we do not pay any commissions for enrolling new members.
While we provide informational brochures and other sales materials, members are primarily responsible for enrolling and educating their new members with respect to products, the compensation plan and how to build a successful membership network. Members are not required to enroll other members as their down-line members, and we do not pay any commissions for enrolling new members.
Herbal supplements LivaPro™, Cordyceps Mycelia CS-4™ , Purus, RespFactor™ 1 Table of Contents Beauty Products to help improve skin health and bring an appearance of youthful vibrancy. This product line includes age-defying and hydrating cleansers, creams, lotions, serums and toners to moisturize, protect and improve the appearance of skin.
Herbal supplements LivaPro™, Cordyceps Mycelia CS-4™ , RespFactor™ 1 Table of Contents Beauty Products to help improve skin health and bring an appearance of youthful vibrancy. This product line includes age-defying and hydrating cleansers, creams, lotions, serums and toners to moisturize, protect and improve the appearance of skin.
Risk Factors - Our recent loss of a significant number of members is adversely affecting our business...”. 7 Table of Contents Government Regulations Direct Selling Activities Direct selling, or multi-level marketing, activities are regulated by various federal, state and local governmental agencies in the United States and other countries.
Risk Factors - Our continuing loss of a significant number of members is adversely affecting our business...”. 7 Table of Contents Government Regulations Direct Selling Activities Direct selling, or multi-level marketing, activities are regulated by various federal, state and local governmental agencies in the United States and other countries.
Our 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.
Our 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.
Big network marketing companies include Nu Skin Enterprises, Inc., USANA Health Sciences, Inc., and Herbalife Nutrition Ltd., which have much greater name recognition and financial resources than we do and also have many more members. They are publicly traded and therefore serve as informational benchmarks, but we don’t overlap with them in terms of marketplace or product range.
Big network marketing companies include Nu Skin Enterprises, Inc., USANA Health Sciences, Inc., and Herbalife Nutrition Ltd., which have much greater name recognition and financial resources than we do and also have many more members. They are publicly traded and therefore serve as informational benchmarks, but we do not significantly overlap with them in terms of marketplace or product range.
Our Industry We are engaged in the direct selling industry, selling wellness, herbal, beauty, lifestyle, home, and daily products. More specifically, we are engaged in what is called network marketing or multi-level marketing.
Our Industry We are engaged in the direct selling industry, selling wellness, herbal, beauty, lifestyle, home, daily and at home test products. More specifically, we are engaged in what is called network marketing or multi-level marketing.
Facial skin care and hand and body care Skindulgence™ 30 Minute Firming System, BioCell SC Mask, Skindulgence™ Essence Gel, Valesce™ Eye Cream, Floraeda Toner and Primer, Botanical Hand Protector™, Airelle® Age-Defying Facial Serum, Airelle® Intense Hydrating Repair Complex, Airelle® Age-Defying Eye & Lip Treatment, Color Awakening Lipstick™, Adamas™ Brightening Series, Micellion Cleansing Water, Skindulgence™ Probiotic Ampoule, Skindulgence™ Daily Gentle Facial Cleanser Lifestyle Products uniquely formulated to improve overall quality of life and to support active, physical and healthy lifestyles including weight management, and energy enhancing supplements.
Facial skin care and hand and body care Skindulgence™ 30 Minute Firming System, BioCell SC Mask, Skindulgence™ Essence Gel, Floraeda Toner and Primer, Botanical Hand Protector™, Airelle ® Age-Defying Facial Serum, Airelle ® Intense Hydrating Repair Complex, Airelle ® Age-Defying Eye & Lip Treatment, Color Awakening Lipstick™, Adamas™ Brightening Night Cream, Micellion Cleansing Water, Skindulgence™ Probiotic Ampoule, Skindulgence™ Daily Gentle Facial Cleanser, Skindulgence ® Revitalizing Serum, Skindulgence ® Revitalizing Eye Cream, Root Revive Hair Serum Lifestyle Products uniquely formulated to improve overall quality of life and to support active, physical and healthy lifestyles including weight management, and energy enhancing supplements.
We have automated a substantial amount of our financial reporting processes through implementation of Oracle’s E-Business Suite, and have integrated other critical business processes such as inventory management, purchasing and costing in our most significant markets. Employees At December 31, 2023, we employed 139 individuals, including 138 total full-time employees worldwide.
We have automated a substantial amount of our financial reporting processes through implementation of Oracle’s E-Business Suite, and have integrated other critical business processes such as inventory management, purchasing and costing in our most significant markets. Employees At December 31, 2024, we employed 133 individuals, including 131 total full-time employees, worldwide.
Of the full-time employees, 86 were located in Greater China (Hong Kong, China, and Taiwan), 31 in the Americas (United States, Canada, Cayman Islands, and Peru), seven in India, five in Europe, three in Japan, two in Malaysia and Singapore, and two in each of South Korea and Russia.
Of the full-time employees, 84 were located in Greater China (Hong Kong, China, and Taiwan), 27 in the Americas (United States, Canada, Cayman Islands, and Peru), seven in India, four in Europe, three in Japan, and two in each of Malaysia, South Korea and Russia.
Our Principal Products We offer a line of “NHT Global” branded products in six distinct categories: wellness, herbal, beauty, lifestyle, home, and daily.
Our Principal Products We offer a line of “NHT Global” branded products in the following distinct categories: wellness, herbal, beauty, lifestyle, home, daily and at home tests.
China’s 100-Day Campaign Focusing on Health Products and Services In January 2019 the Chinese government announced a 100-day campaign focusing on companies involved in the sale of food, equipment, daily necessities, small home electrical appliances and services that are claimed to promote health.
The Chinese government conducted a campaign in 2019 focusing on companies involved in the sale of food, equipment, daily necessities, small home electrical appliances and services that are claimed to promote health.
We are incorporated in Delaware and maintain our corporate headquarters in Hong Kong. Our common stock is currently traded on the NASDAQ Capital Market under the symbol “NHTC.” Available Information Our website is located at www.naturalhealthtrendscorp.com.
We are incorporated in Delaware. In February 2025, we relocated our corporate headquarters from Hong Kong to Rolling Hills Estates, California. Our common stock is currently traded on the NASDAQ Capital Market under the symbol “NHTC.” Available Information Our website is located at www.naturalhealthtrendscorp.com.
December 31, 2023 2022 Americas 1 4,040 4,410 Hong Kong (including those members residing in China) 2 23,490 28,550 Taiwan 2,230 2,390 South Korea 80 70 Japan 520 640 Malaysia and Singapore 350 400 Russia and Kazakhstan 530 730 Europe 870 1,060 India 300 410 Total 32,410 38,660 1 United States, Canada, Mexico and Peru 2 Substantially all of our Hong Kong revenues are derived from the sale of products that are delivered to members in China.
December 31, 2024 2023 Americas 1 3,360 4,040 Hong Kong (including those members residing in China) 2 23,150 23,490 Taiwan 1,870 2,230 South Korea 70 80 Japan 440 520 Malaysia and Singapore 250 350 Russia and Kazakhstan 600 530 Europe 790 870 India 340 300 Total 30,870 32,410 1 United States, Canada, Mexico, Peru and Colombia 2 Substantially all of our Hong Kong revenues are derived from the sale of products that are delivered to members in China.
Risk Factors - Our business in China is subject to compliance with a myriad of applicable laws and regulations...” and “Item 7. - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Business Overview.” Other Regulatory Issues As we operate through many subsidiaries in foreign jurisdictions, we are subject to foreign exchange control, transfer pricing and custom laws that regulate the flow of funds between our entities for product purchases, management services and contractual obligations, such as the payment of member commissions.
Other Regulatory Issues As we operate through many subsidiaries in foreign jurisdictions, we are subject to foreign exchange control, transfer pricing and custom laws that regulate the flow of funds between our entities for product purchases, management services and contractual obligations, such as the payment of member commissions.
It is understood that the campaign was specifically focused on the business practices of direct selling companies. Although the 100-day campaign was due to expire in April 2019, we are not aware of any information indicating that the campaign has formally concluded. However, the Chinese government subsequently announced that it would conduct a “look-back review” to evaluate the 100-day campaign.
It is understood that the campaign was specifically focused on the business practices of direct selling companies. 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.
Members typically share their experiences in using our products and developing their business at these events. We are continually developing and updating our marketing strategies and programs to motivate our members.
Members typically share their experiences in using our products and developing their business at these events. We are continually developing and updating our marketing strategies and programs to motivate our members. Management Information Systems Our business uses a proprietary web-based system to process orders and to communicate bonus volume activity and commissions to members.
Accordingly, we carry minimal accounts receivable and credit losses are historically negligible. 4 Table of Contents As a result of the COVID-19 pandemic, we modified some of our marketing strategies and programs by offering a hybrid approach of both in-person and virtual or online marketing programs and activities.
See “Working with Members . ” Members generally place orders through the internet and pay by credit card prior to shipment. Accordingly, we carry minimal accounts receivable and credit losses are historically negligible. 4 Table of Contents We offer both in-person and virtual or online marketing programs and activities.
Oral care, hair care, and body care Smart Sonic Toothbrush We continuously source unique, proprietary and immediate impact products to offer to our members and customers.
Oral care, hair care, and body care Smart Sonic Toothbrush At Home Tests Measures 17+ critical biomarkers across multiple key areas of your well-being – including your cardiovascular, hormonal, inflammatory, metabolic, and nutritional health. At-home testing kit BioEssence Wellness Panel We continuously source unique, proprietary and immediate impact products to offer to our members and customers.
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See “Working with Members . ” Members generally place orders through the internet and pay by credit card prior to shipment.
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Recent Disruptions to our Business Our normal business operations have recently been disrupted by a series of events, including the COVID-19 pandemic and related measures to control it, the Chinese government’s 100-day campaign focused on companies involved in the sale of health products in China, and recent political and social developments in Hong Kong. See “Item 1A.
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Risk Factors - Epidemics, such as the COVID-19 pandemic, or natural disasters, terrorist attacks or acts of war…”, “Risk Factors - Our business in China is subject to compliance with a myriad of applicable laws and regulations...”, “Risk Factors - Our Hong Kong operations are being adversely affected by recent political and social developments in Hong Kong…”, and “Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations - Business Overview.” Management Information Systems Our business uses a proprietary web-based system to process orders and to communicate bonus volume activity and commissions to members.
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As part of this review, we understand that various Chinese governmental agencies formed a working group to assess the 100-day campaign, particularly focusing on the health market and its supervision in certain provinces.
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We understand that during September 2019 the working group evaluated the performance and results of a number of organizations and governmental departments in these provinces and made recommendations for various improvements. It was noted that each province had opened a number of investigative cases, had successfully closed numerous cases, and had imposed various fines and penalties.
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The 100-day campaign, including its extension and aftermath, has and is expected to continue negatively impacting our business in China in the near-term, but we believe will ultimately benefit us and Chinese consumers in the long-term as purveyors of substandard products are driven from the market. See “Item 1A.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur Hong Kong operations are being adversely affected by recent political and social developments in Hong Kong, and the negative impact on our operations and financial performance could continue or intensify. Our headquarters and a significant number of our employees are based in Hong Kong, and our Hong Kong subsidiary generates a substantial portion of our overall business.
Biggest changeHong Kong's political and economic landscape has in recent years undergone significant change, and this upheaval or related consequences could negatively impact our business and financial performance. 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.
In the course of doing business we may be subject to various taxes, such as sales and use, value-added, and franchise. We are also subject to income taxes in the United States and numerous foreign jurisdictions. We earn a substantial portion of our income in foreign jurisdictions.
In the course of doing business we may be subject to various taxes, such as sales and use, value-added, and franchise taxes. We are also subject to income taxes in the United States and numerous foreign jurisdictions. We earn a substantial portion of our income in foreign jurisdictions.
Specifically, the Cyber Security Law provides that companies adopt a multi-level protection scheme under which network operators are required to perform obligations of security protection to ensure that the network is free from interference, disruption or unauthorized access, and prevent network data from being disclosed, stolen or tampered.
Specifically, the Cyber Security Law provides that companies adopt a multi-level protection scheme under which network operators are required to perform obligations of security protection to ensure that the network is free from interference, disruption or unauthorized access, and prevent network data from being disclosed, stolen or tampered with.
We experienced negative operating cash flows during the years ended December 31, 2023 and 2022, and only modest positive operating cash flows during the years ended December 31, 2021 and 2020. This cash flow performance was primarily due to declines in our revenues being greater than the decreases in expenditures that we could manage.
We experienced negative operating cash flows during the years ended December 31, 2024, 2023 and 2022, and only modest positive operating cash flows during the years ended December 31, 2021 and 2020. This cash flow performance was primarily due to declines in our revenues being greater than the decreases in expenditures that we could manage.
Changes in government trade and economic policies, including the imposition or threatened imposition of tariffs and other restrictive trade policies, and ongoing political and economic disputes between the United States and other jurisdictions, particularly China, may have a negative effect on global economic conditions and our business, financial results and financial condition.
Changes in government trade and economic policies, including the imposition and threatened imposition of tariffs and other restrictive trade policies, and ongoing political and economic disputes between the United States and other jurisdictions, particularly China, may have a negative effect on global economic conditions and our business, financial results and financial condition.
We experienced negative operating cash flows during the years ended December 31, 2023 and 2022, and only modest positive operating cash flows during the years ended December 31, 2021 and 2020. Unless our operating cash flows improve, this negative financial performance could have a material adverse effect on our business and our stock price.
We experienced negative operating cash flows during the years ended December 31, 2024, 2023 and 2022, and only modest positive operating cash flows during the years ended December 31, 2021 and 2020. Unless our operating cash flows improve, this negative financial performance could have a material adverse effect on our business and our stock price.
For example, in January 2019 the Chinese government announced a 100-day campaign focusing on companies involved in the sale of food, equipment, daily necessities, small home electrical appliances and services that are claimed to promote health.
For example, in 2019 the Chinese government announced a 100-day campaign focusing on companies involved in the sale of food, equipment, daily necessities, small home electrical appliances and services that are claimed to promote health.
We believe that this has led some existing members in China (who are signed up as members in Hong Kong) to leave the business or curtail their selling activities and has led some potential members to choose not to participate.
We believe that this led some members in China (who are signed up as members in Hong Kong) to leave the business or curtail their selling activities and has led some potential members to choose not to participate.
Terrorist attacks, the national and international responses to terrorist attacks, and acts of war or hostility could materially and adversely affect our business, results of operations, and financial condition in ways that we currently cannot predict.
In addition, terrorist attacks, the national and international responses to terrorist attacks, and acts of war or hostility could materially and adversely affect our business, results of operations, and financial condition in ways that we currently cannot predict.
Moreover, as our business evolves, we may require additional or different management members, directors or consultants, and there can be no assurance that we will be able to locate, attract and retain them if and when they are needed. 14 Table of Contents Our recent loss of a significant number of members is adversely affecting our business, and if we cannot stabilize or increase the number of members our business could be further negatively impacted.
Moreover, as our business evolves, we may require additional or different management members, directors or consultants, and there can be no assurance that we will be able to locate, attract and retain them if and when they are needed. 14 Table of Contents Our continuing loss of a significant number of members is adversely affecting our business, and if we cannot stabilize or increase the number of members our business could be further negatively impacted.
Department of Justice (the "DOJ") and the SEC relating to certain countries in which we have business, including China. For example, in 2017, a U.S. based direct selling company announced that it was the target of an investigation being conducted by the SEC to determine whether certain activities related to the direct selling company's operations in China violated the FCPA.
Department of Justice (the “DOJ”) and the SEC relating to certain countries in which we have business, including China. For example, in 2017, a U.S. based direct selling company announced that it was the target of an investigation being conducted by the SEC to determine whether certain activities related to the direct selling company's operations in China violated the FCPA.
Currency exchange rate fluctuations could lower our revenue and net income. In 2023, 96% of our revenue was recorded by subsidiaries located outside of North America. Revenue transactions and related commission payments, as well as other incurred expenses, are typically denominated in the local currency. Accordingly, our international subsidiaries generally use the local currency as their functional currency.
Currency exchange rate fluctuations could lower our revenue and net income. In 2024, 96% of our revenue was recorded by subsidiaries located outside of North America. Revenue transactions and related commission payments, as well as other incurred expenses, are typically denominated in the local currency. Accordingly, our international subsidiaries generally use the local currency as their functional currency.
These developments, together with the threat of new tariffs and other restrictive trade policies, may have a material adverse effect on global economic conditions and the stability of global financial markets, and they may significantly reduce global trade and, in particular, adversely affect trade and economic relations between China and the United States.
These developments, together with the threat of new tariffs and other restrictive trade policies and the uncertainties they create, may have a material adverse effect on global economic conditions and the stability of global financial markets, and they may significantly reduce global trade and, in particular, adversely affect trade and economic relations between China and the United States.
The Data Security Law also provides for a national security review procedure for data activities that may affect national security and imposes export restrictions on certain data and information. Finally, the Standing Committee of the National People's Congress of the China also promulgated the Personal Information Protection Law ("PIPL"), which took effect on November 1, 2021.
The Data Security Law also provides for a national security review procedure for data activities that may affect national security and imposes export restrictions on certain data and information. Finally, the Standing Committee of the National People's Congress of the China also promulgated the Personal Information Protection Law (“PIPL”), which took effect on November 1, 2021.
If demand decreases significantly, government regulation restricts their sale, we are unable to adequately source or deliver the products, or we are unable to offer the products for any reason without suitable replacements, our business, results of operations and financial condition could be materially and adversely affected.
If demand decreases significantly, government regulation re stricts their sale, we are unable to adequately source or deliver the products, or we are unable to offer the products for any reason without suitable replacements, our business, results of operations and financial condition could be materially and adversely affected.
We did this because we learned that the 100-day campaign was announced in broad outlines by the central government, and the interpretation and enforcement of the campaign was delegated to the provincial and local governments.
We did this because we learned that the campaign was announced in broad outlines by the central government, and the interpretation and enforcement of the campaign was delegated to the provincial and local governments.
We consider it a top priority for our business to develop an understanding of and cooperate with all levels and jurisdictions of the government agencies and did not want to run the risk of being inadvertently entangled in the government enforcement actions as the provincial and local government formulate and implement their interpretive guidance and rule-making.
We consider it a top priority for our business to develop an understanding of and cooperate with all levels and jurisdictions of the government agencies and did not want to run the risk of being inadvertently entangled in the government enforcement actions as the provincial and local government formulated and implemented their interpretive guidance and rule-making.
Epidemics, natural disasters, terrorist attacks or acts of war or hostility may cause damage or disruption to us, our employees, our facilities and our members and customers, which could negatively impact our revenues, results of operations and financial condition.
Epidemics, natural disasters, terrorist attacks or acts of war or hostility may seriously harm our business. Epidemics, natural disasters, terrorist attacks or acts of war or hostility may cause damage or disruption to us, our employees, our facilities and our members and customers, which could negatively impact our revenues, results of operations and financial condition.
Tensions have become particularly acute following the China legislature’s passage of a national security law in June 2020 that changed the way Hong Kong has been governed since the territory was handed over by the United Kingdom to China in 1997.
Tensions became particularly acute following the China legislature’s passage of a national security law in 2020 that changed the way Hong Kong has been governed since the territory was handed over by the United Kingdom to China in 1997.
It is understood that the campaign was specifically focused on the business practices of direct selling companies. In January 2019 we, like some of our peers, voluntarily decided to temporarily suspend our member activities, such as product roadshows, product trainings and larger company-sponsored events, in China.
It is understood that the campaign was specifically focused on the business practices of direct selling companies. As a result, we and some of our peers voluntarily decided to temporarily suspend our member activities, such as product roadshows, product trainings and larger company-sponsored events, in China.
These and other recent actions may represent an escalation in political and economic tensions involving the United States, China and Hong Kong, which could harm our business.
These and other recent actions reflect an escalation in political and economic tensions involving the United States, China and Hong Kong, which could harm our business.
We incur significant expense in the payment of compensation to our members, which represented approximately 42% of net sales during each of 2023 and 2022. We compensate our members by paying commissions, bonuses, and certain awards and prizes.
We incur significant expense in the payment of compensation to our members, which represented approximately 41% and 42% of net sales during each of 2024 and 2023, respectively. We compensate our members by paying commissions, bonuses, and certain awards and prizes.
In 2023 and 2022, approximately 79% and 78% of our revenue was generated in Hong Kong, respectively. Substantially all of our Hong Kong revenues are derived from the sale of products that are delivered to members in China.
In 2024 and 2023, approximately 82% and 79% of our revenue was generated in Hong Kong, respectively, and substantially all of our Hong Kong revenues are derived from the sale of products that are delivered to members in China.
The number and productivity of our members could be harmed by several factors, including: • adverse publicity or negative perceptions regarding us, our products, our method of distribution or our competitors; • lack of interest in, or the technical failure of, existing or new products; • lack of interest in our existing compensation plan for members or in enhancements or other changes to that compensation plan; • our actions to enforce our policies and procedures; • regulatory actions or charges or private actions against us or others in our industry, such as the 100-day campaign initiated in China in January 2019 (as well as its extension and aftermath, including the related look-back review); • general economic, business and political conditions, including the recent political unrest in Hong Kong and the imposition of restrictive measures that curtail person-to-person interactions, as recently experienced resulting from the COVID-19 pandemic; • increased use of social sharing channels, which may allow members to more easily engage with their customers and other members in other opportunities; • changes in management or the loss of one or more key member leaders; • entry of new competitors, or new products or compensation plan enhancements by existing competitors, in our markets; and • potential saturation or maturity levels in a given country or market which could negatively impact our ability to attract and retain members in such market.
The number and productivity of our members could be harmed by several factors, including: • adverse publicity or negative perceptions regarding us, our products, our method of distribution or our competitors; • lack of interest in, or the technical failure of, existing or new products; • lack of interest in our existing compensation plan for members or in enhancements or other changes to that compensation plan; • our actions to enforce our policies and procedures; • regulatory actions or charges or private actions against us or others in our industry; • general economic, business and political conditions, including the potential governmental imposition of restrictive measures that may curtail person-to-person interactions, as recently experienced resulting from the COVID-19 pandemic, and political unrest in Hong Kong; • increased use of social sharing channels, which may allow members to more easily engage with their customers and other members in other opportunities; • changes in management or the loss of one or more key member leaders; • entry of new competitors, or new products or compensation plan enhancements by existing competitors, in our markets; and • potential saturation or maturity levels in a given country or market which could negatively impact our ability to attract and retain members in such market.
Tensions between the United States and China have increased over the past few years as a result of disputes in areas including trade policy, intellectual property, cybersecurity and data privacy.
Tensions between the United States and China have increased in recent years as a result of disputes in areas including trade policy, intellectual property, cybersecurity and data privacy.
Our foreign currency exchange rate exposure to the South Korean won, Taiwan dollar, Japanese yen, Chinese yuan, Russian ruble, Kazakhstani tenge, Singaporean dollar, Malaysian ringgit, Thai baht, Indian rupee, Canadian dollar, Mexican peso, Peruvian sol and European euro collectively represented approximately 18% and 19% of our revenue in 2023 and 2022, respectively.
Our foreign currency exchange rate exposure to the South Korean won, Taiwan dollar, Japanese yen, Chinese yuan, Russian ruble, Kazakhstani tenge, Singaporean dollar, Malaysian ringgit, Indian rupee, Canadian dollar, Mexican peso, Peruvian sol, European euro and Colombian peso collectively represented approximately 16% and 18% of our revenue in 2024 and 2023, respectively.
We face similar pressures in our other markets, particularly in China where certain government ministries announced in January 2019 a comprehensive 100-day campaign focusing on companies involved in the sale of certain products, including nutritional supplements and health products.
We face similar pressures in our other markets, particularly in China where certain government ministries announced in 2019 a comprehensive 100-day campaign focusing on companies involved in the sale of certain products, including nutritional supplements and health products. This campaign or other actions could result in new legislation or regulation in China.
Although we attempt to work closely with both national and local Chinese governmental agencies in conducting our business, our 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 our policies prohibiting such activities.
It may again in the future be necessary or advisable to suspend member activities or take similar actions, and the resulting periods of reduced activity may have a material adverse effect on our business. 17 Table of Contents Although we attempt to work closely with both national and local Chinese governmental agencies in conducting our business, our 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 our policies prohibiting such activities.
The instability in global financial markets, inflation, shortages and delays related to global supply chain challenges, uncertainties related to the imposition and lifting of governmental restrictions to mitigate the spread of COVID-19, the current economic challenges in China, changes in government policies, geopolitical turmoil and other disruptions to global and regional economies and markets continue to add uncertainty to global economic conditions.
The instability in global financial markets, tariff and trade wars, inflation, shortages and delays related to global supply chain challenges, the current economic challenges in China, changes in government policies, geopolitical turmoil and other disruptions to global and regional economies and markets continue to add uncertainty to global economic conditions.
In response, a number of our markets, particularly China, have implemented tariffs on U.S. imports or otherwise imposed non-tariff barriers such as slow-walking custom clearance of American-made products in response to these U.S. actions.
In response, a number of our markets, particularly China, have implemented tariffs on U.S. imports or otherwise imposed non-tariff barriers such as slow-walking custom clearance of American-made products. U.S. trade policies can change quickly, and the extent and duration of tariffs and other trade barriers are difficult to predict.
Our members may terminate their services with us at any time and, like most direct selling organizations, we have a high rate of attrition. We had 16% fewer active members at December 31, 2023 as compared to the end of 2022, and 16% fewer active members at the end of 2022 as compared to the end of 2021.
Our members may terminate their services with us at any time and, like most direct selling organizations, we have a high rate of attrition.
Hong Kong has in recent years experienced significant political unrest and social strife, including a series of large-scale protests. These developments, along with the impact of the COVID-19 pandemic, led us in 2020 to cease conducting member meetings and events in Hong Kong.
The political and economic landscape in Hong Kong has in recent years undergone significant change, largely due to the increasing influence of the Chinese government. This development, along with the impact of the COVID-19 pandemic, led us to cease conducting member meetings and events in Hong Kong for a period of time.
There have been several instances where adverse publicity in China has harmed our business. See “Item 1A. Risk Factors - Our business in China is subject to compliance with a myriad of applicable laws and regulations…”.
There have been several instances where adverse publicity in China has harmed our business.
State Department has announced that the United States no longer considers Hong Kong to have significant autonomy from China, and the U.S. administration is taking action to end many of the U.S. government’s special trade and economic relations with Hong Kong. Further, on July 14, 2020 the United States enacted the Hong Kong Autonomy Act (and the U.S.
State Department has indicated that the United States no longer considers Hong Kong to have significant autonomy from China, and the United States has enacted sanctions against certain persons related to China's governance of Hong Kong. China has responded in kind.
While the Chinese and Hong Kong governments took comprehensive steps to relax many of their COVID-19 control measures in late 2022, these disruptions materially negatively impacted our financial results from 2020 through 2022. This less restrictive business environment continued throughout 2023.
For example, COVID-19 was first identified in China and subsequently spread quickly around the world, causing the governments of countries in which we operate to impose restrictive measures to control the virus. The disruptions wrought by COVID-19 materially negatively impacted our operations and financial results from 2020 through 2022.
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Inasmuch as member meetings and events located in Hong Kong have in the past served as an important component of our product marketing and distribution efforts, we believe that these developments have negatively affected our operations and financial performance.
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We have since been able to substantially resume normal operations in Hong Kong, but Hong Kong's economy is now increasingly integrated with that of China. We relocated our corporate headquarters from Hong Kong to California in February 2025.
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Although we were able to sponsor a large in-person member event in Hong Kong in the fourth quarter of 2023, it is too early to predict whether these developments will continue to adversely affect our overall business, results of operations and financial condition.
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It is unclear how changed circumstances in Hong Kong will in the future affect our business, but it is possible that the upheaval in Hong Kong's political and economic affairs or related consequences could adversely affect our future business, results of operations and financial condition.
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Epidemics, such as the COVID-19 pandemic, or natural disasters, terrorist attacks or acts of war or hostility may seriously harm our business.
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Although the public health restrictions put in place at the time have largely been lifted, if the COVID-19 virus and its variants cause a resurgence of infection, or if other public health emergencies arise in the future, it could lead to additional restrictive measures that would have a material and adverse effect on our business.
Removed
For example, in late 2019 or early 2020 an outbreak of COVID-19 was first identified in China and subsequently spread around the world, being declared a global pandemic by the World Health Organization in March 2020.
Added
We had 5% fewer active members at December 31, 2024 as compared to the end of 2023, and 16% fewer active members at the end of each of 2023 and 2022 as compared to the end of the previous year.
Removed
The outbreak caused the Chinese government to implement powerful measures to control the virus, such as requiring businesses to close throughout areas of China and restricting public gatherings and certain travel within the country.
Added
The United States has in recent years enacted tariffs on certain items. Further, with President Trump's re-election in 2024, significant increases in tariffs on foreign imports into the United States have been proposed or, the case of imports from China imposed.
Removed
We have significant business in China and in 2023 generated approximately 79% of our revenue in Hong Kong, substantially all of which was derived from the sale of products to members in China.
Removed
The Chinese and Hong Kong governments, like the governments of other countries in which we operate, continue to adjust the restrictive measures that they impose to control COVID-19 based on then-current local circumstances; however, it should be noted that the Chinese and Hong Kong governments imposed some of the most restrictive COVID-19 control measures of any country in the world.
Removed
We are hopeful that this improved state of affairs will enable us to continue more normal operations in China and Hong Kong, but it is still too early to accurately predict the impact on us of this relaxation of control measures and whether it will prove enduring.
Removed
Ultimately, the severity of the impact on us of the COVID-19 pandemic will depend on future developments, including the duration and spread of the virus, and related control measures, which we are unable to accurately predict.
Removed
This and other epidemics, such as the avian influenza, or natural disasters have in the past and could in the future adversely affect our business, results of operations and financial condition.
Removed
Although we have been able to relax some restrictions on member activities in certain markets, it may again in the future be necessary or advisable to suspend member activities or take similar actions, and the resulting periods of reduced activity may have a material adverse effect on our business. 17 Table of Contents Although the 100-day campaign was due to expire in April 2019, we are not aware of any information indicating that the campaign has formally concluded.
Removed
However, the Chinese government subsequently announced that it would conduct a “look-back review” to evaluate the 100-day campaign. As part of this review, we understand that various Chinese governmental agencies formed a working group to assess the 100-day campaign, particularly focusing on the health market and its supervision in certain provinces.
Removed
We understand that during September 2019 the working group evaluated the performance and results of a number of organizations and governmental departments in these provinces and made recommendations for various improvements. It was noted that each province had opened a number of investigative cases, had successfully closed numerous cases, and had imposed various fines and penalties.
Removed
We understand that the look-back review continued after September 2019, and we are not aware that this review has been completed. As a result, the business environment in China for health product companies continues to be challenging, which has sometimes been exacerbated by negative social media sentiment expressed for these types of companies.
Removed
We believe that the campaign, as well as its extension and aftermath (including the look-back review), will continue to negatively impact our business in China in the near-term, but will ultimately benefit us and Chinese consumers as purveyors of substandard products are driven from the market.
Removed
The United States has in recent years enacted tariffs on certain items. Further, there are ongoing discussions and activities regarding changes to other U.S. trade policies and treaties.
Removed
President issued a related executive order), authorizing the U.S. administration to impose sanctions against individuals and entities determined to materially contribute to the erosion of Hong Kong's autonomy, as well as to punish financial institutions that facilitate certain significant transactions. The United States has since imposed sanctions on a number of individuals, and China has responded in kind.
Removed
This campaign, which may not have formally concluded, and may still be the subject of a “look-back review” being conducted by various Chinese governmental agencies, could result in new legislation or regulation.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Added
We also maintain a third-party risk management process to mitigate vulnerabilities associated with external service providers and vendors. This includes reviewing service-level agreements and third-party security certifications, such as PCI DSS and SOC reports, on an annual basis or as-needed to ensure vendors adhere to our security and compliance standards.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. PROPERTIES Our corporate headquarters is located in Hong Kong where we lease 7,300 square feet of office space with a term expiring in June 2026. We also lease 4,900 square feet of corporate office space in Rolling Hills Estates, California with a term expiring in September 2030.
Biggest changeItem 2. PROPERTIES Our corporate headquarters is located in Rolling Hills Estates, California where we lease 4,900 square feet of office space with a term expiring in September 2030. We also lease 7,300 square feet of corporate office space in Hong Kong with a term expiring in June 2026.
Our office space in Hong Kong and Rolling Hills Estates is used in support of all of our business segments, while the North America retail space is used in support of our Primary Reporting Segment.
Our office space in Rolling Hills Estates and Hong Kong is used in support of all of our business segments, while the North America retail space is used in support of our Primary Reporting Segment.
We lease seven branch offices throughout China that are used for our China business segment, and additional office space in Peru, Japan, Taiwan, South Korea, Malaysia, Thailand, India, and the Cayman Islands (all of which are used for our Primary Reporting Segment). We contract with third parties for fulfillment and distribution operations in all of our international markets.
We lease seven branch offices throughout China that are used for our China business segment, and additional office space in Peru, Japan, Taiwan, South Korea, Malaysia and the Cayman Islands (all of which are used for our Primary Reporting Segment). We contract with third parties for fulfillment and distribution operations in all of our international markets.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAt February 23, 2024, there were approximately 110 record holders of our common stock (although we believe that the number of beneficial owners of our common stock is substantially greater). The Company expects to pay a quarterly cash dividend of $0.20 on each share of common stock outstanding for the foreseeable future.
Biggest changeAt February 18, 2025, there were approximately 105 record holders of our common stock (although we believe that the number of beneficial owners of our common stock is substantially greater). The Company expects to pay a quarterly cash dividend of $0.20 on each share of common stock outstanding for the foreseeable future.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is currently traded on the NASDAQ Capital Market (“Nasdaq”) under the symbol “NHTC.” On February 23, 2024, the closing price of our common stock as reported by Nasdaq was $6.07 per share.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is currently traded on the NASDAQ Capital Market (“Nasdaq”) under the symbol “NHTC.” On February 18, 2025, the closing price of our common stock as reported by Nasdaq was $4.86 per share.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

37 edited+7 added−24 removed39 unchanged
Biggest changeResults of Operations The following table sets forth our operating results as a percentage of net sales for the periods indicated: Year Ended December 31, 2023 2022 Net sales 100.0 % 100.0 % Cost of sales 25.4 25.8 Gross profit 74.6 74.2 Operating expenses: Commissions expense 41.9 42.2 Selling, general and administrative expenses 36.5 32.6 Total operating expenses 78.4 74.8 Loss from operations (3.8 ) (0.6 ) Other income, net 5.5 1.8 Income before income taxes 1.7 1.2 Income tax provision 0.4 0.6 Net income 1.3 % 0.6 % 31 Table of Contents Net Sales The following table sets forth revenue by market for the periods indicated (in thousands): Year Ended December 31, 2023 2022 Americas 1 $ 3,364 7.7 % $ 3,256 6.6 % Hong Kong 2 34,898 79.4 38,436 78.2 China 1,235 2.8 2,017 4.1 Taiwan 2,181 5.0 2,493 5.1 South Korea 164 0.4 172 0.4 Japan 450 1.0 676 1.4 Malaysia and Singapore 275 0.6 393 0.8 Russia and Kazakhstan 480 1.1 559 1.1 Europe 733 1.7 891 1.8 India 144 0.3 241 0.5 Total $ 43,924 100.0 % $ 49,134 100.0 % 1 United States, Canada, Mexico and Peru. 2 Substantially all of our Hong Kong revenues are derived from the sale of products that are delivered to members in China.
Biggest changeResults of Operations The following table sets forth our operating results as a percentage of net sales for the periods indicated: Year Ended December 31, 2024 2023 Net sales 100.0 % 100.0 % Cost of sales 26.0 25.4 Gross profit 74.0 74.6 Operating expenses: Commissions expense 40.9 41.9 Selling, general and administrative expenses 36.1 36.5 Total operating expenses 77.0 78.4 Loss from operations (3.0 ) (3.8 ) Other income, net 4.4 5.5 Income before income taxes 1.4 1.7 Income tax provision 0.1 0.4 Net income 1.3 % 1.3 % 31 Table of Contents Net Sales The following table sets forth revenue by market for the periods indicated (in thousands): Year Ended December 31, 2024 2023 Americas 1 $ 2,680 6.2 % $ 3,364 7.7 % Hong Kong 2 35,106 81.7 34,898 79.4 China 1,580 3.7 1,235 2.8 Taiwan 1,591 3.7 2,181 5.0 South Korea 154 0.4 164 0.4 Japan 292 0.7 450 1.0 Malaysia and Singapore 241 0.6 275 0.6 Russia and Kazakhstan 490 1.1 480 1.1 Europe 635 1.5 733 1.7 India 194 0.4 144 0.3 Total $ 42,963 100.0 % $ 43,924 100.0 % 1 United States, Canada, Mexico, Peru and Colombia. 2 Substantially all of our Hong Kong revenues are derived from the sale of products that are delivered to members in China.
Over the course of the pandemic, we also 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.
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.
Our 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.
Our 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 outbreak 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.
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.
For further information regarding some of the risks associated with our loss of members, see “Item 1A. Risk Factors - Our recent loss of a significant number of members is adversely affecting our business…”.
For further information regarding some of the risks associated with our loss of members, see “Item 1A. Risk Factors - Our continuing loss of a significant number of members is adversely affecting our business…”.
On January 12, 2016, the Board of Directors authorized an increase to our 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.
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. Any repurchases will be made in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Exchange Act.
We are unable to predict whether and when we will be successful in obtaining a direct selling license to operate in China, and if we are successful, when we will be permitted to conduct direct selling operations and whether such operations would be profitable. 28 Table of Contents In January 2019 the Chinese government announced a 100-day campaign focused on companies involved in the sale of food, equipment, daily necessities, small home electrical appliances and services that are claimed to promote health.
We are unable to predict whether and when we will be successful in obtaining a direct selling license to operate in China, and if we are successful, when we will be permitted to conduct direct selling operations and whether such operations would be profitable. 28 Table of Contents The Chinese government conducted a campaign in 2019 focusing on companies involved in the sale of food, equipment, daily necessities, small home electrical appliances and services that are claimed to promote health.
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 each of fiscal 2023 and 2022 represented 42% of net sales.
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.
As of December 31, 2023, we were conducting business through 32,410 active members, compared to 38,660 at the end of 2022. We consider a member “active” if they have placed at least one product order with us during the preceding year.
As of December 31, 2024, we were conducting business through 30,870 active members, compared to 32,410 at the end of 2023. We consider a member “active” if they have placed at least one product order with us during the preceding year.
We generate approximately 92% of our net sales from subsidiaries located outside the Americas, with sales of our Hong Kong subsidiary representing 79% of net sales in the latest fiscal year.
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.
As of December 31, 2023, deferred revenue was $6.2 million, which primarily consisted of $4.4 million pertaining to unshipped product orders and unredeemed product vouchers, as well as $1.8 million in auto ship advances.
As of December 31, 2024, deferred revenue was $6.4 million, which primarily consisted of $4.9 million pertaining to unshipped product orders and unredeemed product vouchers, as well as $1.5 million in auto ship advances.
Subsequent to December 31, 2023, on February 5, 2024, the Board of Directors declared another 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.
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. The dividend will be payable on February 28, 2025 to stockholders of record on February 18, 2025.
Our effective tax rate for the year ended December 31, 2023 was lower than in the year ended December 31, 2022 primarily because our reduced income in foreign operations during the year ended December 31, 2023. Liquidity and Capital Resources At December 31, 2023, our cash and cash equivalents totaled $56.2 million.
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. Liquidity and Capital Resources At December 31, 2024, our cash, cash equivalents and marketable securities totaled $43.9 million.
Commissions Expense Commissions were 41.9% of net sales for the year ended December 31, 2023 compared with 42.2% of net sales for the year ended December 31, 2022.
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.
Income Taxes An income tax provision of $177,000 was recognized for the year ended December 31, 2023 compared with $289,000 for the year ended Decemb er 31, 2022 .
Income Taxes An income tax provision of $48,000 was recognized for the year ended December 31, 2024 compared with $177,000 for the year ended December 31, 2023 .
In late 2019 or early 2020 an outbreak of COVID-19 was first identified in China and subsequently spread around the world. On March 11, 2020 the World Health Organization declared the COVID-19 outbreak a global pandemic.
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.
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.
As of December 31, 2024, $21.9 million of the $70.0 million stock repurchase program remained available for future purchases, inclusive of related estimated income tax. No repurchases were made under the stock repurchase program in 2024 or 2023.
See “Item 1A. Risk Factors.” Net sales were $43.9 million for the year ended December 31, 2023 compared with $49.1 million a year ago, a decrease of $5.2 million, or 11%.
See “Item 1A. 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%.
If we are ultimately able to obtain a direct selling license in China, we believe that the incentives inherent in the direct selling model in China would incrementally benefit our existing business.
We expect to reapply for a direct selling license in China when we believe that circumstances are again ripe for doing so. If we are ultimately able to obtain a direct selling license in China, we believe that the incentives inherent in the direct selling model in China would incrementally benefit our existing business.
China has been and continues to be our most important business development project. We operate an e-commerce direct selling platform in Hong Kong that generates revenue derived from the sale of products to members in Hong Kong and elsewhere, including China.
China has been and continues to be our most important business development project. We operate an e-commerce direct selling platform in Hong Kong that in 2024 generated approximately 82% of our revenue, substantially all of which was derived from the sale of products that are delivered to members in China.
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 - Our Hong Kong operations are being adversely affected by recent political and social developments in Hong Kong….”, and “Risk Factors - Our business in China is subject to compliance with a myriad of applicable laws and regulations...”.
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 - Our Hong Kong operations are being adversely affected by recent political and social developments in Hong Kong...”. 29 Table of Contents Statement of Operations Presentation We mainly derive revenue from sales of products. Substantially all of our product sales are to independent members at published wholesale prices.
Risk Factors - Hong Kong's political and economic landscape has in recent years undergone significant change...”. 29 Table of Contents Statement of Operations Presentation We mainly derive revenue from sales of products. Substantially all of our product sales are to independent members at published wholesale prices.
Cash used in operations was $4.3 million and $4.9 million during 2023 and 2022, respectively. Income tax paid during April 2023 and 2022 for the repatriation tax on the deemed repatriation of deferred foreign income was $3.0 million and $1.6 million, respectively.
Income tax paid during A pril 2024 and 2023 for the repatriation tax on the deemed repatriation of deferred foreign income was $4.0 million and $3.0 million, respectively.
As of December 31, 2023, the ratio of current assets to current liabilities was 3.21 to 1.00 and we had $ 44.2 million of working capital. Working capital as of December 31, 2023 decreased $ 12.9 million compared to our working capital as of December 31, 2022.
As of December 31, 2024, the ratio of current assets to current liabilities was 2.45 to 1.00 and we had $30.2 million of working capital. Working capital as of December 31, 2024 decreased $14.1 million compared to our working capital as of December 31, 2023. Cash used in operations was $3.4 million and $4.3 million during 2024 and 2023, respectively.
Selling, general and administrative expenses as a percentage of net sales increased in the current year as compared to the prior year due to the decrease in net sales in the current year and the relatively inelastic nature of these expenses.
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.
Excluding the impact of decreased administrative fee revenue referred to above, commissions as a percentage of net sales decreased slightly in 2023 as compared to the prior year. 32 Table of Contents Selling, General and Administrative Expenses Selling, general and administrative expenses were $16.0 million for each of the years ended December 31, 2023 and 2022.
The decline in commissions as a percentage of net sales was primarily due to lower weekly commissions earned during 2024. 32 Table of Contents 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.
Substantially all of our Hong Kong revenues are derived from the sale of products that are delivered to members in China. Through a separate Chinese entity, we operate an e-commerce retail platform in China. We believe that neither of these activities require a direct selling license in China, which we do not currently hold.
Through a separate Chinese entity, we also operate an e-commerce retail platform in China. 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.
Hong Kong net sales, substantially all of which were derived from the sale of products shipped to members residing in China, decreased $3.5 million, or 9%, over the prior year. The decrease in Hong Kong net sales was primarily due to the changes in deferred revenue in the two years.
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.
As of December 31, 2023, we had $47.2 million in available-for-sale investments classified as cash equivalents. In addition, cash and cash equivalents included $3.7 million held in banks located in China subject to foreign currency controls.
We consider all highly liquid investments with original maturities of three months or less, when purchased, to be cash equivalents. As of December 31, 2024, we had $36.0 million in available-for-sale investments classified as either cash equivalents or marketable securities. In addition, cash and cash equivalents included $3.6 million held in banks located in China subject to foreign currency controls.
Other Income, Net Other income increased to $2.4 million for the year ended December 31, 2023 as compared with $872,000 in the prior year. The increase in other income is primarily due to greater interest earned on our cash equivalents as compared to the prior year.
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.
We understand that the look-back review continued after September 2019, and we are not aware that this review has been completed. As a result, the business environment in China for health product companies continues to be challenging, which has been exacerbated by negative social media sentiment expressed for these types of companies.
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.
Cash used in investing activities totaled $46,000 and $143,000 during 2023 and 2022, respectively. 33 Table of Contents Cash used in financing activities during 2023 and 2022 consisted solely of quarterly dividend payments of $0.20 per common share, totaling an aggregate of $9.2 million and $9.1 million during 2023 and 2022, respectively.
These purchases of marketable securities were offset by $40.4 million of proceeds received from maturities of marketable securities. 33 Table of Contents Cash used in financing activities during 2024 and 2023 consisted solely of quarterly dividend payments of $0.20 per common share, totaling $9.2 million in each period.
This less restrictive business environment in China and Hong Kong continued throughout 2023, and we were able to sponsor a number of in-person member events in China during 2023, as well as a large in-person event in Macau during the second quarter of 2023 and a large in-person event in Hong Kong during the fourth quarter of 2023.
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.
Gross Profit Gross profit was 74.6% of net sales for the year ended December 31, 2023 compared with 74.2% of net sales for the year ended December 31, 2022. Excluding the impact of decreased administrative fee revenue referred to above, the gross profit margin percentage in 2023 slightly improved over the prior year primarily due to lower logistics costs.
Gross Profit Gross profit was 74.0% of net sales for the year ended December 31, 2024 compared with 74.6% of net sales for the year ended December 31, 2023. The decline in gross profit margin was primarily attributable to higher costs related to our Premium Noni juice product.
