Core Viewpoint - Natural Health Trends Corp. (NHTC) has experienced a significant decline in stock price following disappointing earnings results for the year ended September 30, 2025, with a 25.1% drop compared to a 0.6% decline in the S&P 500 Index during the same period [1] Financial Performance - NHTC's third-quarter 2025 revenue decreased by 11.4% to $9.5 million from $10.7 million, with a net loss of $0.4 million, or a loss of $0.04 per diluted share, compared to a net income of $35,000 in the same quarter of 2024 [2] - For the first nine months of 2025, revenue fell by 6.5% to $30 million from $32.1 million, resulting in a net loss of $0.3 million, or a loss of $0.03 per share, compared to a net income of $0.4 million in the prior-year period [3] Key Business Metrics - Orders decreased by 5% year over year in Q3 2025, although they improved by 5% sequentially, indicating some stabilization [4] - Active Members declined to 28,030 as of September 30, 2025, from 30,880 a year earlier, representing a 9.2% decrease [4] - Gross profit for the quarter was $6.9 million, down 11.8% from $7.9 million a year ago, with a gross margin of 73.7% compared to 74.1% in Q3 2024 [5] Expense Management - Commissions expense decreased by 10.5% year over year but rose slightly as a percentage of sales to 40.9% from 40.5% [6] - Selling, general, and administrative expenses decreased by 6.8% to $3.6 million from $3.9 million, indicating early cost control measures [6] Management Commentary and Strategic Initiatives - Management noted a challenging economic outlook in Hong Kong, which accounted for 81.4% of Q3 2025 sales, with an 8% year-over-year revenue decline [7] - A major restructuring is underway, expected to deliver $1.5 million in annualized savings by mid-2026, including a 10% workforce reduction and cost-cutting measures [7] - The company is transitioning U.S.-based product manufacturing closer to Asia to mitigate tariff risks and streamline logistics [7] Future Investments - Planned investments include an AI-enabled marketing app and new marketing initiatives aimed at expanding the member base [8] - The company is organizing recognition and training events to strengthen relationships and leadership development across markets [8] Performance Influencers - Weaker results are attributed to macroeconomic factors in Greater China and company-specific issues such as the timing of promotions and inventory write-offs [9][10] Cash Flow and Liquidity - Net cash used in operating activities was $5 million for the first nine months of 2025, compared to $3.5 million in the prior-year period [11] - Total cash and equivalents declined to $32 million as of September 30, 2025, from $43.9 million at year-end 2024, though liquidity remains adequate [11] Guidance and Capital Allocation - Management expects a one-time restructuring charge of approximately $250,000 in Q4 2025 and aims to realize $1.5 million in annualized cost savings by mid-2026 [12] - The company plans to reduce its quarterly cash dividend to $0.10 per share starting in Q1 of the next year [13] Product Innovation and Milestones - NHTC is energizing its network through product innovation, including the pre-launch of the Soo:vea skincare series in Hong Kong and a limited-edition anti-aging cream in Sweden [14] - The company is planning a year-long program of events and marketing campaigns for its 25th anniversary in 2026 to strengthen the brand [15]

PresentationGreetings. Welcome to Natural Health Trends Corp.'s Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Michelle Glidewell with Natural Health Trends Corp. Thank you. You may begin.Thank you, and welcome to Natural Health Trends Third Quarter 2025 Earnings Conference Call. During today's call, there may be statements made relating to the future results of the company that are forward-looking s ...

Financial Data and Key Metrics Changes - Third quarter net sales decreased 11% to $9.5 million compared to $10.7 million in the third quarter of 2024 [3][7] - Gross profit margin was 73.7% for the third quarter, down from 74.1% last year due to inventory write-offs [7] - Net loss for the third quarter was $431,000, or 4 cents per diluted share, compared to net income of $35,000 in the same quarter of 2024 [8] Business Line Data and Key Metrics Changes - Sales in Hong Kong, which accounted for 82% of total sales, declined 8% year-over-year, or 4% when excluding the impact of product promotions [7] - Commissions expense as a percentage of total sales increased to 40.9% from 40.5% a year ago, primarily due to higher commissions earned by members [7] Market Data and Key Metrics Changes - The economic outlook in the largest market remains challenging, impacting sales and operations [3] - The company is transitioning U.S.-based product manufacturing closer to Asia to mitigate tariff uncertainties and streamline logistics [4] Company Strategy and Development Direction - The company is executing a targeted major restructuring plan expected to yield $1.5 million in annualized savings by mid-2026 [3] - Investments will be made in new systems and technologies, including an AI-enabled marketing app and a member-interface business suite [4] - A year-long celebration is planned to honor the company's 25-year history, aimed at deepening member engagement and creating growth opportunities [6] Management's Comments on Operating Environment and Future Outlook - Management acknowledges near-term challenges in the largest market and emphasizes the importance of executing the restructuring plan [10] - The company aims to align costs with global sales performance to position itself for sustainable growth and long-term profitability [4][10] Other Important Information - A one-time charge of approximately $250,000 is expected in the fourth quarter due to restructuring initiatives [4] - The quarterly cash dividend will be reduced to $0.10 per share in the first quarter of the following year [4] Q&A Session Summary - No specific questions or answers were documented in the provided content.

