Greetings, and welcome to the Natural Health Trends Corp. Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michelle Glidewell with Natural Health Trends Corp. Please go ahead.

Thank you, and welcome to Natural Health Trends second quarter 2023 earnings conference call. During today's call, there may be statements made relating to the future results of the company that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Actual results, performance or achievements could differ materially from those anticipated in such forward-looking statements to the result of certain factors, including those set forth in the company's filings with the Securities and Exchange Commission. It should also be noted that today's call will be webcast live and can be found on the Investors section of the company's corporate website at naturalhealthtrendscorp.com. Instructions for accessing the archived version of the conference call can be found in today's financial results press release, which was issued at approximately 9:00 A.M. Eastern Time. At this time, I'd like to turn the call over to Chris Sharng, President of Natural Health Trends.

Thank you, Michelle, and thanks to everyone for joining us this morning to discuss our second quarter 2023 financial results. With me today is Scott Davidson, our Senior Vice President and Chief Financial Officer. Second quarter net sales were $10.5 million compared to $13.4 million for the second quarter of 2022. The decrease in revenue was mostly attributed to the significant changes in deferred revenue in the two respective quarters. Deferred revenue was up by $1.2 million in the second quarter of 2023, but down by $1.4 million in the same quarter last year. That means during the second quarter, we took in more orders than we could ship this year and we shipped more than the orders taken last year. That alone accounted for $2.6 million of the $2.8 million revenue variance. Otherwise, despite tepid consumer sentiment imposed zero-COVID China, we were able to generate orders roughly comparable to a year ago as orders in Hong Kong increased 5% year-over-year. However, since much of the orders we received came in mid- to late June, they did not all ship out during the quarter, resulting in the increase in deferred revenue of $1.2 million. The late surge in orders follow our first large-scale event in more than three years in Macau, where nearly 900 guests attended. Immediately following this event, we kicked-off an incentive that helped bring in more order volume. We think this positive response to the programs we designed to help increase sales and drive member growth reflects the fact they resonated with our members. While we had hoped for a faster rebound in China with the government's lifting of zero-COVID regulations, our experience has been a more cautious return by consumers as they are uneasy about the economic outlook. Nonetheless, we believe this environment may present an…

Thank you, Chris. Total orders taken during the second quarter were relatively flat, and Hong Kong orders increased 5% year-over-year despite a cautious consumer base in China during the quarter. However, as Chris mentioned, much of the orders came in after our June Macau event resulting in $1.2 million increase in deferred revenue at June 30. A year ago, the opposite happened, with deferred revenue decreasing during the second quarter. As a result, total revenue recognized in the -- for the second quarter was $10.5 million, a decrease of 21% compared to $13.4 million in the second quarter last year. Our active member base decreased 4% to 36,730 at June 30 from 38,330 at March 31 and was down 15% from 43,020 at June 30 last year. Turning to our cost and operating expenses. Gross profit margin was 74.6%, consistent with the second quarter last year. Commissions expense as a percent of total revenue for the second quarter decreased slightly to 42.9% from 43.2% in the prior year quarter. Selling, general and administrative expenses for this quarter were $4.1 million compared to $4 million a year ago. As a result, operating loss for the quarter was $743,000 compared to operating income of $215,000 in the second quarter last year. We recorded an income tax benefit of $82,000 for the quarter compared to an income tax provision of $207,000 in the second quarter last year. Net loss for the second quarter totaled $219,000 or $0.02 per diluted share compared to net income of $183,000 or $0.02 per diluted share in the second quarter of 2022. I'll now turn to our cash flows and balance sheet. Net cash used in operating activities was $2.6 million in the second quarter compared to $1.2 million in the second quarter last year. Excluding our required…

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day. End of Q&A: