10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________

FORM 10-K 

ANNUAL REPORT PURSUANT TO

SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

(Mark One)

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________to_________

Commission File Number

000-19932

RELIV’ INTERNATIONAL, INC.

(Exact name of Registrant as specified in its charter)

Delaware	371172197
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
136 Chesterfield Industrial Boulevard
Chesterfield, Missouri	63005
(Address of principal executive offices)	(Zip Code)

(636) 537-9715

Registrant’s telephone number, including area code

Securities registered pursuant to Sections 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, par value $0.001	NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ☐     No ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes ☐     No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☑     No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑     No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☑

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐          Accelerated filer ☐           Non-accelerated filer ☐

Smaller reporting company ☑          Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐     No ☑

Based upon the closing price of $4.83 per share of the registrant’s common stock as reported on the NASDAQ Global Select Market on June 29, 2018, the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $5.4 million. (The determination of stock ownership by non-affiliates was made solely for the purpose of responding to the requirements of the Form and the registrant is not bound by this determination for any other purpose.)

The number of shares outstanding of the registrant’s common stock as of March 18, 2019 was 1,746,499 (excluding treasury shares).

Documents Incorporated by Reference

Document	Part of Form 10-K into Which Document Is Incorporated
Sections of the registrant’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 23, 2019, which is expected to be filed no later than 120 days after December 31, 2018	Part III

INDEX   

Part I
Item No. 1	Business	1
Item No. 2	Properties	16
Item No. 3	Legal Proceedings	16
Part II
Item No. 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	17
Item No. 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item No. 8	Financial Statements and Supplementary Data	28
Item No. 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	28
Item No. 9A	Controls and Procedures	28
Item No. 9B	Other Information	28
Part III
Item No. 10	Directors, Executive Officers and Corporate Governance	29
Item No. 11	Executive Compensation	29
Item No. 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	29
Item No. 13	Certain Relationships and Related Transactions, and Director Independence	29
Item No. 14	Principal Accounting Fees and Services	29
Part IV
Item No. 15	Exhibits and Financial Statement Schedules	29
Item No. 16	Form 10-K Summary	29

FORWARD-LOOKING STATEMENTS

This annual report includes both historical and “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations and projections about future results. Words such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or similar words are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Although we believe that our opinions and expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements, and our actual results may differ substantially from the views and expectations set forth in this annual report. We disclaim any intent or obligation to update any forward-looking statements after the date of this annual report to conform such statements to actual results or to changes in our opinions or expectations.

PART I

Item No. 1 - Business

Overview

  We are a developer and marketer of a proprietary line of nutritional supplements addressing basic nutrition, specific wellness needs, weight management and sports nutrition. We sell our products through an international network marketing system using independent distributors. We have sold products in the United States since 1988 and in selected international markets since 1991.

  We currently offer 19 nutritional supplements, and our product offering has selectively evolved over our history. Our core line of nutritional supplements, which represented 58.9% of net sales for the year ended December 31, 2018, included the following five products:

• Reliv Classic and Reliv Now — two basic nutritional supplements containing a full and balanced blend of vitamins, minerals, protein and herbs, including a whey-based version of Now.

• Innergize! — an isotonic sports supplement in two flavors

• FibRestore — a high-fiber and antioxidant supplement

• LunaRich X — a soy concentrate with elevated levels of lunasin, in capsule form

In February 2017, we launched our Fit3 fitness and weight loss program in the United States to broaden and bolster our weight management offering, and to appeal to a broader demographic than our essential nutrition. The Fit3 program consists of three principal components: (1) nutrition coaching, (2) exercise coaching and videos, and (3) three fitness products: Active, Burn and Purify. The Fit3 program involves our most interactive offering for distributors and customers, including a separate website with independent content and a focused social media outreach and support initiative. We offer a Fit Kit that includes a 90-day supply of the Fit3 products and access to the information, tools and videos we offer through the program. We believe the Fit3 program provides an attractive alternate entry point for new distributors or customers who are more interested in weight loss and fitness than our essential nutrition or targeted solutions.

We periodically refine our products and introduce related new products and product categories. Our internal research and development team has developed most of our products, and we hold U.S. patents on five of these products —ReversAge, GlucAffect, ProVantage, 24K and CardioSentials. We also own several U.S. and international patents and patent applications related to lunasin through our acquisition of the lunasin technology in September 2016.

We believe that our network marketing model is the best method for the marketing and sale of our products because it utilizes ongoing personal contact among our distributors and their retail customers. This enables our distributors to communicate directly regarding the products, the business opportunity we offer and their personal experiences with both. We provide our distributors with a financially rewarding and entrepreneurial business opportunity, affording them the ability to earn compensation both from the direct sale of products and from sales volume generated by distributors they sponsor. We actively support our distributors by providing marketing materials, a dependable product fulfillment system and frequent educational, training and motivational programs.

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The majority of our sales traditionally has been, and is expected to continue to be, made through our distributors in the United States. We also currently generate sales through distributor networks in Australia, Austria, Canada, France, Germany, Ireland, Malaysia, Mexico, the Netherlands, New Zealand, the Philippines, Singapore and the United Kingdom. In each country in which we conduct business, our distributors operate under a business and compensation model that maintains consistent marketing, sales, fulfillment, and compliance procedures. As of December 31, 2018, our network consisted of approximately 30,370 distributors and preferred customers —19,810 in the United States and 10,560 across our international markets.

Industry Overview

Nutritional Supplement Market 

We operate primarily in the $44 billion U.S. nutritional supplement market which is up 6.1% from the prior year. This is part of the broader $140 billion U.S. nutrition industry according to data published by the Nutrition Business Journal, or NBJ, and an estimated $320.0 billion global nutrition industry, also according to the NBJ. Additionally, more than 185 million Americans, or 75% of all U.S. adults, take dietary supplements annually according to the Council for Responsible Nutrition, an increase of 5 percentage points from 2016.

A combination of demographic, healthcare and lifestyle trends are expected to drive continued growth in the nutritional supplement market. These trends include:

● Aging Population: The older population (persons 65 years or older) numbered 50 million in 2017 according to latest information from the Department of Health and Human Services. This population segment grew 1.6 million from 2014 and they represented 16.03% of the U.S. population, or about one in every seven Americans. By 2060, there will be approximately 98.2 million older persons, nearly one in four U.S. residents. Recent data from the Council for Responsible Nutrition shows that 78% of adults aged 55 and over take dietary supplements. This is up from 74% in 2016. We believe this ever-growing population, living longer lives than in previous decades, will continue to focus on their nutritional needs as they age.

● Rising Healthcare Costs and Commitment to Health: The cost of healthcare in the United States is projected to have grown 5.5% in 2018, up slightly from 4.6% growth in 2017, according to the Centers for Medicare and Medicaid Services (CMS). In 2017, U.S. healthcare spending reached $3.5 trillion or $10,739 per person. As reported from Frost and Sullivan, approximately 75% of total U.S. health care expenditures are spent on preventable health issues. Many studies have demonstrated that dietary supplements have a positive effect on reducing the potential for health issues and consumers are reacting to this by taking charge of their personal health. In a recent survey conducted by Harris Poll, taking vitamins was one of the top five responses from participants wanting to improve health and wellness habits. We believe more consumers will seek the use of nutritional supplements to maintain quality of life as well as reduce medical costs.

● Continued Focus on Weight Management: According to a report published by The State of Obesity in September 2016, nearly 38%, or more than one-third of U.S. men and women were obese, as were almost 17% of U.S. children. It is estimated that 86.3% of Americans will be overweight or obese by 2030. Health care costs related to obesity currently account for almost 21% of U.S. health care costs according to a report by Cornell University and are expected to grow to as much as $956.9 billion by 2030. Being overweight is linked to more than 90 chronic diseases and can lead to more serious health concerns such as diabetes, heart disease and other chronic illnesses. According to a May 2016 report from Technavio, the global weight loss supplement market via direct selling was valued at $624.9 million in 2015 and North America accounted for more than one-third of those sales. Bearing these facts in mind, we believe that there will be a continual need not only for weight loss products but also for wellness products.

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Direct Selling Market

Health and nutrition products are distributed through various market means, including retailers such as supermarkets, drugstores, mass merchants and specialty retailers; direct marketers such as mail order companies and Internet retailers; and direct sellers such as network marketers and healthcare practitioners. We distribute our products through the direct selling channel via our network marketers.

Direct selling involves the marketing of products and services directly to consumers in a person-to-person manner. Direct selling is a significant global industry largely utilized for the sale of a wide range of consumer products from companies such as Avon Products Inc., Alticor Global Holdings, Inc. (Amway Corp.) and Tupperware Brands Corporation. According to the World Federation of Direct Selling Associations, or WFDSA, the 2017 global direct selling market (for all product categories) was estimated to be $189.4 billion, an increase from $182.6 billion in 2016. The WFDSA estimates that the number of individuals engaged in direct selling has nearly tripled between 1999 and 2017, from 35.9 million sellers to 116.7 million in 2017. The United States had 18.6 million direct sellers in 2017, the most of any country. Globally, wellness products came in as the top selling category, the third year in a row that it has come in ahead of cosmetics and personal care.

While the United States is currently the largest direct selling market with $34.9 billion in annual sales in 2017, international markets account for 81% of the entire industry, according to the WFDSA. Twenty-four countries (including the United States) have annual direct sales revenue of at least $1 billion and another twenty-six have annual direct sales revenue of at least $100 million, according to the WFDSA.

  We believe that we are well positioned to capitalize on the world-wide growth trends in direct sales, as both a developer of proprietary nutritional products, utilizing our network marketing distribution system.

Our Competitive Strengths

We believe that we possess a number of competitive strengths that are the keys to our growth and profitability in the future.

Leading Marketer of Bioavailable Lunasin-Containing Products. We own certain technology and proprietary testing and manufacturing processes that allow us to produce LunaRich X, to our knowledge, the only commercial source of soy concentrate with elevated levels of bioactive lunasin. One 310 mg capsule of LunaRich X contains an amount of lunasin equivalent to 25 grams of high quality soy protein. In addition to our LunaRich X capsules, we fortified six other nutritional supplements with LunaRich X so that a serving of those products yields an amount of bioactive lunasin equivalent to consuming 25 grams of soy protein. The products fortified with LunaRich X are Reliv Now with Soy, Reliv Now for Kids, ProVantage, GlucAffect, SoySentials and Fit3 Active.

Complete, Simple Nutrition. We focus on the completeness, balance and simplicity of our basic nutritional supplements — Reliv Classic or Reliv Now — combined with LunaRich X. Our recommended daily regimen of essential nutrition for any new distributor or customer is one shake of either Reliv Now or Reliv Classic and two capsules of LunaRich X. Our two basic nutritional supplements each contain a full and balanced blend of vitamins, minerals, proteins and herbs supporting an individual’s daily nutritional needs and our LunaRich X capsules support an individual’s wellness at the epigenetic level. The combination of Reliv Now or Reliv Classic and LunaRich X makes supplementation simple and effective for the consumer. For more specific individual needs, we provide 16 additional supplements. We believe that our two basic nutritional supplements, together with LunaRich X and our additional supplements, enhance the ability of our distributors to build their businesses by providing a comprehensive, simple product offering.

In-House Development. We utilize nutrition science as the basis for product formulation. We maintain an ongoing research and development effort. We believe our ability to formulate nearly all of our nutritional supplement products enables us to maintain our high standards of quality assurance and proprietary product composition.

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Experienced Ambassador Team. Our Ambassador corps consists of distributors who have achieved the level of Master Director, have earned royalty payments of at least $4,000 in consecutive months and meet our leadership and character criteria necessary to garner our invitation to be an Ambassador. Our Ambassadors generally are our most productive distributors and are essential in recruiting, motivating and training our entire distributor network. We, and our Ambassadors, lead hundreds of annual events throughout all of our markets to motivate and train distributors, including regular recruiting meetings, trainings, conference calls, training schools for Master Affiliates and higher levels and regional, national and international distributor conferences.

Experienced and Incentivized Management Team. Our management team is led by Robert L. Montgomery, who founded our company in 1985. Our executive officers have been employed by our company for an average of 22 years and are experienced in their areas of focus, which include manufacturing, sales, finance, marketing and operations. As of March 18, 2019, our directors and executive officers beneficially own approximately 36.0% of our common stock.

Our Business Strategy

Our basic objective is to increase our net sales by adding customers and distributors, increasing the productivity of our distributors, and by periodically improving our existing products and introducing new products. We also intend to invest in our infrastructure to improve our operating efficiencies, provide better service to our customers and distributors and leverage our current operating facilities to improve our profitability. We seek to accomplish these objectives by employing the following strategic initiatives:

Leverage and Expand our Existing Distributor Base Throughout the United States. The United States has been and will continue to be our largest market. Our growth strategy in the United States involves multiple initiatives, such as the launch in early 2017 of our Fit3 product line and fitness program, continued investment in company-sponsored events and distributor training and better utilization of our upper-level distributors across different geographical areas to increase our distributor base.

Increase Appeal to Broader Demographic. Traditionally, our customer and distributor demographic has skewed towards baby boomers and older individuals searching for nutritional solutions to supplement their diet and support overall wellness.  While continuing to maintain our focus on the needs of this important segment, we believe there is an opportunity to expand our sales and distributor base by increasing our appeal to younger generations interested in nutrition and an active healthy lifestyle.  In February 2017, we launched our Fit3 product line and fitness program aimed at individuals seeking to improve their fitness levels and incorporate healthier options into their daily routines. We believe the nutritional and fitness aspects of Fit3 will attract health conscious on-the-go individuals, many of whom fall within the under-40 demographic.  Further, we maintain an active presence on popular social media sites including Facebook, Twitter, YouTube and several other social networks that are popular with younger generations.  Our internal social media team is comprised of Gen X and Gen Y staffers who regularly interact with distributors, customers and prospects. We plan to continue to develop products and programs and expand our technology offerings in an effort to further appeal to younger generations interested in healthy active lifestyles and a vibrant evolving business opportunity.

Expand in Existing and New International Markets. We believe there is a significant opportunity to increase our net sales in international markets. We have a business model that is compatible across all of our markets and encourages our distributors to pursue their business in multiple markets. We believe this business model supports expansion of our distributor network in our existing international markets and will provide a framework that facilitates our entry into new international markets. To that end, we continue to monitor business conditions in potential new markets and will selectively expand as timing and conditions are appropriate.

Invest in Improved and New Products. As a developer of nutritional supplements, it is vital to continue to invest in the research and development of new and innovative products. For example, in January 2017, we introduced our Fit3 line of products and in January 2013 we launched LunaRich X to support heart health and overall wellness. Additionally, we will continue to improve and validate the efficacy of our existing product line. These types of investments should facilitate customer and distributor retention, as well as the recruitment of new distributors.

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Our Products

Product Overview

Our product line includes nutritional supplements that address basic nutrition, specific wellness needs, weight management and sports nutrition. We combine ingredients from science and nature in targeted, well-balanced, easy-to-use formulas that are specifically designed to enhance wellness and increase performance and energy in specific applications. All but three of our supplements are in powdered form that the consumer mixes with water, juice or other liquid. LunaRich X, Burn and Purify are available in capsule form.   

We currently offer 19 nutritional supplements. Our basic nutritional supplements are formulated to provide a balanced and complete level of supplementation for the consumer. For more specific needs, we provide other focused product formulations. We have purposely been selective in the number and types of products that we offer. By providing a line of targeted products, we make it simple for our distributors and consumers to choose products appropriate for their objectives. We consider four of our oldest and best selling products — Reliv Classic, Reliv Now, Innergize!, and FibRestore — along with LunaRich X capsules to be our primary or “core” products.

The following table summarizes our product categories as of December 31, 2018. The net sales figures are for the year ended December 31, 2018:    

Product Category	Product Name	% of 2018 Net Sales(1)		Year Introduced
Basic Nutrition	Reliv Now		17.3		1988
	Reliv Now with Whey		1.5		2018
	Reliv Classic		10.5		1988
	Now for Kids		6.3		2000
Specific Wellness	FibRestore		9.5		1993
	Arthaffect		6.9		1996
	ReversAge		3.6		2000
	SoySentials		1.5		1998
	CardioSentials		1.7		2005
	GlucAffect		1.0		2008
	24K		1.2		2011
	LunaRich X capsules		12.6		2013
Weight Management	Fit3 product line		2.5		2017
	Meal replacements		0.1		Various
Sports Nutrition	Innergize!		7.6		1991
	ProVantage		2.9		1997

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⁽¹⁾  This table does not include net sales for the year ended December 31, 2018 related to freight and handling, sales of marketing materials, membership fees, and other manufacturing revenue, which represented approximately 13.3% of net sales for the year ended December 31, 2018.

Basic Nutrition Supplements  

Our three basic nutrition supplements provide consumers with a broad spectrum of essential nutrients. Every formulation is specifically designed to optimize and enhance the benefits of the nutrients it contains.

• Reliv Now with Soy is a nutritional supplement containing a variety of vitamins and minerals, soy and various herbs. Reliv Now is available in every country where we operate. In Australia, the product is marketed as Nourish. In 2018, we introduced a soy-free option, Now with Whey. This product has a nearly identical vitamin/mineral profile as Reliv Now with Soy. It is only available in the United States.

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• Reliv Classic is a nutritional supplement containing a variety of vitamins and minerals, soy and various herbs. It is a vegetarian product that contains no animal compounds, artificial preservatives, artificial flavors or added simple sugars. Reliv Classic is available in the United States, Canada, France, Germany, Austria, the Netherlands, the United Kingdom and Ireland.

• Now for Kids is a product designed to provide a balanced nutritional supplement for a child’s diet and contains a variety of vitamins and minerals. Now for Kids is available in Australia, New Zealand, the United States, the United Kingdom, France, Germany, Ireland, Austria, the Netherlands, Mexico, Malaysia and the Philippines. In Australia, the product is marketed as Nourish for Kids.

Specific Wellness Supplements

Our line of eight specific wellness supplements contains specific compounds that target certain nutritional needs. Each product is intended to work in conjunction with our basic nutritional supplement formulas to provide an effective and balanced method for sustaining health and well-being.

• ReversAge is a patented youth-promoting nutritional supplement designed to slow down the effects of the aging process. Three proprietary complexes form the foundation of the supplement: longevity complex, antioxidant complex and herbal complex. The longevity complex is restorative and designed to replenish key hormones while creating balance within the body’s major systems; the antioxidant complex is designed to slow aging at the cellular level; and the herbal complex delivers a variety of herbs, including Ginkgo Biloba and Maca. ReversAge is available in every country where we operate except Germany, the United Kingdom, France, the Netherlands and Ireland. In Canada and Mexico, the product is marketed as Nutriversal.

• SoySentials is a nutritional supplement containing soy as well as other vitamins, minerals and herbs designed for use by women. SoySentials provides a woman with key nutrients targeted to promote women’s health and ease the symptoms of menopause and PMS. SoySentials is available in the United States and Mexico.

• CardioSentials is a patented berry-flavored nutritional supplement that promotes heart health. The product contains 1,500 mg of phytosterols per serving, policosanol and several powerful antioxidants. In a clinical study of this product, participants experienced meaningful reductions in cholesterol as well as improvement in their high-density lipoprotein, or HDL, and low-density lipoprotein, or LDL, ratios. CardioSentials is available only in the United States.

• Arthaffect is a nutritional supplement containing Arthred, a form of hydrolyzed collagen protein, which is clinically reported to support healthy joint function. The product is available in the United States, Australia, New Zealand, Mexico, the Philippines, Malaysia, Singapore, and Canada. The product is marketed as A-Affect in Australia, New Zealand and Canada due to local product regulations.

• FibRestore is a nutritional supplement containing fiber, vitamins, minerals and herbs. A modified version of the FibRestore formula is marketed in Canada under the name Herbal Harmony to comply with Canada’s nutritional regulations. FibRestore is available in all of the countries in which we operate.

• GlucAffect is a patented cinnamon cream flavored nutritional supplement designed to support healthy blood sugar levels. GlucAffect contains Pycnogenol® and other clinically supported active ingredients. GlucAffect has been clinically proven to assist in healthy blood sugar management and support weight loss. GlucAffect is available in the United States.

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• 24K is a patented healthy energy product. 24K is formulated with a synergistic blend of 24 active ingredients designed to enhance the body’s natural vitality and provide energy, focus and stress relief. It contains no caffeine and only 20 calories per serving. 24K is available only in the United States.

• LunaRich X is a nutritional supplement available in capsule form and comes in a bottle of 30, 60 or 120 capsules. LunaRich X is a soy concentrate with elevated levels of bioactive lunasin, a soy peptide shown to have heart health and wellness benefits. LunaRich X is currently available in the United States, Canada, Mexico, the United Kingdom, France, Germany, Ireland, Austria, the Netherlands, the Philippines, Singapore and New Zealand. The product is marketed as LunaRich C in Germany, Austria, the United Kingdom, France, the Netherlands and Ireland due to local regulations.

Weight Management Supplements

Our five weight management supplements combine advanced weight loss promoting complexes with scientifically balanced nutrition and protein for muscle development and toning. Our ingredients are designed to work together, along with proper diet and exercise, to turn unwanted fat into energy without sacrificing muscle mass.

• Active is a nutritional supplement designed as the protein, energy and recovery product for use in our Fit3 program introduced in February 2017. Active combines a three-protein blend of whey, casein and non-GMO soy with active ingredients to support weight loss, physical performance and energy when combined with healthy eating and exercise. Active is currently available in the United States.

• Burn is a nutritional supplement in our Fit 3 program that promotes weight loss when combined with healthy eating and exercise through a targeted fat-burning formula. Burn is available in the United States.

• Purify is a nutritional supplement in our Fit3 program that contains probiotics and liver and metabolic supporting ingredients intended to cleanse the digestive system and allow maximum absorption and metabolic efficiency. Purify is available in the United States.

• Reliv ReShape is designed as a meal replacement or a nutritious snack delivering 12 grams of protein. Reliv ReShape is only sold in Australia and New Zealand.

• Reliv Ultrim-Plus is designed as a meal replacement (for a maximum of two meals per day) for use in a weight loss program. Reliv Ultrim-Plus is sold only in Mexico.

Sports Nutrition Supplements

Our two sports nutrition supplements contain a balance of nutrients scientifically designed to improve athletic performance and endurance, as well as muscle recovery and repair.

• Innergize! is a sports supplement, containing vitamins and minerals designed for performance enhancement. Innergize! is available in every country where we operate. In Canada, the product is marketed as Optain due to local product regulations.

• ProVantage is a patented nutritional supplement containing soy designed to enhance athletic performance with a balance of nutrients needed to improve endurance, muscle recovery and repair. The product also benefits those seeking to increase their soy intake. ProVantage is available in the United States and Canada.

Research and Development

We maintain an ongoing research and development effort and consult with other industry professionals with respect to developments in nutritional science, product enhancements and new products. Since 2011, we have introduced six nutritional supplement products, including 24K, LunaRich X, Active, Burn, Purify and Now with Whey. From time to time, we reformulate and enhance our products. Our research and development team consistently evaluates product advancements in the marketplace and advancements in raw materials and ingredients available for new product ideas and developments.

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For the years ended December 31, 2018 and 2017, our research and development expenses were $473,000 and $488,000 respectively.

SL Technology, Inc.

In mid-2013, we formed a wholly-owned subsidiary, SL Technology, Inc. (“SLTI”) for the purpose of entering into a Technology License Agreement (the “License Agreement”) with Soy Labs, LLC (“Soy Labs”). Pursuant to this License Agreement, Soy Labs granted SLTI an exclusive license for its intellectual property related to its soy concentrate with elevated levels of bioactive lunasin and other soy-related ingredients. The license covered an issued patent and several patent applications related to lunasin and soy-related peptides, proprietary information and manufacturing processes of Soy Labs.

In September 2016, we entered into a letter agreement with Soy Labs to acquire sole ownership of intellectual property subject to the License Agreement.  In consideration for acceleration of the final payment under the License Agreement, Soy Labs transferred all rights, title and interest in the technology to us and terminated any of our future royalty obligations under the License Agreement.

Network Marketing Program

General Overview

We market and sell our products through a network marketing system of independent distributors, who purchase our products from us, or from other distributors, and who then sell our products directly to consumers. In addition to selling our products, our distributors also recruit others to distribute our products. Distributors receive compensation from both the sale of the products they have purchased at wholesale and, in the case of Master Affiliates and above, commissions on the volume of products sold by their downline organization. We believe network marketing is an effective way to distribute our products because it allows and relies on personal contact, education and endorsement of products which are not as readily available through other distribution channels.

We recognize that our sales growth is based on the continued development and growth of our independent distributor force and we strive to maintain an active and motivated distributor network through a combination of quality products, and a business opportunity with distributor discounts, commissions and bonus payments, sales conventions, training, personal recognition and a variety of publications and promotional materials.

Program Structure  

Individuals that do not wish to become distributors, but want to purchase products directly from the company may enroll as retail or preferred customers, so long as they are sponsored by an existing distributor. We created a Preferred Customer program in the United States and Canada, effective February 1, 2016. Those wishing to join as a preferred customer may enroll for an annual fee of $10, for which they receive a 10% discount from the retail prices of our products.

Individuals who desire to market and sell our products may become distributors by being sponsored into the program by an existing distributor, and becoming part of that distributor’s “downline.” We offer a tiered discount and commission, or royalty, format that consists of four principal levels and several sub-levels, which are designed to compensate and motivate distributors to increase their networks and sales volumes.

Our distributors consist principally of individuals, although we also permit entities such as corporations, partnerships, limited liability companies and trusts to become distributors. A new distributor is required to complete a distributor application and, in most areas, to purchase a package of distributor materials (for $40 plus sales tax in the United States) consisting of a Distributor Guide and CD, business forms and promotional materials. The Distributor Agreement, when accepted by us, becomes the contract between us and the distributor and obligates the distributor to the terms of the agreement, which includes our Policies and Procedures for conduct of their business. All distributors are independent contractors and are not our employees.

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In each country in which we conduct business, distributors operate under a compensation system pursuant to which distributors generally are compensated based on their sales volumes. On the basis of sales volume or commission volume, distributors may achieve the following successive levels of achievement and compensation:

Designation	Discount
Retail Distributor(1)		20	%
Affiliate		25	%
Key Affiliate		30	%
Senior Affiliate		35	%
Master Affiliate		40	%(1)
Director		40	%(1)
Key Director		40	%(1)
Senior Director		40	%(1)
Master Director/Ambassador		40	%(1)
Presidential Director/Ambassador		40	%(1)

______________________

⁽¹⁾  In addition to discounts, these levels also receive commissions based on sales in their downline organization.

Distributors purchase products from us at a discount from the suggested retail price for the products and then may sell the product at retail to customers, sell the product to other distributors at wholesale or consume the product. The amount of the discount varies depending on the distributor’s level of achievement, as indicated above.

Distributors generate income equal to the difference between the price at which they sell the product to customers and the discounted price they pay for the product. Distributors also earn wholesale commissions on products purchased by downline distributors in the distributor’s sponsored group equal to the difference between the price at which the distributor is entitled to purchase product and the price at which downline distributors purchase product. We calculate payments and issue a payment directly to the qualified distributor on a weekly basis. For example, assume Distributor A is a 40% discount Master Affiliate who signs up Distributor B, a 30% discount Key Affiliate, who signs up Distributor C, a 20% discount Retail Distributor. If Distributor C purchases directly from us, a 10% wholesale profit check will be sent to Distributor A and a 10% wholesale profit check will be sent to Distributor B.

Upon achieving the level of Master Affiliate, distributors begin to receive additional compensation — “generation royalty” — payments of 8%, 6%, 4%, 3% and 2% of the retail volume of product purchased from us by Master Affiliates and above (and their personal groups) whom they have sponsored, and for each of five downline levels of sponsorship. To qualify for these additional compensation payments, Master Affiliates and above are required to maintain certain monthly sales volumes.

Master Affiliates who sponsor other distributors that achieve the level of Master Affiliate are entitled to become part of the Director Program. Advancement at the Director level is based upon achieving increasing levels of royalties based on sales generated by other distributors in the Director’s downline organization. Distributors achieving each level receive recognition for their achievements at our company-sponsored events and in our publications. We also have a Star Director Program under which distributors achieving the level of Director and above receive additional compensation based on the number of Master Affiliates they have sponsored into the program. Directors receive an additional 1% to 3% royalty on the retail sales volume of Master Affiliates in their downline organization for an unlimited number of levels of sponsorship, until reaching a level that includes a Master Affiliate who also has achieved Star Director status.

Master Directors and Presidential Directors may also be invited to participate in the Ambassador Program. Qualifications to be invited by us to participate in the Ambassador Program include demonstrated competence and leadership qualities. Ambassadors receive recognition and awards for achieving Ambassador status and can then achieve additional levels of accomplishment. We utilize our Ambassadors to lead meetings and conferences, and to provide training and education to our distributors. Ambassadors achieving the level of Silver and higher also participate in the “Reliv Inner Circle,” which may entitle them to receive additional compensation, paid participation in our sponsored events, health insurance and car allowances.

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In addition to the levels of compensation described, we also provide a variety of incentives, bonuses, awards and trips to distributors who achieve high sales volumes and who advance in the distributor ranks.

Distributor Training, Motivation and Management

Our marketing efforts are focused on the development, training, motivation and support of our independent distributors. We support an active training program for our distributors in which our representatives and experienced distributors, usually Ambassadors, lead group training sessions. We provide distributors with manuals, brochures and other promotional, training and informational publications. We encourage distributors to hold regular weekly recruiting meetings and training sessions. We sponsor weekly training conference calls in which a significant number of distributors participate.

Our sponsorship generally includes the following: 

• During 2018, we sponsored numerous special events in cities across all of our markets led by corporate executives and/or experienced Ambassadors;

• For the key markets in which we operate, we sponsor our annual conference for distributors; and

• In the United States during 2018, we sponsored two regional conferences for U.S. distributors.

During 2018, we invested approximately $1.03 million in training, conferences and promotional events for our distributors worldwide compared with $1.25 million in 2017.

Distributor Compliance

Our distributor organization and business model are designed and intended to promote the sale of our products to consumers by distributors. Sales training and promotional efforts emphasize that intention. To that end, we monitor purchases by distributors to identify potentially excessive individual purchases and keep detailed information regarding customer purchases through our corporate shopping cart and as part of our autoship program. Distributors are not required at any time to purchase product, although Master Affiliates and above are required to maintain certain minimum sales levels in their personal groups to continue receiving generation royalty compensation payments.

Distributors may create their own advertising provided that it is within our advertising rules. Unless a distributor is using our designed and approved advertisements, the distributor must submit for approval in writing all advertising (e.g. brochures, flyers, audio tapes, classified or display ads, radio scripts) to our Compliance Department before placing it or arranging for placement.

Pursuant to our Policies and Procedures, which are incorporated by reference into our Distributor Agreement, distributors are permitted to make only those claims about our products that have been approved by us and/or provided in sales and training materials. Distributors acknowledge that our products are not represented as drugs and they are not authorized to make any diagnosis of any medical condition, make drug-type claims for, or prescribe our products to treat or cure, any disease or condition. We do not authorize or permit our distributors to make any express or implied references with regard to our products that they cure, prevent or relieve disease, replace or augment medication, provide therapy, promote healing, alleviate illnesses or symptoms of illnesses, or make any other medical claims for specific ailments.

In order to comply with regulations that apply to both us and our distributors, we conduct considerable research into the applicable regulatory framework prior to entering any new market to identify all necessary licenses and approvals and applicable limitations on operations in that market. We devote substantial resources to obtaining the necessary licenses and approvals and maintaining operations that are in compliance with the applicable limitations. We also research laws applicable to distributor operations and revise or alter distributor materials and products, as required by applicable regulations in each market.

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Regulations in existing and new markets often are ambiguous and subject to considerable interpretive and enforcement discretion by the responsible regulators. In addition, regulations affecting our business often change and are subject to varying interpretation and application. We make every effort to monitor and comply with changes in laws and regulations as they occur.

We have a Compliance Department that receives and reviews allegations of distributor misconduct. If we determine that a distributor has violated our Policies and Procedures, we may take a number of disciplinary actions. For example, we may impose sanctions such as warnings or suspensions until specific conditions are satisfied, or take other appropriate actions at our discretion, including termination of the distributor’s agreement.

Geographic Presence

Markets

We currently sell our products throughout the United States and in 13 other countries around the world. We have sold products in the United States since 1988 and our first product outside of the United States in 1991 when we entered Australia. In 2018, approximately 23.4% of our net sales were generated outside of the United States.

The table below shows the countries in which we operate and the year we commenced selling products:  

Country	Year Entered	Country	Year Entered
United States	1988	Malaysia	2003
Australia	1991	Ireland	2003
New Zealand	1992	Singapore	2004
Canada	1992	Germany	2005
Mexico	1993	Austria	2006
United Kingdom(1)	1995	Netherlands	2006
Philippines	2000	France	2013

______________________

⁽¹⁾  Includes Great Britain, Scotland, Wales and Northern Ireland.

Within the United States, we sell our products to distributors in all 50 states. We derived 42.5% of our domestic net sales in 2018 in California, Pennsylvania, Illinois, Michigan, Texas, Ohio, and Florida, with each state contributing at least 4% of net sales. We believe that there is the opportunity to increase the number of our distributors in all markets where we sell our products.

We organize all of our international operations under our wholly owned subsidiary, Reliv’ World. As of December 31, 2018, Reliv’ World consisted of the following market-specific entities: Reliv’ Australia, Reliv’ New Zealand, Reliv’ Canada, Reliv’ Mexico, Reliv’ Europe, Reliv’ Philippines, Reliv’ Malaysia, and Reliv’ Singapore. We have utilized this method of separate corporations in most of our markets, as local business licensing and product approvals require a local legal entity.

We believe that there is a significant opportunity to increase sales in our current international markets, as a whole. We have established a substantially consistent business model and compensation plan across all of our markets, and we continue to support our international markets with additional marketing programs and materials.

In addition to increasing sales in current international markets, our expansion strategy targets selected new foreign markets, when appropriate.

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New Market Entry Process

When conditions warrant, we evaluate new markets for our products. In order to do so, we perform an analysis of synergies between new and existing countries and distributor presence or interest in new markets, market conditions, regulatory conditions, product approval procedures and competition before selecting markets to enter. Once we decide to enter a new market, we first hire local legal counsel and/or a consultant with appropriate expertise to:

• help ensure that our network marketing system and products comply with all applicable regulations;

• help establish favorable public relations in the new market by acting as an intermediary between us and local regulatory authorities, public officials and business people; and

• explain our products and product ingredients to appropriate regulators and, when necessary, to arrange for local technicians to conduct required ingredient analysis tests of the products.

Where regulatory approval in a foreign market is required, we utilize local counsel and/or consultants to work with regulatory agencies to confirm that all of the ingredients in our products are permissible within the new market. Where reformulation of one or more of our products is required, we attempt to obtain substitute or replacement ingredients. During the regulatory compliance process, we may alter the formulation, packaging, branding or labeling of our products to conform to applicable regulations as well as local variations in customs and consumer habits, and we may modify some aspects of our network marketing system as necessary to comply with applicable regulations.

Following completion of the regulatory compliance phase, we undertake the steps necessary to meet the operations requirements of the new market. In the majority of our new markets, we establish a sales center in a major city and provide for product purchases by telephone and/or pick up. Product is shipped to the purchaser from a warehouse located in the general geographic market or the distributor may walk in to the local office and purchase products, if a pick up center is available. In addition, we initiate plans to satisfy inventory, personnel and transportation requirements of the new market, and we modify our distributor materials, recordings, videos and other training materials as necessary to be suitable for the new market.

In some countries, regulations applicable to the activities of our distributors also may affect our business because in some countries we are, or regulators may assert that we are, responsible for our distributors’ conduct. In these countries, regulators may request or require that we take steps to ensure that our distributors comply with local regulations.

Manufacturing

We established a manufacturing line at our headquarters facility in Chesterfield, Missouri and began to manufacture all of our nutritional supplements in early 1993. We expanded our Chesterfield facility in 1997 to 126,000 square feet of total space. On January 1, 2019, we sold substantially all of the machinery, equipment, inventory, tools and other assets and materials used in manufacturing operations to Nutracom, LLC, (“Nutracom”). Nutracom is owned substantially and is controlled by Dr. Carl W. Hastings and his family. Nutracom is leasing the manufacturing space in our facility for a period of seven years, with an option to renew for a five-year term. We also entered into agreements whereby Nutracom will continue to manufacture our core products on our premises for a period of seven years.   

The substantial overhead and cash flow required to operate the production facility had become a significant detriment to our financial performance, financing strategies and focus.  We sold the manufacturing operations in an effort to reduce operating losses and improve cash flow, provide additional sources of lease and financing revenue and to potentially reduce our cost of goods sold as Nutracom increases its production. The sale to Nutracom also allows us to retain a level of involvement over the production and cost of our products and grants us an equity interest in Nutracom.  The sale will also allow our management to focus on our core business. 

At this facility, all of our powdered nutritional supplements and encapsulated products are manufactured for distribution both domestically and internationally.

Historically, our ability to closely monitor the manufacture of nearly all of our nutritional supplements is a competitive advantage over competitors and contributes to our ability to provide high-quality products. We have not experienced any significant difficulty in obtaining supplies of raw materials for our nutritional supplements or finished product.

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Fulfillment

Distributors and their customers order product in either case lots or individual units of each product and pay for the goods prior to shipment. We also have a preferred customer plan that allows these customers to purchase product at a 10% discount for an annual enrollment fee of $10. We also offer a monthly or quarterly autoship program for distributors and customers. Product is shipped directly to the distributor or customer and upline distributors earn wholesale profits or, if applicable, a commission on all sales.    

In the United States, our products are warehoused at our Chesterfield facility and shipped by common carrier to distributors and customers upon order. Our facility in Chesterfield, Missouri serves all parts of the country. Our products are also warehoused in, and shipped to local distributors from: Sydney, Australia; Auckland, New Zealand; Oakville, Canada; Guadalajara, Mexico; Redditch (Birmingham), England; Makati (Manila), Philippines; and Subang Jaya (Kuala Lumpur), Malaysia. With the exception of our Canada, New Zealand, and Singapore subsidiaries, each of our subsidiaries maintains an office and personnel to receive, record, and fill orders from distributors. Distributors in Ireland, France, Germany, Austria, and the Netherlands order and receive product from our UK-based subsidiary.

We maintain a policy that unused product may be returned by a customer to the selling distributor for a full refund or exchange within 30 days after purchase. We also maintain a policy that any distributor who terminates his or her distributorship may return saleable product which was purchased from us within twelve months of the termination for a refund of 100% of the purchase price less any compensation received relating to the purchase of the products. We believe this buyback policy addresses and satisfies a number of regulatory compliance issues pertaining to network marketing systems.

Historically, product returns and buy backs have not been significant. Product returns and buy backs have been approximately 0.17% and 0.25% of net sales in 2018 and 2017, respectively.

Intellectual Property

Our formulas are protected as trade secrets and, to the extent necessary, by confidentiality agreements. In addition, we have obtained U.S. patents on five products as set forth below:

Product	Patent Expiration Date
ReversAge	May 2021
ProVantage	December 2030
GlucAffect	November 2029
24K	February 2032
CardioSentials	January 2029

In addition to our patented formulas, we own four U.S. patents, 12 international patents and two patent applications related to our soy concentrate ingredient with elevated levels of bioactive lunasin, the key ingredient in our LunaRich X product. Further, we utilize a proprietary production process to produce our soy concentrate that we protect as a trade secret, along with the bioassay to determine the bioavailability of lunasin in our products.

Currently, we have 14 trademarks registered with the U.S. Patent and Trademark Office, or USPTO, including Reliv and the names of 12 of our 18 nutritional products. Reliv Now for Kids, LunaRich X, ReShape, Active, Burn and Purify are not registered with the USPTO. Trademark registrations for selected marks have been issued or applied for in Australia, New Zealand, Canada, Mexico, the United Kingdom, Ireland, the Philippines, Malaysia, Singapore, Germany and several other foreign countries that offer network marketing opportunities. We consider our trademarks to be an important asset of our business.

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Regulation  

Product Regulation  

The formulation, manufacturing, labeling and advertising or promotion of our products are subject to regulation by the Food and Drug Administration, or FDA, which regulates our products under the federal Food, Drug and Cosmetic Act, or FDCA, the Federal Trade Commission, or FTC, and various agencies of the states or countries into which our products are shipped or sold. FDA regulations include requirements and limitations with respect to the labeling of our food products and also with respect to the formulation of those products. FDA regulations also limit and control the extent to which health or other claims can be made with respect to the efficacy of any food or cosmetic. The FDCA has been amended several times with respect to dietary supplements, most recently by the Nutrition Labeling and Education Act of 1990, or NLEA, and the Dietary Supplement Health and Education Act of 1994, or DSHEA, and related regulations. Such legislation governs the formulation, manufacturing, marketing and sale of nutritional supplements, including the content and presentation of health-related information included on the labels or labeling of nutritional supplements.

All of the products we market are classified as dietary supplements under the FDCA. Dietary supplements such as those we sell, for which no “drug” claim is made, are not subject to FDA approval prior to their sale. However, DSHEA established a pre-market notification process for dietary supplements that contain a “new dietary ingredient,” or NDI, a term that is defined as “a dietary ingredient that was not marketed in the United States before October 15, 1994,” the date on which DSHEA was signed into law. Certain NDIs that have been “present in the food supply” are exempt from the notification requirement. For those NDIs that are not exempt, DSHEA requires the manufacturer or distributor of a dietary supplement containing an NDI to submit to the FDA, at least 75 days prior to marketing, a notification containing the basis for concluding that the dietary supplement containing the NDI will “reasonably be expected to be safe.” Dietary supplement products can be removed from the market if shown to be unsafe, or if the FDA determines, based on the labeling of products, that the intended use of the product is for the diagnosis, cure, mitigation, treatment or prevention of disease. The FDA can regulate those products as “drugs” and require premarket approval of a “new drug application.” Distributors of dietary supplements that make any claims for dietary supplements, including product performance and health benefit claims must have substantiation that the statements are truthful and not misleading.

In January 2000, the FDA published a final rule that defines the types of statements that can be made concerning the effect of a dietary supplement on the structure or function of the body pursuant to DSHEA. Under DSHEA, dietary supplement labeling may bear “structure/function” claims, which are claims that the products affect the structure or function of the body, without prior FDA approval. They may not, without prior FDA approval, bear a claim that they can prevent, treat, cure, mitigate or diagnose disease, otherwise known as a “drug claim.” The final rule describes how the FDA will distinguish drug claims from structure/function claims. Dietary supplements, like conventional foods, are also permitted to make “health claims,” which are claims that are exempt from regulation as “drug” claims pursuant to the amendments to the FDCA established by the NLEA in 1990. A “health claim” is a claim, ordinarily approved by FDA regulation, on a food or dietary supplement product’s labeling that “characterizes the relationship of any substance to a disease or health-related condition.” To help assure that foods, dietary supplements and cosmetics comply with the provisions of the FDCA and FDA’s regulations, the FDA has numerous enforcement tools, including the ability to issue warning letters, initiate product seizures and injunctions and pursue criminal penalties.

In July 2016, the FDA put into effect new labeling regulations in which manufacturers must comply by January 1, 2020. We are currently implementing these label changes and will be in full compliance prior to the deadline. The changes will affect the Supplement Facts panel and how macro and micronutrients are claimed.

The manufacture of dietary supplements is subject to existing FDA current good manufacturing practice, or cGMP, regulations for food. In June 2007, the FDA issued regulations relating to more detailed cGMP specifically for dietary supplements. The facilities in Chesterfield are periodically audited by the FDA and we believe they are in full compliance with cGMP.

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Advertisements for our products are subject to regulation by the FTC. The FTC prohibits unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce and provides that the dissemination of any false advertisement pertaining to drugs, cosmetics or foods, including dietary supplements, is an unfair or deceptive practice. Under the FTC’s substantiation doctrine, an advertiser must have a “reasonable basis” for all claims made about a product. The failure to be able to adequately substantiate claims may be considered either deceptive or unfair practices. In order to avoid a violation of the FTC standards, we endeavor to assure that we have adequate substantiation for all advertising claims made for our products. In addition, the FTC has increased its scrutiny of the use of distributor testimonials. Although it is impossible for us to monitor all the product claims made by our independent distributors, we make efforts to monitor distributor testimonials and restrict inappropriate distributor claims. The FTC has been more aggressive in pursuing enforcement against dietary supplement products since the passage of DSHEA in 1994, and has brought numerous actions against dietary supplement companies, some resulting in several million dollar civil penalties and/or restitution as well as court-ordered injunctions.

We are aware that there is adverse publicity in many markets, including the United States, concerning foods that are grown from genetically modified organisms, or GMOs. In some markets, the possibility of health risks thought to be associated with GMOs has prompted proposed or actual governmental regulation. Nearly all ingredients in our formulas are non-GMO.  We use non-GMO ingredients when required by governmental regulations and strive to use non-GMO ingredients in every other instance when commercially feasible and available.  We believe compliance with regulatory requirements in this area should not have a material adverse effect on our business.

Sales Program Regulation

Our distribution and sales program is subject to regulation by the FTC and other federal and state regulation as well as regulations in several countries in which we conduct business. Various state agencies regulate multi-level distribution services. We are required to register with, and submit information to, certain of such agencies and we believe we have complied fully with such requirements. We actively strive to comply with all applicable state and federal laws and regulations affecting our products and our sales and distribution programs. The Attorneys General of several states have taken an active role in investigating and prosecuting companies whose compensation plans they claim violate local anti-pyramid and/or consumer protection statutes. We are unable to predict the effect such increased activity will have on our business in the future nor are we able to predict the probability of future laws, regulations or interpretations which may be passed by state or federal regulatory authorities.

Federal and state laws directed at network marketing programs have been adopted throughout the years to prevent the use of fraudulent practices often characterized as “pyramid schemes.” Illegal pyramid schemes compensate participants primarily for the introduction or enrollment of additional participants into the program. Often these schemes are characterized by large up-front entry or sign-up fees, over-priced products of low value, little or no emphasis on the sale or use of products, high-pressure recruiting tactics and claims of huge and quick financial rewards with little or no effort. Generally, these laws are directed at ensuring that product sales ultimately are made to consumers and that advancement within such sales organizations is based on sales of products.

We believe that our network marketing system satisfies the standards and case law defining a legal marketing system. It is an ongoing part of our business to monitor and respond to regulatory and legal developments, including those that may affect our network marketing system. However, the regulatory and legal requirements concerning network marketing systems do not include “bright line” rules and are inherently fact-based.

Competition

The business of developing and distributing nutritional products such as those we offer is highly competitive. Numerous manufacturers, distributors and retailers compete for consumers and, in the case of other network marketing companies, for distributors. Our competitors include both network marketing companies such as Alticor Global Holdings, Inc. (Amway Corp.), Avon Products Inc., Herbalife Ltd., Mary Kay Inc., Melaleuca, Inc., Mannatech, Inc., Nature’s Sunshine Products Inc., NuSkin Enterprises Inc. and USANA Health Sciences Inc., as well as specialty and mass retail establishments. Our ability to remain competitive depends on the underlying science and high quality of our products and our success in recruiting and retaining distributors. The pool of individuals interested in network marketing tends to be limited in each market and may be reduced to the extent other network marketing companies successfully recruit these individuals into their businesses. We believe that we offer a rewarding compensation plan with attractive financial benefits to compete for the time, attention and commitment of distributors. Our compensation plan is seamless, permitting international expansion.

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Reliv Now and Reliv Classic compete with numerous supplements that offer multi-vitamin benefits. Our fitness and weight management products compete with other products in the weight loss market, including nationally advertised products such as SlimFast. Many companies have entered, or have plans to enter, the sports drink market in which Innergize! and ProVantage compete, a market led by Gatorade. 24K competes with 5-Hour Energy and numerous other liquid energy shots and drinks. With Arthaffect, FibRestore, ReversAge, GlucAffect, CardioSentials, SoySentials, and LunaRich X, we are in the specific wellness needs, food and anti-aging markets, which are extremely competitive and led by the major food companies.

Employees

As of December 31, 2018, we and all of our subsidiaries had approximately 156 full-time employees compared with 160 such employees at the end of 2017. After the Nutracom transaction, our full-time headcount was 99 employees.

Additional Available Information

We make available, free of charge, copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to these reports as soon as reasonably practicable after such material is electronically filed with, or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act. This information is available on our corporate web site at www.reliv.com under the “Investor Relations” section. This information may also be obtained from the SEC’s on-line database located at www.sec.gov.

Item No. 2 – Properties

We own approximately six acres of land and a building containing approximately 126,000 square feet of office, manufacturing and warehouse space located in Chesterfield, Missouri, where we maintain our corporate headquarters and sole manufacturing facility. We believe that our worldwide facilities are suitable and adequate in relation to our present and immediate future needs.

The following table summarizes information related to our worldwide facilities as of March 18, 2019:

Location	Nature of Use	Square Feet		Owned/Leased
Chesterfield, MO, USA	corporate headquarters/call center/manufacturing/warehouse		126,000	Owned
Seven Hills (Sydney), Australia	central office/call center		1,000	Leased
Oakville, Ontario, Canada	warehouse/distribution		2,100	Leased
Guadalajara, Mexico	central office/warehouse/call center		2,300	Leased
Makati City (Manila), Philippines	central office/ warehouse/distribution		4,000	Leased
Redditch (Birmingham), England, UK	central office/ warehouse/distribution		11,500	Leased
Subang Jaya (Kuala Lumpur), Malaysia	central office/call center		300	Leased

We have leased 96,450 square feet of manufacturing and office space in our Chesterfield facility to Nutracom for a period of seven years with a five-year option.

Item No. 3 - Legal Proceedings

From time to time, we are involved in litigation incidental to the conduct of our business. We do not believe that any current proceedings will have a material adverse effect on our business, financial condition, results of operations or cash flows.

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PART II

Item No. 5 - Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is listed on the NASDAQ Global Select Market under the symbol: RELV. The following table sets forth the high and low sales prices of our common stock and the quarterly dividends per share paid on our common stock during the years ended December 31, 2018 and 2017.

	High		Low		Dividend
Year Ending December 31, 2018
Fourth Quarter	$	5.06	$	3.83	$	-
Third Quarter		5.26		4.62		-
Second Quarter		5.35		4.15		-
First Quarter		6.24		4.60		-
Year Ending December 31, 2017
Fourth Quarter	$	8.44	$	3.72	$	-
Third Quarter		13.77		6.22		-
Second Quarter		9.00		5.18		-
First Quarter		8.87		4.13		-

As of March 18, 2019, there were approximately 762 holders of record of our common stock and an additional 1,908 beneficial owners, including shares of common stock held in street name.

We have not declared any cash dividends over the past two years.  The declaration of future dividends is subject to the discretion of our Board of Directors and will depend upon various factors, including our earnings, financial condition, restrictions imposed by any indebtedness that may be outstanding, cash requirements, and other factors deemed relevant by our Board of Directors.  Our current lending agreements contain covenants which may limit our ability to declare cash dividends.

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Item No. 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this Annual Report on Form 10-K. The following discussion and analysis discusses the financial condition and results of our operations on a consolidated basis, unless otherwise indicated.

Overview

We are a developer and marketer of a proprietary line of nutritional supplements addressing basic nutrition, specific wellness needs, weight management and sports nutrition. We sell our products through an international network marketing system utilizing independent distributors. Sales in the United States represented approximately 76.6% of worldwide net sales for the year ended December 31, 2018 compared to approximately 77.7% for the year ended December 31, 2017. Our international operations currently generate sales through distributor networks with facilities in Australia, Canada, Malaysia, Mexico, the Philippines, and the United Kingdom. We also operate in Ireland, France, Germany, Austria and the Netherlands from our United Kingdom distribution center, in New Zealand from our Australia office, and in Singapore from our Malaysia office.

We derive our revenues principally through product sales made by our global independent distributor base, which, as of December 31, 2018, consisted of approximately 30,370 distributors and preferred customers. Our sales can be affected by several factors, including our ability to attract new distributors and retain our existing distributor base, our ability to properly train and motivate our distributor base and our ability to develop new products and successfully maintain our current product line.

All of our sales to distributors outside the United States are made in the respective local currency; therefore, our earnings and cash flows are subject to fluctuations due to changes in foreign currency rates as compared to the U.S. dollar. As a result, exchange rate fluctuations may have an effect on sales and gross margins. Accounting practices require that our results from operations be converted to U.S. dollars for reporting purposes. Consequently, our reported earnings may be significantly affected by fluctuations in currency exchange rates, generally increasing with a weaker U.S. dollar and decreasing with a strengthening U.S. dollar. Products manufactured for sale to our foreign subsidiaries are transacted in U.S. dollars. From time to time, we enter into foreign exchange forward contracts to mitigate our foreign currency exchange risk.

Components of Net Sales and Expense

Product sales represent the actual product purchase price typically paid by our distributors, after giving effect to distributor allowances, which can range from 20% to 40% of suggested retail price, depending on the rank of a particular distributor. Handling and freight income represents the amounts billed to distributors for shipping costs. We record net sales and the related commission expense when the merchandise is shipped.

Our primary expenses include cost of products sold, distributor royalties and commissions and selling, general and administrative expenses.

Cost of products sold primarily consists of expenses related to raw materials, labor, quality control and overhead directly associated with production of our products and sales materials, as well as shipping costs relating to the shipment of products to distributors, and duties and taxes associated with product exports. Cost of products sold is impacted by the cost of the ingredients used in our products, the cost of shipping distributors’ orders, and our efficiency in managing the production of our products.

Distributor royalties and commissions are weekly and monthly payments made to distributors, based on products sold in their downline organization. Based on our distributor agreements, these expenses typically approximate 23% of sales at suggested retail. Distributor royalties and commissions are paid on an amount referred to as the business value (“BV”), which typically ranges between 80% and 90% of the suggested retail price of each product. Also, we include other sales leadership bonuses, such as Ambassador bonuses, within this caption. Overall, distributor royalties and commissions remain directly related to the level of our sales and should continue at comparable levels as a percentage of net sales going forward. We have implemented or are in the process of implementing similar pricing structures in all of our international markets.

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Selling, general and administrative expenses include the compensation and benefits paid to our employees except for those in manufacturing, all other selling expenses, marketing, promotional expenses, travel and other corporate administrative expenses. These other corporate administrative expenses include professional fees, non-manufacturing depreciation and amortization, occupancy costs, communication costs and other similar operating expenses. Selling, general and administrative expenses can be affected by a number of factors, including staffing levels and the cost of providing competitive salaries and benefits; the amount we decide to invest in distributor training and motivational initiatives; and the cost of regulatory compliance.

Results of Operations

Year Ended December 31, 2018 Compared to Year Ended December 31, 2017

Net sales decreased by 13.6% worldwide as net sales in the United States decreased by 14.8% in the year ended December 31, 2018 compared with 2017. During 2018, our international net sales decreased by 9.4% over the prior year with minimal impact from foreign currency fluctuations in the aggregate. Net sales in Europe, our largest foreign market, decreased by 13.2% in 2018 compared to the prior year, with a benefit of 3.0% due to the impact of foreign currency fluctuation. Net sales in Asia increased by 3.8% in 2018 compared to the prior year. When measured in local currencies, net sales in Asia increased by 7.9% in 2018.

      The following table summarizes net sales by geographic market for the years ended December 31, 2018 and 2017.

Net Sales by Market	Year Ended December 31,
(in thousands)	2018					2017					Change from prior year
	Amount		% of Net Sales			Amount		% of Net Sales			Amount			%
	(dollars in thousands)
United States	$	27,673		76.6	%	$	32,475		77.7	%	$	(4,802	)		(14.8	)%
Australia/New Zealand		732		2.0			923		2.2			(191	)		(20.7	)
Canada		719		2.0			915		2.2			(196	)		(21.4	)
Mexico		474		1.3			445		1.0			29			6.5
Europe		3,973		11.0			4,578		11.0			(605	)		(13.2	)
Asia		2,545		7.1			2,453		5.9			92			3.8
Consolidated total	$	36,116		100.0	%	$	41,789		100.0	%	$	(5,673	)		(13.6	)%

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The following table sets forth, as of December 31, 2018 and 2017, the number of our active distributors and Master Affiliates and above. The total number of active distributors includes Master Affiliates and above. We define an active distributor as one that enrolls as a distributor or renews his or her distributorship during the prior twelve months. Master Affiliates and above are distributors that have attained the highest level of discount and are eligible for royalties generated by Master Affiliate groups in their downline organization. We include Preferred Customers as part of our Active Distributor count, and Preferred Customers represent approximately 5,060 and 4,990 of the Active Distributor count as of December 31, 2018 and 2017, respectively.

Active Distributors/Master	December 31, 2018				December 31, 2017				% Change
Affiliates by Market	Active Distributors and Preferred Customers		Master Affiliates and Above		Active Distributors and Preferred Customers		Master Affiliates and Above		Active Distributors and Preferred Customers			Master Affiliates and Above
United States		19,810		2,340		23,050		2,820		(14.1	)%		(17.0	)%
Australia/New Zealand		960		90		1,100		110		(12.7	)		(18.2	)
Canada		560		80		660		90		(15.2	)		(11.1	)
Mexico		970		90		710		60		36.6			50.0
Europe		2,980		390		3,800		450		(21.6	)		(13.3	)
Asia		5,090		380		4,300		380		18.4			0.0
Consolidated total		30,370		3,370		33,620		3,910		(9.7	)%		(13.8	)%

Use of Non-GAAP Financial Information

Net sales expressed in local currency or net sales adjusted for the impact of foreign currency fluctuation are non-GAAP financial measures. We use these measurements to assess the level of business activity in a foreign market, absent the impact of foreign currency fluctuation relative to the U.S. dollar, which our local management has no ability to influence. This is a meaningful measurement to management, and we believe this is a useful measurement to provide to shareholders.

The following table provides key statistics related to distributor activity by market and should be read in conjunction with the following discussion.

Distributor Activity by Market																			International
	United States			AUS/NZ			Canada			Mexico			Europe			Asia			-- Total
Sales in USD (in 000's):
Year ended 12/31/2018	$	27,673		$	732		$	719		$	474		$	3,973		$	2,545		$	8,443
Year ended 12/31/2017	$	32,475		$	923		$	915		$	445		$	4,578		$	2,453		$	9,314
% change in sales-2018 vs. 2017:
Change in GAAP sales in USD		-14.8	%		-20.7	%		-21.4	%		6.5	%		-13.2	%		3.8	%		-9.4	%
Due to currency fluctuation		-			-2.1	%		0.1	%		-2.1	%		3.0	%		-4.1	%		0.0	%
Sales in local currency (non-GAAP)		-14.8	%		-18.6	%		-21.5	%		8.6	%		-16.2	%		7.9	%		-9.4	%
# of new distributors-2018(1)		3,696			146			106			558			1,258			3,042			5,110
# of new distributors-2017(1)		4,667			168			145			271			1,646			2,632			4,862
% change		-20.8	%		-13.1	%		-26.9	%		105.9	%		-23.6	%		15.6	%		5.1	%
# of new Master Affiliates-2018		330			9			14			50			86			171			330
# of new Master Affiliates-2017		534			8			15			15			108			215			361
% change		-38.2	%		12.5	%		-6.7	%		233.3	%		-20.4	%		-20.5	%		-8.6	%
# of Product orders-2018		107,731			4,452			2,418			3,496			13,000			29,791			53,157
# of Product orders-2017		125,648			5,537			3,060			3,235			16,246			25,926			54,004
% change		-14.3	%		-19.6	%		-21.0	%		8.1	%		-20.0	%		14.9	%		-1.6	%

⁽¹⁾   The new distributor totals for 2018 and 2017 include 3,727 and 3,587, respectively, new worldwide preferred customers.

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United States   

● Net sales in the United States declined by 14.8% in 2018 compared to the prior year as all measurements of distributor activity declined. Net sales in the United States in 2018 included $1.44 million in contract manufacturing sales as we utilized our manufacturing facility for third-party production, beginning in mid-2018.

● In May 2018, we launched Reliv Now^® with Whey to provide our cornerstone Now product in an alternative protein source. In 2018, Now with Whey represented 2.0% of network marketing net sales in the United States.

● Products in the LunaRich line, including Reliv Now® and LunaRich X™, continued to perform well, constituting 15.9% and 12.4% of net sales in the United States, respectively, in 2018. Reliv Now and LunaRich X represented 16.7% and 13.5%, respectively, of net sales in the United States in the prior year. Sales of the Fit3 product line represented 3.5% of net sales in the U.S. in 2018 compared to 6.1% of net sales in the prior year.

● Distributor/Preferred Customer enrollments decreased by 20.8% in 2018 compared to the prior year.

● Distributor retention was 73.5% for the twelve month period ended December 31, 2018 compared to 71.5% for all of 2017. Distributor retention is determined by the percentage of active distributors from 2017 that renewed their distributorships in 2018.

● New Master Affiliate qualifications decreased by 38.2% in 2018 compared to the prior year, and Master Affiliate retention improved to 71.3% in 2018 compared to 56.0% in 2017. Master Affiliate retention is defined by the percentage of Master Affiliates as of end of 2017 that requalified their distributorships as Master Affiliates during 2018. Our Master Affiliate count and new Master Affiliate qualifications have been negatively impacted since the increased business volume requirements in February 2016 to reach the Master Affiliate level.

● Our average order size in 2018 decreased by 5.1% to $337 at suggested retail value compared to the prior year. The number of product orders also decreased by 14.3% in 2018 compared to the prior year for the same reasons as the overall decrease in sales.

International Operations

● The average foreign exchange rate for the U.S. dollar for 2018 was stronger against most of the currencies in which we conduct business, except for the Canadian dollar, British pound and Euro, when compared to the average foreign exchange rates for the year ended December 31, 2018. However, in the aggregate, foreign currency fluctuations in 2018 had virtually no impact on foreign sales reported in U.S. dollars.

● We continue to review prices and margins in all of our international markets and plan to make adjustments as needed, as we increased prices in most of our markets in 2018. We are also reviewing sales by product to phase out products with lower sales levels and gross margins as strategically appropriate.

● We closed our operations in Indonesia effective June 30, 2018 due to weak sales and minimal distributor activity.

● Australia/New Zealand and Canadian net sales in 2018 decreased by 18.6% and 21.5%, respectively, in local currency compared to 2017 as the result of decreased distributor activity in the market. We terminated our sales manager in AUS/NZ during Q2 2018.

● Net sales in Mexico increased by 8.6% in local currency in 2018 compared to the prior year. Sales in Mexico have begun to rebound as we have installed new promotions in the market and supported it with additional corporate-sponsored events. During Q3 2018, we retained a sales consultant with experience in another network marketing company in Mexico. In Q4 2018, net sales in Mexico increased by 35.1% compared to the prior-year quarter.

● Net sales in Europe decreased by 16.2% in local currency in 2018 compared to the prior year. Distributor activity declined both in the form of new distributor and preferred customer enrollments and number of product orders placed in the region.

● Sales in Asia increased by 7.9% in local currency in 2018 compared to the prior year. Local currency sales in the Philippines, our largest market in the region, increased by 10.3% in 2018 compared to the prior year. Distributor and customer activity continues to accelerate in the region as new distributor/preferred customer enrollments increased by 15.6% in 2018 and product orders in 2018 increased by 14.9%.

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Costs and Expenses

The following table sets forth selected results of our operations expressed as a percentage of net sales for the years ended December 31, 2018 and 2017. Our results of operations for the periods described below are not necessarily indicative of results of operations for future periods.

Statement of Operations data
(amounts in thousands)	2018						2017
	Amount			% of net sales			Amount			% of net sales
Net sales	$	36,116			100.0	%	$	41,789			100.0	%
Costs and expenses:
Cost of products sold		9,710			26.9			9,401			22.5
Distributor royalties and commissions		11,749			32.6			14,686			35.1
Selling, general and adminstrative		16,521			45.7			17,885			42.8
Loss from operations		(1,864	)		(5.2	)		(183	)		(0.4	)
Interest income		93			0.3			102			0.2
Interest expense		(96	)		(0.3	)		(109	)		(0.3	)
Other income		62			0.2			38			0.1
Loss before income taxes		(1,805	)		(5.0	)		(152	)		(0.4	)
Provision for income taxes		98			0.3			545			1.3
Net loss	$	(1,903	)		(5.3	)%	$	(697	)		(1.7	)%
Loss per common share-Basic	$	(1.03	)				$	(0.38	)
Loss per common share-Diluted	$	(1.03	)				$	(0.38	)

Cost of Products Sold:

● The cost of products sold as a percentage of net sales in 2018 increased by 4.4% compared to the prior-year period. The cost of products sold as a percentage of net sales in 2018 was impacted by the contract manufacturing business, which has a lower margin than the network marketing sales. Cost of products sold as a percentage of net sales was also negatively impacted by promotions in the United States that reduced our handling and freight income.

Distributor Royalties and Commissions:

● Distributor royalties and commissions as a percentage of net sales for 2018 decreased by 2.5% of net sales when compared to the prior-year period. Over the course of 2017, we increased the prices of our products in most of our markets, with prices increased in the U.S. and Canada effective November 1, 2017. As part of the price increase, we did not increase the BV of the products. The BV represents the amount per commissionable product that is paid in distributor royalties and commissions. This accounts for the slight decrease in royalties and commissions expense as a percentage of net sales. Net sales from contract manufacturing also slightly reduced this percentage as commissions are not paid on these sales.

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Selling, General and Administrative Expenses:

● Selling, general and administrative expenses declined by $1.36 million in 2018 compared to the prior-year period but increased as a percentage of net sales due to declining sales.

● Salaries, other staffing expenses, benefits, and incentive compensation decreased in the aggregate by $723,000 in YTD 2018 compared to the prior-year period.

● Sales and marketing expenses decreased by $801,000 in 2018 compared to the prior-year period. Components of the decrease include:

o $368,000 decrease in Star Director and other distributor bonuses, credit card fees, and other expenses related to the level of sales.

o $73,000 decrease in video production and other sales development expense in 2018 compared to the prior-year period. The decrease relates to Fit3 new product launch expenses incurred in Q1 2017.

o $118,000 decrease in distributor conferences and meeting expenses as we held two smaller spring and fall conferences in the U.S. in 2018 versus one major conference.

o $69,000 decrease in promotions expense as we have reduced such activities in 2018 relative to the level of sales.

● Other general and administrative expenses increased by $160,000 in 2018 versus the prior-year period. Components of the increase include:

o $130,000 increase in consulting fees due to the conversion of a former R&D employee to a consulting arrangement, a consulting arrangement related to contact manufacturing business, and the addition of a sales consultant in Mexico in the latter half of 2018.

o $107,000 increase in legal fees

o $60,000 increase in accounting fees

o An increase of $141,000 in the expense on a key-man life insurance policy that was redeemed during 2018.

Offsetting reductions include:

o $95,000 reduction in depreciation expense.

o $66,000 reduction in directors’ fees.

o $47,000 reduction in corporate travel expenses.

● General and administrative expenses in Indonesia for 2018 included $52,000 of severance and other expenses related to the closing of the office and operations in that country in June 2018.

Other Income/Expense:

● The other income in 2018 and 2017 is primarily the result of foreign currency exchange gains on intercompany debt denominated in U.S. dollars in certain of our subsidiaries.

Income Taxes:

● We reported income tax expense of $98,000 for 2018, compared to income tax expense of $545,000 in 2017.

● During the fourth quarter of 2017, we determined that it was more likely than not that operating results in our European subsidiary would not be sufficient to realize our net operating loss carryforwards. Accordingly, we placed a valuation allowance of $509,000 on our deferred tax asset in that subsidiary.

● During 2016, we determined that it was more likely than not that Federal and various state net operating losses generated in 2016 and beyond will not be realized based on projections of future taxable income and other considerations. Accordingly, the tax provisions as of December 31, 2018 and 2017 include the impact of recording a valuation allowance of $265,000 and $198,000, respectively, against the losses generated from a U.S. tax perspective.

● See Note 12 of the Consolidated Financial Statements for additional detail regarding income taxes, including a reconciliation of the income tax expense/benefit to the U.S. statutory rate for each period.

Net Loss:

● For 2018, we reported a net loss of $1.90 million compared to a net loss of $697,000 in 2017. The increase in the net loss is primarily the result of the decrease in net sales in the United States.

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Liquidity and Capital Resources

In 2018, we used $1.17 million of net cash in operating activities, $3.01 million was provided by investing activities, and we used $3.05 million in financing activities. This compares to $157,000 used in operating activities, $377,000 used in investing activities, and $136,000 generated in financing activities in 2017. Cash and cash equivalents decreased by $1.28 million to $1.99 million as of December 31, 2018 compared to $3.27 million as of December 31, 2017.

Significant changes in working capital items consisted of an increase in accounts receivable of $377,000, and an increase in accounts payable and accrued expenses of $366,000 in 2018. The increase in accounts receivable is the result of trade receivables from contract manufacturing customers during the fourth quarter of 2018. The increase in accounts payable and accrued expenses is the result of an increase in trade payables related to the contract manufacturing work as of December 31, 2018 compared to December 31, 2017.

Investing activities during 2018 consisted of $3.07 million in proceeds provided by the redemption of a life insurance policy and payments received on a distributor note receivable of $116,000, offset by a net investment of $173,000 for capital expenditures. Financing activities during 2018 consisted of principal payments of $3.05 million on long-term borrowings.

Stockholders’ equity decreased to $11.99 million at December 31, 2018 compared to $14.36 million at December 31, 2017. The decrease is primarily due to our net loss during 2018 of $1.90 million, an unfavorable adjustment in foreign currency translation of $124,000, and a reduction of $368,000 due to the recognition of deferred revenue under ASU No. 2014-09. Our working capital balance was $4.17 million at December 31, 2018 compared to $2.14 million at December 31, 2017. The current ratio at December 31, 2018 was 2.07 compared to 1.34 at December 31, 2017.

In July 2018, management voluntarily elected to redeem the cash surrender value (CSV) of our whole life insurance policy maintained on the life of our Board of Directors’ Chairman and former Chief Executive Officer. Upon redemption and related receipt of the $3.07 million CSV proceeds, we simultaneously remitted to our lender $2.86 million of the CSV proceeds to be applied towards the full reduction of our outstanding term loan and revolver loan balances. Following this series of July 2018 transactions, the balances of our term loan, revolver loan, and life insurance policy balances were zero.

In September 2018, the maximum borrowing amount on our revolving line of credit was reduced from $2.0 million to $750,000. As amended, the revolver’s maturity date remained April 29, 2019 and the revolver’s interest rate continued to be based on the 30-day LIBOR plus 2.25%. As of December 31, 2018, there were no outstanding borrowings on the revolving line of credit. In January 2019, we borrowed $500,000 under our revolving line of credit. In March 2019, the revolving line of credit’s maturity date was extended to April 28, 2020 and the interest rate was revised to the 30-day LIBOR plus 3.00%. As amended, the revolver’s maximum borrowing amount remains $750,000. Borrowings under the lending agreement continue to be secured by all our tangible and intangible assets and by a mortgage on the real estate of our corporate headquarters.

We have experienced significant losses over the last several years and may experience a loss in 2019. Our existing cash, cash equivalents, operating revenue and borrowing facilities may not be sufficient to fund our operating expenses through the next 12 months which would require us to obtain additional financing before that time. We has taken several steps which management believes will result in an improved financial position, operating results, and cash flows. Over the last several years we have also taken other cost cutting measures including reductions in staff, freezing or lowering salaries, limiting promotional events all in an effort to reduce operating expenses.

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As detailed in Note 2 of the accompanying consolidated financial statements, in January 2019, we entered into a Purchase Agreement with Nutracom, LLC (Nutracom) pursuant to which Nutracom purchased the assets used by us in our manufacturing operations. Assets purchased by Nutracom from us were financed by us under payment terms scheduled to provide incoming funds to us of $200,000 or more per year. We have also entered into an agreement for Nutracom to lease a significant portion of our headquarters building. Management believes that these transactions with Nutracom will be favorable to our financial position, operating results, and cash flows; however, there are risks and uncertainties which arise with these Nutracom transactions and their impact to our operations.

Should the aforementioned changes to the company’s operations not provide sufficient cash flow improvement or should we be unable to obtain sufficient additional capital or borrowings, we may have to engage in any or all of the following activities: (i) monetize our headquarters building via traditional bank lending or a sale and leaseback-type transaction; (ii) monetize a note receivable from a distributor (see Note 11 of the accompanying consolidated financial statements); (iii) restructure our core distributor business model including recruiting, promotions, incentives, and other activities; (iv) cease operations in certain geographic regions, and (v) reduce employee compensation and benefits.

We may not be able to obtain sufficient additional funding through monetizing certain of our existing assets, sourcing additional borrowings, and issuing additional equity, or any other means, and if we are able to do so, these available sources of funds may not be on satisfactory terms. Our ability to raise additional capital in the equity markets, should we choose to do so, is dependent on a number of factors, including, but not limited to, the market demand for our common stock, which itself is subject to a number of business risks and uncertainties, as well as the uncertainty that we would be able to raise such additional capital at a price or on terms that are favorable to us.

These actions may have a material adverse impact on our ability to achieve certain of our planned objectives. Even if we are able to source additional funding, we may be forced to significantly reduce our operations if our operating performance does not improve. If we are unable to source additional funding, we may be forced to significantly reduce or shut down our operations. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effect on our assets or liabilities should we not be able to continue as a going concern.

Critical Accounting Policies

Our financial statements are based on the selection and application of significant accounting policies, which require management to make significant estimates and assumptions. We believe that the following are some of the more critical judgment areas in the application of our accounting policies that currently affect our financial condition and results of operations.

Revenue

On January 1, 2018, we adopted Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (including amendments), and applied the new revenue standard to all contracts using the modified retrospective method. Under this method, prior periods were not restated. Upon adoption, we recognized the cumulative effect of applying the new revenue standard as a reduction of $367,568 (with zero net tax effect) to the opening retained earnings (accumulated deficit) balance.

The new revenue standard defines a five step process to recognize revenues. We account for a contract with our independent distributors (including customers) when there is a legally enforceable contract, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. Product sales revenue (principally nutritional and dietary supplements) and commission expenses are recorded when control is transferred to independent distributors, which occurs at the time of shipment. Generally, net sales reflect product sales less the distributor discount of 20 percent to 40 percent of the suggested retail price. We present distributor royalty and commission expense as an operating expense, rather than a reduction to net sales, as these payments are not made to the purchasing distributor. At point of sale, we receive payment by credit card, personal check, or guaranteed funds for contracts from independent distributors and make related commission payments in the following month.

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Under this new revenue standard, we determined that the timeframe for recognizing the revenue performance obligation for membership fees-type revenue would be lengthened to more closely correlate with the distributor (including customer) membership terms of generally twelve months. Based upon all membership fees contracts still in existence as of December 31, 2017, the adoption of the new revenue standard resulted in the recognition of a deferred revenue liability balance of $367,568. We receive payment for membership fees at the beginning of the annual membership term and recognize membership fees revenue on a straight-line basis in correlation with the completion of our performance obligation under the membership term. At December 31, 2018, the deferred revenue liability balance was $337,234.

Actual and estimated sales returns are classified as a reduction of net sales. We estimate and accrue a reserve for product returns based on our return policy and historical experience. Our return policy allows for distributors to return product only upon termination of his or her distributorship. Allowable returns are limited to saleable product which was purchased within twelve months of the termination for a refund of 100% of the original purchase price less any distributor royalties and commission received relating to the original purchase of the returned products. For the years ended December 31, 2018 and 2017, total returns as a percent of net sales were approximately 0.17% and 0.25%, respectively.

We record handling and freight income as a component of net sales and record handling and freight costs as a component of cost of products sold. Total net sales do not include sales tax as we consider ourselves a pass-through conduit for collecting and remitting applicable sales taxes.

We do not anticipate that the adoption of the new revenue standard will be material to net sales and net income on an ongoing basis.

Inventories

Inventories are valued at the lower of cost or market. Product cost includes raw material, labor and overhead costs and is accounted for using the first-in, first-out basis. On a periodic basis, we review our inventory levels in each country for estimated obsolescence or unmarketable items, as compared to future demand requirements and the shelf life of the various products. Based on this review, we record inventory write-downs when costs exceed expected net realizable value. Historically, our estimates of obsolete or unmarketable items have been materially accurate.

Sales aids and promotional materials inventories represent distributor kits, product brochures, and other sales and business development materials which are held for sale to distributors. Costs of the sales aids and promotional materials held for sale are capitalized as inventories and subsequently recorded to cost of goods sold upon recognition of revenue when sold to distributors. All other advertising and promotional costs are expensed when incurred.

Legal Proceedings

In the ordinary course of business, we are subject to various legal proceedings, including lawsuits and other claims related to labor, product and other matters. We are required to assess the likelihood of adverse judgments and outcomes to these matters as well as the range of potential loss. Such assessments are required to determine whether a loss contingency reserve is required under the provisions of FASB ASC Topic 450, “Contingencies,” and to determine the amount of required reserves, if any. These assessments are subjective in nature. Management makes these assessments for each individual matter based on consultation with outside counsel and based on prior experience with similar claims. To the extent additional information becomes available or our strategies or assessments change, our estimates of potential liability for a given matter may change. Changes to estimates of liability would result in a corresponding additional charge or benefit recognized in the statement of operations in the period in which such changes become known. We recognize the costs associated with legal defense in the periods incurred. Accordingly, the future costs of defending claims are not included in our estimated liability.

26

Income Tax Matters

We account for income taxes in accordance with FASB ASC Topic 740, “Income Taxes,” (ASC Topic 740) which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. ASC Topic 740 also requires that deferred tax assets be reduced by a valuation allowance if it is “more likely than not” that some portion or the entire deferred tax asset will not be realized. In our quarterly evaluation of the need for a valuation allowance, we consider and weigh both positive and negative factors, including the expected level of future taxable income and available tax planning strategies. If actual results differ from the assumptions made in our previous evaluation of our valuation allowance, we may record a change in valuation allowance through income tax expense in the period this determination is made.

The calculations of our tax liabilities involve dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for uncertain tax positions based on the two-step process prescribed in the guidance under ASC Topic 740. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as we have to determine the probability of various possible outcomes. We re-evaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, or new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision.

During 2016, 2017 and 2018, we determined that it was more likely than not that U.S. federal and various state net operating losses primarily generated in these years will not be realized based on projections of future U.S. taxable income, estimated reversals of existing taxable timing differences, and other considerations. Accordingly, the 2018 and 2017 income tax provisions include the impact of recording a full deferred tax asset valuation allowance of approximately $265,000 and $198,000 against the annual losses generated from a U.S. tax perspective.

At December 31, 2018, we had deferred tax assets related to net operating loss carryforwards and other income tax credits in our foreign operations with a tax value of $3.1 million. These net operating loss carryforwards principally do not expire, depending on the country and period in which they occurred. As of December 31, 2017, we assessed the realizability of the European subsidiary’s deferred tax assets and concluded that future realization failed to meet the threshold of more likely than not based upon the subsidiary’s recent tax operating losses. Accordingly, we recorded a full valuation allowance to the European subsidiary’s deferred tax assets and recorded a deferred income tax charge of $509,000 at December 31, 2017. We continue to have a full valuation allowance applied to all other net operating loss carryforwards in our foreign operations.

The Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) 118 to provide guidance to companies on the reporting of the impacts of The United States Tax Cuts and Jobs Act in their financial statements.  Under SAB 118, we recorded affected items in fiscal year 2017 as provisional to allow additional time for clarifying technical guidance from Treasury and analysis of the effect to our current tax positions.  In 2018, we completed our analysis and did not record any adjustments to our 2017 provisional income tax amounts.

Current-Year Adoption of Recent Accounting Pronouncements

Discussion regarding our adoption of accounting pronouncements is included in Note 1 to the Consolidated Financial Statements.

27

Item No. 8 - Financial Statements and Supplementary Data

Reference is made to the Consolidated Financial Statements contained in Part IV hereof.

Item No. 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 

None

Item No. 9A - Controls and Procedures 

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has reviewed and evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2018. Based on such review and evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures were effective as of December 31, 2018, to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, (a) is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms and (b) is accumulated and communicated to our management, including the officers, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the 2013 framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Although there are inherent limitations in the effectiveness of any system of internal control over financial reporting, based on our evaluation, management has concluded our internal controls over financial reporting were effective as of December 31, 2018.

Attestation Report of the Registered Public Accounting Firm 

This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

There were no material changes in our internal control over financial reporting during the fourth quarter of 2018 that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

Item No. 9B - Other Information

None

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PART III

Item No. 10 - Directors, Executive Officers and Corporate Governance

Information called for by Item 10 of Part III is incorporated by reference to the definitive Proxy Statement for the 2019 Annual Meeting of Shareholders to be held on May 23, 2019, which is expected to be filed with the Commission within 120 days after December 31, 2018.

Item No. 11 - Executive Compensation

Information called for by Item 11 of Part III is incorporated by reference to the definitive Proxy Statement for the 2019 Annual Meeting of Shareholders to be held on May 23, 2019, which is expected to be filed with the Commission within 120 days after December 31, 2018.

Item No. 12 - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information called for by Item 12 of Part III is incorporated by reference to the definitive Proxy Statement for the 2019 Annual Meeting of Shareholders to be held on May 23, 2019, which is expected to be filed with the Commission within 120 days after December 31, 2018.

Item No. 13 - Certain Relationships and Related Transactions, and Director Independence

Information called for by Item 13 of Part III is incorporated by reference to the definitive Proxy Statement for the 2019 Annual Meeting of Shareholders to be held on May 23, 2019, which is expected to be filed with the Commission within 120 days after December 31, 2018.

Item No. 14 - Principal Accountant Fees and Services

Information called for by Item 14 of Part III is incorporated by reference to the definitive Proxy Statement for the 2019 Annual Meeting of Shareholders to be held on May 23, 2019, which is expected to be filed with the Commission within 120 days after December 31, 2018.

PART IV

Item No. 15 - Exhibits and Financial Statement Schedules

(a) 1. The Consolidated Financial Statements filed as part of this report on Form 10-K are listed on the accompanying Index to Consolidated Financial Statements and Consolidated Financial Statement Schedules.

2. Financial schedules required to be filed by Item 8 of this form, and by Item 15(d) below:

All other financial schedules are not required under the related instructions or are inapplicable and therefore have been omitted.

3. Exhibits: See the Exhibit Index immediately before the signature page of this Annual Report on Form 10-K.

Item No. 16 – Form 10-K Summary

None

29

Exhibit Index 

Exhibit Number	Document
2.1	Purchase Agreement with Nutracom, LLC dated January 1, 2019 (filed herewith).
3.1	Second Amended and Restated Certificate of Incorporation (incorporated by reference to Appendix B of Schedule 14A of the Registrant filed on April 17, 2003).
3.2	Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to the Form 10-K of the Registrant for the year ended December 31, 2016)
3.3	By-Laws (incorporated by reference to the Registration Statement on Form S-3 of the Registrant filed on February 21, 2006).
3.4	Amendment to By-Laws dated March 22, 2001 (incorporated by reference to the Registration Statement on Form S-3 of the Registrant filed on February 21, 2006).
3.5	Certificate of Designation to Create a Class of Series A Preferred Stock for Reliv’ International, Inc. (incorporated by reference to Exhibit 3.1 to the Form 10-Q of the Registrant for quarter ended March 31, 2003).
4.1	Form of Reliv International, Inc. common stock certificate (incorporated by reference to the Registration Statement on Form S-3 of the Registrant filed on February 21, 2006).
10.1	Amended Exclusive License Agreement with Theodore P. Kalogris dated December 1, 1991 (incorporated by reference to Exhibit 10.1 to the Form 10-K of the Registrant for the year ended December 31, 1992).
10.2*	Robert L. Montgomery Employment Agreement dated June 19, 2007 (incorporated by reference to Exhibit 10.1 to the Form 8-K of the Registrant filed June 25, 2007).
10.3*	Carl W. Hastings Employment Agreement dated January 1, 2019 (filed herewith).
10.4*	Reliv’ International, Inc. Supplemental Executive Retirement Plan dated June 1, 1998 (incorporated by reference to Exhibit 10.19 to the Form10-K of the Registrant for year ended December 31, 1998).
10.5*	Reliv International, Inc. Employee Stock Ownership Plan and Trust dated August 29, 2006 (incorporated by reference to Exhibit 10.1 to the Form 8-K of the Registrant filed August 30, 2006).
10.6*	2009 Distributor Stock Purchase Plan (incorporated by reference to Appendix 1 of Form S-3 Registration Statement the Registrant filed July 1, 2009).
10.7*	2009 Incentive Stock Plan (incorporated by reference to Exhibit 10.1 to the Form S-8 Registration Statement the Registrant filed December 2, 2010).
10.8*	2014 Incentive Stock Plan (incorporated by reference to Exhibit 10.1 to the Form S-8 Registration Statement the Registrant filed November 19, 2014).
10.9*	Reliv International, Inc. Incentive Compensation Plan effective January 1, 2007 (incorporated by reference to Exhibit 10.1 to the Form 8-K of the Registrant filed May 31, 2007).

30

10.10*	R. Scott Montgomery Employment Agreement dated January 2, 2008 (incorporated by reference to Exhibit 10.1 to the Form 8-K of the Registrant filed January 4, 2008).
10.11*	Ryan A. Montgomery Employment Agreement dated January 2, 2008 (incorporated by reference to Exhibit 10.2 to the Form 8-K of the Registrant filed January 4, 2008).
10.12*	Steven D. Albright Employment Agreement dated January 2, 2008 (incorporated by reference to Exhibit 10.4 to the Form 8-K of the Registrant filed January 4, 2008).
10.13	Loan Sale Agreement between 2010-1 RADC/CADC Venture, LLC and Reliv International, Inc. dated March 16, 2012 (incorporated by reference to Exhibit 10.1 to the Form 10-Q of the Registrant for the quarter ended March 31, 2012).
10.14	Technology License Agreement by and between SL Technology, Inc. and Soy Labs, LLC dated July 23, 2013 (incorporated by reference to Exhibit 10.1 to the Form 8-K of the Registrant filed July 25, 2013).
10.15	Agreement by and among Reliv International, Inc., SL Technology, Inc., Soy Labs, LLC and 1Soy, Inc. dated July 23, 2013 (incorporated by reference to Exhibit 10.2 to the Form 8-K of the Registrant filed July 25, 2013).
10.16	Letter agreement between SL Technology, Inc. and Soy Labs, LLC dated September 2, 2016 (incorporated by reference to Exhibit 10.18 to the Form 10-K of the Registrant for the year ended December 31, 2016)
10.17	Promissory Note (revolving credit facility) dated September 30, 2015 among Reliv International, Inc., Reliv, Inc., Reliv World Corporation, and SL Technology, Inc., as Borrowers and Enterprise Bank & Trust (incorporated by reference to Exhibit 10.2 to the Form 10-Q of the Registrant filed November 13, 2015).
10.18	Business Loan Agreement dated September 30, 2015 among Reliv International, Inc., Reliv, Inc., Reliv World Corporation, and SL Technology, Inc., as Borrowers and Enterprise Bank & Trust (incorporated by reference to Exhibit 10.3 to the Form 10-Q of the Registrant filed November 13, 2015).
10.19	Deed of Trust dated September 30, 2015 between Reliv International, Inc. as Grantor and Enterprise Bank & Trust (incorporated by reference to Exhibit 10.4 to the Form 10-Q of the Registrant filed November 13, 2015).
10.20	First Amendment to Loan Agreement dated September 30, 2016 among Reliv International, Inc., Reliv, Inc., Reliv World Corporation, and SL Technology, Inc., as Borrowers and Enterprise Bank & Trust (incorporated by reference to Exhibit 10.1 to the Form 10-Q of the Registrant filed November 14, 2016).
10.21	Change in Terms Agreement (revolving credit facility) dated September 30, 2016 among Reliv International, Inc., Reliv, Inc., Reliv World Corporation, and SL Technology, Inc., as Borrowers and Enterprise Bank & Trust (incorporated by reference to Exhibit 10.2 to the Form 10-Q of the Registrant filed November 14, 2016).
10.22	Second Amendment to Loan Agreement dated April 11, 2018 among Reliv International, Inc., Reliv, Inc., Reliv World Corporation, and SL Technology, Inc., as Borrowers and Enterprise Bank & Trust (incorporated by reference to Exhibit 10.1 to the Form 10-Q of the Registrant filed May 15, 2018).
10.23	Change in Terms Agreement (revolving credit facility) dated April 30, 2018 among Reliv International, Inc., Reliv, Inc., Reliv World Corporation, and SL Technology, Inc., as Borrowers and Enterprise Bank & Trust (incorporated by reference to Exhibit 10.3 to the Form 10-Q of the Registrant filed May 15, 2018).

31

10.24	Third Amendment to Loan Agreement dated September 11, 2018 among Reliv International, Inc., Reliv, Inc., Reliv World Corporation, and SL Technology, Inc., as Borrowers and Enterprise Bank & Trust (incorporated by reference to Exhibit 10.1 to the Form 10-Q of the Registrant filed November 14, 2018).
10.25	Change in Terms Agreement (revolving credit facility) dated September 11, 2018 among Reliv International, Inc., Reliv, Inc., Reliv World Corporation, and SL Technology, Inc., as Borrowers and Enterprise Bank & Trust (incorporated by reference to Exhibit 10.2 to the Form 10-Q of the Registrant filed November 14, 2018).
10.26	Lease between Registrant (lessor) and Nutracom, LLC (lessee) dated January 1, 2019 (filed herewith).
10.27	Secured Term Note issued by Nutracom, LLC to Registrant dated January 1, 2019 (filed herewith).
10.28	Unsecured Term Note issued by Nutracom, LLC to Registrant dated January 1, 2019 (filed herewith).
10.29	Fourth Amendment to Loan Agreement dated March 25, 2019 among Reliv International, Inc., Reliv, Inc., Reliv World Corporation, and SL Technology, Inc., as Borrowers and Enterprise Bank & Trust (filed herewith)
10.30	Change in Terms Agreement (revolving credit facility) dated March 25, 2019 among Reliv International, Inc., Reliv, Inc., Reliv World Corporation, and SL Technology, Inc., as Borrowers and Enterprise Bank & Trust (filed herewith).
11	Statement re: computation of per share earnings (incorporated by reference to Note 9 of the Consolidated Financial Statements contained in Part IV).
21	Subsidiaries of the Registrant (filed herewith).
23	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm (filed herewith).
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended (filed herewith).
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended (filed herewith).
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
101	Interactive Data Files, including the following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Net Loss and Comprehensive Loss, (iii) the Consolidated Statements of Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to Consolidated Financial Statements.

*Indicates management compensation plan, contract or arrangement.

32

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

RELIV’ INTERNATIONAL, INC.

By:	/s/ Ryan A. Montgomery
	Ryan A. Montgomery, Chief Executive Officer
Date: March 29, 2019
Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By:	/s/ Robert L. Montgomery
	Robert L. Montgomery, Chairman of the Board of Directors
Date: March 29, 2019
By:	/s/ Steven D. Albright
	Steven D. Albright, Chief Financial Officer (and accounting officer)
Date: March 29, 2019
By:	/s/ Ryan A. Montgomery
	Ryan A. Montgomery, Chief Executive Officer, Director
Date: March 29, 2019
By:	/s/ Denis St. John
	Denis St. John, Director
Date: March 29, 2019
By:	/s/ Robert M. Henry
	Robert M. Henry, Director
Date: March 29, 2019
By:	/s/ John M. Klimek
	John M. Klimek, Director
Date: March 29, 2019

33

Reliv’ International, Inc.

and Subsidiaries

Consolidated Financial Statements

Years ended December 31, 2018 and 2017

Contents

Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets as of December 31, 2018 and 2017	F-2
Consolidated Statements of Net Loss and Comprehensive Loss for the years ended December 31, 2018 and 2017	F-4
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2018 and 2017	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2018 and 2017	F-6
Notes to Consolidated Financial Statements – December 31, 2018	F-8

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors

Reliv’ International, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Reliv’ International, Inc. and Subsidiaries (the Company) as of December 31, 2018 and 2017, and the related consolidated statements of net loss and comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.

The Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1991.

St. Louis, Missouri

March 29, 2019

F-1

Reliv’ International, Inc. and Subsidiaries

Consolidated Balance Sheets

	December 31
	2018		2017
Assets
Current assets:
Cash and cash equivalents	$	1,989,974	$	3,272,788
Accounts receivable, less allowances of $5,000 in 2018 and $26,300 in 2017		400,759		29,760
Accounts due from employees and distributors		151,222		138,497
Inventories:
Finished goods		2,460,563		2,762,249
Raw materials		372,865		1,653,466
Sales aids and promotional materials		121,519		139,770
Total inventories		2,954,947		4,555,485
Refundable income taxes		22,712		26,552
Assets held for sale		2,124,939		-
Prepaid expenses and other current assets		441,453		372,602
Total current assets		8,086,006		8,395,684
Other assets		338,974		337,190
Cash surrender value of life insurance		-		3,086,522
Note receivable due from distributor		1,282,072		1,405,113
Intangible assets, net		1,948,263		2,174,248
Property, plant, and equipment		14,420,559		19,055,260
Less accumulated depreciation		9,722,009		13,378,021
Property, plant, and equipment, net		4,698,550		5,677,239
Total assets	$	16,353,865	$	21,075,996

F-2

Reliv’ International, Inc. and Subsidiaries

Consolidated Balance Sheets (continued)

	December 31
	2018			2017
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	3,880,086		$	3,200,018
Income taxes payable		35,304			12,616
Revolving line of credit		-			500,000
Current maturities of long-term debt		-			2,545,421
Total current liabilities		3,915,390			6,258,055
Noncurrent liabilities:
Other noncurrent liabilities		445,611			453,354
Total noncurrent liabilities		445,611			453,354
Stockholders’ equity:
Preferred stock, par value $0.001 per share; 500,000 shares authorized; -0- shares issued and outstanding in 2018 and 2017		-			-
Common stock, par value $0.001 per share; 5,000,000 shares authorized, 2,110,013 shares issued and 1,845,160 shares outstanding in 2018; 2,110,013 shares issued and 1,845,160 shares outstanding in 2017		2,110			2,110
Additional paid-in capital		30,622,547			30,598,920
Accumulated deficit		(12,311,138	)		(10,040,229	)
Accumulated other comprehensive loss:
Foreign currency translation adjustment		(982,095	)		(857,654	)
Treasury stock		(5,338,560	)		(5,338,560	)
Total stockholders’ equity		11,992,864			14,364,587
Total liabilities and stockholders’ equity	$	16,353,865		$	21,075,996

See accompanying notes.

F-3

Reliv’ International, Inc. and Subsidiaries

Consolidated Statements of Net Loss

and Comprehensive Loss

	Year ended December 31
	2018			2017
Product sales	$	33,918,169		$	38,751,357
Handling & freight income		2,197,572			3,037,425
Net sales		36,115,741			41,788,782
Costs and expenses:
Cost of products sold		9,709,743			9,401,406
Distributor royalties and commissions		11,749,604			14,685,553
Selling, general, and administrative		16,520,885			17,885,226
Loss from operations		(1,864,491	)		(183,403	)
Other income (expense):
Interest income		93,054			101,901
Interest expense		(95,556	)		(109,254	)
Other income		61,652			38,844
Loss before income taxes		(1,805,341	)		(151,912	)
Provision for income taxes		98,000			545,000
Net loss available to common shareholders	$	(1,903,341	)	$	(696,912	)
Other comprehensive income (loss):
Foreign currency translation adjustment		(124,441	)		113,551
Comprehensive loss	$	(2,027,782	)	$	(583,361	)
Loss per common share - Basic	$	(1.03	)	$	(0.38	)
Weighted average shares		1,845,000			1,845,000
Loss per common share - Diluted	$	(1.03	)	$	(0.38	)
Weighted average shares		1,845,000			1,845,000

See accompanying notes.

F-4

Reliv’ International, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

										Accumulated
					Additional					Other
	Common Stock				Paid-In		Accumulated			Comprehensive			Treasury Stock
	Shares		Amount		Capital		Deficit			Loss			Shares		Amount			Total
Balance at December 31, 2016		2,110,013	$	2,110	$	30,565,144	$	(9,284,317	)	$	(1,030,205	)		264,853	$	(5,338,560	)	$	14,914,172
Net loss		-		-		-		(696,912	)		-			-		-			(696,912	)
Other comprehensive income (loss):
Foreign currency translation adjustment		-		-		-		-			113,551			-		-			113,551
Income tax effects of Tax Cuts & Jobs Act		-		-		-		(59,000	)		59,000			-		-			-
Total comprehensive loss																			(583,361	)
Stock-based compensation		-		-		33,776		-			-			-		-			33,776
Balance at December 31, 2017		2,110,013		2,110		30,598,920		(10,040,229	)		(857,654	)		264,853		(5,338,560	)		14,364,587
Net loss		-		-		-		(1,903,341	)		-			-		-			(1,903,341	)
Other comprehensive income (loss):
Foreign currency translation adjustment		-		-		-		-			(124,441	)		-		-			(124,441	)
Total comprehensive loss																			(2,027,782	)
Adoption of Accounting Standards Update 2014-09		-		-		-		(367,568	)		-			-		-			(367,568	)
Stock-based compensation		-		-		23,627		-			-			-		-			23,627
Balance at December 31, 2018		2,110,013	$	2,110	$	30,622,547	$	(12,311,138	)	$	(982,095	)		264,853	$	(5,338,560	)	$	11,992,864

See accompanying notes.

F-5

Reliv’ International, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

	Year ended December 31
	2018			2017
Operating activities
Net loss	$	(1,903,341	)	$	(696,912	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		810,442			900,126
Stock-based compensation		23,627			33,776
Non-cash life insurance policy reduction (accretion)		20,329			(120,540	)
(Gain) loss on sale of property, plant and equipment		(684	)		(8,844	)
Deferred income taxes		-			508,000
Foreign currency transaction (gain)/loss		(32,577	)		(20,659	)
(Increase) decrease in accounts receivable and accounts due from employees and distributors		(377,466	)		104,671
(Increase) decrease in inventories		(26,036	)		15,472
(Increase) decrease in refundable income taxes		(3,840	)		70,612
(Increase) decrease in prepaid expenses and other current assets		(75,941	)		107,051
(Increase) decrease in other assets		(1,783	)		(32,102	)
Increase (decrease) in income taxes payable		30,909			12,616
Increase (decrease) in accounts payable & accrued expenses and other non-current liabilities		366,437			(1,030,062	)
Net cash used in operating activities		(1,169,924	)		(156,795	)
Investing activities
Proceeds from sale of property, plant, and equipment		8,522			13,143
Purchase of property, plant, and equipment		(181,343	)		(499,409	)
Proceeds from redemption of life insurance policy		3,066,193			-
Payments received on distributor note receivable		115,892			109,160
Net cash provided by (used in) investing activities		3,009,264			(377,106	)
Financing activities
Proceeds from revolving line of credit borrowings		-			500,000
Principal payments on long-term borrowings		(3,045,421	)		(363,736	)
Net cash provided by (used in) financing activities		(3,045,421	)		136,264
Effect of exchange rate changes on cash and cash equivalents		(76,733	)		63,608
Increase (decrease) in cash and cash equivalents		(1,282,814	)		(334,029	)
Cash and cash equivalents at beginning of year		3,272,788			3,606,817
Cash and cash equivalents at end of year	$	1,989,974		$	3,272,788

F-6

Reliv’ International, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (continued)

	Year ended December 31
	2018		2017
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	99,000	$	99,800
Income taxes paid (received), net	$	66,600	$	(52,500	)

See accompanying notes.

F-7

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2018

1. Nature of Business and Significant Accounting Policies

Nature of Business

Reliv’ International, Inc. (the Company) produces a proprietary line of nutritional supplements addressing basic nutrition, specific wellness needs, weight management, and sports nutrition. These products are sold by subsidiaries of the Company to a sales force of independent distributors of the Company that sell products directly to consumers. The Company and its subsidiaries sell products to distributors throughout the United States and in Australia, Austria, Canada, France, Germany, Ireland, Malaysia, Mexico, the Netherlands, New Zealand, the Philippines, Singapore, and the United Kingdom.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its foreign and domestic subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Cash Equivalents

The Company's policy is to consider the following as cash and cash equivalents: demand deposits and short-term investments with a maturity of three months or less when purchased.

Inventories

Inventories are valued at the lower of cost or market. Product cost includes raw materials, labor, and overhead costs and is accounted for on a first-in, first-out basis. On a periodic basis, the Company reviews its inventory levels, as compared to future demand requirements and the shelf life of the various products. Based on this review, the Company records inventory write-downs when necessary.

Sales aids and promotional materials inventories represent distributor kits, product brochures, and other sales and business development materials which are held for sale to distributors. Cost of the sales aids and promotional materials held for sale are capitalized as inventories and subsequently recorded to cost of goods sold upon recognition of revenue when sold to distributors. All other advertising and promotional costs are expensed when incurred.

F-8

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1. Nature of Business and Significant Accounting Policies (continued)

Property, Plant, and Equipment

Property, plant, and equipment are stated on the cost basis. Depreciation is computed using the straight-line or an accelerated method over the useful life of the related assets. Generally, computer equipment and software are depreciated over 3 to 5 years, office equipment and machinery over 7 years, and real property over 39 years.  

Foreign Currency Translation and Transaction Gains or Losses

All balance sheet accounts have been translated using the exchange rates in effect at the balance sheet date. Statements of net income (loss) amounts have been translated using the average exchange rate for the year. The gains and losses resulting from the changes in exchange rates from year to year have been reported in other comprehensive income (loss). The foreign currency translation adjustment is the only component of accumulated other comprehensive loss. If applicable, foreign currency translation adjustments exclude income tax expense (benefit) as certain of the Company’s investments in non-U.S. subsidiaries are deemed to be reinvested for an indefinite period of time. Foreign currency transaction gains (losses) were $32,577 and $20,659 for 2018 and 2017, respectively.

Basic and Diluted Earnings (Loss) per Share

Basic earnings (loss) per common share are computed using the weighted average number of common shares outstanding during the year. Diluted earnings (loss) per common share are computed using the weighted average number of common shares and potential dilutive common shares that were outstanding during the period. Potential dilutive common shares consist of outstanding stock options, outstanding stock warrants, and convertible preferred stock. See Note 9 for additional information regarding earnings (loss) per share.

Stock-Based Compensation

The Company has stock-based incentive plans under which it may grant stock option, restricted stock, and unrestricted stock awards. The Company recognizes stock-based compensation expense based on the grant date fair value of the award and the related vesting terms. Depending upon the characteristics of the option, the fair value of stock-based awards is primarily determined using the Black-Scholes model, which incorporates assumptions and management estimates including the risk-free interest rate, expected volatility, expected option life, and dividend yield. The Company recognizes forfeitures when incurred. See Note 8 for additional information.

The Company accounts for options granted to non-employees and warrants granted to distributors under the fair value approach required by FASB ASC Topic 505-50, “Equity Based Payments to Non-Employees.”

F-9

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1. Nature of Business and Significant Accounting Policies (continued)

Fair Value Measurements

FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements required under other accounting pronouncements. See Note 6 for further discussion.

Income Taxes

The provision for income taxes is computed using the liability method. The primary differences between financial statement and taxable income result from financial statement accruals and reserves and differences between depreciation and amortization for book and tax purposes.

Unrecognized tax benefits are accounted for as required by FASB ASC Topic 740 which prescribes a more likely than not threshold for financial statement presentation and measurement of a tax position taken or expected to be taken in a tax return. See Note 12 for further discussion.

Advertising

Costs of sales aids and promotional materials are capitalized as inventories. All other advertising and promotional costs are expensed when incurred. The Company recorded $19,300 and $22,300 of advertising expense in 2018 and 2017, respectively.

Research and Development Expenses

Research and development expenses, which are charged to selling, general, and administrative expenses as incurred, were $473,000 and $488,000 in 2018 and 2017, respectively.

Amortizable Intangible Assets

The Company records intangible assets based on management’s determination of the fair value of the respective assets at the time of acquisition. Determining the fair value of intangible assets is judgmental and involves the use of significant estimates and assumptions of future company operations. The Company bases its fair value estimates and related asset lives on assumptions it believes to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from these estimates.

Intangible assets estimated to have finite lives are amortized over their estimated economic life under the straight-line method; such method correlates to management’s estimate of the assets’ economic benefit. Based on management’s estimates at origination, these lives range from two to seventeen years. Related amortization expense is presented within Selling, General, and Administrative in the accompanying consolidated statements of net loss and comprehensive loss. As of December 31, 2018, remaining lives of intangible assets range from six to eleven years.

F-10

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1. Nature of Business and Significant Accounting Policies (continued)

Revenue Recognition 

On January 1, 2018, the Company adopted Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (including amendments), and applied the new revenue standard to all contracts using the modified retrospective method. Under this method, prior periods are not restated. Upon adoption, the Company recognized the cumulative effect of applying the new revenue standard as a reduction of $367,568 (with zero net tax effect) to the opening retained earnings (accumulated deficit) balance.

The new revenue standard defines a five step process to recognize revenues. The Company accounts for a contract with its independent distributors (including customers) when there is a legally enforceable contract, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. Product sales revenue (principally nutritional and dietary supplements) and commission expenses are recorded when control is transferred to independent distributors, which occurs at the time of shipment. Generally, net sales reflect product sales less the distributor discount of 20 percent to 40 percent of the suggested retail price. The Company presents distributor royalty and commission expense as an operating expense, rather than a reduction to net sales, as these payments are not made to the purchasing distributor. At point of sale, the Company receives payment by credit card, personal check, or guaranteed funds for contracts from independent distributors and makes related commission payments in the following month.

Under this new revenue standard, the Company determined that the timeframe for recognizing the revenue performance obligation for membership fees-type revenue would be lengthened to more closely correlate with the distributor (including customer) membership terms of generally twelve months. Based upon all membership fees contracts still in existence as of December 31, 2017, the adoption of the new revenue standard resulted in the recognition of a deferred revenue liability balance of $367,568. The Company receives payment for membership fees at the beginning of the annual membership term and recognizes membership fees revenue on a straight-line basis in correlation with the completion of its performance obligation under the membership term. At December 31, 2018, the deferred revenue liability balance was $337,234.

Actual and estimated sales returns are classified as a reduction of net sales. The Company estimates and accrues a reserve for product returns based on the Company’s return policy and historical experience. The Company’s return policy allows for distributors to return product only upon termination of his or her distributorship. Allowable returns are limited to saleable product which was purchased within twelve months of the termination for a refund of 100% of the original purchase price less any distributor royalties and commission received relating to the original purchase of the returned products. For the years ended December 31, 2018 and 2017, total returns as a percent of net sales were approximately 0.17% and 0.25%, respectively.

F-11

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1. Nature of Business and Significant Accounting Policies (continued)

Revenue Recognition (continued)

The Company records handling and freight income as a component of net sales and records handling and freight costs as a component of cost of products sold. Total net sales do not include sales tax as the Company considers itself a pass-through conduit for collecting and remitting applicable sales taxes.

In accordance with the new revenue standard requirements, the disclosure of the impact of adoption to the Company’s results from operations are as follows:

	Year Ended December 31, 2018
				Without			Effect of
				Adoption of			Change
	As Reported			ASU 2014-09			Higher/(Lower)
Operating results
Net sales	$	36,115,741		$	36,086,633		$	29,108
Net loss		(1,903,341	)		(1,932,449	)		29,108

The Company does not anticipate that the adoption of the new revenue standard will be material to net sales and net income on an ongoing basis.

New Accounting Pronouncements – Not Yet Adopted

In February 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-02, Leases (Topic 842) which supersedes the existing lease guidance. This update requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. Subsequent to its issuance of ASU No. 2016-02, the FASB issued related ASU’s, including ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which provides for another transition method in addition to the modified retrospective approach originally required by ASU No. 2016-02. This transition method option under ASU No. 2018-11 allows entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

As required, the Company will adopt ASU 2016-02 on January 1, 2019. The Company anticipates applying certain practical expedients permitted in the standard, as well as the prospective transition method. The Company’s adoption of this new lease standard will result in the January 1, 2019 recognition of right-of-use assets and lease liabilities of approximately $460,000 in the Company’s consolidated financial statements. The Company leases certain office facilities, storage, and equipment.

F-12

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1. Nature of Business and Significant Accounting Policies (continued)

Going Concern

The Company has incurred operating losses, declining net sales, and negative net cash flows over its most recent five years. Management estimates that these unfavorable trends are more likely than not to continue for the foreseeable future, and as a result, the Company will require additional financial support to fund its operations and execute its business plan. As of December 31, 2018, the Company had $1,989,974 in cash and cash equivalents which may not be sufficient to fund the Company’s planned operations through one year after the date the consolidated financial statements are issued, and accordingly, there is substantial doubt about the Company’s ability to continue as a going concern. The analysis used to determine the Company’s ability to continue as a going concern does not include cash sources outside of the Company’s direct control that management expects to be available within the next twelve months.

The Company may not be able to obtain sufficient additional funding through monetizing certain of its existing assets, sourcing additional borrowings, and issuing additional equity, or any other means, and if it is able to do so, these available sources of funds may not be on satisfactory terms. The Company’s ability to raise additional capital in the equity markets, should the Company choose to do so, is dependent on a number of factors, including, but not limited to, the market demand for the Company’s common stock, which itself is subject to a number of business risks and uncertainties, as well as the uncertainty that the Company would be able to raise such additional capital at a price or on terms that are favorable to the Company

The Company has taken several steps which management believes will result in an improved financial position, operating results, and cash flows. As detailed in Note 7 of these consolidated financial statements, in January 2019, the Company has borrowed $500,000 of its available $750,000 revolving line of credit balance. In March 2019, the Company and its lender have agreed to extend its available $750,000 revolving line of credit agreement to April 28, 2020.

As detailed in Note 2 of these consolidated financial statements, in January 2019, the Company entered into a Purchase Agreement with Nutracom, LLC (Nutracom) pursuant to which Nutracom purchased the assets used by the Company in its manufacturing operations. Assets purchased by Nutracom from the Company were financed by the Company under payment terms scheduled to provide incoming funds to the Company of $200,000 or more per year. The Company has also entered into an agreement for Nutracom to lease a significant portion of the Company’s headquarters building. Management believes that these transactions with Nutracom will be favorable to its financial position, operating results, and cash flows; however, there are risks and uncertainties which arise with these Nutracom transactions and their impact to the Company’s operations.

F-13

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1. Nature of Business and Significant Accounting Policies (continued)

Going Concern (continued)

Should the aforementioned changes to the company’s operations not provide sufficient cash flow improvement or should the Company be unable to obtain sufficient additional capital or borrowings, the Company may have to engage in any or all of the following activities: (i) seek to monetize its headquarters building via traditional bank lending or a sale and leaseback-type transaction; (ii) monetizing its note receivable from a distributor (see Note 11); (iii) restructure its core distributor business model including recruiting, promotions, incentives, and other activities; (iv) cease operations in certain geographic regions, and (v) reduce employee compensation and benefits.

These actions may have a material adverse impact on the Company’s ability to achieve certain of its planned objectives. Even if the Company is able to source additional funding, it may be forced to significantly reduce its operations if its business operating performance does not improve. If the Company is unable to source additional funding, it may be forced to significantly reduce or shut down its operations. These consolidated financial statements have been prepared on a going concern basis and do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary in the event the Company can no longer continue as a going concern.

2. Assets Held For Sale

On January 1, 2019, the Company entered into a Purchase Agreement with Nutracom, LLC (Nutracom) pursuant to which Nutracom purchased the following assets used by the Company in its manufacturing operations:

● Inventories (sold at cost of $1.56 million) and,

● Machinery and other equipment with a net book value of $565,000 (sold for $1 million; gain on disposal of $435,000).

Nutracom was formed by the Company’s manufacturing operations management which included former officers of the Company. Employees of the Company’s manufacturing operations were offered employment by Nutracom.

Prior to its approval of the transaction, the Company’s Board of Directors formed a special committee consisting of the Company’s independent directors to review the transaction. To assist in its review, the special committee engaged a qualified third-party expert to opine a fairness opinion on the transaction and related agreements as detailed below.

F-14

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

2. Assets Held For Sale (continued)

Concurrently with the execution of the Purchase Agreement, the Company entered into several agreements with Nutracom including a product supply agreement for a term of seven years, a fulfillment agreement, and a facility lease agreement whereby Nutracom will lease manufacturing, warehouse, and certain office space of the Company’s headquarters building from the Company for a term of seven years, with a Nutracom option for an additional five-year term. Annual lease amounts range from $193,000 to $410,000 per year over the seven-year term.

Nutracom provided the following consideration to the Company for the manufacturing operations and related identified assets and agreements:

● $1 million secured promissory note, seven year term, fixed interest rate of 5.5%, principal and interest payable monthly;

● $764,344 unsecured promissory note, seven year term, fixed interest rate of 7.0%, interest only payable for the first two years with monthly payment of principal and interest thereafter under a ten-year amortization schedule. The face value of the unsecured note includes the first year’s rent due the Company under the facility lease agreement.

● Nutracom management transferred to the Company its ownership of 99,200 shares of the Company’s common stock valued at $540,144.

● Nutracom issued to the Company a non-voting Class B 15% equity membership interest in Nutracom, LLC. The Class B interest does not share in any profits or losses from operations of Nutracom. As defined within the Nutracom Operating Agreement, upon any merger, consolidation, disposition, or liquidation of Nutracom, the Class B equity membership interest converts to a Class A equity membership interest.

● Commencing January 1, 2020, the Company’s Class B interest will be entitled to receive a percentage, (ranging from 1.0% to 1.25%) of Nutracom’s annual revenues (excluding Nutracom’s revenues from sales to the Company).

The Company’s non-voting Class B 15% equity membership interest in Nutracom was valued by the aforementioned third-party expert at $505,000. As the Company’s non-voting membership interest does not participate in the management of Nutracom, nor does the Company share in any Nutracom operating profits or losses, the Company anticipates accounting for its Nutracom equity investment under the cost method.

As of December 31, 2018, the Company has presented inventories and machinery and other equipment sold to Nutracom as a current asset under the caption of “Assets held for sale” in the accompanying consolidated balance sheets. The Company will account for the Nutracom transactions in its first quarter 2019 financial results.

F-15

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

3. Property, Plant, and Equipment

Property, plant, and equipment at December 31, 2018 and 2017, consist of the following:

	2018		2017
Land and land improvements	$	905,190	$	905,190
Building		9,964,523		9,950,190
Machinery and equipment		180,519		4,755,727
Office equipment		1,157,392		1,183,115
Computer equipment and software		2,212,935		2,261,038
		14,420,559		19,055,260
Less accumulated depreciation		9,722,009		13,378,021
	$	4,698,550	$	5,677,239

At December 31, 2018, approximately $0.56 million of net property, plant, and equipment (cost $4.70 million; $4.14 million accumulated depreciation) is presented as “Assets held for sale” in the accompanying consolidated balance sheets. See Note 2 for further discussion.

For the years ended December 31, 2018 and 2017, depreciation expense was $584,457 and $674,141, respectively.

4. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses at December 31, 2018 and 2017, consist of the following:

	2018		2017
Trade payables	$	2,105,814	$	1,667,495
Distributors' commissions		1,030,948		1,115,649
Sales taxes		195,802		154,958
Deferred revenue		337,234		-
Payroll and payroll taxes		210,288		261,916
	$	3,880,086	$	3,200,018

F-16

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

5. Amortizable Intangible Assets

The Company had amortizable intangible assets as follows as of December 31, 2018 and 2017:

					Accumulated
	Gross Carrying Amount				Amortization
	2018		2017		2018		2017
Distributorship and related agreements	$	2,060,000	$	2,060,000	$	1,437,423	$	1,327,556
Lunasin technology license		1,954,661		1,954,661		628,975		512,857
	$	4,014,661	$	4,014,661	$	2,066,398	$	1,840,413

Amortization expense for intangible assets totaled $225,985 in each of 2018 and 2017, respectively. Amortization expense for amortizable intangible assets over the next five years is estimated to be:

	Intangible
	Amortization
2019	$	226,000
2020		226,000
2021		226,000
2022		226,000
2023		226,000

6. Fair Value of Financial Instruments

The carrying amount and fair value of financial instruments at December 31, 2018 and 2017 were approximately as follows:

	Carrying		Fair
Description	Amount		Value		Level 1		Level 2		Level 3
December 31, 2018
Note receivable	$	1,405,112	$	1,529,000		-	$	1,529,000		-
Marketable securities		339,000		339,000	$	339,000		-		-
December 31, 2017
Long-term debt	$	3,045,421	$	3,045,421		-	$	3,045,421		-
Note receivable		1,521,005		1,684,000		-		1,684,000		-
Marketable securities		330,000		330,000	$	330,000		-		-

F-17

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

6. Fair Value of Financial Instruments (continued)

Fair value can be measured using valuation techniques such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). Accounting standards utilize a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those levels:

Level 1:	Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:	Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets or similar assets or liabilities in markets that are not active.
Level 3:	Unobservable inputs that reflect the reporting entity’s own assumptions.

Long-term debt: The fair value of the Company’s term and revolver loans approximated carrying value as these loans had variable market-based interest rates that reset every thirty days.

Note receivable: The Company’s note receivable is a variable rate residential mortgage-based financial instrument. An average of published interest rate quotes for a fifteen-year residential jumbo mortgage, a comparable financial instrument, was used to estimate fair value of this note receivable under a discounted cash flow model.

Marketable securities: The assets (trading securities) of the Company’s Supplemental Executive Retirement Plan are recorded at fair value on a recurring basis, and are presented within Other Assets in the consolidated balance sheets.

The carrying value of other financial instruments, including cash, accounts receivable and accounts payable, and accrued liabilities approximate fair value due to their short maturities or variable-rate nature of the respective balances.

7. Debt

Debt at December 31, 2018 and 2017 consists of the following:

	2018		2017
Term loan	$	-	$	2,545,421
Revolving line of credit		-		500,000
		-		3,045,421
Less current maturities		-		3,045,421
Long-term portion	$	-	$	-

F-18

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

7. Debt (continued)

Effective September 30, 2015, the Company entered into a series of lending agreements with a new primary lender which included agreements for a $3.25 million term loan and $3.5 million revolving credit facility. These lending agreements replaced similar borrowings under agreements with the Company’s former primary lender.

The $3.25 million term loan was for a period of three years and required monthly term loan payments, under a ten-year amortization, consisting of principal of $27,080 plus interest with a balloon payment for the outstanding balance due and payable on September 30, 2018. The term loan’s interest rate was based on the 30-day LIBOR plus 2.25%.

The $3.5 million revolving line of credit agreement, originally dated September 30, 2015, and subsequently amended and extended, accrues interest at a floating interest rate based on the 30-day LIBOR plus 2.25% and had an original term of one year.

At June 30, 2018, the Company was current on all principal and interest due to its lender. In July 2018, management voluntarily elected to redeem the cash surrender value (CSV) of the Company’s whole life insurance policy maintained on the life of the Company’s Board of Directors’ Chairman and former Chief Executive Officer. Upon redemption and related receipt of the $3.07 million CSV proceeds, the Company simultaneously remitted to its lender $2.86 million of the CSV proceeds to be applied towards the full reduction of its outstanding term loan and revolver balances. Following this series of July 2018 transactions, the balances of the Company’s term loan, revolver loan, and life insurance policy balances were zero.

Effective with a September 11, 2018 amendment, the revolving line of credit’s maximum borrowing amount was reduced from $2.0 million to $750,000. As amended, the revolver’s maturity date remained April 29, 2019 and the revolver’s interest rate continued to be based on the 30-day LIBOR plus 2.25%. As of December 31, 2018, there were no outstanding borrowings on the revolving line of credit. In January 2019, the Company borrowed $500,000 under its revolving line of credit.

Effective with a March 2019 amendment, the revolving line of credit’s maturity date was extended to April 28, 2020 and the interest rate was revised to the 30-day LIBOR plus 3.00%. As amended, the revolver’s maximum borrowing amount remains $750,000.

Borrowings under the lending agreement are secured by all tangible and intangible assets of the Company and by a mortgage on the real estate of the Company’s headquarters. At December 31, 2018, the Company was in compliance with its loan covenant requirements.

F-19

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

8. Stockholders’ Equity

Stock Options – Incentive Stock Plans

The Company sponsors an incentive stock plan (the “2014 Plan”) allowing for a maximum of 142,857 shares to be granted in the form of either incentive stock options, non-qualified stock options, restricted stock awards, or unrestricted stock awards. Employees, directors, advisors, and consultants of the Company are eligible to receive the grants. This plan has been approved by the stockholders of the Company. The Compensation Committee of the Board of Directors administers the plan.

The 2014 Plan provides that options may be issued under the Plan at an option price not less than fair market value of the stock at the time the option is granted. Under the plan, restricted stock of the Company may be granted at no cost to the grantee. The grantees are entitled to dividends and voting rights for their respective shares. Restrictions limit the sale or transfer of these shares during the requisite service period. In addition, the committee may grant or sell unrestricted stock at a purchase price to be determined by the committee. Vesting terms and restrictions, if applicable, under the plan, are set by the committee and will be 10 years or less. The 2014 Plan expires in 2024.

In May 2017, the Company’s shareholders voted to approve a 2017 Incentive Stock Plan (2017 Plan) which authorizes the issuance of up to 200,000 shares of the Company’s common stock in various forms of stock options and/or stock awards. The 2017 Plan will not become effective until registered with the Securities and Exchange Commission.

A summary of the Company’s stock option activity and related information for the years ended December 31 follows:

	2018					2017
	Options			Weighted Avg. Exercise Price		Options			Weighted Avg. Exercise Price
Outstanding beginning of the year		140,424		$	7.85		236,844		$	$8.14
Granted		-					-
Exercised		-					-
Expired and forfeited		(58,998	)		7.96		(96,420	)		8.57
Outstanding at end of year		81,426		$	7.77		140,424		$	7.85
Exercisable at end of year		14,655		$	7.77		13,713		$	7.77

Compensation cost for the stock option plan was approximately $21,000 ($21,000 net of tax) and $27,000 ($27,000 net of tax) for the years ended December 31, 2018 and 2017, respectively, and has been recorded in selling, general, and administrative expense. As of December 31, 2018, the total remaining unrecognized compensation cost related to the non-vested portion of time vesting stock options totaled $19,000 ($19,000 net of tax), which will be amortized over the weighted remaining requisite service period of 1.17 years. The aggregate intrinsic value of stock options outstanding and currently exercisable at December 31, 2018 was $-0-.

F-20

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

8. Stockholders’ Equity (continued)

Distributor Stock Purchase Plan

In July 2009, the Company established a Distributor Stock Purchase Plan (2009 Plan) which replaced a similar plan which had expired.

The plan allows distributors who have reached the “Ambassador” status the opportunity to allocate up to 10% of their monthly compensation into the plan to be used to purchase the Company’s common stock at the current market value. The plan also states that at the end of each year, the Company will grant warrants to purchase additional shares of the Company’s common stock based on the number of shares purchased by the distributors under the plan during the year. The warrant exercise price will equal the market price for the Company’s common stock at the date of issuance. The warrants issued shall be in the amount of 25% of the total shares purchased under the plan during the year and the warrants are fully vested upon grant.

The Company records expense under the fair value method for warrants granted to distributors. Total expense for the warrants was $3,000 and $6,600 in 2018 and 2017, respectively.

A summary of the Company’s warrant activity for the years ended December 31 follows:

	2018					2017
	Warrants			Weighted Avg. Exercise Price		Warrants			Weighted Avg. Exercise Price
Outstanding beginning of the year		5,960		$	4.46		6,291		$	5.34
Granted		1,113			4.24		1,258			4.77
Exercised		-					-
Expired		(2,183	)		4.06		(1,589	)		8.19
Outstanding at end of year		4,890		$	4.58		5,960		$	4.46
Exercisable at end of year		4,890					5,960

			As of December 31, 2018
			Warrants Outstanding and Exercisable
Range of Exercise Prices			Warrants		Weighted Avg. Exercise Price		Weighted Avg. Remaining Life
	$4.24			1,113	$	4.24		3.00
	$4.64			2,519		4.64		1.00
	$4.77			1,258		4.77		2.00
$4.24	-	$4.77		4,890	$	4.58		1.71

F-21

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

8. Stockholders’ Equity (continued)

Distributor Stock Purchase Plan (continued)

The fair value of the warrants was estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions:

	Year ended December 31
	2018			2017
Expected warrant life (years)		3.0			3.0
Risk-free weighted average interest rate		2.46	%		1.98	%
Stock price volatility		55.8	%		73.8	%
Dividend yield		0.0	%		0.0	%

The intrinsic value for stock warrants outstanding at December 31, 2018 was $-0-.

The 2009 Distributor Stock Purchase Plan was established with a ten-year life. As a result, there will be no further grants from this Plan. Upon exercise, forfeiture or expiration of all outstanding warrants, the Plan will terminate.

9. Loss per Share

The following table sets forth the computation of basic and diluted loss per share:

	Year ended December 31
	2018			2017
Numerator:
Net loss	$	(1,903,341	)	$	(696,912	)
Denominator:
Denominator for basic loss per share – weighted average shares		1,845,000			1,845,000
Dilutive effect of employee stock options and other warrants		-			-
Denominator for diluted loss per share – adjusted weighted average shares		1,845,000			1,845,000
Basic loss per share	$	(1.03	)	$	(0.38	)
Diluted loss per share	$	(1.03	)	$	(0.38	)

For the years ended December 31, 2018 and 2017, options and warrants totaling 86,316 and 146,384, respectively, shares of common stock were not included in the denominator for diluted loss per share because their effect would be anti-dilutive or because the shares were deemed contingently issuable.

F-22

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

10. Leases

The Company leases certain office facilities, storage, and equipment. These leases have varying terms, and certain leases have renewal and/or purchase options. Future minimum payments under non-cancelable leases with initial or remaining terms in excess of one year consist of the following at December 31, 2018:

2019	$	268,652
2020		186,168
2021		16,479
2022		16,479
2023		6,681
Thereafter		-
	$	494,459

Rent expense for operating leases was $326,724 and $338,734 for the years ended December 31, 2018 and 2017, respectively.

11. Note Receivable Due From Distributor

In March 2012, the Company purchased a note and mortgage (“Note”) from a real estate investment management firm on certain properties in Wyoming and Idaho for $2 million. In May 2012, the Company entered into a Loan Modification Agreement (“LMA”) with the Note’s original and present borrower (“Borrower”) to restructure the Note’s principal amount due and related terms. The LMA terms are for a principal balance due of $2 million with interest only payments made monthly in 2012. The LMA’s interest rate is the greater of 6% or prime and there is no prepayment penalty for voluntary principal payments. Concurrently, with the execution of the LMA, the Company and the Borrower also entered into a Security Agreement in which repayment of the LMA is secured by the Borrower’s Reliv distributorship business.

As originally structured, beginning in 2013, the LMA was to require monthly payment of principal and interest under a five-year amortization period. In February 2013, while retaining the Company’s right to require Borrower’s compliance with the LMA’s terms, the Company and the Borrower agreed to a verbal modification in the payment schedule in which the Company agreed to accept monthly payments of principal and interest under a fifteen-year amortization period. The outstanding balance of the note receivable was $1,405,112 and $1,521,005 as of December 31, 2018 and 2017, respectively.

F-23

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

12. Income Taxes

Compenents of loss before income taxes:	Year ended December 31
	2018			2017
United States	$	(1,694,301	)	$	(30,606	)
Foreign		(111,040	)		(121,306	)
	$	(1,805,341	)	$	(151,912	)

Compenents of provision (benefit) for income taxes:	Year ended December 31
	2018			2017
Current:
Federal	$	(3,000	)	$	(2,000	)
State		4,000			5,000
Foreign		97,000			33,000
Total current		98,000			36,000
Deferred:
Federal		-			-
State		-			-
Foreign		-			509,000
Total deferred		-			509,000
	$	98,000		$	545,000

F-24

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

12. Income Taxes (continued)

The provision (benefit) for income taxes is different from the amounts computed by applying the United States federal statutory income tax rate of 21% and 34% for the years ended December 31, 2018 and 2017, respectively. The reasons for these differences are as follows:

	Year ended December 31
	2018			2017
Income taxes at U.S. statutory rate	$	(379,000	)	$	(52,000	)
State income taxes, net of federal benefit		7,000			11,000
Higher/(lower) effective taxes on earnings/losses in foreign countries		38,000			(65,000	)
Foreign corporate income taxes		97,000			33,000
Foreign tax credit carryover		-			(66,000	)
Life insurance settlement		118,000			-
GILTI		34,000			-
Nondeductible meals and entertainment expense		9,000			13,000
Valuation allowance, net		186,000			707,000
Other		(12,000	)		(36,000	)
	$	98,000		$	545,000

The Company has determined that it was more likely than not that its U.S. federal and various state net operating losses will not be realized based on projections of future U.S. taxable income, estimated reversals of existing taxable timing differences, and other considerations. Accordingly, the 2018 and 2017 income tax provisions include the impact of recording a full deferred tax asset valuation allowance of approximately $186,000 and $198,000, respectively, against the annual losses generated from a U.S. tax perspective. The Company has a deferred tax asset relating to domestic federal net operating loss carryforwards of approximately $451,000 at December 31, 2018 of which approximately $188,000 will expire between 2036 and 2037. The Company has a deferred tax asset of $3,118,000 at December 31, 2018 relating to foreign net operating loss carryforwards in various jurisdictions which principally do not expire. At December 31, 2018, the Company has recorded a full valuation allowance against all domestic and foreign net operating loss carryforward balances as it is more likely than not that this asset will not be realized.

As of December 31, 2017, management’s assessment of the realizability of its Europe’s subsidiary’s deferred tax assets concluded that it no longer meets the threshold of more likely than not based upon the subsidiary’s recent declining operating results. Accordingly, the Company recorded a full valuation allowance against the Europe subsidiary’s deferred tax assets with a corresponding deferred income tax charge of $509,000 in 2017.

F-25

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

12. Income Taxes (continued)

The components of the deferred tax assets and liabilities, and the related tax effects of each temporary difference at December 31, 2018 and 2017, are as follows:

	2018			2017
Deferred tax assets:
Inventory obsolescence reserve	$	53,000		$	62,000
Product refund reserve		-			7,000
Deferred revenue		91,000			-
Organization costs		117,000			127,000
Deferred compensation		97,000			94,000
Depreciation and amortization		2,000			-
Miscellaneous accrued expenses		23,000			13,000
Domestic net operating loss carryforwards		451,000			186,000
Foreign net operating loss carryforwards		3,118,000			3,413,000
Valuation allowance		(3,845,000	)		(3,767,000	)
		107,000			135,000
Deferred tax liabilities:
Depreciation and amortization		-			28,000
Foreign currency exchange		107,000			107,000
		107,000			135,000
Net deferred tax assets (liabilities)	$	-		$	-

The United States Tax Cuts and Jobs Act (TCJA) was enacted in December 2017, which significantly changed U.S. tax law, principally by permanently reducing the U.S. federal statutory rate to 21% effective January 1, 2018, implementing a territorial tax system, and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The effect of the federal tax rate reduction to 21% was reflected as a reduction in the December 31, 2017 U.S. deferred tax asset balances with a corresponding reduction in the valuation allowance. Under the TCJA’s repatriation tax, the Company’s cumulative amount of unremitted foreign earnings and related tax was immaterial.

Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) 118 to provide guidance to companies on the reporting of the impacts of TCJA in their financial statements. Under SAB 118, the Company recorded affected items in fiscal year 2017 as provisional to allow additional time for clarifying technical guidance from Treasury and analysis of the effect to the Company’s current tax positions. In 2018, the Company has completed its analysis and did not record any adjustments to its 2017 provisional income tax amounts.

The TCJA introduced a new tax on global intangible low-taxed income (“GILTI”) effective as of January 1, 2018. The Company’s policy is to treat GILTI as a period cost when incurred.

F-26

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

12. Income Taxes (continued)

At December 31, 2018 and 2017, the Company had $32,000 and $36,000, respectively, of cumulative unrecognized tax benefits, of which only the net amount of $22,000 would impact the effective income tax rate if recognized.

The aggregate changes in the balance of net unrecognized tax benefits were as follows:

	2018			2017
Beginning of year	$	26,000		$	32,000
Settlements and effective settlements with tax authorities		-			-
Lapse of statute of limitations		(7,000	)		(6,000	)
Decrease to tax positions taken during prior periods		(3,000	)		(6,000	)
Increase to tax positions taken during current period		6,000			6,000
End of year	$	22,000		$	26,000

The Company applied applicable accounting guidance relating to accounting for uncertainty in income taxes. Reserves for uncertainty in income taxes are adjusted quarterly in light of changing facts and circumstances, such as the progress of tax audits, case law, and emerging legislation. The primary difference between gross unrecognized tax benefits and net unrecognized tax benefits is the U.S. federal tax benefit from state tax deductions. It is the Company’s practice to recognize interest and / or penalties related to income tax matters in income tax expense.

At December 31, 2018 and 2017, the Company had $10,000 and $11,000, respectively, accrued for interest and penalties within the balance of unrecognized tax benefits. The Company’s unrecognized tax benefits balance is included within other noncurrent liabilities on the consolidated balance sheets.

The Company, including its domestic and foreign subsidiaries, is subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. The Company has concluded all U.S. federal income tax matters for years through 2014 and concluded years through 2014 with its primary state jurisdiction.

One of the Company’s foreign subsidiaries is presently under local country audit for alleged deficiencies (totaling approximately $800,000 plus interest at 20% per annum) in value-added tax (VAT) and withholding tax for the years 2004 through 2006. The Company, in consultation with its legal counsel, believes that there are strong legal grounds that it should not be liable to pay the majority of the alleged tax deficiencies. As of December 31, 2010, management estimated and reserved approximately $185,000 for resolution of this matter and recorded this amount within Selling, General, and Administrative expense in the 2010 Consolidated Statement of Income. In 2011, the Company made good faith deposits to the local tax authority under the tax agency’s administrative judicial resolution process. As of December 31, 2018, management’s estimated reserve (net of deposits) for this matter is approximately $172,500.

F-27

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

13. Employee Benefit Plans

The Company sponsors a 401(k) employee savings plan which covers substantially all employees. Employees can contribute up to 15% of their gross income to the plan. The Company matched a percentage of the employee’s contribution at a rate of 10% for the years ended December 31, 2018, and 2017, respectively. Company contributions under the 401(k) plan totaled $36,800 and $35,400 in 2018 and 2017, respectively.

The Company sponsors an employee stock ownership plan ("ESOP") which covers substantially all U.S. employees. Contributions to the ESOP are funded by the Company on a discretionary basis. In 2018 and 2017, the Company did not make any contributions to the ESOP.

14. Incentive Compensation Plans

Under a Board of Directors approved incentive compensation plan, bonuses are payable quarterly in an amount not to exceed 18% of the Company’s Income from Operations for any period, subject to the Company achieving a minimum quarterly Income from Operations of at least $500,000. For fiscal years 2018 and 2017, the Board determined that the aggregate amount of incentive compensation available under the Plan shall be equal to 18% of the Company’s Income from Operations. The bonus pool is allocated to executives according to a specified formula, with a portion allocated to a middle management group determined by the Executive Committee of the Board of Directors. The Company expensed a total of $-0- and $109,500 to the participants of the bonus pool for 2018 and 2017, respectively.

The Company sponsors a Supplemental Executive Retirement Plan (SERP) to allow certain executives to defer a portion of their annual salary and bonus into a grantor trust. A grantor trust was established to hold the assets of the SERP. The Company funds the grantor trust by paying the amount deferred by the participant into the trust at the time of deferral. Investment earnings and losses accrue to the benefit or detriment of the participants. The SERP also provides for a discretionary matching contribution by the Company not to exceed 100% of the participant’s annual contribution. In 2018 and 2017, the Company did not provide a match. The participants fully vest in the deferred compensation three years from the date they enter the SERP. The participants are not eligible to receive distribution under the SERP until retirement, death, or disability of the participant. At December 31, 2018 and 2017, SERP assets were $339,000 and $330,000, respectively, and are included in “Other Assets” in the accompanying consolidated balance sheets. At December 31, 2018 and 2017, SERP liabilities were $341,000 and $332,000, respectively, and are included in “Other Non-Current Liabilities” in the accompanying consolidated balance sheets. The changes in the balances of SERP assets and SERP liabilities during 2018 and 2017 were due to net realized and unrealized investment gains/losses incurred by the plan.

F-28

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

15. Segment Information

Description of Products and Services by Segment

The Company operates in one reportable segment, a network marketing segment consisting of six operating units that sell nutritional and dietary products to a sales force of independent distributors that sell the products directly to customers. These operating units are based on geographic regions. Geographic area data for the years ended December 31, 2018 and 2017 follow:

	2018		2017
Net sales to external customers
United States	$	27,673,352	$	32,474,797
Australia/New Zealand		732,227		922,594
Canada		718,560		914,775
Mexico		474,372		445,299
Europe (1)		3,972,381		4,578,095
Asia (2)		2,544,849		2,453,222
Total net sales	$	36,115,741	$	41,788,782
Assets by area
United States	$	13,584,424	$	18,100,872
Australia/New Zealand		540,591		572,368
Canada		166,533		265,629
Mexico		179,713		219,501
Europe (1)		867,008		1,032,641
Asia (2)		1,015,596		884,985
Total consolidated assets	$	16,353,865	$	21,075,996

(1)	Europe consists of United Kingdom, Ireland, France, Germany, Austria, and the Netherlands.
(2)	Asia consists of Philippines, Malaysia, and Singapore.

The Company classifies its sales into two categories of sales products plus handling & freight income. Net sales by product category data for the years ended December 31, 2018 and 2017, follow:

	2018		2017
Net sales by product category
Nutritional and dietary supplements	$	32,670,362	$	37,326,863
Sales aids, membership fees, and other		1,247,807		1,424,494
Handling & freight income		2,197,572		3,037,425
Total net sales	$	36,115,741	$	41,788,782

F-29

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

16. Restructuring Activities

In April 2018, the Company announced the June 30, 2018 closing of the operations of its Reliv Indonesia subsidiary. The total cost of this program, primarily representing employee severance costs, facility exit costs, and a write-down of inventory to its net realizable value, was approximately $77,000, and was included in the company’s operating results for the second quarter ended June 30, 2018. At December 31, 2018, this program has been substantially completed.

17. Subsequent Events

On January 1, 2019, the Company entered into a Purchase Agreement with Nutracom, LLC (Nutracom) pursuant to which Nutracom purchased the assets used by the Company in its manufacturing operations. See Note 2 for further information.

In January 2019, the Company borrowed $500,000 under its revolving line of credit. In March 2019, the Company and its primary lender amended the terms of the Company’s revolving line of credit agreement. See Note 7 for further information.

F-30

EX-2.1

Exhibit 2.1

PURCHASE AGREEMENT

Nutracom, LLC, a Missouri limited liability company (“Nutracom”), and Reliv International, Inc., a Delaware corporation (“Reliv”), enter into this Purchase Agreement for the purchase and sale of certain assets of the Nutracom Division of Reliv (the “Business”).

RECITALS

WHEREAS, the Nutracom and Reliv have completed negotiations regarding Nutracom’s proposed purchase of the assets of the Business from Reliv; and

WHEREAS, Carl Hastings, Steve Hastings and Brett Hastings (the “Hastings Group”), controlling members of Nutracom, have made arrangements to transfer shares of Reliv common stock to Nutracom, and to make cash investments in Nutracom, in order to provide for the consideration for such purchase;

NOW THEREFORE IT IS HEREBY AGREED AS FOLLOWS:

TERMS

1. Terms.The parties have mutually agreed upon the following terms and conditions relative to the purchase of the Business assets:

(a) Nutracom will purchase the following assets of the Business:

(i)      all usable raw materials, packaging, work-in-process and finished goods held by the Business for third parties (the “Inventory”), but excluding any finished goods of Reliv held by the Business and the raw materials listed on Exhibit A; and

(ii)     all machinery, equipment, including office equipment and related assets, molds, dies, tooling, fixtures, parts, supplies and other assets and materials used in the Business (the “Manufacturing Assets”), including those items listed on Exhibit B.

(b) Nutracom will not assume any liabilities associated with the Business except for outstanding purchase orders for Inventory and those liabilities specifically identified on Exhibit C.

(c) Nutracom will pay Reliv the sum of $1,250,000 ($1,000,000 equipment value and $250,000 prepaid rent) plus Reliv’s aggregate standard cost of the Inventory at Closing (the “Inventory Value”, which is estimated at $1.7 million) (collectively, the “Purchase Price”). The Purchase Price will be payable as follows:

(i)      The Hastings Group will assign to Reliv at the Closing (as hereinafter defined) 99,200 shares of Reliv common stock, which the parties agree will have a value of $5.445 per share or an aggregate value of $540,144 (“Share Payment”).

(ii)     Nutracom will issue to Reliv a non-voting Class B membership interest in the limited liability company representing a 15% equity holding in Nutracom. Commencing one year after Closing, the Class B membership interest will be entitled to receive 1% of Nutracom’s annual gross revenue excluding gross revenue originating from sales to Reliv (“Third Party Revenue”) up to $5 million dollars, 1.25% of Third Party Revenue between $5 million and $15 million, 1.0% of Third Party Revenue in excess of $15 million (“Guaranteed Payment”). No other payments or profit sharing will be paid to Reliv with respect to the Class B membership interest except that upon a sale of Nutracom, the Class B membership interest will receive its proportionate share (initially 15% but subject to dilution) with respect to any sale proceeds. In the event of an acquisition, business combination or merger between Nutracom and a third party, the Guaranteed Payment shall terminate at such closing and the Class B members shall participate in the profits, losses and distributions of Nutracom in the same manner as the Class A members based on the proportionate share of the Class B membership interest. The Class B membership interest will be valued at $505,000 (“Membership Value”). Upon Closing the Hastings Group agrees to capitalize Nutracom in the amount of at least $500,000 in cash. The Operating Agreement of Nutracom will provide Reliv participation rights and tag-along rights in the event Nutracom management determines to sell Nutracom or the Business in the future.

(iii)    At Closing, Nutracom will enter into a promissory note (“Secured Promissory Note”) with Reliv in an amount equal to $1,000,000. The Secured Promissory Note will be issued for a term of seven years with interest accruing on the outstanding principal balance at a rate of 5.5%. The Secured Promissory Note will be amortized ratably over the seven-year period with a monthly payment of $14,370. The Secured Promissory Note will be secured by a purchase money security interest in the Manufacturing Assets.

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(iv)   At Closing, Nutracom will enter into an unsecured promissory note (“Unsecured Promissory Note”) with Reliv in an amount equal to the Inventory Value plus $250,000 to be treated as prepaid rent under the lease referred to in (v) below, less the Share Payment and Membership Value. The Unsecured Promissory Note will be issued for a term of seven years with interest accruing on the outstanding principal balance at a rate of 7.0%. The Unsecured Promissory Note will provide for payments of interest only the first two years. The principal will be amortized over a ten-year amortization schedule during the remaining five years of the Unsecured Promissory Note with a balloon payment due upon expiration of the term.

By way of example only, the value of the Unsecured Promissory Note will be calculated as follows:

Inventory Value (est)	$1,700,000
+Prepaid Rent	+ $250,000
-Share Payment	- $540,144
-Membership Value	- $505,000
Initial Note Principal Amount	$904,856

(v)    At Closing, Nutracom will enter into a lease agreement for the premises occupied by the Business (96,450 sq. ft.) for a period of seven years with an option by Nutracom to renew for a 5-year term. Rent for the first year of the lease will be $2.59 per square foot or an annual rent of $250,000 and will be prepaid at Closing as set forth in Section 1(c)(iv). Rent for the second year of the lease will be $2.00 per square foot or an annual rent of $192,900. Rent for years three through five will be $4.00 per square foot or an annual rent of $385,800. Rent for years six and seven will be $4.25 per square foot or an annual rent of $409,912.50. Rent for the renewal term will be $4.25 per square foot or an annual rent of $409,912.50. In addition to rent, Nutracom will pay to Reliv its proportionate share of real estate taxes, property insurance (including excess flood coverage) and common area maintenance, less the proportionate share of maintenance expenses incurred by Nutracom which are allocable to the space occupied by Reliv. The lease will provide Nutracom a right of first offer on the building in the event Reliv determines to sell the building.

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(vi)    At Closing, Carl Hastings will enter into an employment agreement with Reliv at a base salary of $225,000 for the first year and $200,000 thereafter plus a monthly car allowance of $800 per month. The employment agreement will have a one-year term, and will renew annually thereafter unless either party gives notice of its intent not to renew. Carl Hastings will receive employee benefits and otherwise be treated on a basis standard for full-time Reliv employees, but will be required to work no more than 20 hours per week. Carl Hastings’ travel obligations will be restricted to attendance in the United States only at not more than two Reliv conferences per year and not more than two appearances at special events as reasonably requested by Reliv. The employment agreement will not restrict Carl Hastings’ ability to formulate products for Nutracom and its customers; provided, however, Carl Hastings will not, during the term of his employment with Reliv, provide use of his image, likeness or endorsement for any products developed for Nutracom or its customers. During the term of the employment agreement, Carl Hastings will provide all reasonably requested research and development for Reliv as a part of his employment arrangement.

(vii)   The parties will enter into a supply agreement, fulfillment agreement, and license agreement on substantially the same terms as outlined on the attached corresponding agreement outlines. In addition, the parties will enter into a Secured Promissory Note, an Unsecured Promissory Note, security agreement, and operating agreement of Nutracom, on terms mutually agreeable to the parties. The security agreement will provide Reliv a right of first offer on the Manufacturing Assets as long as the principal balances on the Secured Promissory Note and Unsecured Promissory Note remain outstanding.

2.	Nutracom Intellectual Property.   Reliv hereby sells, transfers and assigns to Nutracom any and all rights, title and interest in and to the ideas, concepts, formulas, products and associated intellectual property developed in connection with the Business for customers other than Reliv, as listed on Exhibit D.
3.	Condition to Closing.   The following will be conditions to Closing:

a. The Inventory and Manufacturing Assets shall be free and clear of any liens, claims and encumbrances;

b. The Hastings Group and any other members of Nutracom shall have invested at least an aggregate of $500,000 in cash in Nutracom and shall have contributed an aggregate of 99,200 shares of Reliv common stock to be transferred to Nutracom at Closing as provided above; and

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c. Reliv shall have received a satisfactory fairness opinion relating to the proposed transaction by a qualified firm.

4. Best Efforts.   The parties agree to use their best efforts to reach a fair and equitable agreement regarding any issues arising after execution of the Purchase Agreement which were not specifically addressed by the transaction documents.

5. Closing.    The closing (the “Closing”) of the transactions contemplated herein will be held on the date of this Purchase Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written below.

Dated: January 1, 2019

NUTRACOM, LLC

By /s/ Brett Hastings                                  

Name: Brett Hastings                                 

Title: President                                           

RELIV INTERNATIONAL, INC.

By /s/ Ryan Montgomery                          

Name: Ryan Montgomery                         

Title: Chief Executive Officer                     

Note: This plan does not contain the following schedules: Supply Agreement, Fulfillment Agreement, or Lunasin License Agreement. The Registrant will furnish supplementally a copy of any of these schedules to the Commission upon request.

- 5 -

EXHIBIT A

Excluded Raw Materials

See Attached

EXHIBIT B

Manufacturing Assets

See attached

EXHIBIT C

Assumed Liabilities

Nutracom will assume the liability for accrued, but unused PTO time for all Reliv employees transferring to Nutracom, up to 40 hours, similar to the annual carryover provisions in Reliv’s employee policies.

Reliv will assume the wages liability for Reliv hourly employees in which wages earned in December 2018 and prior to January 1, 2019 remain unpaid as of December 31, 2018.

Nutracom will file the personal property tax declaration for calendar 2019 with St. Louis County for all equipment acquired in the Purchase Agreement and make the appropriate tax payments as billed by St. Louis County for calendar 2019.

Nutracom will assume the liability for services provided by contract labor beginning with service days beginning January 1, 2019 (for example, financial responsibility for “split-week” contract labor invoices which cover both December 2018 and January 2019 time periods will result in Reliv assuming financial responsibility for contract labor services provided prior to January 1, 2019 and Nutracom assuming financial responsibility for contract labor services provided subsequent to January 1, 2019).

Nutracom will assume the liability for all taxes, if any, which might arise with its purchase of all assets (including equipment, inventory, and other assets) acquired in the Purchase Agreement.

Nutracom will assume the liability for all tangible items received and services received beginning January 1, 2019, including inventory, supplies, fixed assets, repairs, services, etc., relating to the Nutracom business, with a receipt date of January 1, 2019 and thereafter. Actual receipt date at the 136/138 Chesterfield Industrial Blvd facility will determine the ownership/liability of the item or service received; notwithstanding a vendor invoice date or a vendor ship date from the vendor’s facility.

Nutracom will assume the liability for all purchase commitments (including purchase orders, purchase requisitions, verbal orders, and similar forms of commitments) relating to the Nutracom business which are outstanding and unfulfilled as of the close of business on December 31, 2018.

Nutracom will assume the liability for fulfilling all unfilled and outstanding Nutracom customer purchase orders existing as of the close of business on December 31, 2018.

Upon request by Reliv, Nutracom will assist Reliv with the cash collection of all unpaid Nutracom customer invoices outstanding as of the close of business on December 31, 2018.

Nutracom will assume liability for all Nutracom customer sales returns in which the original customer sale occurred prior to December 31, 2018 and the related customer sales return occurred subsequent to December 31, 2018. Under the preceding scenario, Nutracom’s liability will consist of payment to Reliv in an amount representing the sales value of the product return plus any additional related costs such as the original outbound freight, product return freight, or other costs related to the sales return. Reliv will authorize a credit of up to $25,000 to Designer Protein related to issues with production invoiced on invoice #8443.

Reliv will assume the liability for all quality assurance testing vendor invoices with an invoice date of December 31, 2018 or earlier. Nutracom will assume the liability for all quality assurance testing vendor invoices other than Reliv with an invoice date of January 1, 2019 or later.

Nutracom will assume liability for specific invoices for production and testing supplies as follows:

Invoice #	Vendor	Amount
1160121	Tri-Pro Graphics & Packaging	$3,069.15
342055	BioControl Systems, Inc.	$3,022.52

EXHIBIT D

Assigned Intellectual Property

Any and all formulas, product concepts and product ideas formulated at the request of, or for promotion to, customers, potential customers and brands of Nutracom and/or its partners and affiliates, including, but not limited to, the following (provided no such formulas are identical or substantially similar to any product of Reliv):

Toddler Daily Essentials

Tween Daily Essentials

Adult Daily Essentials

Senior Daily Essentials

Adult Digestion Essentials

Youth Digestion Essentials

Adult Protect Capsules

Infant Formula

Infant Cereal

Keto Salts

Keto Protein

Inner Beauty

Hair, Skin & Nails Capsules

Weight Loss Formula

Ensure-Equivalent Products

Collagen Products

Reds Products

Beets Products

Greens Products

Hydration/Electrolyte

Pre-Workout

Post-Workout

Branch Chain Amino Acids

Essential Amino Acids

Sleep Aid

Sexual Performance Aid

Protein Pancakes

Protein Oats

CBD Capsules/Powdered Formulas

Formulas developed to match an existing product of a potential or existing customer of Nutracom

EX-10.3

Exhibit 10.3

EMPLOYMENT AGREEMENT

THIS AGREEMENT is made and entered into this 1^st day of January, 2019, by and between Reliv' International, Inc., a Delaware corporation (the “Company”), and Carl W. Hastings (hereinafter referred to as the “Executive”).

WHEREAS, the Executive is presently, and for some time has been, employed as an Executive of the Company, pursuant to the terms of an Employment Agreement dated June 1, 1997, a Services Agreement dated July 1, 2002, an Employment Agreement dated July 7, 2007 and an Employment Agreement dated March 31, 2014 (“Prior Employment Agreements”);

WHEREAS, the Company desires to be assured of the continued association and services of Executive and Executive desires to continue in the employment of the Company on the terms provided herein.

NOW, THEREFORE, in consideration of the premises and of the terms, covenants and conditions hereinafter contained, the parties hereto agree as follows:

1.       Employment, Duties and Authority.

1.1     The Company hereby employs Executive and Executive hereby accepts employment by the Company on the terms, covenants and conditions herein contained.

1.2     The Executive is hereby employed by the Company as Chief Scientific Officer. The Executive shall have such duties, responsibilities and authority as the Chief Executive Officer, Board of Directors or Executive Committee of the Company shall determine from time to time. In general, it is anticipated that the services which Executive shall perform for the Company shall include: (i) research concerning product development for the Company, (ii) product formulation development, and (iii) attendance at, and participation in, distributor events of the Company as requested from time to time. With regard to travel, the Executive shall not be required to engage in travel outside of the United States. In addition, Executive shall not be required to attend more than four distributor events during any 12-month period of time.

1.3      Executive shall devote approximately one-half (approximately 85 hours per month) of his energies, interest, abilities and productive time to the performance of his duties and responsibilities hereunder. The Company shall maintain an office for Executive at its principal offices and Executive may perform services at such office; provided, that Executive shall be entitled to perform services hereunder at his home or other location as well.

1.4      The Company acknowledges and agrees that Executive will be permitted to provide the same or similar duties and services to Nutracom, LLC (“Nutracom”) or any successor in interest to Nutracom as a consultant while employed by the Company on the terms and conditions set forth herein.

2.        Compensation and Benefits.

2.1      Basic Salary.

2.1.1   During the Initial Term (as hereinafter defined), the Company shall pay to Executive a basic salary at the rate per month of $18,750. During each Renewal Term (as hereinafter defined), the Company shall pay to Executive a basic salary at the rate of $16,667 per month. Such basic salary shall be paid by the Company to Executive each month, less amounts which the Company may be required to withhold from such payments by applicable federal, state or local laws or regulations.

2.1.2   If the Executive shall be absent from work on account of personal injuries or sickness, he shall continue to receive the payments provided for in paragraph 2.1.1 hereof; provided, however, that any such payment may, at the Company's option, be reduced by the amount which the Executive may receive, for the period covered by any such payments, in disability payments (i) pursuant to any disability insurance which the Company, in its sole discretion, may maintain, or (ii) under any governmental program for disability compensation.

2.2      Benefits; Expense Reimbursement.

2.2.1   During the term of Executve’s employment hereunder, the Executive shall be entitled to, and shall receive, all other benefits of employment available to other employees of the Company generally, including participation in hospital, surgical, medical or other group health plans or accident benefits, pension or profit-sharing plans, or vacation plans as shall be instituted or maintained by the Company, in its sole discretion.

2.2.2   During the term hereof, the Company shall reimburse Executive for all reasonable and necessary expenses incurred by Executive in the performance of his duties hereunder, including without limitation, travel, meals, lodging, office supplies or equipment subject to such reasonable limitations, restrictions and reporting standards as the Board of Directors of the Company may from time to time establish. Executive shall provide to the Company promptly after incurring any such expenses a detailed report thereof and such information relating thereto as the Company shall from time to time require. Such information shall be sufficient to support the deductibility of all such expenses by the Company for federal income tax purposes.

2.2.3   Specific benefits to which Executive shall be entitled shall be set forth on Schedule A hereto.

2.3      Compensation Schedule. There is attached as Schedule A hereto a schedule of the basic compensation and benefits to which Executive shall be entitled during the employment term of this Agreement.

2

3.           Term.

The employment of Executive hereunder shall be for a term commencing on January 1, 2019 and expiring on December 31, 2019 (“Initial Term”). Upon the expiration of the Initial Term, the term of such employment automatically shall be renewed for an additional term of one year commencing on January 1st and expiring on the succeeding December 31st (a “Renewal Term”) unless Executive or the Company shall give notice of the termination of Executive's employment and this Agreement by written notice to the other more than 90 days prior to the date of expiration of the Initial Term or any Renewal Term. In the event that such notice of termination shall be given timely, subject to any accrued rights of Executive to compensation, including without limitation pursuant to the provisions of paragraph 4 hereof, this Agreement shall terminate on the date of expiration of such Initial Term or Renewal Term.

4.           Termination.

4.1        The Company shall be entitled to terminate this Agreement, and Executive’s employment with the Company, prior to the expiration of its Initial Term or any Renewal Term, on the occurrence of an event of default with respect to Executive as provided herein.

4.2         For purposes of this Agreement, an event of default with respect to Executive shall include:

4.2.1   Any failure by Executive to perform his duties, responsibilities or obligations hereunder in a faithful and diligent manner or with reasonable care and (if such failure can be cured) the failure by Executive to cure such failure within 10 days after written notice thereof shall have been given to Executive by the Company;

4.2.2   A violation by Executive of any provision of this Agreement and the failure by Executive to cure such violation (if such violation can be cured) within 10 days after written notice thereof shall have been given to Executive by the Company;

4.2.3   Commission by Executive of any material act of dishonesty as an employee of the Company or of disloyalty to the Company, or any wrongful or unauthorized appropriation, taking or misuse of funds, property or business opportunities of the Company.

4.3         The Company shall be entitled to terminate the employment term of this Agreement at any time by written notice to Executive in the event of, and at the time of, the permanent mental or physical disability of Executive as provided herein during the term of employment hereunder. Permanent mental or physical disability of Executive shall be deemed to have occurred when Executive shall have failed or been unable to perform his duties hereunder for an aggregate of 180 days in any one period of 210 consecutive days and with a certification from a licensed physician in the State of Missouri that Executive is permanently disabled from performing his duties hereunder.

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4.4        Executive shall be entitled to terminate his employment with the Company under this Agreement prior to the expiration of its term:

4.4.1    Upon the occurrence of an event of default with respect to the Company; or,

4.4.2    At any time upon 270 days prior written notice to the Company.

4.5        For purposes of this Agreement an event of default with respect to the Company shall include:

4.5.1    Any failure by the Company to perform its obligations to Executive under this Agreement and (if such failure can be cured) the failure by the Company to cure such failure within 10 days after written notice thereof shall have been given to the Company by Executive;

4.5.2    The Company shall:

(a)     admit in writing its inability to pay its debts generally as they become due,

(b)     file a petition for relief under any chapter of Title 11 of the United States Code or a petition to take advantage of any insolvency under the laws of the United States of America or any state thereof,

(c)     make an assignment for the benefit of its creditors,

(d)     consent to the appointment of a receiver of itself or of the whole or any substantial part of its property,

(e)     suffer the entry of an order for relief under any chapter of Title 11 of the United Sates Code, or

(f)     file a petition or answer seeking reorganization under the Federal Bankruptcy Laws or any other applicable law or statute of the United States of America or any state thereof.

4.6        In the event of termination of this Agreement and Executive's employment hereunder by the Company pursuant to paragraph 4.1 hereof, all rights and obligations of the Company and Executive hereunder shall terminate on the date of such termination, subject to the following:

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4.6.1   Executive shall be entitled to receive (subject to any rights of set off or counterclaim by the Company) all salary, fees, additional compensation or benefits which shall have accrued prior to the date of such termination and the obligation of the Company for the payment of salary, consultation fees, additional compensation or benefits shall terminate as at the date of such termination;

4.6.2   All rights of the Company or Executive which shall have accrued hereunder prior to the date of such termination, and all provisions of this Agreement provided herein to survive termination of employment of Executive hereunder, shall survive such termination and the Company and Executive shall continue to be bound by such provisions in accordance with the terms thereof;

4.7        In the event of termination of the Agreement by Executive in accordance with paragraph 4.4 hereof, all rights and obligations of the Company and Executive hereunder shall terminate on the date of such termination, subject to the following:

4.7.1    Executive shall be entitled to receive all salary, consultation fees, additional compensation or benefits which shall have accrued prior to the date of such termination and the Company's obligation for the payment of salary, consultation fees, additional compensation or benefits shall terminate as of the date of such termination;

4.7.2    All rights of the Company or Executive which shall have accrued hereunder prior to the date of such termination and the obligations of Executive pursuant to paragraphs 5, 6, and 7 provided herein to survive termination of employment of Executive hereunder shall survive such termination and the Executive shall continue to be bound by such provisions in accordance with their terms.

4.8        This Agreement and all rights and obligations of the parties hereunder shall terminate immediately upon the death of Executive except that (i) all rights of the Company or Executive which shall have accrued hereunder prior to the date of such termination, and all provisions of this Agreement provided herein to survive termination of employment of Executive hereunder, shall survive the death of Executive and the Company and heirs, legatees and legal representatives of Executive shall continue to be bound by such provisions in accordance with the terms thereof and (ii) the Company shall pay to the heirs, legatees or personal representative of Executive (a) all compensation or benefits hereunder accrued but not paid to the date of Executive's death, and (b) an amount equal to the total compensation which would have been payable to Executive hereunder, but for his death, for a period of six months from the date of his death.

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5.         Confidential Information.

5.1       “Confidential Information” means information disclosed by the Company to Executive, or developed or obtained by Executive during his employment by the Company, either before the date or during the term of this Agreement, provided that such information is not generally known in the business and industry in which the Company is or may subsequently become engaged, relating to or concerning the business, projects, products, processes, formulas, know-how, techniques, designs or methods of the Company, whether relating to research, development, manufacture, purchasing, accounting, engineering, marketing, merchandising, selling or otherwise. Without limitation, Confidential Information shall include all know-how, technical information, inventions, ideas, concepts, processes and designs relating to products of the Company, whether now existing or hereafter developed, and all prices, customer or distributor names, customer or distributor lists, marketing and other relationships, whether contractual or not, between the Company, its suppliers, customers, distributors, employees, agents, consultants and independent contractors but shall exclude the names of customers or distributors known to Executive prior to the effective date hereof.

5.2       Executive agrees that, during the term hereof or while Executive shall receive compensation hereunder and after termination of his employment with the Company for so long as the Confidential Information shall not be generally known or generally disclosed (except by Executive or by means of wrongful use or disclosure), Executive shall not use any Confidential Information, except on behalf of the Company, or disclose any Confidential Information to any person, firm, partnership, company, corporation or other entity, except as authorized by the President or the Board of Directors of the Company.

5.3       Notwithstanding the foregoing, the Company and Executive agree that any and all products, processes, formulas, know-how, techniques, designs or methods, whether relating to research, development, manufacture, purchasing, accounting, engineering, marketing, merchandising, selling or otherwise, including without limitation the products and concepts listed on Schedule B, developed by Executive prior to or during the term of this Agreement for Nutracom shall be the sole and exclusive property of Nutracom and shall not constitute Confidential Information for purposes of this Agreement.

6.         Inventions.

6.1       “ Reliv Inventions” shall mean discoveries, concepts, ideas, designs, methods, formulas, know-how, techniques or any improvements thereon, whether patentable or not, made, conceived or developed, in whole or in part, by Executive upon the request of Reliv, but excluding any inventions made, conceived or developed for customers of Nutracom other than Reliv.

6.2       Executive covenants and agrees to communicate and fully disclose to the Board of Directors of the Company any and all Reliv Inventions made or conceived by him during the term hereof or while receiving any compensation or payment from the Company and further agrees that any and all such Reliv Inventions which he may conceive or make, during the term hereof or while receiving any compensation or payments from the Company, shall be at all times and for all purposes regarded as acquired and held by him in a fiduciary capacity and solely for the benefit of the Company and shall be the sole and exclusive property of the Company. The provisions of this subparagraph shall not apply to an invention developed for Nutracom or for which no trade secret information of the Company was used.     

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6.3       Executive also covenants and agrees that he will assist the Company in every proper way upon request to obtain for its benefit patents for any and all inventions referred to in paragraph 6.2 hereof in any and all countries. All such patents and patent applications are to be, and remain, the exclusive property of the Company for the full term thereof and to that end, the Executive covenants and agrees that he will, whenever so requested by the Company or its duly authorized agent, make, execute and deliver to the Company, its successors, assigns or nominees, without charge to the Company, any all applications, applications for divisions, renewals, reissues, specifications, oaths, assignments and all other instruments which the Company shall deem necessary or appropriate in order to apply for and obtain patents of the United States or foreign countries for any and all Reliv Inventions referred to in paragraph 6.2 hereof or in order to assign and convey to the Company, its successors, assigns or nominees, the sole and exclusive right, title and interest in and to such Reliv Inventions, applications or patents. Executive likewise covenants and agrees that his obligations to execute any such instruments or papers shall continue after the expiration or termination of this Agreement with respect to any and all such Reliv Inventions, and such obligations shall be binding upon his heirs, executors, assigns, administrators or other legal representatives.

7.         Writings and Working Papers.

Executive covenants and agrees that any and all books, textbooks, letters, pamphlets, drafts, memoranda or other writings of any kind written by him for or on behalf of the Company or in the performance of Executive's duties hereunder, Confidential Information referred to in paragraph 5.1 hereof and all notes, records and drawings made or kept by him of work performed for the benefit of the Company shall be and are the sole and exclusive property of the Company and the Company shall be entitled to any and all copyrights thereon or other rights relating thereto. Executive agrees to execute any and all documents or papers of any nature which the Company or its successors, assigns or nominees deem necessary or appropriate to acquire, enhance, protect, perfect, assign, sell or transfer its rights under this paragraph. Executive also agrees that upon request he will place all such notes, records and drawings in the Company's possession and will not take with him without the written consent of a duly authorized officer of the Company any notes, records, drawings, blueprints or other reproductions relating or pertaining to or connected with his employment of the business, books, textbooks, pamphlets, documents work or investigations of the Company. The obligations of this paragraph shall survive the term of employment hereunder or the termination or expiration of the Initial Term or any Renewal Term hereof.

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8.         Specific Enforcement.

Executive is obligated under this Agreement to render service of a special, unique, unusual, extraordinary and intellectual character, thereby giving this Agreement peculiar value so that the loss of such service or violation by Executive of this Agreement could not reasonably or adequately be compensated in damages in an action at law. Therefore, in addition to other remedies provided by law, the Company shall have the right during the Initial Term or any Renewal Term of this Agreement (or thereafter with respect to obligations continuing after the expiration or termination of this Agreement) to compel specific performance hereof by Executive or to obtain injunctive relief against violations hereof by Executive, and if the Company prevails in any proceeding therefor, it will also be entitled to recover all costs and expenses incurred by the Company in connection therewith, including attorneys' fees.

9.         Name, Image and Likeness; Endorsement

9.1       During the term of the employment of Executive hereunder, the Company shall be entitled to use the name, image and likeness of Executive, and to reproduce, copy and disseminate, video and audio recordings of Executive, without additional charge or payment to Executive, in connection with promotional materials and activities of the Company. From and after the date of the expiration of the Initial Term or any Renewal Term of this Agreement, or of the earlier termination of this Agreement in accordance with Paragraph 4 hereof, the Company shall be entitled to use the name, image and likeness of Executive, and to reproduce, copy and disseminate, video and audio recordings of Executive; provided, however, that for each calendar year during which the Company shall so utilize such items, the Company shall pay to Executive, or to his heirs, representatives, or assigns a fee in the amount of $10,000. The right of the Company provided herein shall survive the expiration of the Initial Term or any Renewal Term of this Agreement, or its termination, for any reason, for a period of 20 years.

9.2       During the term of the employment of Executive hereunder, Executive shall not use his name, image or likeness to endorse any products other than Reliv products; provided, however, Nutracom shall be permitted to use the name, image and likeness of Executive for its promotional and marketing materials intended for specific customers of Nutracom and for Nutracom business development in general, but will not promote Executive’s name, image and likeness on its website or social media advertising and other publicly accessible media during the term of Executive’s employment.

10.       Assignment.

The rights and duties of a party hereunder shall not be assignable by that party, except that the Company may assign this Agreement and all rights and obligations hereunder to, and may require the assumption thereof by, any corporation or any other business entity which succeeds to all or substantially all the business of the Company through merger, consolidation or corporate reorganization or by acquisition of all or substantially all of the assets of the Company.

11.       Binding Effect.     This Agreement shall be binding upon the parties hereto and their respective successors in interest, heirs and personal representatives and, to the extent permitted herein, the assigns of the Company.

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12.       Severability.

If any provision of this Agreement or any part hereof or application hereof to any person or circumstance shall be finally determined by a court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this Agreement, or the remainder of such provision or the application of such provision to persons or circumstances other than those as to which it has been held invalid or unenforceable, shall not be affected thereby and each provision of this Agreement shall remain in full force and effect to the fullest extent permitted by law. The parties also agree that, if any portion of this Agreement, or any part hereof or application hereof, to any person or circumstance shall be finally determined by a court of competent jurisdiction to be invalid or unenforceable to any extent, any court may so modify the objectionable provision so as to make it valid, reasonable and enforceable.

13.       Notices.

All notices, or other communications required or permitted to be given hereunder shall be in writing and shall be delivered personally or mailed, certified mail, return receipt requested, postage prepaid, to the parties as follows:

If to the Company:	Ryan A. Montgomery
	Chief Executive Officer Reliv' International, Inc. P. O. Box 405 Chesterfield, MO 63006-0405
If to Executive:	Carl W. Hastings
	19 Grand Meridien Court Wildwood, MO 63005

Any notice mailed in accordance with the terms hereof shall be deemed received on the third day following the date of mailing. Either party may change the address to which notices to such party may be given hereunder by serving a proper notice of such change of address to the other party.

14.       Entire Agreement.

This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior written or oral negotiations, representations, agreements, commitments, contracts or understandings with respect thereto and no modification, alteration or amendment to this Agreement may be made unless the same shall be in writing and signed by both of the parties hereto.

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15.       Waivers.

No failure by either party to exercise any of such party's rights hereunder or to insist upon strict compliance with respect to any obligation hereunder, and no custom or practice of the parties at variance with the terms hereof, shall constitute a waiver by either party to demand exact compliance with the terms hereof. Waiver by either party of any particular default by the other party shall not affect or impair such party's rights in respect to any subsequent default of the same or a different nature, nor shall any delay or omission of either party to exercise any rights arising from any default by the other party affect or impair such party's rights as to such default or any subsequent default.

16.       Governing Law; Jurisdiction.

16.1    For purposes of construction, interpretation and enforcement, this Agreement shall be deemed to have been entered into under the laws of the State of Missouri and its validity, effect, performance, interpretation, construction and enforcement shall be governed by and subject to the laws of the State of Missouri.

16.2    Any and all suits for any and every breach of this Agreement may be instituted and maintained in any court of competent jurisdiction in the State of Missouri and the parties hereto consent to the jurisdiction and venue in such court and the service of process by certified mail to the addresses for the parties provided for notices herein.

[THE BALANCE OF THIS PAGE IS INTENTIONALLY BLANK]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

RELIV INTERNATIONAL, INC.

By: /s/ Ryan A. Montgomery                                  

      Authorized Officer

Attest:

Secretary

EXECUTIVE:

/s/ Carl W. Hastings                                                 

Carl W. Hastings

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SCHEDULE A
Carl W. Hastings
		Comments	Monthly	Annual
Initial Term Base Salary		Per Contract	$18,750	$225,000
Renewal Term Base Salary		Per Contract	$16,667	$200,000
Health and Dental Insurance	(1)	Standard Company Plan	$473.48	$5,681.76
Life Insurance-$10,000 in coverage		Standard Company Plan		$187
Long and Short Term
Disability Insurance		Standard Company Plan		$2,379
Supplemental Disability-Equitable		Actual Premium		$4,491
Policy # 229571332503
401(k) Matching Contribution*		Standard Company Plan
ESOP Contribution*		Standard Company Plan
Automobile Allowance		Per Contract	$800	$9,600
Total				$247,339**
*Estimated value will be adjusted to actual at end of each calendar year **Initial Term compensation total. Renewal term(s) total of $222,339.
(1)  Monthly amount represents net Company contribution after employee contribution.

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SCHEDULE B – Nutracom

Products and Concepts

Any and all formulas, product concepts and product ideas formulated at the request of, or for promotion to, customers, potential customers and brands of Nutracom and/or its partners and affiliates, including, but not limited to, the following (provided no such formulas are identical or substantially similar to any product of Reliv):

Toddler Daily Essentials

Tween Daily Essentials

Adult Daily Essentials

Senior Daily Essentials

Adult Digestion Essentials

Youth Digestion Essentials

Adult Protect Capsules

Infant Formula

Infant Cereal

Keto Salts

Keto Protein

Inner Beauty

Hair, Skin & Nails Capsules

Weight Loss Formula

Ensure-Equivalent Products

Collagen Products

Reds Products

Beets Products

Greens Products

Hydration/Electrolyte

Pre-Workout

Post-Workout

Branch Chain Amino Acids

Essential Amino Acids

Sleep Aid

Sexual Performance Aid

Protein Pancakes

Protein Oats

CBD Capsules/Powdered Formulas

Formulas developed to match an existing product of a potential or existing customer of Nutracom

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EX-10.26

Exhibit 10.26

LEASE

To

Nutracom, LLC

138 Chesterfield Industrial Boulevard

Chesterfield, MO 63005

January 1, 2019

Page 1 of 22

REFERENCE PAGE OF LEASE

DATE OF LEASE:	January 1, 2019
BUILDING:	as shown on Exhibit “A”
LESSOR:	Reliv International, Inc.
LESSOR’S ADDRESS:	136 Chesterfield Industrial Boulevard
	Chesterfield, MO 63005
LESSOR’S PHONE:	(636) 733-1410
LESSOR’S CONTACT:	Ryan A. Montgomery, Chief Executive Officer
LESSOR’S E-MAIL ADDRESS	ramontgomery@relivinc.com
LESSEE:	Nutracom, LLC
LESSEE'S ADDRESS:	138 Chesterfield Industrial Boulevard
	Chesterfield, MO 63005
LESSEE’S PHONE:	(636) 733-1315
LESSEE’S CONTACT:	Brett Hastings, President
LESSEE’S E-MAIL ADDRESS	bhastings@nutracom.us
PREMISES:	136 Chesterfield Industrial Boulevard
	Chesterfield, MO 63005
TERM OF LEASE:
Occupancy Date:	1/1/2019
Commencement Date:	1/1/2019
Termination Date:	12/31/2025
RENT:
Minimum Annual Rent:	1/1/2019 - 12/31/19	$250,000.00
	1/1/2020 - 12/31/20	$192,900.00
	1/1/2021 - 12/31/21	$385,800.00
	1/1/2022 - 12/31/22	$385,800.00
	1/1/2023 - 12/31/23	$385,800.00
	1/1/2024 - 12/31/24	$409,912.50
	1/1/2025 - 12/31/25	$409,912.50
PERMITTED USE:	Light manufacturing of food and food supplements;
	Warehousing; Office
EXHIBITS TO LEASE:	Exhibit “A”    (Site Plan)
	Exhibit “B”     (Estoppel Certificate)
SQUARE FEET:
Building Leased Premises	96,450 sq. ft.
Building Total Premises	126,273 sq. ft.
Building Pro Rata Share	76%
Leased Premises and Lot	138,244 sq. ft.
Total Premises and Lot	230,367sq. ft.
Premises and Lot Pro Rata Share	60%

Page 2 of 22

This Agreement of Lease is made this 1st day of January, 2019 by and between RELIV INTERNATIONAL, INC., a Delaware corporation, hereinafter called "Lessor" and NUTRACOM, LLC, a Missouri limited liability company, hereinafter called "Lessee".

WITNESSETH:

Lessor, in consideration of the rents and covenants hereinafter set forth, hereby leases to Lessee, and Lessee hereby leases from Lessor, the property, outlined in red on Exhibit "A" attached hereto and incorporated herein, commonly known as 138 Chesterfield Industrial Boulevard, in the City of Chesterfield, County of St. Louis, State of Missouri, which is hereinafter referred to as the "Premises".

TO HAVE AND TO HOLD the Premises unto the Lessee for a term which shall begin on the "Occupancy Date" as shown on the Reference Page and hereinafter defined, and shall continue for a period of seven (7) years following the "Commencement Date" as shown on the reference page, plus an additional five (5) years if Lessee shall exercise its option to renew thie Lease, on the following terms and conditions:

RENTAL: ARTICLE I.

Lessee agrees to pay Lessor, at Lessor’s address set forth on the Reference Page hereof, or such other place as Lessor may from time to time designate, rental for the Premises as follows:

Lessee agrees for the period of 01/01/19 to 12/31/19 to pay a guaranteed and “fixed minimum annual rent” of two hundred fifty thousand dollars and no cents ($250,000.00), in advance, in the form of a promissory note of Lessee in the amount of at least $250,000, of which Lessor hereby acknowledges.

Lessee agrees for the period of 01/01/20 to 12/31/20 to pay a guaranteed and “fixed minimum annual rent” of one hundred ninety-two thousand nine hundred dollars ($192,900.00) for each twelve (12) month period payable in advance in successive monthly installments of sixteen thousand seventy-five dollars and no cents ($16,075.00) each, on or before the first day of each consecutive calendar month during said period.

Lessee agrees for the period of 01/01/21 to 12/31/21 to pay a guaranteed and “fixed minimum annual rent” of three hundred eighty-five thousand eight hundred dollars and no cents ($385,800.00) for each twelve (12) month period payable in advance in successive monthly installments of thirty-two thousand one hundred fifty dollars and no cents ($32,150.00) each, on or before the first day of each consecutive calendar month during said period.

Lessee agrees for the period of 01/01/22 to 12/31/22 to pay a guaranteed and “fixed minimum annual rent” of three hundred eighty-five thousand eight hundred dollars and no cents ($385,800.00) for each twelve (12) month period payable in advance in successive monthly installments of thirty-two thousand one hundred fifty dollars and no cents ($32,150.00) each, on or before the first day of each consecutive calendar month during said period.

Page 3 of 22

Lessee agrees for the period of 01/01/23 to 12/31/23 to pay a guaranteed and “fixed minimum annual rent” of three hundred eighty-five thousand eight hundred dollars and no cents ($385,800.00) for each twelve (12) month period payable in advance in successive monthly installments of thirty-two thousand one hundred fifty dollars and no cents ($32,150.00) each, on or before the first day of each consecutive calendar month during said period.

Lessee agrees for the period of 01/01/24 to 12/31/24 to pay a guaranteed and “fixed minimum annual rent” of four hundred nine thousand nine hundred twelve dollars and fifty cents ($409,912.50) for each twelve (12) month period payable in advance in successive monthly installments of thirty-four thousand one hundred fifty-nine dollars and thirty-eight cents ($34,159.38) each, on or before the first day of each consecutive calendar month during said period.

Lessee agrees for the period of 01/01/25 to 12/31/25 to pay a guaranteed and “fixed minimum annual rent” of four hundred nine thousand nine hundred twelve dollars and fifty cents ($409,912.50) for each twelve (12) month period payable in advance in successive monthly installments of thirty-four thousand one hundred fifty-nine dollars and thirty-eight cents ($34,159.38) each, on or before the first day of each consecutive calendar month during said period.

The term "Lease Year" shall mean a period of twelve consecutive calendar months, the first of which Lease Years shall commence on the Commencement Date. The words "Occupancy Date" whenever used in this Lease shall be deemed to refer to the date as shown on the reference page of this Lease at which time the terms of this Lease shall become effective except as set forth below. The words "Commencement Date" whenever used in this Lease shall be deemed to refer to the date as shown on the reference page of this Lease as the commencement of minimum rent being due and owing.

It is anticipated that Lessor and Lessee will review on a monthly basis all charges owed by one party to the other under the terms of this Lease and the agreements and commitments set forth in that certain Purchase Agreement of even date herewith by and between Lessor and Lessee (the “Purchase Agreement”). Accordingly, rent due under this Lease may be offset against those amounts owed by Lessor to Lessee pursuant to the transactions contemplated by the Purchase Agreement, as agreed upon by Lessor and Lessee. In such case, any rent offset between the parties shall be considered paid when due hereunder.

USE: ARTICLE II.

The Premises shall be used and occupied by Lessee for the permitted use shown on the reference page of this lease and for no other purpose. The permitted use is sometimes referred to herein as a “use or Lessee’s use”. Lessee's use and occupancy shall be in compliance with all applicable laws, ordinances, rules, and government regulations. Lessee shall not store, display, distribute or sell any alcohol, liquors or intoxicating beverages without first receiving Lessor’s written consent at its sole discretion.

Lessee at its sole cost shall procure any and all licenses, permits and the like and maintain same in good standing, as may be required for Lessee to lawfully conduct its business and occupy the Premises according to any and all applicable laws, rules, regulations and/or ordinances.

Lessee covenants not to do or suffer any waste or damage, disfigurement or injury to any improvements now or hereafter forming a part of the Premises and indemnifies and holds Lessor harmless from any and all costs, fees including but not limited to reasonable attorneys fees and/or expenses associated with same. Lessee shall, during the entire term, continuously use the Premises for the purpose stated in this Lease carrying on therein Lessee’s business undertaking in a reputable manner, diligently and energetically.

Page 4 of 22

CONDITION ON POSSESSION : ARTICLE III.

Lessor agrees to provide Lessee with the Premises in an “as is” condition.

Lessee has examined and knows the condition of the Premises and has received the same in good order and repair, and acknowledges that Lessee is accepting same in “as is” condition, and no agreements or promises to decorate, alter, repair or improve the Premises, have been made by Lessor or its agent(s) if any, prior to or at the execution of this Lease.

Lessee agrees that on or before taking possession of the Premises it will comply with all the terms and conditions of this Lease and Lessee’s obligation for Real Estate Tax Reimbursement and Proof of Insurance shall begin as of the Occupancy Date. Lessor reserves the right to withhold Lessee’s right to occupancy if any or all conditions required of Lessee prior to or after its occupancy are not timely met without changing the dates, terms, conditions and/or obligations of this Lease.

CERTIFICATE OF ESTOPPEL: ARTICLE IV.

Lessor and Lessee agree at the commencement of the term hereof, and thereafter, at any time during the term hereof, upon notice as defined herein, to execute, acknowledge and deliver the certificate of estoppel attached hereto as Exhibit “B” within five (5) days of such notice without charge or fee.

TAXES: ARTICLE V.

As of and following the Occupancy Date. Lessee shall pay as additional rent, an amount equal to one-twelfth (1/12) of Lessee’s Premises and Lot Pro Rata Share (as set forth on the Reference Page) of Lessor's estimation of real property taxes, assessments, and similar charges, " impositions" which may be levied or assessed by taxing authorities against the land and building and all other improvements (hereinafter collectively called "taxes") against the Premises. If the actual taxes and impositions exceed the sum already paid by Lessee, Lessee shall pay the excess to Lessor within (30) days after receipt of an invoice therefore and documentation of the actual amount paid by Lessor. If the actual taxes and impositions are less than that already paid by Lessee, Lessor shall, at Lessee's option, credit the difference to future payments of taxes and impositions owed by Lessee hereunder or refund it to Lessee.

If at any time during the Term of this Lease the method of taxation prevailing at the commencement of the Term hereof shall be altered so that any new tax, assessment, levy, imposition, or charge, or any part thereof, shall be measured by or be based in whole or in part upon the Lease or Premises, or the rent, additional rent or other income therefrom and shall be imposed upon the Lessor, then all such taxes, assessments, levies, impositions or charges, or the part thereof, to the extent that they are so measured or based, shall be deemed to be included within the term impositions for the purposes hereof, to the extent that such impositions would be payable if the Premises were the only property of Lessor subject to such impositions. There shall be excluded from impositions all federal, state, and local income taxes, federal excess profit taxes, franchise, capital stock and federal or state estate or inheritance taxes of Lessor. 

Page 5 of 22

LANDSCAPING: ARTICLE VI.

The parking areas, drives, walkways and landscaped areas (all the foregoing being hereinafter referred to as "Landscaping"), as shown on Exhibit A as included in the leased premises shall be available to Lessee and its employees, customers and invitees, subject to the following:

Lessee shall not make any alterations or additions to the Landscaping without first procuring Lessor’s written consent, which in Lessor’s sole discretion may be withheld. All work and/or alterations shall fully comply with all applicable laws, ordinances, rules and regulations as well as drawings submitted to and approved by Lessor and shall be performed in a good and workmanlike manner.

As of and following the Occupancy Date. Lessee shall maintain the Landscaping for the entire property (including the leased premises and the portion of the building and premises retained by the Lessor) in a good, clean, orderly and workmanlike first class manner using new materials and or healthy plantings of first rate quality (as applicable) and cause all driveways and sidewalks to be snow plowed and kept free of debris and snow and ice. All costs incurred in the operation and maintenance of all Landscaping, including, without limiting the generality of the foregoing; the cost of lighting, cleaning, security, removing snow and ice, maintenance, care and replacement of trees, shrubbery, policing, repairing, and insuring Lessee, and Lessee's agents and employees for activities relating to the Leased Premises and Landscaping shall be incurred initially by Lessee but shall be allocated and shared among Lessor and Lessee generally in accordance with the Premises and Lot Pro Rata Share. Lessor shall promptly reimburse Lessee for Lessor’s share of all such expenses.

If Lessee fails to comply with the terms of this provision, Lessor may, after thirty (30) days written notice, undertake the maintenance and charge Lessee the costs thereof plus an additional 10% for the management of such maintenance and upkeep, repairs and replacements.

UTILITIES: ARTICLE VII.

As of and following the Occupancy Date. Lessee shall pay for all utility services used by Lessee including but not limited to heat, gas, water, sewer, electricity, data lines and telephone used in the Premises, said services are hereinafter referred to as "utilities". Lessee shall at all times keep the Premises at a temperature sufficiently high to prevent the freezing of water in pipes and fixtures. Lessee shall pay directly any sums which are due to any utility company or governmental body furnishing utilities to the Premises, throughout the term of this Lease; provided that, if Lessor shall pay any utility charges for the entire building of which the Premises are part, Lessee shall reimburse Lessor for its Building Pro Rata Share. Lessee shall indemnify Lessor and save it harmless against any costs, liability or damages on any utilities accounts for which Lessee shall be responsible.

CARE AND MAINTENANCE OF THE PREMISES: ARTICLE VIII.

Lessee covenants not to perform any acts which may suffer any waste, damage, disfigure, injure any improvements now or hereinafter forming a part of the Premises, or any invitees, or persons at, in or around, the Premises, or be a nuisance or menace to nearby businesses and/or neighboring property owners.

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Lessee shall keep the Premises and the entire building and area of which the Premises is part, including the roof, sidewalks, parking areas, drives, service and delivery areas of the Premises, clean and free from rubbish, dirt, ice and snow at all times, keeping the Premises in a good clean and healthy condition and free from any and all refuse discharged by Lessee in the operation of its business and store all trash and garbage as directed by Lessor and/or applicable governmental statute, code, rule, or regulation and arrange for the regular removal thereof at Lessee’s cost.

Lessee at all times during the term of this Lease shall have and keep in force a maintenance contract (in form and with a contractor reasonably satisfactory to Lessor) providing for inspection and necessary repairs at least once each calendar quarter of the heating, air conditioning and ventilating equipment. The inspection shall include a check of the performance of major components, lubricating moving parts, check of refrigerant charges, inspect for oil and refrigerant leaks, check operating and safety controls, check pressures and temperatures, inspect condensers, inspect fans, motors and starters, check electrical connections amperages, and voltages, check belts and drives and change oil, filters, or dryers. Said contract shall not be cancelable by either contractor and/or Lessee without a prior thirty (30) day written notice to Lessor.

Lessee at all times during the term of this Lease shall have and keep in force a maintenance contract (in form and with a contractor reasonably satisfactory to Lessor) providing for inspection and necessary repairs, not less than once each calendar quarter, of the sprinkler and "fire suppression" systems, keeping the fire suppression systems in good working order, code, regulation and ordinance compliant. Lessee shall provide any and all required inspection and performance reports to the Insurance company and or governmental agency requiring same with copies to Lessor. Said contract shall not be cancelable by either contractor and/or Lessee without a prior thirty (30) day written notice to Lessor.

Lessee shall not burn any trash or garbage nor shall Lessee dispose of and/or store any toxic and/or hazardous materials in, on, or about the Premises. Lessee shall not obstruct the sidewalks, fire lanes or areaways of the Premises.

The Lessee at its sole cost and expense shall regularly clean all waste, and garbage from the Premises which shall be thrown away in receptacles appropriate for the handling of such refuse and the Lessee shall keep the Premises in a good clean and healthy condition and free from any and all refuse discharged by Lessee in the operation of its business.

The costs of maintenance of the building of which the Premises is part shall be paid initially by Lessee but shall be shared and allocated among Lessor and Lessee generally in accordance with the Building Pro Rata Share.

REPAIRS: ARTICLE IX.

Lessee shall at all times, at its own cost and expense, keep the Premises, including, but not limited to, all interior and/or exterior, nonstructural, plumbing, electrical, building fixtures, walls, ceilings, floors, lighting, doors, windows, foundations, downspouts, gutters, heating, air conditioning, signs and any and all other building systems, in good order, condition, and repair; provided any such maintenance and repairs are of an ordinary nature or general and routine maintenance. If Lessee fails to maintain, replace, portions of the Premises requiring same promptly and/or properly, and if such failure is not cured within thirty (30) days after Lessees receipt of Lessors written notice, Lessor may at its option perform such maintenance, repairs, and/or replacements on behalf of Lessee and Lessee will upon demand, pay to Lessor, as rent, the cost plus ten percent (10%) thereof for Lessor’s administrative costs associated with same.

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Lessor shall be responsible at its own cost and expense for any extraordinary repairs or maintenance related to the structural, plumbing, electrical, heating, air conditioning, foundation and roof portions of the Premises. Lessee shall immediately give Lessor written notice of any defect or need for repairs, after which Lessor shall have a reasonable opportunity to repair the same or cure such defect.

Lessor's liability with respect to any defects, repairs or maintenance for which Lessor is responsible under any of the provisions of this Lease shall be limited to the cost of such repairs or maintenance or the curing of such defect, provided however, that if such repairs, replacements, or maintenance become necessary by reason of any act of negligence or construction by Lessee, its agents, contractors, or employees, then Lessee shall pay the total cost of such repairs, replacements or maintenance.

At all times all such maintenance, repairs, and/or replacements shall be performed in a good and workmanlike manner using new materials of high quality.

ALTERATIONS AND INSTALLATIONS: ARTICLE X.

Lessee shall not make any alterations in or additions to the Premises without first procuring Lessor's prior written consent. All alterations, additions and improvements, shall remain and be surrendered with the Premises at the termination of the Term of this Lease, whether by lapse of time or otherwise, all without credit to Lessee, unless such removal has been consented to or required at the time of Lessor's consent to the alteration.

Lessee shall make all of the alterations and installations at Lessee's sole cost and expense. All work and materials shall be furnished and conducted in a good and workmanlike manner. If a permit is required for any alteration and/or installation Lessee agrees to give Lessor copies of any all applications, inspection reports and approvals.

If Lessor shall not allow an alteration or improvement to remain after termination, Lessee shall remove the alterations, improvements and installations placed in the Premises by Lessee and repair any damage occasioned by such removals. All removals and repairs are to be performed in a good and workmanlike manner, no less than 10 days prior to the termination of this Lease, all at Lessee's sole cost and expense.

The foregoing shall not apply to any of Lessee's personal property, furniture, trade fixtures, machinery, equipment or production facilities, all of which shall at all times remain the property of Lessee and Lessee shall have the right to install and/or remove all of Lessee’s trade fixtures, machinery, equipment, and production facilities without Lessor’s written consent. For any installations and/or removals Lessee agrees that all work will be compliant with all applicable laws, ordinances, rules and regulations and that any adverse condition “Damage” will be repaired and the premises restored by Lessee at the termination of the Lease, at Lessee’s sole cost and expense.

UNTENANTABILITY: ARTICLE XI.

In the event the Premises shall be destroyed, or so damaged by fire, explosion, windstorm or other casualty so as to be untenantable, Lessor may restore the Premises within a reasonable time after such destruction or damage, or may terminate the Lease and the term demised as of the date of the destruction or damage, in either case by giving Lessee notice within one hundred eighty (180) days after the date of the destruction or damage, and rent shall abate on a per diem basis during the period of restoration.

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In the event the Premises shall be damaged as aforesaid but are not thereby rendered untenantable, Lessor shall restore the Premises with reasonable dispatch, and while such damage is being repaired, Lessee shall be entitled to an equitable abatement of rent as reasonably and equitably determined by Lessor. Lessor shall not be liable or responsible for any delays in rebuilding or repairing due to labor controversies, riots, acts of God, national emergency, acts of a public enemy, government laws or regulations, inability to procure materials or labor, or any other cause or causes beyond its control.

If Lessee is inconvenienced but its business is not interrupted, there shall be no abatement of rent.

EMINENT DOMAIN: ARTICLE XII.

In case all of the Premises is taken by the exercise of the power of eminent domain, this Lease shall terminate as of the date possession is taken, and Lessor shall refund any rent paid in advance in the ratio of thirty days to the number of days between the date possession is so taken and the first day of the next calendar month.

If thirty five per cent (35%) or more of the Premises is so taken, further provided that the taking of the portion of said Premises does materially affect the operation and conduct of Lessee’s business, then this Lease shall terminate at the election of either party upon notice to the other within thirty (30) days after the payment, or the deposit with the appropriate public officer, of the compensation awarded to Lessor, and in that event the term shall terminate on the date possession of the part condemned is taken by the condemning authority and the rent shall be paid to that date. In the event of a partial taking, rent shall equitably abate as of the effective date the government takes possession and/or such possession by Lessee is lost.

If the Lease and term are not terminated, Lessor, at its expense and within thirty days after the payment or deposit of the compensation as aforesaid, shall commence to reconstruct the Premises not affected by the taking and with reasonable diligence proceed with such construction, and during the reconstruction and thereafter, the minimum rent shall be reduced in the proportion that the part taken bears to the Leased Premises.

In any event, the entire compensation awarded shall belong to Lessor without any deduction there from for any present or future estate or interest of Lessee, and Lessee hereby assigns to Lessor all of its right, title and interest in and to any and all such compensation together with any and all rights, estate and interest of Lessee now existing or hereafter arising in and to the same or any part thereof.

SIGNS: ARTICLE XIII.

Lessee shall have the right at its sole cost to use sign "Standards" or structures presently existing on the Premises and to erect signs identifying Lessee's business. All such signs shall have Lessor’s prior written consent and be in conformance with all applicable laws, ordinances, rules and regulations applicable thereto. Lessee shall give Lessor copies of all applications, approvals and permits required for any signage. Lessee shall not use any advertising medium that shall be deemed objectionable to Lessor in its reasonable discretion.

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Lessee shall remove all signage it has installed, repairing any damage caused by such removals returning the sign standards and the Premises to its original “blank” condition at its sole cost and expense at the end or termination of this Lease.

ASSIGNMENT OR SUBLETTING: ARTICLE XIV.

Lessee shall not sublet, assign or permit the use or occupancy of the Premises or any part or parts thereof by anyone other than Lessee without the prior written consent of Lessor, which may be withheld at its sole discretion.

Should any Sublease, assignment, use or occupancy be consented to, all future subleases, assignments, uses or occupancies will still require Lessor's prior written consent. In the event of any subletting, assignment, use or occupancy Lessee shall remain liable for all the terms and conditions of this Lease.

Should Lessee attempt to sublease, assign or permit the use or occupancy, by anyone other than Lessee without Lessor's written consent, such sublease, assignment, use or occupancy shall be null and void and any options granted under this Lease shall be null and void.

REMEDIES: ARTICLE XV.

Lessor may terminate Lessee's right of possession and repossess the Premises without terminating this Lease and/or terminate the estate and term demised by giving ten (10) days written notice to Lessee upon the happening of one or more of the following events which are not cured within said period:

a) the making by Lessee of an assignment for the benefit of its creditors;

b) the levying of a writ of execution or attachment on or against the property of Lessee;

c) the taking of any action for the voluntary dissolution of Lessee or of consolidation with or merger into another corporation;

d) the doing, or permitting to be done by Lessee of any act which creates a mechanic's lien or claim therefore against the Premises;

e) the failure of Lessee to pay an installment of rent when due, subject to any right of offset on the part of Lessee;

f) if proceedings are instituted in a court of competent jurisdiction for the reorganization, liquidation or involuntary dissolution of Lessee, or for its adjudication as bankrupt or insolvent, or for the appointment of a receiver of the property of Lessee, and said proceedings are not dismissed, and any receiver, trustee or liquidator appointed therein discharged within thirty days after the institution of said proceedings;

g) the recording of any document against Lessor’s title without, first receiving Lessor’s written consent;

h) the failure of Lessee to perform any other of its covenants under this Lease for thirty (30) days or more after receipt of written notice of such failure.

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Lessee shall not do any act which shall in any way encumber the title of Lessor in and to the Premises, nor shall the interest or estate of Lessor in the Premises be in any way subject to any claim by way of lien or encumbrance, whether by operation of law or by virtue of any express or implied contract by Lessee. Any claim to, or lien upon, the Premises arising from any act or omission of Lessee shall accrue only against the leasehold estate of Lessee and shall be subject and subordinate to the paramount title and rights of Lessor in and to the premises. Any lien or encumbrance caused by Lessee or its agents to Lessor's title which is not removed within the notice period set forth above shall constitute a default hereunder.

Upon the termination of the estate or Lessee's right to possession, Lessor may re-enter the Premises with process of law using such force as may be necessary, and remove all persons and chattels therefrom and Lessor shall not be liable for damages or otherwise by reason of re-entry or termination of the term of the Lease. Notwithstanding such termination, the liability of Lessee for the rent provided for hereinabove shall not be extinguished for the balance of the term remaining after said termination, and Lessor shall be entitled to recover immediately as liquidated damages an amount equal to the minimum rent for the said balance of the term less the fair rental value of the Premises for the said balance of the term. Upon and after entry into possession without termination of this Lease, Lessor may, but need not, relet the Premises or any part thereof for the account of Lessee for such rent, for such time and upon such terms as Lessor, in Lessor's sole discretion, shall determine, and Lessee shall be responsible for any resulting deficiency along with all costs of reletting including but not limited to brokerage commissions, decorating and/or rehabilitation of the Premises. At Lessor's election, Lessor may sue the Lessee for rent due and owing Lessor by Lessee under this Lease, as many times as is necessary to recover all rents and sums due hereunder, if the Premises are not relet or if eventually relet, for any deficiency which results by virtue of the default by Lessee and Lessor reletting the Premises for rental which is less than that which Lessee was required to pay hereunder. Lessee waives any defense of Res Judicata concerning any successive suits which are brought by Lessor pursuant to this provision unless Lessor has specifically received a judgment for the identical amount for an identical period in a previous suit of Lessor. Lessor and Lessee acknowledge and agree that all rent, common area maintenance charges and taxes, fees, expenses, penalties and/or any other sum payable hereunder or pursuant to the terms of this Lease sometimes referred to as "rent" shall be deemed rent which is due and payable as required under this Lease.

In the event of any breach by Lessee of any of the provisions of this Lease, Lessor may immediately or at any time thereafter, without additional notice, cure such breach for the account of and at the expense of Lessee such expense to constitute additional rent. If Lessor at any time, by reason of such breach, is compelled to pay any sum of money or do any act which will require the payment of any sum of money, or incurs any expense, including but not limited to reasonable attorney fees, in instituting or prosecuting any action or proceeding to enforce Lessor's rights hereunder, the sum or sums so paid by Lessor, with interest thereon at the rate set forth below from the date of payment thereof, shall be deemed to be additional rent hereunder and shall be due from Lessee to Lessor on the first day of the month following the payment of such respective sums or expenses by Lessor.

Subject to any right of offset on the part of Lessee, if Lessee shall fail to pay to Lessor, when due, any installment of rent or other payment due hereunder, Lessee shall pay to Lessor interest on such rent or other payment at the rate of the greater of the prime rate ("prime rate" is defined as the monthly average of the daily rate published in the Wall Street Journal [eastern edition] or if none or said publication ceases to exist the monthly average of the daily interest rate announced by the Federal Reserve Bank with jurisdiction in New York, New York being the rate charged by the Federal Reserve to the banks and generally thought of as their cost of money) established and in force by the Federal Reserve plus three percent (3%) per annum.

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Lessee will, at the expiration or termination of this Lease, yield up possession to Lessor, and failing so to do, at Lessor's option Lessee will pay as liquidated damages for each day possession is withheld, an amount equal to double the amount of the daily rent, computed on a thirty day month basis; provided, however, that Lessor's right to recover such liquidated damages shall not preclude Lessor from recovering any greater amount of damages sustained by it or as otherwise allowed by law.

No receipt of money by Lessor from Lessee after breach by Lessee or after the termination of this Lease or after the service of any notice or after the commencement of any suit, or after final judgment for possession of the Premises shall operate to waive any breach or to reinstate, continue or extend the term of this Lease or affect any such notice, demand or suit.

No waiver by one party of any default of the other party under this lease or any provision hereof shall be implied from any omission by a party to take any action on account of such default if such default persists or is repeated and no express waiver shall affect any default other than the default specified in the express waiver, and that only for the time and to the extent therein stated. One or more waivers of any condition of this Lease by either party shall not be construed as a waiver of a subsequent breach of the same covenant, term, or condition or as an amendment to this Lease’s terms, covenants and conditions.

Upon a breach hereof by Lessee which results in a judgment for possession and/or rent in a court of competent jurisdiction, and when, after the entrance of such judgment Lessee remains in possession or control of the Premises as a tenant at sufferance, then Lessee shall also be liable for all rent, damages, costs, and expense which Lessor incurs during such period after judgment and Lessor shall be entitled to file an additional lawsuit for recovery of same without Lessee offering a defense of Res Judicata and such recovery and/or law suit shall not operate as a renewal of this Lease or Lessee's right of possession.

All rights and remedies of Lessor herein enumerated shall be cumulative and none shall exclude any other right or remedy allowed by law and/or in equity, and said rights and remedies may be exercised and enforced concurrently and whenever and as often as occasion therefore arises.

SURRENDER: ARTICLE XVI.

Upon the termination of this Lease, whether by forfeiture, lapse of time or otherwise, or upon termination of Lessee's right to possession of the Premises, Lessee will at once surrender and deliver up the Premises, together with all improvements thereon, to Lessor in a fully operational, clean, safe, good condition and repair, reasonable wear and tear excepted. All improvements shall include but not be limited to all landscaping, plumbing, lighting, electrical, and affixed equipment and other articles or personal property used in the operation of the Premises, but shall not include Lessee's personal property, furniture, trade fixtures, machinery, equipment or production facilities, all of which shall at all times remain the property of Lessee. Lessee shall also surrender all keys and inform Lessor of any combinations on any locks, safes and vaults, if any, on the Premises.

Lessee shall remove all of Lessee's personal property, equipment and signs other than such personal property and equipment as are referred to above; provided,

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a) that Lessee at its sole cost shall repair any injury or damage to the Premises which may result from such removals

b) If Lessee does not remove Lessee's furniture, machinery, signs, and all other items of personal property of every kind and description from the Premises prior to the end of the term, however ended, Lessor may, at its option, remove the same and consider same to be abandoned and dispose of such property. Lessee shall pay to Lessor on demand the cost of removal, repair of any damage resulting from the removal and for disposal. Lessor may treat such property as having been conveyed to Lessor with the Lease as a Bill of Sale, without further payment or credit by Lessor to Lessee.

If Lessee retains possession of the Premises or any part thereof after the termination of the term by lapse of time or otherwise that such holding over constitutes renewal of this Lease on a month to month basis at a monthly rate equal to 150% of the monthly rental then in effect for the last month of the lease term. Lessee shall also pay all damages, consequential as well as direct, sustained by Lessor by reason of such retention.

All other additions, hardware, non-trade fixtures and all improvements, temporary or permanent, in or upon the Premises placed there by Lessee shall become Lessor's property and shall remain upon the Premises upon such termination of this Lease by lapse of time or otherwise, without compensation or allowance or credit to Lessee.

If prior to said termination, or within fifteen days thereafter, Lessor so directs by written notice to Lessee, Lessee shall, at its sole cost, promptly remove the additions, improvements, fixtures, trade fixtures and installations which were placed in the Premises by Lessee, and repair any damage occasioned by such removals and should Lessee not remove all alteration as directed by Lessor, Lessee upon demand shall pay as rent all costs of removal and restoration of such alterations and additions together with and a management fee equal to 10% of such costs to Lessor.

INSURANCE: ARTICLE XVII.

Prior to the Commencement Date of this Lease, Lessee shall procure from companies reasonably satisfactory to Lessor and maintain at Lessee’s own cost and expense, for the benefit of Lessee, its agents, employees and contractors, and Lessor, its beneficiaries, agents, employees, contractors and mortgagee, the following insurance:

a) public liability covering the Leased Premises and the use and operation thereof in broad form with limits of not less than $1,000,000.00 combined single limit per occurrence/aggregate for each person and $2,000,000.00 for each accident or bodily injury and $500,000.00 for property damage.

b) workman’s compensation in accordance with statutorily required limits.

c) fire and extended coverage insurance covering Lessee’s fixtures, personal property and contents of Lessee located in the Leased Premises in an amount equal to the 100% replacement cost of such property.

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d) if directed by Lessor fire and extended coverage insurance covering the building in the Leased Premises against loss from the risks normally covered by a policy with fire and extended coverage, loss or damage by boiler or internal explosion by boiler equal to one hundred percent (100%) of its replacement cost under Standard Fire and Extended Coverage Policy and all other risks of direct physical loss as insured against under Special Form (“all risk”) coverage. Such insurance shall be primary to and non-contributing to any insurance carried by Lessor. Endorsements for inflation and ordinance changes shall be included with such coverage. Loss by explosion will be covered. Loss of rents for up to one year will be provided to Lessor. Lessor may procure this coverage and have Lessee pay 100% of the cost thereof if Lessor does not request Lessee to procure this coverage. Where Lessor Permits Lessee to procure such coverage Lessor shall be a named insured.

If at any time during the term of this Lease, Lessee owns or rents more than one location, the policy shall contain an endorsement to the effect that the aggregate limit in the policy shall apply separately to each location owned or rented by Lessee. Lessee shall cause its liability insurance to include contractual liability coverage fully covering the indemnity hereinabove set forth. All of the aforesaid insurance shall be in responsible companies and written on an “occurrence” basis and not on a “claims made” basis.

Lessee at its sole cost and expense agrees to furnish certificates evidencing the insurance Lessee is required to procure and deliver them to Lessor without delay. Certificates for the renewal of such insurance shall be delivered by Lessee to Lessor at least thirty (30) days prior to their respective expiration dates.

Lessor, Lessor’s agent, and mortgagee (if the name of any such mortgagee is provided to Lessee) shall be named as an additional insured on the above mentioned policies called for in paragraph a and c of this article. Any insurance required hereunder shall not be subject to cancellation except after 30 days prior written notice to Lessor.

Lessee shall not do anything which will in any way impair the obligation of any policy of insurance covering the Leased Premises or any part thereof nor shall Lessee take any action either by omission or commission which directly or indirectly causes the insurance costs to materially increase, and should Lessee take such action it shall be solely responsible for any and all excess or extraordinary premium or cost resulting therefrom.

Lessee shall cause each insurance policy carried to be written in a manner so as to provide that the insurance company waives all right of recovery by way of subrogation in connection with any loss or damage covered by any such policies. Neither party shall be liable to the other for any loss or damage caused by fire or any of the risks enumerated in the standard extended coverage insurance to the extent same is covered by insurance which actually pays the entire claim in question.

Companies having an A.M. Bests’ or Standard and Poors rating of A+ or better will be utilized. A certificate of insurance evidencing coverage is in place without disclaimer that such certificate is not evidence of in force coverage shall be furnished to Lessor prior to the Commencement Date and thereafter a current certificate of insurance evidencing coverage is in place without disclaimer that such certificate is not evidence of in force coverage shall be deposited with Lessor.

Lessee shall maintain at Lessee’s own cost and expense, for the benefit of Lessee, its agents, employees and contractors, and Lessor, its beneficiaries, agents, employees contractors and mortgagee the insurance called for herein.

Any moneys paid out from the standard fire and extended coverage policy on the building shall first be utilized to repair or replace the damaged portion of the Leased Premises or paid to Lessor, unless Lessor otherwise elects in writing.

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ENVIRONMENTAL MATTERS: ARTICLE XVIII.

In the event Lessee shall conduct or authorize the generation, transportation, storage, treatment, or disposal at the Premises of any substance regulated under the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of 1986, the Federal Water Pollution Control Act and all other federal, state, and local laws relating to emissions, discharges, releases, or threatened releases of industrial, toxic, or hazardous substances or wastes of other pollutants, contaminants, petroleum products or chemicals (collectively “Hazardous Substances”) into the environment (including, without limitation, ambient air, surface water, ground water, land surface, or subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of Hazardous Substances (the “Environmental Laws”):

(a) Lessee shall, at its own cost, comply with all Environmental Laws.

(b) Lessee shall promptly provide Landlord with copies of all communications, permits, or agreements with any governmental authority or agency (federal, state, or local) or any private entity relating in any way to the presence, release, threat of release, placement on or in the Premises, or the generation, transportation, storage, treatment, or disposal at the Premises, of any Hazardous Substance.

(c) Lessor and Lessor's agents and employees shall have the right to enter the Premises and/or conduct appropriate tests for the purpose of ascertaining that Lessee complies with all Environmental Laws relating in any way to the presence of Hazardous Substances on the Premises.

(d) Upon written request by Lessor, Lessee shall provide Lessor with the results of appropriate tests of air, water, or soil to demonstrate that Lessee complies with all Environmental Laws relating in any way to the presence of Hazardous Substances on the Premises.

If, as a result of Lessee's action, or the actions of Lessee's agents, employees, guests, invitees, or independent contractors, the presence, release, threat of release, placement on or in the Premises, or the generation, transportation, storage, treatment, or disposal at the Premises of any Hazardous Substance: (i) gives rise to liability (including, but not limited to, a response action, remedial action, or removal action) under RCRA, CERCLA, the IEPA, or any common law theory based on nuisance or strict liability, (ii) causes a significant public health effect, or (iii) pollutes or threatens to pollute the environment, Lessee shall promptly take any and all remedial and removal action necessary to clean up the Premises and mitigate exposure to liability arising from the Hazardous Substance, whether or not required by law.

Lessee hereby represents that the intended operation of Lessee's business on the Premises is not currently subject to reporting under Section 312 of the Federal Emergency Planning and Community Right-To-Know Act of 1986, and federal regulations promulgated thereunder , and in event Lessee's business at any time becomes subject to the afore-described Act and regulations, Lessee shall fully comply therewith and shall promptly provide Lessor with copies of all reporting materials filed or submitted under such Act and regulations.

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Lessee shall indemnify, defend, and hold Lessor harmless from all damages, costs, losses, expenses (including, but not limited to, reasonable attorney's fees and engineering fees) arising from or attributable to any breach by Lessee of any of the provisions of this Section. Lessee's obligations hereunder shall survive the termination of this Lease.

SUBORDINATION TO MORTGAGE: ARTICLE XIX.

Lessee will, upon written demand by Lessor, execute such instruments as may be required to subordinate the rights and interest of Lessee under this Lease to the lien of any mortgage at any time placed on the Premises provided that such subordination shall not affect Lessee's right to the possession of the Premises so long as Lessee is not in default hereunder.

NOTICES: ARTICLE XX.

Any notice under this Lease shall be deemed sufficiently given if sent by registered mail, or certified return receipt mail, to Lessee, and/or to Lessor at the address as shown on the reference page of this Lease, and either party may by like notice designate a different address to which notices shall be sent. Notices shall be deemed received three (3) days from the date when mailed. Notice may also be given by overnight messenger service effective upon delivery with proof of delivery being available.

Notices may also be given via electronic transmission including by e-mail and by facsimile transmission "fax". In the event of an e-mail or a fax transmission, notice shall be effective on the day of the e-mail or fax notification is received during normal business hours on a business day or if notice is sent at a time other than during normal business hours on a business day on the next business day immediately following the day of transmission. Copies of all electronic transmission including by e-mail and by fax transmissions shall also be forwarded on the same day by regular first class mail.

INSPECTION AND MARKETING: ARTICLE XXI.

Lessor, or Lessor’s agent, may enter the Premises upon reasonable advance notice for the purpose of making its repairs or repairs which Lessee may neglect or refuse to make in accordance with the covenants and agreements of this Lease without being deemed guilty of any eviction or disturbance of Lessee’s use or possession of the Premises, and without being liable in any manner to Lessee.

Lessor, or Lessor’s agent may upon reasonable advance notice during normal business hours with a phone notice to Lessee, to the person and number shown on the reference page of this Lease, enter the Premises for the purpose of inspecting, marketing, and/or showing the Premises.

Lessor, or Lessor’s agent within twelve (12) months prior to the expiration of the lease term, may place the usual notice or sign of “For Sale” or “For Rent” on the Premises, such signs to remain thereon without molestation. Lessor, or Lessor’s agent may upon reasonable advance notice during normal business hours with a phone notice to Lessee, to the person and number shown on the reference page of this Lease, enter the Premises for the purpose of inspecting, marketing, and/or showing the Premises to persons or representatives of entities wishing to Lease same.

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OPTIONS: ARTICLE XXII.

Lessor hereby grants to Lessee an option to renew this Lease for one additional term of five (5) years, beginning at the expiration of the original term of this Lease, on the same terms and conditions provided herein, except that the annual minimum rental will be four hundred nine thousand nine hundred twelve dollars and fifty cents ($409,912.50).

This option may be exercised once and no subsequent options shall be implied once exercised.

If Lessee elects to exercise said option, it shall do so by giving Lessor notice in writing of such election at least six (6) months prior to the expiration of the original term of this Lease, or this Lease as extended. Lessee agrees to give Lessor peaceful possession of said premises at the end of the term of this Lease or any renewal thereof in accordance with the terms of the Lease.

In the event of a sublease, and/or a failure to timely notify Lessor as called for herein and/or a breach of this agreement then this option(s) shall be deemed terminated and shall be null and void.

Lessor hereby grants to Lessee a right of first offer with respect to the sale of the building and property of which the Premises is part (the “Property”) on the following terms:

a)         If Lessor shall determine to sell the Property during the term of this Lease or any renewal term, Lessor shall first notify Lessee of such intent by written notice to Lessee.

b)        Lessee shall have the option and right, to be given to Lessor within thirty (30) days of the receipt of the notice of intent to sell from Lessor, to make an offer for the Property specifying the price and terms of sale including without limitation the description of the Property to be purchased (the “Offer”). 

c)          Lessor may either accept or reject the Offer within a period of thirty (30) days.

d)         If Lessor rejects the Offer, Lessor shall be free to sell the Property to third parties;

provided, however, that the foregoing right of first offer shall not apply to a sale-leaseback or financing transaction with respect to the Property by Lessor.

COVENANT TO HOLD HARMLESS: ARTICLE XXIII.

Lessee indemnifies and agrees to save Lessor harmless against any and all claims, liability, damages, costs and expenses of whatever nature, including but not limited to reasonable attorney's and accountant's fees, and/or costs of other consultants or experts arising from the conduct of the business and/or operation by Lessee or from any default on the part of Lessee in the performance or failure to perform any agreement, obligation and/or covenant to be performed pursuant to the terms of this Lease, or from any act of negligence whether by omission or commission of Lessee, its agent, contractor, employee, sublessee, concessionaire, licensee or invitee in or about the Premises or arising from or by virtue of Lessee's possession, use and/or control over the Premises or the conduct of its business in or therefrom. In the event Lessee has insurance, Lessor shall first look to Lessee’s insurance and to the extent Lessor is able to recover entirely under Lessee’s insurance, Lessee shall have no personal liability. However, to the extent Lessee’s insurance is inadequate (for any reason including the insurance company’s refusal to pay) to reimburse Lessor for Lessor’s damages, Lessee shall be liable for same.

Page 17 of 22

Except to the extent directly caused by the negligence of Lessor and/or its agents and/or resulting from Lessor or its agents failure to perform an act required of Lessor under this Lease, if any action, claim or proceeding is brought against Lessor by reason of any such action, claim or proceeding, Lessee covenants to defend such action, claim or proceeding at Lessee's sole cost and expense. Lessor shall not be liable, and Lessee waives and releases all claims for damage to person or property sustained by Lessee, Lessee's employees, invitees and customers, resulting from the Premises, or any equipment or appurtenance, becoming out of repair, or resulting from any accident in or about said building or the Premises. Lessor shall have the right to choose and appoint legal counsel should same become necessary as a result of the provisions hereof.

Lessor indemnifies and agrees to hold Lessee harmless against any claims, liability, damages, costs and expenses of whatsoever nature, including but not limited to, reasonable attorneys’ fees and/or costs of other consultants or experts arising from the negligent conduct of Lessor in connection with the Premises. In the event of a claim against Lessor, Lessee shall first look to Lessor’s insurance and to the extent Lessee is able to recover entirely under Lessor’s insurance, Lessor shall have no personal liability. However, to the extent Lessor’s insurance is inadequate to reimburse Lessee for Lessee’s damages, Lessor shall be liable for same. Any liability of the Lessor shall be limited to Lessor's interest in the Premises.

LESSOR'S LIEN: ARTICLE XXIV.

Lessor shall have a first lien upon the interest of Lessee under this Lease, to secure payment of all rent or monies due under this Lease, which lien may be foreclosed in equity at any time when rent or money are overdue under this Lease; and the Lessor shall be entitled to name a receiver of said leasehold interest, to be appointed in any such foreclosure proceeding, who shall take possession of said Premises and who may relet the same under the orders of the court appointing him.

GENERAL: ARTICLE XXV.

Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third person to create a principal and agent relationship, a partnership, a joint venture, or any other association between Lessor and Lessee, it being expressly understood and agreed that neither the method of computation of rent nor any other provisions contained in this Lease nor any act of the parties hereto shall be deemed to create any relationship between Lessor and Lessee other than the relationship of Lessor and Lessee.

The consent or approval by Lessor to or of any act by Lessee requiring Lessor's consent or approval shall not be deemed to waive or render unnecessary Lessor's consent or approval to or of any subsequent similar act by Lessee.

The invalidity or unenforceability of any provision hereof shall not affect or impair any other provisions. The necessary grammatical changes required to make the provisions of this Lease apply in the plural sense where there is more than one Lessee and to either corporations, associations, partnerships, sole proprietorship or individuals, males or females, shall in all instances be assumed as though in each case fully expressed. The headings of the articles contained herein are for convenience only and do not define, limit or construe the contents of such articles.

Page 18 of 22

MISCELLANEOUS: ARTICLE XXVI.

a) This Lease may not be altered, changed or amended except by an instrument in writing signed by both parties hereto.

b) The Individuals executing the terms of this Lease certify that they have authority to enter into this Lease, that it is binding and enforceable upon the party upon whose behalf they have signed and that the terms of this agreement do not and will not violate any other agreement between either of the parties and any third party.

c) All covenants, promises, representations and agreements herein contained shall be binding upon, apply and inure to the benefit of Lessor and Lessee and their respective heirs, legal representatives, successors and assigns.

d) Time is of the essence of this Lease, and all provisions herein relating thereto shall be strictly construed.

e) The words "Lessor" and "Lessee" wherever used in this Lease shall be construed to mean Lessors or Lessees in all cases where there is more than one Lessor or Lessee, and to apply to individuals, male or female, or to firms or corporations, as the same may be described as Lessor or Lessee herein, and the necessary grammatical changes shall be assumed in each case as though fully expressed.

f) Whenever any sum due hereunder, including but not limited to rent for a period of less than either or both a lease year or calendar month, then all such sums shall be prorated on a per diem basis, and shall be payable in accordance with the terms of this Lease.

g) Neither party shall record this Lease or a memorandum hereof without the prior written consent of the other party and the party seeking the recording shall pay all charges and taxes incident thereto. Recording this Lease without the prior written consent of Lessor shall be a default of this lease.

h) Each of the parties represents and warrants to the other that it has not dealt with any broker or finder in connection with this Lease except as designated on the Reference Page, and agrees to defend, indemnify and hold, the other completely harmless and free from any and all loss, liability, costs, damages or expenses (including but not limited to attorneys' fees) incurred as a result of any breach of the foregoing warranty. Lessor agrees to pay the broker, if any, listed above in accordance with its listing agreement.

i) The submission of this document for examination and negotiation does not constitute an offer to Lease, or a reservation of, or option for, the Leased Premises and this document shall become effective and binding only upon execution and delivery hereof by Lessor and by Lessee. All negotiations, considerations, representations and understandings between Lessor and Lessee are incorporated herein.

j) This Lease shall be construed and enforced in accordance with the laws of the state where the Leased Premises are located.

k) Where more than one lessee is executing this Lease all Lessees shall be joint and severally liable.

Page 19 of 22

IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day and year first above written.

LESSEE:

NUTRACOM, L.L.C.

By:_/s/ Brett Hastings__________________________ Dated: January 1, 2019

      Brett Hastings, President          

LESSOR:

RELIV INTERNATIONAL, INC

By: /s/ Ryan A. Montgomery____________________ Dated: January 1, 2019

       Ryan A. Montgomery

       Chief Executive Officer

Page 20 of 22

Exhibit “A”

Site Plan

See Attached.

Page 21 of 22

EXHIBIT “B”

Estoppel Certificate

Lessee and Lessor, hereby state, represent and certified the following:

1. The undersigned are the Lessee and Lessor under that certain Lease dated January 1, 2019 for the Premises commonly known as 138 Chesterfield Industrial Boulevard, Chesterfield, MO 63005;

2. Lessee has accepted delivery of the premises and has entered into occupancy thereof;

3. The Lease represents the entire agreement between the parties as to the leasing, is in full force and effect and has not been assigned, modified, supplemented or amended in any way; except as follows (if none, so state);

4. The primary term of the Lease commenced on January 1, 2019 and continues to December 31, 2025, and contains a five (5) year renewal option(s);

5. The monthly base rental and other charges are current and have not been paid more than one month in advance;

6. Except as stated below, as of this date neither Lessee nor Lessor is in default under any of the terms, conditions, provisions or agreements of the Lease and neither Lessee nor Lessor has any offsets, claims, defenses against the other with respect to the Lease:                                                                                                                                                                                                                                                                                                                                                                                                      

The foregoing statements, representations, and certifications are delivered pursuant to Article IV of the Lease agreement, and may be relied upon by a prospective purchaser or mortgagee of the Leased Premises or their respective successors and assigns. The undersigned certifies that he or she has the authority to execute this Estoppel Certificate on behalf of Lessee and/or Lessor.

Lessee:	Lessor:
NUTRACOM, L.L.C.	RELIV INTERNATIONAL, INC.
By  /s/ Brett Hastings	By  /s/ Ryan A. Mongtomery
Brett Hastings, President	Ryan A. Montgomery, CEO

Page 22 of 22

EX-10.27

Exhibit 10.27

SECURED TERM NOTE

$1,000,000 January 1, 2019

This SECURED TERM NOTE is executed and delivered under and pursuant to that certain Purchase Agreement dated as of the date hereof by and among Reliv International, Inc., a Delaware corporation (“Company”) and Nutracom, LLC, a Missouri limited liability company (“Maker”).

FOR VALUE RECEIVED, Maker hereby promises to pay to the Company at the address of the Company, 136 Chesterfield Industrial Boulevard, Chesterfield, Missouri 63005, or at such other place as the Company may from time to time designate to Maker in writing:

(i)      the principal sum of One Million ($1,000,000) Dollars, payable in accordance with the terms hereof, subject to acceleration upon the occurrence of an Event of Default and during the continuation thereof;

(ii)     interest on the unpaid principal amount of this Note from time to time outstanding, at the rate of 5.5% per annum, until such principal amount is paid in full in accordance with the terms hereof. Upon and after the occurrence of an Event of Default, and during the continuation thereof, interest shall be payable at the Default Rate provided herein.

This Note is the Secured Promissory Note referred to in the Purchase Agreement and is secured by the liens granted pursuant to the Security Agreement among the parties hereto executed and delivered as of the date hereof.

The principal amount of this Note may be voluntarily prepaid, in whole or in part, without penalty at any time by Maker.

Payment of principal and interest under this Note shall be amortized over a term of 84 months from the date hereof, at which time the entire amount and balance of all principal and interest under this Note shall be due and payable. The amortized payments per month payable hereunder shall be the sum of Fourteen Thousand Three Hundred Seventy Dollars ($14,370). Each such payment shall be due and payable on the first day of each month after the date hereof commencing with February 1, 2019.

If an Event of Default shall occur, the entire then outstanding amount of the principal balance and all accrued interest shall immediately become due and payable, without notice, together with reasonable attorneys’ fees if collection hereof is placed in the hands of an attorney to obtain or enforce payment hereof. An Event of Default hereunder shall mean and include:

(i)     the failure of Maker to make any payment within 10 days of such payment becoming due hereunder;

(ii)       the making by Maker of an assignment for the benefit of its creditors;

(iii)      the levying of a writ of execution or attachment on or against the property of Maker;

(iv)      the failure of Maker to perform any of its obligations hereunder or under the Purchase Agreement, any document executed pursuant to the Purchase Agreement or the Security Agreement, and the failure to cure any such violation or failure to perform within 10 days after notice thereof is given to Maker;

(v)       the taking of any action for the voluntary dissolution of Maker or of consolidation with or merger into another entity, or the sale by Maker of all or substantially all of its assets;

(vi)     if proceedings are instituted in a court of competent jurisdiction for the reorganization, liquidation or involuntary dissolution of Maker, or for its adjudication as bankrupt or insolvent, or for the appointment of a receiver of the property of Maker, and said proceedings are not dismissed, and any receiver, trustee or liquidator appointed therein discharged within thirty days after the institution of said proceedings;

The Default Rate of interest hereunder shall be 8%; provided that, in no event, shall interest exceed the maximum interest rate permitted by law.

Any notice under this Note shall be deemed sufficiently given if sent by registered mail, or certified return receipt mail, to Maker, and/or to the Company at the address as shown on the signature page of this Note, and either party may by like notice designate a different address to which notices shall be sent. Notices shall be deemed received three (3) days from the date when mailed. Notice may also be given by overnight messenger service effective upon delivery with proof of delivery being available. Notices may also be given via electronic transmission including by e-mail and by facsimile transmission "fax". In the event of an e-mail or a fax transmission, notice shall be effective on the day of the e-mail or fax notification is received during normal business hours on a business day or if notice is sent at a time other than during normal business hours on a business day on the next business day immediately following the day of transmission. Copies of all electronic transmission including by e-mail and by fax transmissions shall also be forwarded on the same day by regular first class mail.

This Note shall be governed by, and construed and enforced in accordance with the internal laws of the State of Missouri.

Maker expressly waives any presentment, demand, protest, notice of protest, or notice of any kind except as expressly provided herein.     

MAKER:

Nutracom, LLC

By:       /s/ Brett M. Hastings             

     Brett M. Hastings, President

EX-10.28

Exhibit 10.28

UNSECURED TERM NOTE

$764,343.51 January 1, 2019

This UNSECURED TERM NOTE is executed and delivered under and pursuant to that certain Purchase Agreement dated as of the date hereof by and among Reliv International, Inc., a Delaware corporation (“Company”) and Nutracom, LLC, a Missouri limited liability company (“Maker”).

FOR VALUE RECEIVED, Maker hereby promises to pay to the Company at the address of the Company, 136 Chesterfield Industrial Boulevard, Chesterfield, Missouri 63005, or at such other place as the Company may from time to time designate to Maker in writing:

(i)      the principal sum of Seven Hundred Sixty-Four Thousand Three Hundred Forty-Three and 51/100 Dollars ($764,343.51), payable in accordance with the terms hereof, subject to acceleration upon the occurrence of an Event of Default and during the continuation thereof;

(ii)     interest on the unpaid principal amount of this Note from time to time outstanding, at the rate of 7.0% per annum, until such principal amount is paid in full in accordance with the terms hereof. Upon and after the occurrence of an Event of Default, and during the continuation thereof, interest shall be payable at the Default Rate provided herein.

The principal amount of this Note may be voluntarily prepaid, in whole or in part, without penalty at any time by Maker.

Interest only shall be due under this Note for the first 24 months from the date hereof. Thereafter, payments of principal and interest under this Note shall be amortized over a term of 120 months beginning on January 1, 2021. All accrued interest and the principal balance of this Note shall be due and payable in full on January 1, 2026. For the first 24 months of this Note, the interest payments per month payable hereunder shall be Four Thousand Four Hundred Fifty-Eight and 67/100 Dollars ($4,458.67). Beginning January 1, 2021, the payments of principal and accrued interest hereunder shall be Eight Thousand Eight Hundred Seventy-Four and 68/100 Dollars ($8,874.68). Each such payment shall be due and payable on the first day of each month after the date hereof commencing with February 1, 2019.

If an Event of Default shall occur, the entire then outstanding amount of the principal balance and all accrued interest shall immediately become due and payable, without notice, together with reasonable attorneys’ fees if collection hereof is placed in the hands of an attorney to obtain or enforce payment hereof. An Event of Default hereunder shall mean and include:

(i)     the failure of Maker to make any payment within 10 days of such payment becoming due hereunder;

(ii)       the making by Maker of an assignment for the benefit of its creditors;

(iii)      the levying of a writ of execution or attachment on or against the property of Maker;

(iv)      the failure of Maker to perform any of its obligations hereunder or under the Purchase Agreement, any document executed pursuant to the Purchase Agreement or the Security Agreement, and the failure to cure any such violation or failure to perform within 10 days after notice thereof is given to Maker;

(v)       the taking of any action for the voluntary dissolution of Maker or of consolidation with or merger into another entity, or the sale by Maker of all or substantially all of its assets;

(vi)     if proceedings are instituted in a court of competent jurisdiction for the reorganization, liquidation or involuntary dissolution of Maker, or for its adjudication as bankrupt or insolvent, or for the appointment of a receiver of the property of Maker, and said proceedings are not dismissed, and any receiver, trustee or liquidator appointed therein discharged within thirty days after the institution of said proceedings;

The Default Rate of interest hereunder shall be 8%; provided that, in no event, shall interest exceed the maximum interest rate permitted by law.

Any notice under this Note shall be deemed sufficiently given if sent by registered mail, or certified return receipt mail, to Maker, and/or to the Company at the address as shown on the signature page of this Note, and either party may by like notice designate a different address to which notices shall be sent. Notices shall be deemed received three (3) days from the date when mailed. Notice may also be given by overnight messenger service effective upon delivery with proof of delivery being available. Notices may also be given via electronic transmission including by e-mail and by facsimile transmission "fax". In the event of an e-mail or a fax transmission, notice shall be effective on the day of the e-mail or fax notification is received during normal business hours on a business day or if notice is sent at a time other than during normal business hours on a business day on the next business day immediately following the day of transmission. Copies of all electronic transmission including by e-mail and by fax transmissions shall also be forwarded on the same day by regular first class mail.

This Note shall be governed by, and construed and enforced in accordance with the internal laws of the State of Missouri.

Maker expressly waives any presentment, demand, protest, notice of protest, or notice of any kind except as expressly provided herein.     

MAKER:

Nutracom, LLC

By     /s/ Brett M. Hastings              

     Brett M. Hastings, President

EX-10.29

Exhibit 10.29

EX-10.30

Exhibit 10.30

EX-21

Exhibit 21

Reliv International, Inc.

Subsidiaries of Registrant¹

Nutrition 2000, Inc., a Delaware corporation

Reliv, Inc., an Illinois corporation

Reliv World Corporation, an Illinois corporation

Reliv Europe, Inc., an Illinois corporation

Reliv Australia Pty, Limited, organized under the laws of Australia

Reliv New Zealand, Limited, organized under the laws of New Zealand

Reliv Now de Mexico, S. de R.L. de C.V., organized under the laws of Mexico

Reliv Philippines, Inc., organized under the laws of the Philippines

Reliv Canada Company, organized under the laws of Canada

Reliv International Sdn. Bhd., organized under the laws of Malaysia

Reliv Singapore Pte Ltd., organized under the laws of Singapore

Reliv Europe Limited, organized under the laws of the United Kingdom

SL Technology, Inc., a Missouri corporation

¹ All of our subsidiaries conduct business under their legal names as stated above.

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:

1. Registration Statement (Form S-3 No. 333-131974) of Reliv International, Inc., as amended,

2. Registration Statement (Form S-8 No. 333-67921) pertaining to the Reliv International, Inc. 401(k) Plan,

3. Registration Statement (Form S-3 No. 333-160374) pertaining to the 2009 Distributor Stock Purchase Plan,

4. Registration Statement (Form S-8 No. 333-170928) pertaining to the Reliv International, Inc. 2009 Incentive Stock Plan, and

5. Registration Statement (Form S-8 No. 333-200372) pertaining to the Reliv International, Inc. 2014 Incentive Stock Plan.

of our report dated March 29, 2019, with respect to the consolidated financial statements of Reliv International, Inc. and Subsidiaries included in this Annual Report (Form 10-K) of Reliv International, Inc. for the year ended December 31, 2018.

/s/ Ernst & Young LLP

St. Louis, Missouri

March 29, 2019

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Ryan A. Montgomery, certify that:

1.     I have reviewed this annual report on Form 10-K of Reliv International, Inc.;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 29, 2019

 /s/ Ryan A. Montgomery                     

Ryan A. Montgomery

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Steven D. Albright, certify that:

1.     I have reviewed this annual report on Form 10-K of Reliv International, Inc.;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 29, 2019

 /s/ Steven D. Albright                   

Steven D. Albright

Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of Reliv’ International, Inc. (the “Company”) for the fiscal year ended December 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Ryan A. Montgomery, as Chief Executive Officer of the Company, and Steven D. Albright, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)     The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)     The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Ryan A. Montgomery                     

Ryan A. Montgomery

Chief Executive Officer

Date: March 29, 2019

/s/ Steven D. Albright                         

Steven D. Albright

Chief Financial Officer

Date: March 29, 2019

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and is not being “filed” as part of the Form 10-K or as a separate disclosure document for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liability under that section. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act except to the extent that this Exhibit 32 is expressly and specifically incorporated by reference in any such filing.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2018	Mar. 18, 2019	Jun. 29, 2018
Document Information [Line Items]
Entity Registrant Name	RELIV INTERNATIONAL INC
Entity Central Index Key	0000768710
Trading Symbol	relv
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding (in shares)		1,746,449
Entity Public Float			$ 5.4
Entity Shell Company	false
Document Type	10-K
Document Period End Date	Dec. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY
Amendment Flag	false

XML

Consolidated Balance Sheets - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 1,989,974	$ 3,272,788
Accounts receivable, less allowances of $5,000 in 2018 and $26,300 in 2017	400,759	29,760
Accounts due from employees and distributors	151,222	138,497
Inventories:
Finished goods	2,460,563	2,762,249
Raw materials	372,865	1,653,466
Sales aids and promotional materials	121,519	139,770
Total inventories	2,954,947	4,555,485
Refundable income taxes	22,712	26,552
Assets held for sale	2,124,939
Prepaid expenses and other current assets	441,453	372,602
Total current assets	8,086,006	8,395,684
Other assets	338,974	337,190
Cash surrender value of life insurance		3,086,522
Note receivable due from distributor	1,282,072	1,405,113
Intangible assets, net	1,948,263	2,174,248
Property, plant, and equipment, gross	14,420,559	19,055,260
Less accumulated depreciation	9,722,009	13,378,021
Property, plant, and equipment, net	4,698,550	5,677,239
Total assets	16,353,865	21,075,996
Current liabilities:
Accounts payable and accrued expenses	3,880,086	3,200,018
Income taxes payable	35,304	12,616
Revolving line of credit		500,000
Current maturities of long-term debt		2,545,421
Total current liabilities	3,915,390	6,258,055
Noncurrent liabilities:
Other noncurrent liabilities	445,611	453,354
Total noncurrent liabilities	445,611	453,354
Stockholders’ equity:
Preferred stock, par value $0.001 per share; 500,000 shares authorized; -0- shares issued and outstanding in 2018 and 2017	0	0
Common stock, par value $0.001 per share; 5,000,000 shares authorized, 2,110,013 shares issued and 1,845,160 shares outstanding in 2018; 2,110,013 shares issued and 1,845,160 shares outstanding in 2017	2,110	2,110
Additional paid-in capital	30,622,547	30,598,920
Accumulated deficit	(12,311,138)	(10,040,229)
Accumulated other comprehensive loss:
Foreign currency translation adjustment	(982,095)	(857,654)
Treasury stock	(5,338,560)	(5,338,560)
Total stockholders’ equity	11,992,864	14,364,587
Total liabilities and stockholders’ equity	$ 16,353,865	$ 21,075,996

XML

Consolidated Balance Sheets (Parentheticals) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Accounts receivable, allowances	$ 5,000	$ 26,300
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	500,000	500,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	5,000,000	5,000,000
Common stock, shares issued (in shares)	2,110,013	2,110,013
Common stock, shares outstanding (in shares)	1,845,160	1,845,160

XML

Consolidated Statements of Net Loss and Comprehensive Loss - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Net sales	$ 36,115,741	$ 41,788,782
Costs and expenses:
Cost of products sold	9,709,743	9,401,406
Distributor royalties and commissions	11,749,604	14,685,553
Selling, general, and administrative	16,520,885	17,885,226
Loss from operations	(1,864,491)	(183,403)
Other income (expense):
Interest income	93,054	101,901
Interest expense	(95,556)	(109,254)
Other income	61,652	38,844
Loss before income taxes	(1,805,341)	(151,912)
Provision for income taxes	98,000	545,000
Net loss available to common shareholders	(1,903,341)	(696,912)
Other comprehensive income (loss):
Foreign currency translation adjustment	(124,441)	113,551
Comprehensive loss	$ (2,027,782)	$ (583,361)
Loss per common share - Basic (in dollars per share)	$ (1.03)	$ (0.38)
Weighted average shares (in shares)	1,845,000	1,845,000
Loss per common share - Diluted (in dollars per share)	$ (1.03)	$ (0.38)
Weighted average shares (in shares)	1,845,000	1,845,000
Product [Member]
Net sales	$ 33,918,169	$ 38,751,357
Shipping and Handling [Member]
Net sales	$ 2,197,572	$ 3,037,425

XML

Consolidated Statements of Stockholders' Equity - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Treasury Stock [Member]	Total
Balance (in shares) at Dec. 31, 2016	2,110,013				264,853
Balance at Dec. 31, 2016	$ 2,110	$ 30,565,144	$ (9,284,317)	$ (1,030,205)	$ (5,338,560)	$ 14,914,172
Net loss			(696,912)			(696,912)
Foreign currency translation adjustment				113,551		113,551
Income tax effects of Tax Cuts & Jobs Act			(59,000)	59,000
Total comprehensive loss						(583,361)
Stock-based compensation		33,776				33,776
Balance (in shares) at Dec. 31, 2017	2,110,013				264,853
Balance at Dec. 31, 2017	$ 2,110	30,598,920	(10,040,229)	(857,654)	$ (5,338,560)	14,364,587
Net loss			(1,903,341)			(1,903,341)
Foreign currency translation adjustment				(124,441)		(124,441)
Total comprehensive loss						(2,027,782)
Stock-based compensation		23,627				23,627
Adoption of Accounting Standards Update 2014-09			(367,568)			(367,568)
Balance (in shares) at Dec. 31, 2018	2,110,013				264,853
Balance at Dec. 31, 2018	$ 2,110	$ 30,622,547	$ (12,311,138)	$ (982,095)	$ (5,338,560)	$ 11,992,864

XML

Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Operating activities
Net loss	$ (1,903,341)	$ (696,912)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	810,442	900,126
Stock-based compensation	23,627	33,776
Non-cash life insurance policy reduction (accretion)	20,329	(120,540)
(Gain) loss on sale of property, plant and equipment	(684)	(8,844)
Deferred income taxes		508,000
Foreign currency transaction (gain)/loss	(32,577)	(20,659)
(Increase) decrease in accounts receivable and accounts due from employees and distributors	(377,466)	104,671
(Increase) decrease in inventories	(26,036)	15,472
(Increase) decrease in refundable income taxes	(3,840)	70,612
(Increase) decrease in prepaid expenses and other current assets	(75,941)	107,051
(Increase) decrease in other assets	(1,783)	(32,102)
Increase (decrease) in income taxes payable	30,909	12,616
Increase (decrease) in accounts payable & accrued expenses and other non-current liabilities	366,437	(1,030,062)
Net cash used in operating activities	(1,169,924)	(156,795)
Investing activities
Proceeds from sale of property, plant, and equipment	8,522	13,143
Purchase of property, plant, and equipment	(181,343)	(499,409)
Proceeds from redemption of life insurance policy	3,066,193
Payments received on distributor note receivable	115,892	109,160
Net cash provided by (used in) investing activities	3,009,264	(377,106)
Financing activities
Proceeds from revolving line of credit borrowings		500,000
Principal payments on long-term borrowings	(3,045,421)	(363,736)
Net cash provided by (used in) financing activities	(3,045,421)	136,264
Effect of exchange rate changes on cash and cash equivalents	(76,733)	63,608
Increase (decrease) in cash and cash equivalents	(1,282,814)	(334,029)
Cash and cash equivalents at beginning of year	3,272,788	3,606,817
Cash and cash equivalents at end of year	1,989,974	3,272,788
Supplemental disclosures of cash flow information:
Interest	99,000	99,800
Income taxes paid (received), net	$ 66,600	$ (52,500)

XML

Note 1 - Nature of Business and Significant Accounting Policies

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Significant Accounting Policies [Text Block]

1.

Nature of Business and Significant Accounting Policies

Nature of Business

Reliv’ International, Inc. (the Company) produces a proprietary line of nutritional supplements addressing basic nutrition, specific wellness needs, weight management, and sports nutrition. These products are sold by subsidiaries of the Company to a sales force of independent distributors of the Company that sell products directly to consumers. The Company and its subsidiaries sell products to distributors throughout the United States and in Australia, Austria, Canada, France, Germany, Ireland, Malaysia, Mexico, the Netherlands, New Zealand, the Philippines, Singapore, and the United Kingdom.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its foreign and domestic subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Cash Equivalents

The Company's policy is to consider the following as cash and cash equivalents: demand deposits and short-term investments with a maturity of

three

months or less when purchased.

Inventories

Inventories are valued at the lower of cost or market. Product cost includes raw materials, labor, and overhead costs and is accounted for on a

first

-in,

first

-out basis. On a periodic basis, the Company reviews its inventory levels, as compared to future demand requirements and the shelf life of the various products. Based on this review, the Company records inventory write-downs when necessary.

Sales aids and promotional materials inventories represent distributor kits, product brochures, and other sales and business development materials which are held for sale to distributors. Cost of the sales aids and promotional materials held for sale are capitalized as inventories and subsequently recorded to cost of goods sold upon recognition of revenue when sold to distributors. All other advertising and promotional costs are expensed when incurred.

Property, Plant, and Equipment

Property, plant, and equipment are stated on the cost basis. Depreciation is computed using the straight-line or an accelerated method over the useful life of the related assets. Generally, computer equipment and software are depreciated over

3

to

5

years, office equipment and machinery over

7

years, and real property over

39

years.  

Foreign Currency Translation and Transaction Gains or Losses

All balance sheet accounts have been translated using the exchange rates in effect at the balance sheet date. Statements of net income (loss) amounts have been translated using the average exchange rate for the year. The gains and losses resulting from the changes in exchange rates from year to year have been reported in other comprehensive income (loss). The foreign currency translation adjustment is the only component of accumulated other comprehensive loss. If applicable, foreign currency translation adjustments exclude income tax expense (benefit) as certain of the Company’s investments in non-U.S. subsidiaries are deemed to be reinvested for an indefinite period of time. Foreign currency transaction gains (losses) were

$32,577

and

$20,659

for

2018

and

2017,

respectively.

Basic and Diluted Earnings (Loss) per Share

Basic earnings (loss) per common share are computed using the weighted average number of common shares outstanding during the year. Diluted earnings (loss) per common share are computed using the weighted average number of common shares and potential dilutive common shares that were outstanding during the period. Potential dilutive common shares consist of outstanding stock options, outstanding stock warrants, and convertible preferred stock. See Note

9

for additional information regarding earnings (loss) per share.

Stock-Based Compensation

The Company has stock-based incentive plans under which it

may

grant stock option, restricted stock, and unrestricted stock awards. The Company recognizes stock-based compensation expense based on the grant date fair value of the award and the related vesting terms. Depending upon the characteristics of the option, the fair value of stock-based awards is primarily determined using the Black-Scholes model, which incorporates assumptions and management estimates including the risk-free interest rate, expected volatility, expected option life, and dividend yield. The Company recognizes forfeitures when incurred. See Note

8

for additional information.

The Company accounts for options granted to non-employees and warrants granted to distributors under the fair value approach required by FASB ASC Topic

505

-

50,

“Equity Based Payments to Non-Employees.”

Fair Value Measurements

FASB ASC Topic

820,

“Fair Value Measurements and Disclosures,” defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements required under other accounting pronouncements. See Note

6

for further discussion.

Income Taxes

The provision for income taxes is computed using the liability method. The primary differences between financial statement and taxable income result from financial statement accruals and reserves and differences between depreciation and amortization for book and tax purposes.

Unrecognized tax benefits are accounted for as required by FASB ASC Topic

740

which prescribes a more likely than

not

threshold for financial statement presentation and measurement of a tax position taken or expected to be taken in a tax return. See Note

12

for further discussion.

Advertising

Costs of sales aids and promotional materials are capitalized as inventories. All other advertising and promotional costs are expensed when incurred. The Company recorded

$19,300

and

$22,300

of advertising expense in

2018

and

2017,

respectively.

Research and Development Expenses

Research and development expenses, which are charged to selling, general, and administrative expenses as incurred, were

$473,000

and

$488,000

in

2018

and

2017,

respectively.

Amortizable Intangible Assets

The Company records intangible assets based on management’s determination of the fair value of the respective assets at the time of acquisition. Determining the fair value of intangible assets is judgmental and involves the use of significant estimates and assumptions of future company operations. The Company bases its fair value estimates and related asset lives on assumptions it believes to be reasonable but that are unpredictable and inherently uncertain. Actual future results

may

differ from these estimates.

Intangible assets estimated to have finite lives are amortized over their estimated economic life under the straight-line method; such method correlates to management’s estimate of the assets’ economic benefit. Based on management’s estimates at origination, these lives range from

two

to

seventeen

years. Related amortization expense is presented within Selling, General, and Administrative in the accompanying consolidated statements of net loss and comprehensive loss. As of

December 31, 2018,

remaining lives of intangible assets range from

six

to

eleven

years.

Revenue Recognition

 

On

January 1, 2018,

the Company adopted Accounting Standards Update (ASU)

No.

2014

-

09,

Revenue from Contracts with Customers

(including amendments), and applied the new revenue standard to all contracts using the modified retrospective method. Under this method, prior periods are

not

restated. Upon adoption, the Company recognized the cumulative effect of applying the new revenue standard as a reduction of

$367,568

(with

zero

net tax effect) to the opening retained earnings (accumulated deficit) balance.

The new revenue standard defines a

five

step process to recognize revenues. The Company accounts for a contract with its independent distributors (including customers) when there is a legally enforceable contract, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. Product sales revenue (principally nutritional and dietary supplements) and commission expenses are recorded when control is transferred to independent distributors, which occurs at the time of shipment. Generally, net sales reflect product sales less the distributor discount of

20

percent to

40

percent of the suggested retail price. The Company presents distributor royalty and commission expense as an operating expense, rather than a reduction to net sales, as these payments are

not

made to the purchasing distributor. At point of sale, the Company receives payment by credit card, personal check, or guaranteed funds for contracts from independent distributors and makes related commission payments in the following month.

Under this new revenue standard, the Company determined that the timeframe for recognizing the revenue performance obligation for membership fees-type revenue would be lengthened to more closely correlate with the distributor (including customer) membership terms of generally

twelve

months. Based upon all membership fees contracts still in existence as of

December 31, 2017,

the adoption of the new revenue standard resulted in the recognition of a deferred revenue liability balance of

$367,568.

The Company receives payment for membership fees at the beginning of the annual membership term and recognizes membership fees revenue on a straight-line basis in correlation with the completion of its performance obligation under the membership term. At

December 31, 2018,

the deferred revenue liability balance was

$337,234.

Actual and estimated sales returns are classified as a reduction of net sales. The Company estimates and accrues a reserve for product returns based on the Company’s return policy and historical experience. The Company’s return policy allows for distributors to return product only upon termination of his or her distributorship. Allowable returns are limited to saleable product which was purchased within

twelve

months of the termination for a refund of

100%

of the original purchase price less any distributor royalties and commission received relating to the original purchase of the returned products. For the years ended

December 31, 2018

and

2017,

total returns as a percent of net sales were approximately

0.17%

and

0.25%,

respectively.

The Company records handling and freight income as a component of net sales and records handling and freight costs as a component of cost of products sold. Total net sales do

not

include sales tax as the Company considers itself a pass-through conduit for collecting and remitting applicable sales taxes.

In accordance with the new revenue standard requirements, the disclosure of the impact of adoption to the Company’s results from operations are as follows:

	Year Ended December 31, 2018
				Without			Effect of
				Adoption of			Change
	As Reported			ASU 2014-09			Higher/(Lower)
Operating results
Net sales	$	36,115,741		$	36,086,633		$	29,108
Net loss		(1,903,341	)		(1,932,449	)		29,108

The Company does

not

anticipate that the adoption of the new revenue standard will be material to net sales and net income on an ongoing basis.

New Accounting Pronouncements –

Not

Yet Adopted

In

February 2016,

the Financial Accounting Standards Board (FASB) issued ASU

No.

2016

-

02,

Leases (Topic

842

)

which supersedes the existing lease guidance. This update requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. Subsequent to its issuance of ASU

No.

2016

-

02,

the FASB issued related ASU’s, including ASU

No.

2018

-

11,

Leases (Topic

842

): Targeted Improvements,

which provides for another transition method in addition to the modified retrospective approach originally required by ASU

No.

2016

-

02.

This transition method option under ASU

No.

2018

-

11

allows entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

As required, the Company will adopt ASU

2016

-

02

on

January 1, 2019.

The Company anticipates applying certain practical expedients permitted in the standard, as well as the prospective transition method. The Company’s adoption of this new lease standard will result in the

January 1, 2019

recognition of right-of-use assets and lease liabilities of approximately

$460,000

in the Company’s consolidated financial statements. The Company leases certain office facilities, storage, and equipment.

Going Concern

The Company has incurred operating losses, declining net sales, and negative net cash flows over its most recent

five

years. Management estimates that these unfavorable trends are more likely than

not

to continue for the foreseeable future, and as a result, the Company will require additional financial support to fund its operations and execute its business plan. As of

December 31, 2018,

the Company had

$1,989,974

in cash and cash equivalents which

may

not

be sufficient to fund the Company’s planned operations through

one

year after the date the consolidated financial statements are issued, and accordingly, there is substantial doubt about the Company’s ability to continue as a going concern. The analysis used to determine the Company’s ability to continue as a going concern does

not

include cash sources outside of the Company’s direct control that management expects to be available within the next

twelve

months.

The Company

may

not

be able to obtain sufficient additional funding through monetizing certain of its existing assets, sourcing additional borrowings, and issuing additional equity, or any other means, and if it is able to do so, these available sources of funds

may

not

be on satisfactory terms. The Company’s ability to raise additional capital in the equity markets, should the Company choose to do so, is dependent on a number of factors, including, but

not

limited to, the market demand for the Company’s common stock, which itself is subject to a number of business risks and uncertainties, as well as the uncertainty that the Company would be able to raise such additional capital at a price or on terms that are favorable to the Company

The Company has taken several steps which management believes will result in an improved financial position, operating results, and cash flows. As detailed in Note

7

of these consolidated financial statements, in

January 2019,

the Company has borrowed

$500,000

of its available

$750,000

revolving line of credit balance. In

March 2019,

the Company and its lender have agreed to extend its available

$750,000

revolving line of credit agreement to

April 28, 2020.

As detailed in Note

2

of these consolidated financial statements, in

January 2019,

the Company entered into a Purchase Agreement with Nutracom, LLC (Nutracom) pursuant to which Nutracom purchased the assets used by the Company in its manufacturing operations. Assets purchased by Nutracom from the Company were financed by the Company under payment terms scheduled to provide incoming funds to the Company of

$200,000

or more per year. The Company has also entered into an agreement for Nutracom to lease a significant portion of the Company’s headquarters building. Management believes that these transactions with Nutracom will be favorable to its financial position, operating results, and cash flows; however, there are risks and uncertainties which arise with these Nutracom transactions and their impact to the Company’s operations.

Should the aforementioned changes to the company’s operations

not

provide sufficient cash flow improvement or should the Company be unable to obtain sufficient additional capital or borrowings, the Company

may

have to engage in any or all of the following activities: (i) seek to monetize its headquarters building via traditional bank lending or a sale and leaseback-type transaction; (ii) monetizing its note receivable from a distributor (see Note

11

); (iii) restructure its core distributor business model including recruiting, promotions, incentives, and other activities; (iv) cease operations in certain geographic regions, and (v) reduce employee compensation and benefits.

These actions

may

have a material adverse impact on the Company’s ability to achieve certain of its planned objectives. Even if the Company is able to source additional funding, it

may

be forced to significantly reduce its operations if its business operating performance does

not

improve. If the Company is unable to source additional funding, it

may

be forced to significantly reduce or shut down its operations. These consolidated financial statements have been prepared on a going concern basis and do

not

include any adjustments to the amounts and classification of assets and liabilities that

may

be necessary in the event the Company can

no

longer continue as a going concern.

XML

Note 2 - Assets Held For Sale

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

2.

Assets Held For Sale

On

January 1, 2019,

the Company entered into a Purchase Agreement with Nutracom, LLC (Nutracom) pursuant to which Nutracom purchased the following assets used by the Company in its manufacturing operations:

● Inventories (sold at cost of $1.56 million) and,

● Machinery and other equipment with a net book value of $565,000 (sold for $1 million; gain on disposal of $435,000 ).

Nutracom was formed by the Company’s manufacturing operations management which included former officers of the Company. Employees of the Company’s manufacturing operations were offered employment by Nutracom.

Prior to its approval of the transaction, the Company’s Board of Directors formed a special committee consisting of the Company’s independent directors to review the transaction. To assist in its review, the special committee engaged a qualified

third

-party expert to opine a fairness opinion on the transaction and related agreements as detailed below.

Concurrently with the execution of the Purchase Agreement, the Company entered into several agreements with Nutracom including a product supply agreement for a term of

seven

years, a fulfillment agreement, and a facility lease agreement whereby Nutracom will lease manufacturing, warehouse, and certain office space of the Company’s headquarters building from the Company for a term of

seven

years, with a Nutracom option for an additional

five

-year term. Annual lease amounts range from

$193,000

to

$410,000

per year over the

seven

-year term.

Nutracom provided the following consideration to the Company for the manufacturing operations and related identified assets and agreements:

● $1 million secured promissory note, seven year term, fixed interest rate of 5.5%, principal and interest payable monthly;

● $764,344 unsecured promissory note, seven year term, fixed interest rate of 7.0%, interest only payable for the first two years with monthly payment of principal and interest thereafter under a ten -year amortization schedule. The face value of the unsecured note includes the first year’s rent due the Company under the facility lease agreement.

● Nutracom management transferred to the Company its ownership of 99,200 shares of the Company’s common stock valued at $540,144.

● Nutracom issued to the Company a non-voting Class B 15% equity membership interest in Nutracom, LLC. The Class B interest does not share in any profits or losses from operations of Nutracom. As defined within the Nutracom Operating Agreement, upon any merger, consolidation, disposition, or liquidation of Nutracom, the Class B equity membership interest converts to a Class A equity membership interest.

● Commencing January 1, 2020, the Company’s Class B interest will be entitled to receive a percentage, (ranging from 1.0% to 1.25% ) of Nutracom’s annual revenues (excluding Nutracom’s revenues from sales to the Company).

The Company’s non-voting Class B

15%

equity membership interest in Nutracom was valued by the aforementioned

third

-party expert at

$505,000.

As the Company’s non-voting membership interest does

not

participate in the management of Nutracom, nor does the Company share in any Nutracom operating profits or losses, the Company anticipates accounting for its Nutracom equity investment under the cost method.

As of

December 31, 2018,

the Company has presented inventories and machinery and other equipment sold to Nutracom as a current asset under the caption of “Assets held for sale” in the accompanying consolidated balance sheets. The Company will account for the Nutracom transactions in its

first

quarter

2019

financial results.

XML

Note 3 - Property, Plant, and Equipment

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

3.

Property, Plant, and Equipment

Property, plant, and equipment at

December 31, 2018

and

2017,

consist of the following:

	2018		2017
Land and land improvements	$	905,190	$	905,190
Building		9,964,523		9,950,190
Machinery and equipment		180,519		4,755,727
Office equipment		1,157,392		1,183,115
Computer equipment and software		2,212,935		2,261,038
		14,420,559		19,055,260
Less accumulated depreciation		9,722,009		13,378,021
	$	4,698,550	$	5,677,239

At

December 31, 2018,

approximately

$0.56

million of net property, plant, and equipment (cost

$4.70

million;

$4.14

million accumulated depreciation) is presented as “Assets held for sale” in the accompanying consolidated balance sheets. See Note

2

for further discussion.

For the years ended

December 31, 2018

and

2017,

depreciation expense was

$584,457

and

$674,141,

respectively.

XML

Note 4 - Accounts Payable and Accrued Expenses

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

4.

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses at

December 31, 2018

and

2017,

consist of the following:

	2018		2017
Trade payables	$	2,105,814	$	1,667,495
Distributors' commissions		1,030,948		1,115,649
Sales taxes		195,802		154,958
Deferred revenue		337,234		-
Payroll and payroll taxes		210,288		261,916
	$	3,880,086	$	3,200,018

XML

Note 5 - Amortizable Intangible Assets

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

5.

Amortizable Intangible Assets

The Company had amortizable intangible assets as follows as of

December 31, 2018

and

2017:

					Accumulated
	Gross Carrying Amount				Amortization
	2018		2017		2018		2017
Distributorship and related agreements	$	2,060,000	$	2,060,000	$	1,437,423	$	1,327,556
Lunasin technology license		1,954,661		1,954,661		628,975		512,857
	$	4,014,661	$	4,014,661	$	2,066,398	$	1,840,413

Amortization expense for intangible assets totaled

$225,985

in each of

2018

and

2017,

respectively. Amortization expense for amortizable intangible assets over the next

five

years is estimated to be:

	Intangible
	Amortization
2019	$	226,000
2020		226,000
2021		226,000
2022		226,000
2023		226,000

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Note 6 - Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Fair Value Disclosures [Text Block]

6.

Fair Value of Financial Instruments

The carrying amount and fair value of financial instruments at

December 31, 2018

and

2017

were approximately as follows:

	Carrying		Fair
Description	Amount		Value		Level 1		Level 2		Level 3
December 31, 2018
Note receivable	$	1,405,112	$	1,529,000		-	$	1,529,000		-
Marketable securities		339,000		339,000	$	339,000		-		-
December 31, 2017
Long-term debt	$	3,045,421	$	3,045,421		-	$	3,045,421		-
Note receivable		1,521,005		1,684,000		-		1,684,000		-
Marketable securities		330,000		330,000	$	330,000		-		-

Fair value can be measured using valuation techniques such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). Accounting standards utilize a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into

three

broad levels. The following is a brief description of those levels:

Level 1:	Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:	Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets or similar assets or liabilities in markets that are not active.
Level 3:	Unobservable inputs that reflect the reporting entity’s own assumptions.

Long-term debt

: The fair value of the Company’s term and revolver loans approximated carrying value as these loans had variable market-based interest rates that reset every

thirty

days.

Note receivable

: The Company’s note receivable is a variable rate residential mortgage-based financial instrument. An average of published interest rate quotes for a

fifteen

-year residential jumbo mortgage, a comparable financial instrument, was used to estimate fair value of this note receivable under a discounted cash flow model.

Marketable securities

: The assets (trading securities) of the Company’s Supplemental Executive Retirement Plan are recorded at fair value on a recurring basis, and are presented within Other Assets in the consolidated balance sheets.

The carrying value of other financial instruments, including cash, accounts receivable and accounts payable, and accrued liabilities approximate fair value due to their short maturities or variable-rate nature of the respective balances.

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Note 7 - Debt

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Debt Disclosure [Text Block]

7.

Debt

Debt at

December 31, 2018

and

2017

consists of the following:

	2018		2017
Term loan	$	-	$	2,545,421
Revolving line of credit		-		500,000
		-		3,045,421
Less current maturities		-		3,045,421
Long-term portion	$	-	$	-

Effective

September 30, 2015,

the Company entered into a series of lending agreements with a new primary lender which included agreements for a

$3.25

million term loan and

$3.5

million revolving credit facility. These lending agreements replaced similar borrowings under agreements with the Company’s former primary lender.

The

$3.25

million term loan was for a period of

three

years and required monthly term loan payments, under a

ten

-year amortization, consisting of principal of

$27,080

plus interest with a balloon payment for the outstanding balance due and payable on

September 30, 2018.

The term loan’s interest rate was based on the

30

-day LIBOR plus

2.25%.

The

$3.5

million revolving line of credit agreement, originally dated

September 30, 2015,

and subsequently amended and extended, accrues interest at a floating interest rate based on the

30

-day LIBOR plus

2.25%

and had an original term of

one

year.

At

June 30, 2018,

the Company was current on all principal and interest due to its lender. In

July 2018,

management voluntarily elected to redeem the cash surrender value (CSV) of the Company’s whole life insurance policy maintained on the life of the Company’s Board of Directors’ Chairman and former Chief Executive Officer. Upon redemption and related receipt of the

$3.07

million CSV proceeds, the Company simultaneously remitted to its lender

$2.86

million of the CSV proceeds to be applied towards the full reduction of its outstanding term loan and revolver balances. Following this series of

July 2018

transactions, the balances of the Company’s term loan, revolver loan, and life insurance policy balances were

zero

.

Effective with a

September 11, 2018

amendment, the revolving line of credit’s maximum borrowing amount was reduced from

$2.0

million to

$750,000.

As amended, the revolver’s maturity date remained

April 29, 2019

and the revolver’s interest rate continued to be based on the

30

-day LIBOR plus

2.25%.

As of

December 31, 2018,

there were

no

outstanding borrowings on the revolving line of credit. In

January 2019,

the Company borrowed

$500,000

under its revolving line of credit.

Effective with a

March 2019

amendment, the revolving line of credit’s maturity date was extended to

April 28, 2020

and the interest rate was revised to the

30

-day LIBOR plus

3.00%.

As amended, the revolver’s maximum borrowing amount remains

$750,000.

Borrowings under the lending agreement are secured by all tangible and intangible assets of the Company and by a mortgage on the real estate of the Company’s headquarters. At

December 31, 2018,

the Company was in compliance with its loan covenant requirements.

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Note 8 - Stockholders' Equity

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Shareholders' Equity and Share-based Payments [Text Block]

8.

Stockholders’ Equity

Stock Options – Incentive Stock Plans

The Company sponsors an incentive stock plan (the

“2014

Plan”) allowing for a maximum of

142,857

shares to be granted in the form of either incentive stock options, non-qualified stock options, restricted stock awards, or unrestricted stock awards. Employees, directors, advisors, and consultants of the Company are eligible to receive the grants. This plan has been approved by the stockholders of the Company. The Compensation Committee of the Board of Directors administers the plan.

The

2014

Plan provides that options

may

be issued under the Plan at an option price

not

less than fair market value of the stock at the time the option is granted. Under the plan, restricted stock of the Company

may

be granted at

no

cost to the grantee. The grantees are entitled to dividends and voting rights for their respective shares. Restrictions limit the sale or transfer of these shares during the requisite service period. In addition, the committee

may

grant or sell unrestricted stock at a purchase price to be determined by the committee. Vesting terms and restrictions, if applicable, under the plan, are set by the committee and will be

10

years or less. The

2014

Plan expires in

2024.

In

May 2017,

the Company’s shareholders voted to approve a

2017

Incentive Stock Plan (

2017

Plan) which authorizes the issuance of up to

200,000

shares of the Company’s common stock in various forms of stock options and/or stock awards. The

2017

Plan will

not

become effective until registered with the Securities and Exchange Commission.

A summary of the Company’s stock option activity and related information for the years ended

December 31

follows:

	2018					2017
	Options			Weighted Avg. Exercise Price		Options			Weighted Avg. Exercise Price
Outstanding beginning of the year		140,424		$	7.85		236,844		$	$8.14
Granted		-					-
Exercised		-					-
Expired and forfeited		(58,998	)		7.96		(96,420	)		8.57
Outstanding at end of year		81,426		$	7.77		140,424		$	7.85
Exercisable at end of year		14,655		$	7.77		13,713		$	7.77

Compensation cost for the stock option plan was approximately

$21,000

(

$21,000

net of tax) and

$27,000

(

$27,000

net of tax) for the years ended

December 31, 2018

and

2017,

respectively, and has been recorded in selling, general, and administrative expense. As of

December 31, 2018,

the total remaining unrecognized compensation cost related to the non-vested portion of time vesting stock options totaled

$19,000

(

$19,000

net of tax), which will be amortized over the weighted remaining requisite service period of

1.17

years. The aggregate intrinsic value of stock options outstanding and currently exercisable at

December 31, 2018

was $-

0

-.

Distributor Stock Purchase Plan

In

July 2009,

the Company established a Distributor Stock Purchase Plan (

2009

Plan) which replaced a similar plan which had expired.

The plan allows distributors who have reached the “Ambassador” status the opportunity to allocate up to

10%

of their monthly compensation into the plan to be used to purchase the Company’s common stock at the current market value. The plan also states that at the end of each year, the Company will grant warrants to purchase additional shares of the Company’s common stock based on the number of shares purchased by the distributors under the plan during the year. The warrant exercise price will equal the market price for the Company’s common stock at the date of issuance. The warrants issued shall be in the amount of

25%

of the total shares purchased under the plan during the year and the warrants are fully vested upon grant.