Financial Performance - Net sales for Q3 2025 were $9,477,000, a decrease of 11.4% compared to $10,691,000 in Q3 2024[17] - Gross profit for Q3 2025 was $6,987,000, down 11.9% from $7,926,000 in Q3 2024[17] - The net loss for Q3 2025 was $431,000 compared to a net income of $35,000 in Q3 2024[19] - Comprehensive loss for Q3 2025 was $440,000, compared to comprehensive income of $324,000 in Q3 2024[19] - For the three months ended September 30, 2025, total net sales were $9,477,000, a decrease of 11.0% compared to $10,691,000 for the same period in 2024[42] - For the nine months ended September 30, 2025, total net sales were $30,027,000, down 6.5% from $32,117,000 in 2024[42] - The company reported a net loss available to common stockholders of $431,000 for the three months ended September 30, 2025, compared to a net income of $35,000 for the same period in 2024[42] - The company reported a loss before income taxes of $289,000 for the three months ended September 30, 2025, compared to income of $166,000 in the same period of 2024[83] Assets and Liabilities - Total current assets decreased to $37,888,000 in Q3 2025 from $50,983,000 in Q4 2024, representing a decline of 25.7%[15] - Total liabilities decreased to $16,103,000 in Q3 2025 from $22,487,000 in Q4 2024, a reduction of 28.5%[15] - The accumulated deficit increased to $33,547,000 in Q3 2025 from $26,344,000 in Q4 2024[15] - Total assets as of September 30, 2025, were $42,251,000, down from $55,359,000 as of December 31, 2024[84] - Cash and cash equivalents increased to $14,336,000 in Q3 2025 from $13,533,000 in Q4 2024, an increase of 5.9%[15] - Total cash, cash equivalents, and restricted cash at the end of the period was $14,371,000, down from $22,937,000 at the end of the same period in 2024[23] - Cash, cash equivalents, and marketable securities totaled $32.0 million as of September 30, 2025, a decrease of $11.9 million from December 31, 2024[119] - Working capital as of September 30, 2025, was $23.1 million, a decrease of $7.1 million compared to December 31, 2024[120] Operating Expenses - Operating expenses for Q3 2025 were $7,482,000, down 8.8% from $8,201,000 in Q3 2024[17] - Commissions expense for the three months ended September 30, 2025, was $3,832,000, a decrease from $4,256,000 in 2024[81] - Selling, general and administrative expenses decreased by $262,000 to $3.6 million for the three months ended September 30, 2025[113] - Cash used in operating activities for the nine months ended September 30, 2025, was $5,038,000, an increase from $3,455,000 in 2024[23] Dividends and Shareholder Returns - The company declared dividends of $0.20 per share, totaling $2,303,000 for the nine months ended September 30, 2025[20] - Dividends paid remained constant at $6,909,000 for both the nine months ended September 30, 2025, and 2024[23] - The Company declared and paid cash dividends of $0.20 per common share for the first three quarters of 2025, totaling $6.9 million, consistent with the same period in 2024[75] Inventory and Sales - Inventories increased by $1,161,000 in the nine months ended September 30, 2025, compared to an increase of $619,000 in 2024[23] - Finished goods inventory decreased to $1,798,000 as of September 30, 2025, from $2,770,000 as of December 31, 2024[46] - The company's inventories as of September 30, 2025, were valued at $1,663,000, compared to $2,617,000 as of December 31, 2024[84] - Actual sales returns were 1% of sales for both the nine months ended September 30, 2025, and 2024[37] International Operations - The company has an active presence in multiple international markets, including the Americas, Greater China, Southeast Asia, and Europe[25] - Approximately 93% of net sales are generated from subsidiaries located outside the Americas, highlighting the company's international focus[90] - The Hong Kong subsidiary generated approximately 83% of the company's revenue in the first nine months of 2025, primarily from sales delivered to members in China[91] Tariffs and Trade Impact - The U.S. imposed a 125% tariff on Chinese-origin goods in April 2025, which has affected sales and may lead to higher product prices in the future[94] - The company is actively evaluating options to transition production to other jurisdictions to mitigate the impact of U.S. tariffs, which may result in long-term cost savings[95] - The ongoing trade disputes may adversely affect trade and economic relations between the U.S. and China, impacting the company's operations and financial results[138] - The company may incur additional costs related to tariffs and may not be able to recover these costs through surcharges[138] Corporate Governance and Compliance - The company has not experienced any changes in internal control over financial reporting that materially affected its operations during the fiscal quarter ended September 30, 2025[133] - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2025[132] - There have been no material changes to the company's risk factors since the Annual Report for the year ended December 31, 2024[137] - There are no legal proceedings currently affecting the company[136]

Exhibit 99.1 Mr. Sharng continued, "These actions will enable investments in new systems and technologies, including an AI-enabled marketing app and a member-interface business suite, as well as new marketing initiatives designed to drive member growth and engagement. By aligning costs with global sales performance, we are positioning the company for sustainable growth, profitability, and long-term value creation." 1 – Orders decreased 5% year over year, but increased 5% sequentially – Restructuring initiat ...

– Orders decreased 5% year over year, but increased 5% sequentially– Restructuring initiatives expected to achieve $1.5 million annualized savings by mid-2026– Declared a quarterly cash dividend of $0.20 per share LOS ANGELES, Nov. 05, 2025 (GLOBE NEWSWIRE) -- Natural Health Trends Corp. (NASDAQ: NHTC), a leading direct-selling and e-commerce company that markets premium quality personal care, wellness and “quality of life” products under the NHT Global brand, today announced its financial results for the q ...

Core Viewpoint - Natural Health Trends Corp. will report its third quarter financial results on November 5, 2025, at 9:00 a.m. Eastern Time, followed by a conference call at 11:30 a.m. Eastern Time to discuss the results [1]. Company Overview - Natural Health Trends Corp. is a leading international direct-selling and e-commerce company that markets premium quality personal care, wellness, and "quality of life" products under the NHT Global brand [3]. - The company operates through subsidiaries across Asia, the Americas, and Europe [3]. Conference Call Details - The conference call to discuss the third quarter 2025 financial results is scheduled for November 5, 2025, at 11:30 a.m. Eastern Time / 8:30 a.m. Pacific Time [2]. - Dial-in number for the conference call is 1-800-330-6730, with participant ID 236986 [2]. - A replay of the call will be available on the Company's Investor Relations website for those unable to participate live [2].

Core Viewpoint - Natural Health Trends Corp. (NHTC) reported a decline in revenue and net income for the second quarter of 2025, primarily due to ongoing trade tensions affecting consumer confidence in its main market, Hong Kong, while the company is taking steps to realign its supply chain to mitigate these challenges [2][10][12]. Revenue and Earnings Performance - NHTC's second-quarter 2025 revenues were $9.8 million, a decrease of 6.3% from $10.5 million in the same quarter last year [2]. - Net income for the quarter was $15,000, down significantly from $173,000 a year ago, resulting in breakeven earnings per diluted share compared to $0.02 previously [2]. - For the first half of 2025, revenues totaled $20.6 million, a 4.1% decrease from $21.4 million in the first half of 2024 [3]. Sales Performance - Sales in Hong Kong, which accounted for 81.6% of total quarterly sales, declined by 5.5% year over year [4]. - Active members decreased to 29,260 as of June 30, 2025, a decline of 5.9% from 31,110 a year ago [6]. Financial Metrics - Gross profit for the second quarter was $7.3 million, down 6.7% from $7.8 million in the prior-year quarter, with a gross margin of 73.9% compared to 74.2% previously [5]. - Commissions expense rose to 40.9% of sales from 40.1% a year ago, while selling, general, and administrative expenses decreased by 6.2% year over year to $3.6 million [5]. Cash Flow and Operating Activities - Cash used in operating activities increased to $5.2 million in the first half of 2025 from $3 million a year ago [7]. - Total cash, cash equivalents, and marketable securities were $34.2 million at the end of June, down from $43.9 million at the end of 2024 [6]. Management Commentary - Management acknowledged challenges from global trade uncertainties and weak consumer sentiment in core markets, indicating a strategic shift of supply chain operations from the U.S. to Asia to reduce tariff exposure and improve cost efficiency [8][10]. - The company is also focusing on engaging its distributor base through training and incentive programs, with the launch of a new market in Colombia showing positive reception [9]. Strategic Outlook - NHTC did not provide specific forward-looking revenue or earnings guidance but expressed confidence in the strategic realignment of its supply chain and investments in products and programs to support long-term growth [12]. - A significant financial milestone was the full settlement of the company's U.S. Tax Cuts and Jobs Act liability, which impacted operating cash flow but removed a liability from the balance sheet [13].

Financial Data and Key Metrics Changes - Net sales for Q2 2025 were $9.8 million, a 6% decrease compared to $10.5 million in Q2 2024, attributed to heightened economic uncertainty [4][8] - Gross profit margin was 73.9%, consistent with the previous year [8] - Operating loss for the quarter was $333,000, compared to a loss of $238,000 in Q2 2024 [8] - Net income for Q2 2025 was $15,000, or breakeven per diluted share, down from $173,000, or $0.02 per diluted share in Q2 2024 [8] - Net cash used in operating activities was $5.2 million, compared to $3 million in the same period last year [10] - Total cash, cash equivalents, and marketable securities decreased to $34.2 million from $41.9 million at the end of Q1 2025 [10] Business Line Data and Key Metrics Changes - Sales in Hong Kong, which accounted for 82% of total sales, declined by 5% year-over-year due to economic uncertainty [8] Market Data and Key Metrics Changes - The company launched its newest market, Colombia, with a successful grand opening event, indicating strong enthusiasm for growth in South America [6] Company Strategy and Development Direction - The company is transitioning its US-based supply chain to trusted manufacturing partners in Asia to reduce exposure to tariffs and streamline logistics [4][5] - Focus on operational discipline, expense management, and inventory control to mitigate risks associated with economic headwinds [6][11] - Continued investment in brand programs, product innovation, and digital enhancements to drive future growth [7] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging economic environment due to trade tensions affecting consumer sentiment [4] - Despite near-term pressures, long-term fundamentals remain strong, and the company is committed to executing strategic priorities [11] Other Important Information - The Board of Directors declared a cash dividend of $0.20 per share, payable on August 22 to stockholders of record as of August 12 [10] Q&A Session Summary - No specific questions or answers were documented in the provided content.

[PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the company's unaudited interim consolidated financial statements and management's analysis [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements, including balance sheets, income statements, cash flows, and comprehensive notes, for the periods ended June 30, 2025 [Consolidated Balance Sheets](index=5&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) This table presents the company's consolidated balance sheets as of June 30, 2025, and December 31, 2024 Consolidated Balance Sheets (in Thousands) | ASSETS (in Thousands) | June 30, 2025 (Unaudited) | December 31, 2024 | | :-------------------- | :------------------------ | :------------------ | | Cash and cash equivalents | $10,534 | $13,533 | | Marketable securities | $23,711 | $30,407 | | Inventories | $2,769 | $3,272 | | Other current assets | $3,845 | $3,771 | | **Total current assets** | **$40,859** | **$50,983** | | Property and equipment, net | $154 | $190 | | Operating lease right-of-use assets | $2,108 | $2,498 | | Restricted cash | $37 | $34 | | Deferred tax asset | $387 | $382 | | Other assets | $1,617 | $1,272 | | **Total assets** | **$45,162** | **$55,359** | | | | | | LIABILITIES AND STOCKHOLDERS' EQUITY (in Thousands) | June 30, 2025 (Unaudited) | December 31, 2024 | | :-------------------------------- | :------------------------ | :------------------ | | Accounts payable | $962 | $895 | | Income taxes payable | $7 | $4,908 | | Accrued commissions | $1,866 | $2,021 | | Other accrued expenses | $1,337 | $1,425 | | Deferred revenue | $6,078 | $6,428 | | Amounts held in eWallets | $3,089 | $3,286 | | Operating lease liabilities | $1,060 | $1,127 | | Other current liabilities | $549 | $709 | | **Total current liabilities** | **$14,948** | **$20,799** | | Deferred tax liability | $172 | $174 | | Operating lease liabilities | $1,186 | $1,514 | | **Total liabilities** | **$16,306** | **$22,487** | | | | | | Stockholders' equity: | | | | Common stock | $13 | $13 | | Additional paid-in capital | $84,969 | $84,901 | | Accumulated deficit | $(30,813) | $(26,344) | | Accumulated other comprehensive loss | $(916) | $(1,301) | | Treasury stock | $(24,397) | $(24,397) | | **Total stockholders' equity** | **$28,856** | **$32,872** | | **Total liabilities and stockholders' equity** | **$45,162** | **$55,359** | [Consolidated Statements of Operations](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20(UNAUDITED)) This table details the company's consolidated statements of operations for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Operations (in Thousands, Except Per Share Data) | (In Thousands, Except Per Share Data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $9,813 | $10,475 | $20,550 | $21,426 | | Cost of sales | $2,558 | $2,699 | $5,390 | $5,611 | | Gross profit | $7,255 | $7,776 | $15,160 | $15,815 | | Operating expenses: | | | | | | Commissions expense | $4,012 | $4,203 | $8,500 | $8,689 | | Selling, general and administrative expenses | $3,576 | $3,811 | $7,338 | $7,729 | | Total operating expenses | $7,588 | $8,014 | $15,838 | $16,418 | | Loss from operations | $(333) | $(238) | $(678) | $(603) | | Other income, net | $348 | $519 | $813 | $1,082 | | Income before income taxes | $15 | $281 | $135 | $479 | | Income tax provision (benefit) | $0 | $108 | $(2) | $118 | | Net income | $15 | $173 | $137 | $361 | | Net income per common share: | | | | | | Basic | $0.00 | $0.02 | $0.01 | $0.03 | | Diluted | $0.00 | $0.02 | $0.01 | $0.03 | [Consolidated Statements of Comprehensive Income](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME%20(UNAUDITED)) This table presents the company's consolidated statements of comprehensive income for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Comprehensive Income (in Thousands) | (In Thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $15 | $173 | $137 | $361 | | Other comprehensive income (loss), net of tax: | | | | | | Foreign currency translation adjustment | $229 | $(36) | $377 | $(150) | | Unrealized gains (losses) on available-for-sale securities | $(1) | $8 | $8 | $(30) | | **Comprehensive income** | **$243** | **$145** | **$522** | **$181** | [Consolidated Statements of Stockholders' Equity](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY%20(UNAUDITED)) This table outlines changes in the company's consolidated stockholders' equity for the six months ended June 30, 2025 Consolidated Statements of Stockholders' Equity (in Thousands, Except Share Data) | (In Thousands, Except Share Data) | Common Stock Shares | Common Stock Amount | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Treasury Stock Shares | Treasury Stock Amount | Total Stockholders' Equity | | :-------------------------------- | :------------------ | :------------------ | :------------------------- | :------------------ | :----------------------------------- | :-------------------- | :-------------------- | :------------------------- | | **BALANCE, December 31, 2024** | **12,979,414** | **$13** | **$84,901** | **$(26,344)** | **$(1,301)** | **(1,466,339)** | **$(24,397)** | **$32,872** | | Net income | — | — | — | $122 | — | — | — | $122 | | Share-based compensation | — | — | $34 | — | — | — | — | $34 | | Dividends declared, $0.20/share | — | — | — | $(2,303) | — | — | — | $(2,303) | | Foreign currency translation adjustments | — | — | — | — | $148 | — | — | $148 | | Unrealized gains on available-for-sale securities | — | — | — | — | $9 | — | — | $9 | | **BALANCE, March 31, 2025** | **12,979,414** | **$13** | **$84,935** | **$(28,525)** | **$(1,144)** | **(1,466,339)** | **$(24,397)** | **$30,882** | | Net income | — | — | — | $15 | — | — | — | $15 | | Share-based compensation | — | — | $34 | — | — | — | — | $34 | | Dividends declared, $0.20/share | — | — | — | $(2,303) | — | — | — | $(2,303) | | Foreign currency translation adjustments | — | — | — | — | $229 | — | — | $229 | | Unrealized losses on available-for-sale securities | — | — | — | — | $(1) | — | — | $(1) | | **BALANCE, June 30, 2025** | **12,979,414** | **$13** | **$84,969** | **$(30,813)** | **$(916)** | **(1,466,339)** | **$(24,397)** | **$28,856** | [Consolidated Statements of Cash Flows](index=10&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS%20(UNAUDITED)) This table presents the company's consolidated statements of cash flows for the six months ended June 30, 2025 and 2024 Consolidated Statements of Cash Flows (in Thousands) | (In Thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :----------------------------- | :----------------------------- | | **CASH FLOWS FROM OPERATING ACTIVITIES:** | | | | Net income | $137 | $361 | | Adjustments to reconcile net income to net cash used in operating activities: | | | | Depreciation and amortization | $59 | $69 | | Net accretion of marketable securities | $(214) | $(215) | | Share-based compensation | $68 | $75 | | Noncash lease expense | $573 | $545 | | Deferred income taxes | $(3) | $16 | | Changes in assets and liabilities: | | | | Inventories | $525 | $6 | | Other current assets | $402 | $(294) | | Other assets | $(334) | $(101) | | Accounts payable | $65 | $(335) | | Income taxes payable | $(4,901) | $(3,817) | | Accrued commissions | $(194) | $106 | | Other accrued expenses | $(110) | $136 | | Deferred revenue | $(311) | $1,432 | | Amounts held in eWallets | $(170) | $(339) | | Operating lease liabilities | $(561) | $(560) | | Other current liabilities | $(182) | $(104) | | **Net cash used in operating activities** | **$(5,151)** | **$(3,019)** | | **CASH FLOWS FROM INVESTING ACTIVITIES:** | | | | Purchases of property and equipment | $(20) | $(30) | | Purchases of marketable securities | $(27,552) | $(36,164) | | Proceeds from maturities of marketable securities | $34,215 | $3,307 | | **Net cash provided by (used in) investing activities** | **$6,643** | **$(32,887)** | | **CASH FLOWS FROM FINANCING ACTIVITIES:** | | | | Dividends paid | $(4,606) | $(4,606) | | **Net cash used in financing activities** | **$(4,606)** | **$(4,606)** | | Effect of exchange rates on cash, cash equivalents and restricted cash | $118 | $(92) | | Net decrease in cash, cash equivalents and restricted cash | $(2,996) | $(40,604) | | CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period | $13,567 | $56,217 | | **CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period** | **$10,571** | **$15,613** | [Notes to Consolidated Financial Statements](index=11&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) This section provides detailed explanations and disclosures for the consolidated financial statements, covering accounting policies, revenue, balance sheet components, and other financial details [1. Nature of Operations and Summary of Significant Accounting Policies](index=11&type=section&id=1.%20NATURE%20OF%20OPERATIONS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section describes the company's business as an international direct-selling and e-commerce entity and outlines its significant accounting policies - Natural Health Trends Corp. is an international direct-selling and e-commerce company, selling personal care, wellness, and "quality of life" products under the "NHT Global" brand[24](index=24&type=chunk) - The Company has an active physical presence in the Americas, Greater China, Southeast Asia, South Korea, Japan, India, and Europe, and operates in Russia and Kazakhstan through a local service provider[25](index=25&type=chunk) - The unaudited interim consolidated financial statements are prepared in accordance with GAAP for interim financial information, with certain disclosures condensed or omitted[26](index=26&type=chunk) - Cash and cash equivalents include **$3.1 million** held in bank accounts in China, subject to foreign currency controls[28](index=28&type=chunk) - The Company is evaluating the impact of new FASB ASUs 2023-09 (Income Taxes) and 2024-03 (Expense Disaggregation Disclosures) on its financial statements[32](index=32&type=chunk)[33](index=33&type=chunk) [2. Revenue](index=13&type=section&id=2.%20REVENUE) This section details the company's revenue recognition policies and provides a breakdown of net sales by category - Revenue is recognized when performance obligations are satisfied, typically upon product shipment and title transfer to independent members (F.O.B. Shipping Point)[35](index=35&type=chunk) - Sales returns were **1% of sales** for both the six months ended June 30, 2025 and 2024[36](index=36&type=chunk) - Deferred revenue from unshipped product orders and unredeemed product vouchers decreased from **$4.9 million** at December 31, 2024, to **$4.6 million** at June 30, 2025[39](index=39&type=chunk) Net Sales by Category (in Thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Product sales | $9,596 | $10,218 | $20,128 | $20,849 | | Administrative fees, freight and other | $262 | $318 | $539 | $719 | | Less: sales returns | $(45) | $(61) | $(117) | $(142) | | **Total net sales** | **$9,813** | **$10,475** | **$20,550** | **$21,426** | - No single market other than Hong Kong had net sales greater than **10% of total net sales**, and no single customer accounted for **10% or more of net sales**[42](index=42&type=chunk) [3. Balance Sheet Components](index=15&type=section&id=3.%20BALANCE%20SHEET%20COMPONENTS) This section provides a detailed breakdown of key balance sheet components, including cash, inventories, and deferred revenue Cash, Cash Equivalents and Restricted Cash (in Thousands) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash | $7,187 | $7,925 | | Cash equivalents | $3,347 | $5,608 | | Restricted cash | $37 | $34 | | **Total Cash, cash equivalents and restricted cash** | **$10,571** | **$13,567** | Inventories (in Thousands) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Finished goods | $2,300 | $2,770 | | Raw materials | $469 | $502 | | **Total Inventories** | **$2,769** | **$3,272** | Deferred Revenue (in Thousands) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Unshipped product and unredeemed product vouchers | $4,603 | $4,940 | | Auto ship advances | $1,475 | $1,488 | | **Total Deferred revenue** | **$6,078** | **$6,428** | [4. Fair Value Measurements](index=15&type=section&id=4.%20FAIR%20VALUE%20MEASUREMENTS) This section outlines the company's fair value measurements for marketable securities, categorized by valuation levels - The Company's investments in money market funds, municipal debt securities, and corporate debt securities are classified as available-for-sale and carried at fair value[46](index=46&type=chunk) Fair Value Measurements (in Thousands) | Category | Fair Value Level | June 30, 2025 Fair Value (in Thousands) | December 31, 2024 Fair Value (in Thousands) | | :--- | :--- | :--- | :--- | | Money market funds | Level 1 | $1,951 | $2,092 | | Municipal debt securities | Level 2 | $6,796 | $3,458 | | Corporate debt securities | Level 2 | $18,311 | $30,465 | | **Total investments** | | **$27,058** | **$36,015** | [5. Leases](index=17&type=section&id=5.%20LEASES) This section details the company's lease obligations for office and retail spaces, including lease costs and terms - The Company leases corporate office space in California and Hong Kong, and retail space in Rowland Heights, CA, Richmond, BC, and Metuchen, NJ[51](index=51&type=chunk) - Additional leased office space includes seven branch offices in China, and locations in Peru, Japan, Taiwan, South Korea, Malaysia, India, Colombia, and the Cayman Islands[52](index=52&type=chunk) Lease Cost (in Thousands) | (In Thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Operating leases | $312 | $319 | $620 | $644 | | Short-term leases | $35 | $36 | $68 | $72 | | **Total lease cost** | **$347** | **$355** | **$688** | **$716** | - As of June 30, 2025, the weighted-average remaining lease term for operating leases was **3.4 years**, with a weighted-average discount rate of **4.3%**[54](index=54&type=chunk) [6. Income Taxes](index=18&type=section&id=6.%20INCOME%20TAXES) This section discusses the company's effective income tax rate, net operating loss carryforwards, and significant tax payments - The effective income tax rate for the three and six months ended June 30, 2025, includes estimates for foreign income inclusions like GILTI and Subpart F income, and prior year true-ups[56](index=56&type=chunk) - As of June 30, 2025, the Company has **$390,000** of U.S. federal net operating loss carryforwards and **$457,000** of U.S. state net operating loss carryforwards[57](index=57&type=chunk) - The final installment of **$5.1 million** for the repatriation tax on deemed deferred foreign income was paid in April 2025[58](index=58&type=chunk) [7. Commitments and Contingencies](index=18&type=section&id=7.%20COMMITMENTS%20AND%20CONTINGENCIES) This section outlines the company's commitments and potential contingencies, including employment agreement provisions - The Company has employment agreements with management that include provisions for specified payments in the event of a change in control or termination without cause[61](index=61&type=chunk) [8. Stock-Based Incentive Plans](index=19&type=section&id=8.