Although the 100-day campaign was due to expire in April 2019, we are not aware of any information indicating that the campaign has formally concluded. However, the Chinese government subsequently announced that it would conduct a “look-back review” to evaluate the 100-day campaign.
It is understood that the campaign was specifically focused on the business practices of direct selling companies. 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.
Recent political and social developments in Hong Kong, along with the impact of the COVID-19 pandemic and related government control measures, are also adversely affecting our Hong Kong operations and led us in 2020 to cease sponsoring member meetings and events in Hong Kong.
The political and economic landscape in Hong Kong has in recent years undergone significant change, largely due to the increasing influence of the Chinese government. This development, along with the impact of the COVID-19 pandemic, led us to cease conducting member meetings and events in Hong Kong for a period of time.
Disregarding these payments, cash used in operations improved $2.0 million in 2023 primarily due to an increase in interest earned on our cash equivalents, as well as less employee-related payouts compared to the prior year.
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.
Removed
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 expect to reapply for a direct selling license in China when we believe that circumstances are again ripe for doing so.
Added
Risk Factors - Epidemics, natural disasters, terrorist attacks or acts of war…”. 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.
Removed
It is understood that the campaign was specifically focused on the business practices of direct selling companies. The campaign and associated negative media coverage resulted in a significant adverse impact on our business, as consumers widely curtailed their purchases within the affected industries.
Added
We have since been able to substantially resume normal operations in Hong Kong, but Hong Kong's economy is now increasingly integrated with that of China. We relocated our corporate headquarters from Hong Kong to California in February 2025.
Removed
We, like some of our peers, voluntarily decided in January 2019 to temporarily suspend our member activities, such as product roadshows, product trainings and larger company-sponsored events, in China.
Added
It is unclear how changed circumstances in Hong Kong will in the future affect our business, but it is possible that the upheaval in Hong Kong's political and economic affairs or related consequences could adversely affect our future business, results of operations and financial condition. See “Item 1A.
Removed
We did this because we learned that the 100-day campaign was announced in broad outlines by the central government, and the interpretation and enforcement of the campaign was delegated to the provincial and local governments.
Added
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.
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We consider it a top priority for our business to develop an understanding of and cooperate with all levels and jurisdictions of the government agencies, and did not want to run the risk of being inadvertently entangled in government enforcement actions as the provincial and local governments formulate and implement their interpretive guidance and rule-making.
Added
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.
Removed
Although we have been able to relax some restrictions on member activities in certain markets, it may again in the future be necessary or advisable to suspend member activities or take similar actions from time to time, and such periods of reduced activity may have a material adverse effect on our business.
Added
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. Tax Cuts and Jobs Act.
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As part of this review, we understand that various Chinese governmental agencies formed a working group to assess the 100-day campaign, particularly focusing on the health market and its supervision in certain provinces.
Added
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.
Removed
We understand that during September 2019 the working group evaluated the performance and results of a number of organizations and governmental departments in these provinces and made recommendations for various improvements. It was noted that each province had opened a number of investigative cases, had successfully closed numerous cases, and had imposed various fines and penalties.
Removed
We believe that the campaign, as well as its extension and aftermath (including the look-back review), will continue to negatively impact our business in China in the near-term, but will ultimately benefit us and Chinese consumers in the long-term as purveyors of substandard products are driven from the market.
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We have significant business in China and in 2023 generated approximately 79% of our revenue in Hong Kong, substantially all of which was derived from the sale of products to members in China.
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The Chinese and Hong Kong governments, like the governments of the other countries in which we operate, continue to adjust the restrictive measures that they impose to control COVID-19 based on then-current local circumstances; however, it should be noted that the Chinese and Hong Kong governments imposed some of the most restrictive COVID-19 control measures of any country in the world.
Removed
Of particular note, the spread of the Omicron variant in Hong Kong and China, along with the imposition of strong government control measures, significantly disrupted our operations and negatively affected our results of operations in 2022. During the first half of the year, our third-party logistics providers also experienced substantial difficulties importing and distributing our products in China.
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However, by early June 2022 the Chinese government began relaxing some of its more stringent policies and we found that the difficulties encountered by our third-party logistics providers were largely resolved by the end of the month.
Removed
Finally, after four consecutive quarters during which we were unable to sponsor any in-person member events in China, Macau or Hong Kong, we sponsored an in-person event at the end of the third quarter of 2022 in China.
Removed
Notwithstanding this modestly improved state of affairs, through late 2022 the Chinese and Hong Kong governments continued to impose strong control measures that were negatively impacting our ability to interact with our members and the ability of our members to interact with each other and their customers.
Removed
We are planning more such events and are hopeful that we will continue to normalize operations in China and Hong Kong. Nevertheless, it is still too early to accurately predict the impact on us and our third-party providers of this relaxation of control measures and whether it will prove enduring.
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Ultimately, the severity of the impact on us of the COVID-19 pandemic will depend on future developments, including the duration and spread of the virus, and the related control measures, which we are unable to accurately predict. See “Item 1A. Risk Factors - Epidemics, such as the COVID-19 pandemic, or natural disasters, terrorist attacks or acts of war…”.
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Inasmuch as member meetings and events located in Hong Kong have in the past served as an important component of our product marketing and distribution efforts, we believe that these developments have negatively affected our operations and financial performance.
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Although we were able to sponsor a large in-person member event in Hong Kong in the fourth quarter of 2023, it is too early to predict whether these developments will continue to adversely affect our overall business, results of operations and financial condition. See “Item 1A.
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Deferred revenue increased $569,000 during 2023, but decreased $2.9 million during the prior year as promotional orders from December 2021 were fulfilled and recognized, resulting in a $3.5 million variance. As a result of tepid consumer sentiment in China during 2023, our order volume was down 3% compared with the prior year.
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The decrease in Hong Kong net sales was also due to the recognition of lower administrative fees in 2023 as compared to the prior year, as increased activity within member electronic wallet (eWallet) accounts resulted in less fees assessed during the current year.
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Outside of our Hong Kong business, net sales decreased $1.7 million, or 16%, over the prior year, with decreased year-over-year net sales in each other geographic market except the Americas. The decrease in net sales during 2023 resulted in a loss from operations for the year, as well as negative cash flows from operations.
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The tax provision for 2022 primarily resulted from the impact of the global intangible low-taxed income (“GILTI”) inclusion offset by foreign tax credit attributes generated as a result of GILTI, as well as income tax expense from various foreign jurisdictions.
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Total cash and cash equivalents decreased by $13.5 million from December 31, 2022 to December 31, 2023, primarily due to cash used in operating activities and dividends paid during 2023. We consider all highly liquid investments with original maturities of three months or less, when purchased, to be cash equivalents.

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