%20STOCK-BASED%20INCENTIVE%20PLANS) This section details the company's stock-based incentive plans, including available shares, restricted stock activity, and phantom share grants - As of June 30, 2025, **1,129,047 shares** remained available for issuance under the 2016 Equity Incentive Plan[63](index=63&type=chunk) Restricted Stock Activity | Restricted Stock Activity | Shares | Wtd. Avg. Price at Date of Issuance | | :------------------------ | :--- | :--- | | Nonvested at December 31, 2024 | 28,676 | $4.84 | | Vested | (14,356) | $4.84 | | Nonvested at June 30, 2025 | 14,320 | $4.84 | - Share-based compensation expense for restricted stock was **$34,000** for the three months and **$68,000** for the six months ended June 30, 2025[64](index=64&type=chunk) - On April 1, 2025, **223,307 phantom shares** were granted, vesting over two years with both time-based and performance-based conditions, including positive operating profit and stock appreciation[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk) - No compensation expense was recognized related to the cash settlement of phantom shares during the six months ended June 30, 2025, compared to **$181,000** in the prior year period[70](index=70&type=chunk) [9. Stockholders' Equity](index=21&type=section&id=9.%20STOCKHOLDERS'%20EQUITY) This section provides information on changes in stockholders' equity, including dividends, stock repurchase programs, and comprehensive income components - The Company declared and paid cash dividends of **$0.20 per common share** during each of the first two quarters of 2025 and 2024, totaling **$4.6 million** in each six-month period[72](index=72&type=chunk) - As of June 30, 2025, **$21.9 million** of the **$70.0 million** stock repurchase program remained available for future purchases[73](index=73&type=chunk) Accumulated Other Comprehensive Loss (in Thousands) | (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 (Q1 2025) | $148 | $9 | $157 | | Balance, March 31, 2025 | $(1,127) | $(17) | $(1,144) | | Other comprehensive income (loss) (Q2 2025) | $229 | $(1) | $228 | | **Balance, June 30, 2025** | **$(898)** | **$(18)** | **$(916)** | [10. Related Party Transactions](index=21&type=section&id=10.%20RELATED%20PARTY%20TRANSACTIONS) This section discloses transactions with related parties, specifically royalty payments for a product to an entity indirectly owned by a former director - The Company pays royalties to Broady Health Sciences, L.L.C. (BHS) for the product ReStor™, with George K. Broady (former director and >5% owner) being an indirect owner of BHS[75](index=75&type=chunk) - Royalties recognized were **$9,000** for the three months and **$18,000** for the six months ended June 30, 2025[75](index=75&type=chunk) [11. Segment Information](index=22&type=section&id=11.%20SEGMENT%20INFORMATION) This section presents financial information by operating segment and geographic area, highlighting net sales and operating income - The Company aggregates most operating segments (including Hong Kong) into a "Primary Reporting Unit," with China and Russia/Kazakhstan as separate segments due to different operating models[77](index=77&type=chunk) - The President (CODM) reviews financial information geographically, using net sales, gross profit, and operating profit to assess segment performance and allocate resources[78](index=78&type=chunk) Net Sales by Segment (in Thousands) | Segment (in Thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Primary Reporting Unit Net Sales | $9,493 | $10,023 | $19,899 | $20,489 | | China Net Sales | $219 | $336 | $453 | $720 | | Russia and Kazakhstan Net Sales | $101 | $116 | $198 | $217 | | **Total Net Sales** | **$9,813** | **$10,475** | **$20,550** | **$21,426** | Segment Income (Loss) from Operations (in Thousands) | Segment (in Thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Primary Reporting Unit Segment Income (Loss) from Operations | $1,560 | $1,710 | $3,233 | $3,336 | | China Segment Income (Loss) from Operations | $(169) | $(76) | $(315) | $(170) | | Russia and Kazakhstan Segment Income (Loss) from Operations | $(24) | $(17) | $(64) | $(57) | Net Sales by Geographic Area (in Thousands) | Geographic Area (in Thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | United States | $299 | $263 | $585 | $525 | | Canada | $130 | $142 | $231 | $253 | | Peru and Colombia | $320 | $284 | $569 | $504 | | Hong Kong | $8,004 | $8,468 | $17,127 | $17,642 | | China | $219 | $336 | $453 | $720 | | Taiwan | $396 | $486 | $718 | $823 | | Japan | $82 | $55 | $146 | $121 | | Malaysia and Singapore | $82 | $66 | $132 | $119 | | Russia and Kazakhstan | $101 | $116 | $198 | $217 | | Europe | $120 | $157 | $270 | $309 | | Other foreign countries | $60 | $102 | $121 | $193 | | **Total net sales** | **$9,813** | **$10,475** | **$20,550** | **$21,426** | - Substantially all of the Company's Hong Kong revenues are derived from the sale of products delivered to members in China[85](index=85&type=chunk) [12. Subsequent Event](index=24&type=section&id=12.%20SUBSEQUENT%20EVENT) This section reports a significant event occurring after the reporting period, specifically a declared quarterly cash dividend - On July 28, 2025, the Board of Directors declared a quarterly cash dividend of **$0.20 per common share**, payable on August 22, 2025, to stockholders of record on August 12, 2025[86](index=86&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the company's financial condition, operational results, liquidity, and critical accounting estimates, emphasizing foreign operations and geopolitical risks [Business Overview](index=25&type=section&id=Business%20Overview) This section provides an overview of the company's international direct-selling and e-commerce business, active member trends, and exposure to foreign market risks - Natural Health Trends Corp. is an international direct-selling and e-commerce company, selling personal care, wellness, and "quality of life" products under the "NHT Global" brand[87](index=87&type=chunk) - Active members decreased to **29,260** at June 30, 2025, from **30,870** at December 31, 2024, and **31,110** at June 30, 2024[88](index=88&type=chunk) - Approximately **93% of net sales** are from subsidiaries outside the Americas, making operating results susceptible to foreign currency fluctuations, trade policy, inflation, and geopolitical conditions[89](index=89&type=chunk) - Hong Kong's e-commerce platform generated approximately **83% of revenue** in the first six months of 2025, substantially all from sales to members in China[90](index=90&type=chunk) - The company withdrew its direct selling license application in China in 2019 and plans to reapply when circumstances are favorable, expecting potential benefits but also higher fixed costs[90](index=90&type=chunk) - U.S. tariffs on Chinese goods escalated in Q1 2025, with reciprocal tariffs from China, leading to negative consumer sentiment and economic uncertainty in the company's largest market, impacting Q2 sales[93](index=93&type=chunk)[94](index=94&type=chunk) - The company is exploring transitioning product production from the U.S. to other jurisdictions, including Asia, to mitigate tariff effects, which may involve short-term expenses like product reregistration[94](index=94&type=chunk) [Statement of Operations Presentation](index=27&type=section&id=Statement%20of%20Operations%20Presentation) This section explains the components of the consolidated statements of operations, including revenue recognition, cost of sales, and operating expenses - Revenue is primarily from product sales to independent members at wholesale prices, recognized upon shipment and title transfer[96](index=96&type=chunk) - Cost of sales includes product purchases, freight, import duties, packing materials, product royalties, promotional materials, and provisions for slow-moving or obsolete inventories[97](index=97&type=chunk) - Member commissions are the most significant expense, paid weekly based on bonus volume points from down-line network purchases[98](index=98&type=chunk) - Selling, general and administrative expenses include administrative compensation and benefits, travel, credit card fees, professional fees, occupancy costs, and marketing/promotion expenses[101](index=101&type=chunk) - Sales and net earnings are affected by changes in currency exchange rates; a weakening U.S. dollar generally increases sales and earnings, while a strengthening U.S. dollar decreases them[103](index=103&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, detailing changes in net sales, gross profit, operating expenses, and net income Statement of Operations as Percentage of Net Sales | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | **100.0%** | **100.0%** | **100.0%** | **100.0%** | | Cost of sales | **26.1%** | **25.8%** | **26.2%** | **26.2%** | | Gross profit | **73.9%** | **74.2%** | **73.8%** | **73.8%** | | Commissions expense | **40.9%** | **40.1%** | **41.4%** | **40.5%** | | Selling, general and administrative expenses | **36.4%** | **36.4%** | **35.7%** | **36.1%** | | Total operating expenses | **77.3%** | **76.5%** | **77.1%** | **76.6%** | | Loss from operations | **(3.4)%** | **(2.3)%** | **(3.3)%** | **(2.8)%** | | Other income, net | **3.5%** | **5.0%** | **4.0%** | **5.0%** | | Income before income taxes | **0.1%** | **2.7%** | **0.7%** | **2.2%** | | Income tax provision (benefit) | **0.0%** | **1.0%** | **(0.0)%** | **0.5%** | | Net income | **0.1%** | **1.7%** | **0.7%** | **1.7%** | [Net Sales](index=29&type=section&id=Net%20Sales) This section analyzes the changes in net sales for the three and six months ended June 30, 2025, highlighting regional performance Net Sales (in Thousands) | Period | 2025 Net Sales (in Thousands) | 2024 Net Sales (in Thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $9,813 | $10,475 | $(662) | -6% | | Six Months Ended June 30 | $20,550 | $21,426 | $(876) | -4% | - Hong Kong net sales (primarily to China) decreased by **$464,000 (5%)** for Q2 2025 and **$515,000 (3%)** for YTD 2025, mainly due to negative consumer sentiment from tariff threats[108](index=108&type=chunk)[109](index=109&type=chunk) - Net sales outside Hong Kong decreased by **$198,000 (10%)** for Q2 2025 and **$361,000 (10%)** for YTD 2025, primarily due to decreased sales in the Chinese e-commerce retail business[108](index=108&type=chunk)[109](index=109&type=chunk) [Gross Profit](index=29&type=section&id=Gross%20Profit) This section discusses the company's gross profit and its percentage of net sales for the current and prior periods - Gross profit was **73.9% of net sales** for the three months ended June 30, 2025, a slight decrease from **74.2%** in the comparable period a year ago[110](index=110&type=chunk) - Gross profit remained consistent at **73.8% of net sales** for both six-month periods ended June 30, 2025 and 2024[110](index=110&type=chunk) [Commissions Expense](index=29&type=section&id=Commissions%20Expense) This section examines the commissions expense, noting its increase as a percentage of net sales due to higher member earnings - Commissions expense increased as a percentage of net sales to **40.9%** for Q2 2025 (from **40.1%** in Q2 2024) and to **41.4%** for YTD 2025 (from **40.5%** in YTD 2024)[111](index=111&type=chunk) - The increase in commissions as a percentage of net sales was primarily due to higher weekly commissions earned by members during the first six months of 2025[111](index=111&type=chunk) [Selling, General and Administrative Expenses](index=29&type=section&id=Selling,%20General%20and%20Administrative%20Expenses) This section analyzes changes in selling, general and administrative expenses, attributing decreases to lower employee and event costs Selling, General and Administrative Expenses (in Thousands) | Period | 2025 Amount (in Thousands) | 2024 Amount (in Thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $3,576 | $3,811 | $(235) | -6.2% | | Six Months Ended June 30 | $7,338 | $7,729 | $(391) | -5.1% | - The decrease in SG&A expenses was primarily due to lower employee-related expenses and event costs compared to the prior year periods[112](index=112&type=chunk) - Selling, general and administrative expenses as a percentage of net sales were relatively consistent for both the three- and six-month periods[112](index=112&type=chunk) [Other Income, Net](index=30&type=section&id=Other%20income,%20net) This section details the decrease in other income, net, primarily due to lower interest income during the reporting periods Other Income, Net (in Thousands) | Period | 2025 Amount (in Thousands) | 2024 Amount (in Thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $348 | $519 | $(171) | -33.0% | | Six Months Ended June 30 | $813 | $1,082 | $(269) | -24.9% | - The decrease in other income, net, was primarily due to less interest income earned during the current year periods[113](index=113&type=chunk) [Income Taxes](index=31&type=section&id=Income%20Taxes) This section explains the income tax provision, including foreign income inclusions and the evaluation of new tax legislation Income Tax Provision (Benefit) (in Thousands) | Period | 2025 Amount (in Thousands) | 2024 Amount (in Thousands) | | :--- | :--- | :--- | | Three Months Ended June 30 | $0 | $108 | | Six Months Ended June 30 | $(2) | $118 | - The tax provision primarily resulted from foreign income inclusions (GILTI, Subpart F income) and tax benefits in foreign jurisdictions[114](index=114&type=chunk) - The "One Big Beautiful Bill Act" (OBBBA) was signed into law on July 4, 2025, making permanent key elements of the U.S. Tax Cuts and Jobs Act[115](index=115&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's liquidity and capital resources, including cash, working capital, and cash flow activities - Cash, cash equivalents, and marketable securities totaled **$34.2 million** at June 30, 2025, a decrease of **$9.7 million** from December 31, 2024, primarily due to dividends paid and the final repatriation tax payment[116](index=116&type=chunk) - Working capital was **$25.9 million** at June 30, 2025, with a current asset to current liability ratio of **2.7 to 1.0**, representing a **$4.3 million decrease** from December 31, 2024[117](index=117&type=chunk) - Net cash used in operating activities was **$5.2 million** for the first six months of 2025, compared to **$3.0 million** for the first six months of 2024, largely due to a **$5.1 million** repatriation tax payment in April 2025[118](index=118&type=chunk) - Cash flows provided by investing activities totaled **$6.6 million** during the first six months of 2025, a significant change from **$32.9 million** used in the prior year, driven by proceeds from marketable securities maturities offsetting new purchases[119](index=119&type=chunk) - Cash flows used in financing activities were **$4.6 million** for both H1 2025 and H1 2024, consisting solely of quarterly dividend payments of **$0.20 per common share**[120](index=120&type=chunk) - The company expects to continue paying a quarterly cash dividend of **$0.20 per share** for the foreseeable future, subject to Board discretion[120](index=120&type=chunk) - **$21.9 million** remained available under the **$70.0 million** stock repurchase program as of June 30, 2025[121](index=121&type=chunk) - Management believes existing internal liquidity is adequate to fund normal business operations and financial commitments for the foreseeable future[122](index=122&type=chunk) - The company prioritizes investing resources in Greater China and other promising markets, including establishing China-based manufacturing, increasing brand awareness, and building service infrastructure for a prospective China direct selling license[123](index=123&type=chunk) [Critical Accounting Estimates](index=33&type=section&id=Critical%20Accounting%20Estimates) This section highlights critical accounting estimates and assumptions that significantly impact the company's financial statements - The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosures[124](index=124&type=chunk) - Critical accounting estimates involve assumptions about highly uncertain matters where changes could materially impact financial condition or results of operations[125](index=125&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that the company is not required to provide quantitative and qualitative disclosures about market risk under smaller reporting company disclosure rules - Not applicable under smaller reporting company disclosure rules[127](index=127&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the company's evaluation of its disclosure controls and procedures and reports on any changes in internal control over financial reporting [Disclosure Controls and Procedures](index=33&type=section&id=Disclosure%20Controls%20and%20Procedures) This section confirms management's evaluation of the effectiveness of disclosure controls and procedures as of June 30, 2025 - Management, with the participation of the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2025[128](index=128&type=chunk) - Concluded that the disclosure controls and procedures were effective as of June 30, 2025[128](index=128&type=chunk) [Changes in Internal Control over Financial Reporting](index=33&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports no material changes in internal control over financial reporting during the fiscal quarter ended June 30, 2025 - No changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[129](index=129&type=chunk) [PART II - OTHER INFORMATION](index=34&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section provides additional information not covered in Part I, including legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20LEGAL%20PROCEEDINGS) This section states that there are no legal proceedings to report - None[132](index=132&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20RISK%20FACTORS) This section updates previously disclosed risk factors, focusing on government trade policies, tariffs, and geopolitical disputes impacting business - No material changes to risk factors since the 2024 Annual Report on Form 10-K, except as set forth in this section[133](index=133&type=chunk) - Changes in government trade and economic policies, including escalating U.S. tariffs on Chinese goods (up to **125%**, temporarily reduced to **10%** with a pre-existing **20%** tariff), and retaliatory tariffs from China, may negatively affect global economic conditions and the company's business[134](index=134&type=chunk) - The company may incur additional costs for shipments into China, potentially requiring surcharges, and is exploring transitioning product production outside the U.S. to mitigate tariff effects, which could involve transition costs like product reregistration[134](index=134&type=chunk) - Ongoing trade disputes and increased tensions between the U.S. and China (including Hong Kong's governance) could disrupt China/Hong Kong business, affect product distribution, reduce net sales, increase operational costs, or lead to retaliatory actions[135](index=135&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section indicates that there were no unregistered sales of equity securities or use of proceeds to report - None[138](index=138&type=chunk) [Item 3. Defaults Upon Senior Securities](index=35&type=section&id=Item%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section states that there were no defaults upon senior securities to report - None[139](index=139&type=chunk) [Item 4. Mine Safety Disclosures](index=35&type=section&id=Item%204.%20MINE%20SAFETY%20DISCLOSURES) This section indicates that mine safety disclosures are not applicable to the company - Not applicable[140](index=140&type=chunk) [Item 5. Other Information](index=35&type=section&id=Item%205.%20OTHER%20INFORMATION) This section states that there is no other information to report - None[141](index=141&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20EXHIBITS) This section lists the exhibits filed as part of the Form 10-Q, including certifications, XBRL taxonomy files, and a form of phantom share agreement - Includes certifications of Principal Executive Officer and Principal Financial Officer (31.1, 31.2, 32.1)[143](index=143&type=chunk) - Contains Inline XBRL Taxonomy Extension files (101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE) and Cover Page Interactive Data File (104)[143](index=143&type=chunk) - References Form of Phantom Share Agreement under the Phantom Equity Plan (10.1)[143](index=143&type=chunk) [Signatures](index=37&type=section&id=Signatures) This section contains the required signatures for the Form 10-Q, confirming its submission by the Chief Financial Officer - Report signed by Timothy S. Davidson, Senior Vice President and Chief Financial Officer, on July 30, 2025[147](index=147&type=chunk)