The Company records expense under the fair value method for warrants granted to distributors. Total expense for the warrants was

$3,000

and

$6,600

in

2018

and

2017,

respectively.

A summary of the Company’s warrant activity for the years ended

December 31

follows:

	2018					2017
	Warrants			Weighted Avg. Exercise Price		Warrants			Weighted Avg. Exercise Price
Outstanding beginning of the year		5,960		$	4.46		6,291		$	5.34
Granted		1,113			4.24		1,258			4.77
Exercised		-					-
Expired		(2,183	)		4.06		(1,589	)		8.19
Outstanding at end of year		4,890		$	4.58		5,960		$	4.46
Exercisable at end of year		4,890					5,960

			As of December 31, 2018
			Warrants Outstanding and Exercisable
Range of Exercise Prices			Warrants		Weighted Avg. Exercise Price		Weighted Avg. Remaining Life
	$4.24			1,113	$	4.24		3.00
	$4.64			2,519		4.64		1.00
	$4.77			1,258		4.77		2.00
$4.24	-	$4.77		4,890	$	4.58		1.71

The fair value of the warrants was estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions:

	Year ended December 31
	2018			2017
Expected warrant life (years)		3.0			3.0
Risk-free weighted average interest rate		2.46	%		1.98	%
Stock price volatility		55.8	%		73.8	%
Dividend yield		0.0	%		0.0	%

The intrinsic value for stock warrants outstanding at

December 31, 2018

was $-

0

-.

The

2009

Distributor Stock Purchase Plan was established with a

ten

-year life. As a result, there will be

no

further grants from this Plan. Upon exercise, forfeiture or expiration of all outstanding warrants, the Plan will terminate.

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Note 9 - Loss Per Share

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Earnings Per Share [Text Block]

9.

Loss per Share

The following table sets forth the computation of basic and diluted loss per share:

	Year ended December 31
	2018			2017
Numerator:
Net loss	$	(1,903,341	)	$	(696,912	)
Denominator:
Denominator for basic loss per share – weighted average shares		1,845,000			1,845,000
Dilutive effect of employee stock options and other warrants		-			-
Denominator for diluted loss per share – adjusted weighted average shares		1,845,000			1,845,000
Basic loss per share	$	(1.03	)	$	(0.38	)
Diluted loss per share	$	(1.03	)	$	(0.38	)

For the years ended

December 31, 2018

and

2017,

options and warrants totaling

86,316

and

146,384,

respectively, shares of common stock were

not

included in the denominator for diluted loss per share because their effect would be anti-dilutive or because the shares were deemed contingently issuable.

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Note 10 - Leases

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Leases of Lessee Disclosure [Text Block]

10.

Leases

The Company leases certain office facilities, storage, and equipment. These leases have varying terms, and certain leases have renewal and/or purchase options. Future minimum payments under non-cancelable leases with initial or remaining terms in excess of

one

year consist of the following at

December 

31,

2018:

2019	$	268,652
2020		186,168
2021		16,479
2022		16,479
2023		6,681
Thereafter		-
	$	494,459

Rent expense for operating leases was

$326,724

and

$338,734

for the years ended

December 31, 2018

and

2017,

respectively.

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Note 11 - Note Receivable Due From Distributor

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables, Excluding Allowance for Credit Losses [Text Block]

11.

Note Receivable Due From Distributor

In

March 2012,

the Company purchased a note and mortgage (“Note”) from a real estate investment management firm on certain properties in Wyoming and Idaho for

$2

million. In

May 2012,

the Company entered into a Loan Modification Agreement (“LMA”) with the Note’s original and present borrower (“Borrower”) to restructure the Note’s principal amount due and related terms. The LMA terms are for a principal balance due of

$2

million with interest only payments made monthly in

2012.

The LMA’s interest rate is the greater of

6%

or prime and there is

no

prepayment penalty for voluntary principal payments. Concurrently, with the execution of the LMA, the Company and the Borrower also entered into a Security Agreement in which repayment of the LMA is secured by the Borrower’s Reliv distributorship business.

As originally structured, beginning in

2013,

the LMA was to require monthly payment of principal and interest under a

five

-year amortization period. In

February 2013,

while retaining the Company’s right to require Borrower’s compliance with the LMA’s terms, the Company and the Borrower agreed to a verbal modification in the payment schedule in which the Company agreed to accept monthly payments of principal and interest under a

fifteen

-year amortization period. The outstanding balance of the note receivable was

$1,405,112

and

$1,521,005

as of

December 31, 2018

and

2017,

respectively.

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Note 12 - Income Taxes

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

12.

Income Taxes

Compenents of loss before income taxes:	Year ended December 31
	2018			2017
United States	$	(1,694,301	)	$	(30,606	)
Foreign		(111,040	)		(121,306	)
	$	(1,805,341	)	$	(151,912	)

Compenents of provision (benefit) for income taxes:	Year ended December 31
	2018			2017
Current:
Federal	$	(3,000	)	$	(2,000	)
State		4,000			5,000
Foreign		97,000			33,000
Total current		98,000			36,000
Deferred:
Federal		-			-
State		-			-
Foreign		-			509,000
Total deferred		-			509,000
	$	98,000		$	545,000

The provision (benefit) for income taxes is different from the amounts computed by applying the United States federal statutory income tax rate of

21%

and

34%

for the years ended

December 31, 2018

and

2017,

respectively. The reasons for these differences are as follows:

	Year ended December 31
	2018			2017
Income taxes at U.S. statutory rate	$	(379,000	)	$	(52,000	)
State income taxes, net of federal benefit		7,000			11,000
Higher/(lower) effective taxes on earnings/losses in foreign countries		38,000			(65,000	)
Foreign corporate income taxes		97,000			33,000
Foreign tax credit carryover		-			(66,000	)
Life insurance settlement		118,000			-
GILTI		34,000			-
Nondeductible meals and entertainment expense		9,000			13,000
Valuation allowance, net		186,000			707,000
Other		(12,000	)		(36,000	)
	$	98,000		$	545,000

The Company has determined that it was more likely than

not

that its U.S. federal and various state net operating losses will

not

be realized based on projections of future U.S. taxable income, estimated reversals of existing taxable timing differences, and other considerations. Accordingly, the

2018

and

2017

income tax provisions include the impact of recording a full deferred tax asset valuation allowance of approximately

$186,000

and

$198,000,

respectively, against the annual losses generated from a U.S. tax perspective. The Company has a deferred tax asset relating to domestic federal net operating loss carryforwards of approximately

$451,000

at

December 31, 2018

of which approximately

$188,000

will expire between

2036

and

2037.

The Company has a deferred tax asset of

$3,118,000

at

December 31, 2018

relating to foreign net operating loss carryforwards in various jurisdictions which principally do

not

expire. At

December 31, 2018,

the Company has recorded a full valuation allowance against all domestic and foreign net operating loss carryforward balances as it is more likely than

not

that this asset will

not

be realized.

As of

December 31, 2017,

management’s assessment of the realizability of its Europe’s subsidiary’s deferred tax assets concluded that it

no

longer meets the threshold of more likely than

not

based upon the subsidiary’s recent declining operating results. Accordingly, the Company recorded a full valuation allowance against the Europe subsidiary’s deferred tax assets with a corresponding deferred income tax charge of

$509,000

in

2017.

The components of the deferred tax assets and liabilities, and the related tax effects of each temporary difference at

December 31, 2018

and

2017,

are as follows:

	2018			2017
Deferred tax assets:
Inventory obsolescence reserve	$	53,000		$	62,000
Product refund reserve		-			7,000
Deferred revenue		91,000			-
Organization costs		117,000			127,000
Deferred compensation		97,000			94,000
Depreciation and amortization		2,000			-
Miscellaneous accrued expenses		23,000			13,000
Domestic net operating loss carryforwards		451,000			186,000
Foreign net operating loss carryforwards		3,118,000			3,413,000
Valuation allowance		(3,845,000	)		(3,767,000	)
		107,000			135,000
Deferred tax liabilities:
Depreciation and amortization		-			28,000
Foreign currency exchange		107,000			107,000
		107,000			135,000
Net deferred tax assets (liabilities)	$	-		$	-

The United States Tax Cuts and Jobs Act (TCJA) was enacted in

December 2017,

which significantly changed U.S. tax law, principally by permanently reducing the U.S. federal statutory rate to

21%

effective

January 1, 2018,

implementing a territorial tax system, and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The effect of the federal tax rate reduction to

21%

was reflected as a reduction in the

December 31, 2017

U.S. deferred tax asset balances with a corresponding reduction in the valuation allowance. Under the TCJA’s repatriation tax, the Company’s cumulative amount of unremitted foreign earnings and related tax was immaterial.

Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”)

118

to provide guidance to companies on the reporting of the impacts of TCJA in their financial statements. Under SAB

118,

the Company recorded affected items in fiscal year

2017

as provisional to allow additional time for clarifying technical guidance from Treasury and analysis of the effect to the Company’s current tax positions. In

2018,

the Company has completed its analysis and did

not

record any adjustments to its

2017

provisional income tax amounts.

The TCJA introduced a new tax on global intangible low-taxed income (“GILTI”) effective as of

January 1, 2018.

The Company’s policy is to treat GILTI as a period cost when incurred.

At

December 31, 2018

and

2017,

the Company had

$32,000

and

$36,000,

respectively, of cumulative unrecognized tax benefits, of which only the net amount of

$22,000

would impact the effective income tax rate if recognized.

The aggregate changes in the balance of net unrecognized tax benefits were as follows:

	2018			2017
Beginning of year	$	26,000		$	32,000
Settlements and effective settlements with tax authorities		-			-
Lapse of statute of limitations		(7,000	)		(6,000	)
Decrease to tax positions taken during prior periods		(3,000	)		(6,000	)
Increase to tax positions taken during current period		6,000			6,000
End of year	$	22,000		$	26,000

The Company applied applicable accounting guidance relating to accounting for uncertainty in income taxes. Reserves for uncertainty in income taxes are adjusted quarterly in light of changing facts and circumstances, such as the progress of tax audits, case law, and emerging legislation. The primary difference between gross unrecognized tax benefits and net unrecognized tax benefits is the U.S. federal tax benefit from state tax deductions. It is the Company’s practice to recognize interest and / or penalties related to income tax matters in income tax expense.

At

December 31, 2018

and

2017,

the Company had

$10,000

and

$11,000,

respectively, accrued for interest and penalties within the balance of unrecognized tax benefits. The Company’s unrecognized tax benefits balance is included within other noncurrent liabilities on the consolidated balance sheets.

The Company, including its domestic and foreign subsidiaries, is subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. The Company has concluded all U.S. federal income tax matters for years through

2014

and concluded years through

2014

with its primary state jurisdiction.

One of the Company’s foreign subsidiaries is presently under local country audit for alleged deficiencies (totaling approximately

$800,000

plus interest at

20%

per annum) in value-added tax (VAT) and withholding tax for the years

2004

through

2006.

The Company, in consultation with its legal counsel, believes that there are strong legal grounds that it should

not

be liable to pay the majority of the alleged tax deficiencies. As of

December 31, 2010,

management estimated and reserved approximately

$185,000

for resolution of this matter and recorded this amount within Selling, General, and Administrative expense in the

2010

Consolidated Statement of Income. In

2011,

the Company made good faith deposits to the local tax authority under the tax agency’s administrative judicial resolution process. As of

December 31, 2018,

management’s estimated reserve (net of deposits) for this matter is approximately

$172,500.

XML

Note 13 - Employee Benefit Plans

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Pension and Other Postretirement Benefits Disclosure [Text Block]

13.

Employee Benefit Plans

The Company sponsors a

401

(k) employee savings plan which covers substantially all employees. Employees can contribute up to

15%

of their gross income to the plan. The Company matched a percentage of the employee’s contribution at a rate of

10%

for the years ended

December 31, 2018,

and

2017,

respectively. Company contributions under the

401

(k) plan totaled

$36,800

and

$35,400

in

2018

and

2017,

respectively.

The Company sponsors an employee stock ownership plan ("ESOP") which covers substantially all U.S. employees. Contributions to the ESOP are funded by the Company on a discretionary basis. In

2018

and

2017,

the Company did

not

make any contributions to the ESOP.

XML

Note 14 - Incentive Compensation Plans

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Compensation Related Costs, General [Text Block]

14.

Incentive Compensation Plans

Under a Board of Directors approved incentive compensation plan, bonuses are payable quarterly in an amount

not

to exceed

18%

of the Company’s Income from Operations for any period, subject to the Company achieving a minimum quarterly Income from Operations of at least

$500,000.

For fiscal years

2018

and

2017,

the Board determined that the aggregate amount of incentive compensation available under the Plan shall be equal to

18%

of the Company’s Income from Operations. The bonus pool is allocated to executives according to a specified formula, with a portion allocated to a middle management group determined by the Executive Committee of the Board of Directors. The Company expensed a total of $-

0

- and

$109,500

to the participants of the bonus pool for

2018

and

2017,

respectively.

The Company sponsors a Supplemental Executive Retirement Plan (SERP) to allow certain executives to defer a portion of their annual salary and bonus into a grantor trust. A grantor trust was established to hold the assets of the SERP. The Company funds the grantor trust by paying the amount deferred by the participant into the trust at the time of deferral. Investment earnings and losses accrue to the benefit or detriment of the participants. The SERP also provides for a discretionary matching contribution by the Company

not

to exceed

100%

of the participant’s annual contribution. In

2018

and

2017,

the Company did

not

provide a match. The participants fully vest in the deferred compensation

three

years from the date they enter the SERP. The participants are

not

eligible to receive distribution under the SERP until retirement, death, or disability of the participant. At

December 31, 2018

and

2017,

SERP assets were

$339,000

and

$330,000,

respectively, and are included in “Other Assets” in the accompanying consolidated balance sheets. At

December 31, 2018

and

2017,

SERP liabilities were

$341,000

and

$332,000,

respectively, and are included in “Other Non-Current Liabilities” in the accompanying consolidated balance sheets. The changes in the balances of SERP assets and SERP liabilities during

2018

and

2017

were due to net realized and unrealized investment gains/losses incurred by the plan.

XML

Note 15 - Segment Information

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

15.

Segment Information

Description of Products and Services by Segment

The Company operates in

one

reportable segment, a network marketing segment consisting of

six

operating units that sell nutritional and dietary products to a sales force of independent distributors that sell the products directly to customers. These operating units are based on geographic regions. Geographic area data for the years ended

December 31, 2018

and

2017

follow:

	2018		2017
Net sales to external customers
United States	$	27,673,352	$	32,474,797
Australia/New Zealand		732,227		922,594
Canada		718,560		914,775
Mexico		474,372		445,299
Europe (1)		3,972,381		4,578,095
Asia (2)		2,544,849		2,453,222
Total net sales	$	36,115,741	$	41,788,782
Assets by area
United States	$	13,584,424	$	18,100,872
Australia/New Zealand		540,591		572,368
Canada		166,533		265,629
Mexico		179,713		219,501
Europe (1)		867,008		1,032,641
Asia (2)		1,015,596		884,985
Total consolidated assets	$	16,353,865	$	21,075,996

( 1 )	Europe consists of United Kingdom, Ireland, France, Germany, Austria, and the Netherlands.
( 2 )	Asia consists of Philippines, Malaysia, and Singapore.

The Company classifies its sales into

two

categories of sales products plus handling & freight income. Net sales by product category data for the years ended

December 31, 2018

and

2017,

follow:

	2018		2017
Net sales by product category
Nutritional and dietary supplements	$	32,670,362	$	37,326,863
Sales aids, membership fees, and other		1,247,807		1,424,494
Handling & freight income		2,197,572		3,037,425
Total net sales	$	36,115,741	$	41,788,782

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

XML

Note 16 - Restructuring Activities

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Restructuring and Related Activities Disclosure [Text Block]

16.

Restructuring Activities

In

April 2018,

the Company announced the

June 30, 2018

closing of the operations of its Reliv Indonesia subsidiary. The total cost of this program, primarily representing employee severance costs, facility exit costs, and a write-down of inventory to its net realizable value, was approximately

$77,000,

and was included in the company’s operating results for the

second

quarter ended

June 30, 2018.

At

December 31, 2018,

this program has been substantially completed.

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Note 17 - Subsequent Events

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Subsequent Events [Text Block]

17.

Subsequent Events

On

January 1, 2019,

the Company entered into a Purchase Agreement with Nutracom, LLC (Nutracom) pursuant to which Nutracom purchased the assets used by the Company in its manufacturing operations. See Note

2

for further information.

In

January 2019,

the Company borrowed

$500,000

under its revolving line of credit. In

March 2019,

the Company and its primary lender amended the terms of the Company’s revolving line of credit agreement. See Note

7

for further information.

F-

30

XML

Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Nature of Operations, Policy [Policy Text Block]

Nature of Business

Reliv’ International, Inc. (the Company) produces a proprietary line of nutritional supplements addressing basic nutrition, specific wellness needs, weight management, and sports nutrition. These products are sold by subsidiaries of the Company to a sales force of independent distributors of the Company that sell products directly to consumers. The Company and its subsidiaries sell products to distributors throughout the United States and in Australia, Austria, Canada, France, Germany, Ireland, Malaysia, Mexico, the Netherlands, New Zealand, the Philippines, Singapore, and the United Kingdom.

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its foreign and domestic subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash Equivalents

The Company's policy is to consider the following as cash and cash equivalents: demand deposits and short-term investments with a maturity of

three

months or less when purchased.

Inventory, Policy [Policy Text Block]

Inventories

Inventories are valued at the lower of cost or market. Product cost includes raw materials, labor, and overhead costs and is accounted for on a

first

-in,

first

-out basis. On a periodic basis, the Company reviews its inventory levels, as compared to future demand requirements and the shelf life of the various products. Based on this review, the Company records inventory write-downs when necessary.

Sales aids and promotional materials inventories represent distributor kits, product brochures, and other sales and business development materials which are held for sale to distributors. Cost of the sales aids and promotional materials held for sale are capitalized as inventories and subsequently recorded to cost of goods sold upon recognition of revenue when sold to distributors. All other advertising and promotional costs are expensed when incurred.

Property, Plant and Equipment, Policy [Policy Text Block]

Property, Plant, and Equipment

Property, plant, and equipment are stated on the cost basis. Depreciation is computed using the straight-line or an accelerated method over the useful life of the related assets. Generally, computer equipment and software are depreciated over

3

to

5

years, office equipment and machinery over

7

years, and real property over

39

years.  

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currency Translation and Transaction Gains or Losses

All balance sheet accounts have been translated using the exchange rates in effect at the balance sheet date. Statements of net income (loss) amounts have been translated using the average exchange rate for the year. The gains and losses resulting from the changes in exchange rates from year to year have been reported in other comprehensive income (loss). The foreign currency translation adjustment is the only component of accumulated other comprehensive loss. If applicable, foreign currency translation adjustments exclude income tax expense (benefit) as certain of the Company’s investments in non-U.S. subsidiaries are deemed to be reinvested for an indefinite period of time. Foreign currency transaction gains (losses) were

$32,577

and

$20,659

for

2018

and

2017,

respectively.

Earnings Per Share, Policy [Policy Text Block]

Basic and Diluted Earnings (Loss) per Share

Basic earnings (loss) per common share are computed using the weighted average number of common shares outstanding during the year. Diluted earnings (loss) per common share are computed using the weighted average number of common shares and potential dilutive common shares that were outstanding during the period. Potential dilutive common shares consist of outstanding stock options, outstanding stock warrants, and convertible preferred stock. See Note

9

for additional information regarding earnings (loss) per share.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-Based Compensation

The Company has stock-based incentive plans under which it

may

grant stock option, restricted stock, and unrestricted stock awards. The Company recognizes stock-based compensation expense based on the grant date fair value of the award and the related vesting terms. Depending upon the characteristics of the option, the fair value of stock-based awards is primarily determined using the Black-Scholes model, which incorporates assumptions and management estimates including the risk-free interest rate, expected volatility, expected option life, and dividend yield. The Company recognizes forfeitures when incurred. See Note

8

for additional information.

The Company accounts for options granted to non-employees and warrants granted to distributors under the fair value approach required by FASB ASC Topic

505

-

50,

“Equity Based Payments to Non-Employees.”

Fair Value Measurement, Policy [Policy Text Block]

Fair Value Measurements

FASB ASC Topic

820,

“Fair Value Measurements and Disclosures,” defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements required under other accounting pronouncements. See Note

6

for further discussion.

Income Tax, Policy [Policy Text Block]

Income Taxes

The provision for income taxes is computed using the liability method. The primary differences between financial statement and taxable income result from financial statement accruals and reserves and differences between depreciation and amortization for book and tax purposes.

Unrecognized tax benefits are accounted for as required by FASB ASC Topic

740

which prescribes a more likely than

not

threshold for financial statement presentation and measurement of a tax position taken or expected to be taken in a tax return. See Note

12

for further discussion.

Advertising Costs, Policy [Policy Text Block]

Advertising

Costs of sales aids and promotional materials are capitalized as inventories. All other advertising and promotional costs are expensed when incurred. The Company recorded

$19,300

and

$22,300

of advertising expense in

2018

and

2017,

respectively.

Research and Development Expense, Policy [Policy Text Block]

Research and Development Expenses

Research and development expenses, which are charged to selling, general, and administrative expenses as incurred, were

$473,000

and

$488,000

in

2018

and

2017,

respectively.

Goodwill and Intangible Assets, Intangible Assets, Policy [Policy Text Block]

Amortizable Intangible Assets

The Company records intangible assets based on management’s determination of the fair value of the respective assets at the time of acquisition. Determining the fair value of intangible assets is judgmental and involves the use of significant estimates and assumptions of future company operations. The Company bases its fair value estimates and related asset lives on assumptions it believes to be reasonable but that are unpredictable and inherently uncertain. Actual future results

may

differ from these estimates.

Intangible assets estimated to have finite lives are amortized over their estimated economic life under the straight-line method; such method correlates to management’s estimate of the assets’ economic benefit. Based on management’s estimates at origination, these lives range from

two

to

seventeen

years. Related amortization expense is presented within Selling, General, and Administrative in the accompanying consolidated statements of net loss and comprehensive loss. As of

December 31, 2018,

remaining lives of intangible assets range from

six

to

eleven

years.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

 

On

January 1, 2018,

the Company adopted Accounting Standards Update (ASU)

No.

2014

-

09,

Revenue from Contracts with Customers

(including amendments), and applied the new revenue standard to all contracts using the modified retrospective method. Under this method, prior periods are

not

restated. Upon adoption, the Company recognized the cumulative effect of applying the new revenue standard as a reduction of

$367,568

(with

zero

net tax effect) to the opening retained earnings (accumulated deficit) balance.

The new revenue standard defines a

five

step process to recognize revenues. The Company accounts for a contract with its independent distributors (including customers) when there is a legally enforceable contract, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. Product sales revenue (principally nutritional and dietary supplements) and commission expenses are recorded when control is transferred to independent distributors, which occurs at the time of shipment. Generally, net sales reflect product sales less the distributor discount of

20

percent to

40

percent of the suggested retail price. The Company presents distributor royalty and commission expense as an operating expense, rather than a reduction to net sales, as these payments are

not

made to the purchasing distributor. At point of sale, the Company receives payment by credit card, personal check, or guaranteed funds for contracts from independent distributors and makes related commission payments in the following month.

Under this new revenue standard, the Company determined that the timeframe for recognizing the revenue performance obligation for membership fees-type revenue would be lengthened to more closely correlate with the distributor (including customer) membership terms of generally

twelve

months. Based upon all membership fees contracts still in existence as of

December 31, 2017,

the adoption of the new revenue standard resulted in the recognition of a deferred revenue liability balance of

$367,568.

The Company receives payment for membership fees at the beginning of the annual membership term and recognizes membership fees revenue on a straight-line basis in correlation with the completion of its performance obligation under the membership term. At

December 31, 2018,

the deferred revenue liability balance was

$337,234.

Actual and estimated sales returns are classified as a reduction of net sales. The Company estimates and accrues a reserve for product returns based on the Company’s return policy and historical experience. The Company’s return policy allows for distributors to return product only upon termination of his or her distributorship. Allowable returns are limited to saleable product which was purchased within

twelve

months of the termination for a refund of

100%

of the original purchase price less any distributor royalties and commission received relating to the original purchase of the returned products. For the years ended

December 31, 2018

and

2017,

total returns as a percent of net sales were approximately

0.17%

and

0.25%,

respectively.

The Company records handling and freight income as a component of net sales and records handling and freight costs as a component of cost of products sold. Total net sales do

not

include sales tax as the Company considers itself a pass-through conduit for collecting and remitting applicable sales taxes.

In accordance with the new revenue standard requirements, the disclosure of the impact of adoption to the Company’s results from operations are as follows:

	Year Ended December 31, 2018
				Without			Effect of
				Adoption of			Change
	As Reported			ASU 2014-09			Higher/(Lower)
Operating results
Net sales	$	36,115,741		$	36,086,633		$	29,108
Net loss		(1,903,341	)		(1,932,449	)		29,108

The Company does

not

anticipate that the adoption of the new revenue standard will be material to net sales and net income on an ongoing basis.

New Accounting Pronouncements, Policy [Policy Text Block]

New Accounting Pronouncements –

Not

Yet Adopted

In

February 2016,

the Financial Accounting Standards Board (FASB) issued ASU

No.

2016

-

02,

Leases (Topic

842

)

which supersedes the existing lease guidance. This update requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. Subsequent to its issuance of ASU

No.

2016

-

02,

the FASB issued related ASU’s, including ASU

No.

2018

-

11,

Leases (Topic

842

): Targeted Improvements,

which provides for another transition method in addition to the modified retrospective approach originally required by ASU

No.

2016

-

02.

This transition method option under ASU

No.

2018

-

11

allows entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

As required, the Company will adopt ASU

2016

-

02

on

January 1, 2019.

The Company anticipates applying certain practical expedients permitted in the standard, as well as the prospective transition method. The Company’s adoption of this new lease standard will result in the

January 1, 2019

recognition of right-of-use assets and lease liabilities of approximately

$460,000

in the Company’s consolidated financial statements. The Company leases certain office facilities, storage, and equipment.

Going Concern [Policy Text Block]

Going Concern

The Company has incurred operating losses, declining net sales, and negative net cash flows over its most recent

five

years. Management estimates that these unfavorable trends are more likely than

not

to continue for the foreseeable future, and as a result, the Company will require additional financial support to fund its operations and execute its business plan. As of

December 31, 2018,

the Company had

$1,989,974

in cash and cash equivalents which

may

not

be sufficient to fund the Company’s planned operations through

one

year after the date the consolidated financial statements are issued, and accordingly, there is substantial doubt about the Company’s ability to continue as a going concern. The analysis used to determine the Company’s ability to continue as a going concern does

not

include cash sources outside of the Company’s direct control that management expects to be available within the next

twelve

months.

The Company

may

not

be able to obtain sufficient additional funding through monetizing certain of its existing assets, sourcing additional borrowings, and issuing additional equity, or any other means, and if it is able to do so, these available sources of funds

may

not

be on satisfactory terms. The Company’s ability to raise additional capital in the equity markets, should the Company choose to do so, is dependent on a number of factors, including, but

not

limited to, the market demand for the Company’s common stock, which itself is subject to a number of business risks and uncertainties, as well as the uncertainty that the Company would be able to raise such additional capital at a price or on terms that are favorable to the Company

The Company has taken several steps which management believes will result in an improved financial position, operating results, and cash flows. As detailed in Note

7

of these consolidated financial statements, in

January 2019,

the Company has borrowed

$500,000

of its available

$750,000

revolving line of credit balance. In

March 2019,

the Company and its lender have agreed to extend its available

$750,000

revolving line of credit agreement to

April 28, 2020.

As detailed in Note

2

of these consolidated financial statements, in

January 2019,

the Company entered into a Purchase Agreement with Nutracom, LLC (Nutracom) pursuant to which Nutracom purchased the assets used by the Company in its manufacturing operations. Assets purchased by Nutracom from the Company were financed by the Company under payment terms scheduled to provide incoming funds to the Company of

$200,000

or more per year. The Company has also entered into an agreement for Nutracom to lease a significant portion of the Company’s headquarters building. Management believes that these transactions with Nutracom will be favorable to its financial position, operating results, and cash flows; however, there are risks and uncertainties which arise with these Nutracom transactions and their impact to the Company’s operations.

Should the aforementioned changes to the company’s operations

not

provide sufficient cash flow improvement or should the Company be unable to obtain sufficient additional capital or borrowings, the Company

may

have to engage in any or all of the following activities: (i) seek to monetize its headquarters building via traditional bank lending or a sale and leaseback-type transaction; (ii) monetizing its note receivable from a distributor (see Note

11

); (iii) restructure its core distributor business model including recruiting, promotions, incentives, and other activities; (iv) cease operations in certain geographic regions, and (v) reduce employee compensation and benefits.

These actions

may

have a material adverse impact on the Company’s ability to achieve certain of its planned objectives. Even if the Company is able to source additional funding, it

may

be forced to significantly reduce its operations if its business operating performance does

not

improve. If the Company is unable to source additional funding, it

may

be forced to significantly reduce or shut down its operations. These consolidated financial statements have been prepared on a going concern basis and do

not

include any adjustments to the amounts and classification of assets and liabilities that

may

be necessary in the event the Company can

no

longer continue as a going concern.

XML

Note 1 - Nature of Business and Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block]

	Year Ended December 31, 2018
				Without			Effect of
				Adoption of			Change
	As Reported			ASU 2014-09			Higher/(Lower)
Operating results
Net sales	$	36,115,741		$	36,086,633		$	29,108
Net loss		(1,903,341	)		(1,932,449	)		29,108

XML

Note 3 - Property, Plant, and Equipment (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Property, Plant and Equipment [Table Text Block]

	2018		2017
Land and land improvements	$	905,190	$	905,190
Building		9,964,523		9,950,190
Machinery and equipment		180,519		4,755,727
Office equipment		1,157,392		1,183,115
Computer equipment and software		2,212,935		2,261,038
		14,420,559		19,055,260
Less accumulated depreciation		9,722,009		13,378,021
	$	4,698,550	$	5,677,239

XML

Note 4 - Accounts Payable and Accrued Expenses (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Accounts Payable and Accrued Liabilities [Table Text Block]

	2018		2017
Trade payables	$	2,105,814	$	1,667,495
Distributors' commissions		1,030,948		1,115,649
Sales taxes		195,802		154,958
Deferred revenue		337,234		-
Payroll and payroll taxes		210,288		261,916
	$	3,880,086	$	3,200,018

XML

Note 5 - Amortizable Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Finite-Lived Intangible Assets [Table Text Block]

					Accumulated
	Gross Carrying Amount				Amortization
	2018		2017		2018		2017
Distributorship and related agreements	$	2,060,000	$	2,060,000	$	1,437,423	$	1,327,556
Lunasin technology license		1,954,661		1,954,661		628,975		512,857
	$	4,014,661	$	4,014,661	$	2,066,398	$	1,840,413

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

	Intangible
	Amortization
2019	$	226,000
2020		226,000
2021		226,000
2022		226,000
2023		226,000

XML

Note 6 - Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Fair Value, by Balance Sheet Grouping [Table Text Block]

	Carrying		Fair
Description	Amount		Value		Level 1		Level 2		Level 3
December 31, 2018
Note receivable	$	1,405,112	$	1,529,000		-	$	1,529,000		-
Marketable securities		339,000		339,000	$	339,000		-		-
December 31, 2017
Long-term debt	$	3,045,421	$	3,045,421		-	$	3,045,421		-
Note receivable		1,521,005		1,684,000		-		1,684,000		-
Marketable securities		330,000		330,000	$	330,000		-		-

XML

Note 7 - Debt (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Debt [Table Text Block]

	2018		2017
Term loan	$	-	$	2,545,421
Revolving line of credit		-		500,000
		-		3,045,421
Less current maturities		-		3,045,421
Long-term portion	$	-	$	-

XML

Note 8 - Stockholders' Equity (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Share-based Compensation, Stock Options, Activity [Table Text Block]

	2018					2017
	Options			Weighted Avg. Exercise Price		Options			Weighted Avg. Exercise Price
Outstanding beginning of the year		140,424		$	7.85		236,844		$	$8.14
Granted		-					-
Exercised		-					-
Expired and forfeited		(58,998	)		7.96		(96,420	)		8.57
Outstanding at end of year		81,426		$	7.77		140,424		$	7.85
Exercisable at end of year		14,655		$	7.77		13,713		$	7.77

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

	2018					2017
	Warrants			Weighted Avg. Exercise Price		Warrants			Weighted Avg. Exercise Price
Outstanding beginning of the year		5,960		$	4.46		6,291		$	5.34
Granted		1,113			4.24		1,258			4.77
Exercised		-					-
Expired		(2,183	)		4.06		(1,589	)		8.19
Outstanding at end of year		4,890		$	4.58		5,960		$	4.46
Exercisable at end of year		4,890					5,960

Schedule of Stockholders' Equity Note, Warrants and Rights Outstanding and Exercisable [Table Text Block]

			As of December 31, 2018
			Warrants Outstanding and Exercisable
Range of Exercise Prices			Warrants		Weighted Avg. Exercise Price		Weighted Avg. Remaining Life
	$4.24			1,113	$	4.24		3.00
	$4.64			2,519		4.64		1.00
	$4.77			1,258		4.77		2.00
$4.24	-	$4.77		4,890	$	4.58		1.71

Warrants [Member]

Notes Tables

Schedule of Share-based Payment Award, Warrants, Valuation Assumptions [Table Text Block]

	Year ended December 31
	2018			2017
Expected warrant life (years)		3.0			3.0
Risk-free weighted average interest rate		2.46	%		1.98	%
Stock price volatility		55.8	%		73.8	%
Dividend yield		0.0	%		0.0	%

XML

Note 9 - Loss Per Share (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Year ended December 31
	2018			2017
Numerator:
Net loss	$	(1,903,341	)	$	(696,912	)
Denominator:
Denominator for basic loss per share – weighted average shares		1,845,000			1,845,000
Dilutive effect of employee stock options and other warrants		-			-
Denominator for diluted loss per share – adjusted weighted average shares		1,845,000			1,845,000
Basic loss per share	$	(1.03	)	$	(0.38	)
Diluted loss per share	$	(1.03	)	$	(0.38	)

XML

Note 10 - Leases (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

2019	$	268,652
2020		186,168
2021		16,479
2022		16,479
2023		6,681
Thereafter		-
	$	494,459

XML

Note 12 - Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Income before Income Tax, Domestic and Foreign [Table Text Block]

Compenents of loss before income taxes:	Year ended December 31
	2018			2017
United States	$	(1,694,301	)	$	(30,606	)
Foreign		(111,040	)		(121,306	)
	$	(1,805,341	)	$	(151,912	)

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

Compenents of provision (benefit) for income taxes:	Year ended December 31
	2018			2017
Current:
Federal	$	(3,000	)	$	(2,000	)
State		4,000			5,000
Foreign		97,000			33,000
Total current		98,000			36,000
Deferred:
Federal		-			-
State		-			-
Foreign		-			509,000
Total deferred		-			509,000
	$	98,000		$	545,000

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	Year ended December 31
	2018			2017
Income taxes at U.S. statutory rate	$	(379,000	)	$	(52,000	)
State income taxes, net of federal benefit		7,000			11,000
Higher/(lower) effective taxes on earnings/losses in foreign countries		38,000			(65,000	)
Foreign corporate income taxes		97,000			33,000
Foreign tax credit carryover		-			(66,000	)
Life insurance settlement		118,000			-
GILTI		34,000			-
Nondeductible meals and entertainment expense		9,000			13,000
Valuation allowance, net		186,000			707,000
Other		(12,000	)		(36,000	)
	$	98,000		$	545,000

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	2018			2017
Deferred tax assets:
Inventory obsolescence reserve	$	53,000		$	62,000
Product refund reserve		-			7,000
Deferred revenue		91,000			-
Organization costs		117,000			127,000
Deferred compensation		97,000			94,000
Depreciation and amortization		2,000			-
Miscellaneous accrued expenses		23,000			13,000
Domestic net operating loss carryforwards		451,000			186,000
Foreign net operating loss carryforwards		3,118,000			3,413,000
Valuation allowance		(3,845,000	)		(3,767,000	)
		107,000			135,000
Deferred tax liabilities:
Depreciation and amortization		-			28,000
Foreign currency exchange		107,000			107,000
		107,000			135,000
Net deferred tax assets (liabilities)	$	-		$	-

Schedule of Unrecognized Tax Benefits Roll Forward [Table Text Block]

	2018			2017
Beginning of year	$	26,000		$	32,000
Settlements and effective settlements with tax authorities		-			-
Lapse of statute of limitations		(7,000	)		(6,000	)
Decrease to tax positions taken during prior periods		(3,000	)		(6,000	)
Increase to tax positions taken during current period		6,000			6,000
End of year	$	22,000		$	26,000

XML

Note 15 - Segment Information (Tables)

12 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas [Table Text Block]

	2018		2017
Net sales to external customers
United States	$	27,673,352	$	32,474,797
Australia/New Zealand		732,227		922,594
Canada		718,560		914,775
Mexico		474,372		445,299
Europe (1)		3,972,381		4,578,095
Asia (2)		2,544,849		2,453,222
Total net sales	$	36,115,741	$	41,788,782
Assets by area
United States	$	13,584,424	$	18,100,872
Australia/New Zealand		540,591		572,368
Canada		166,533		265,629
Mexico		179,713		219,501
Europe (1)		867,008		1,032,641
Asia (2)		1,015,596		884,985
Total consolidated assets	$	16,353,865	$	21,075,996

Schedule of Segment Reporting Information by Product [Table Text Block]

	2018		2017
Net sales by product category
Nutritional and dietary supplements	$	32,670,362	$	37,326,863
Sales aids, membership fees, and other		1,247,807		1,424,494
Handling & freight income		2,197,572		3,037,425
Total net sales	$	36,115,741	$	41,788,782

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Note 1 - Nature of Business and Significant Accounting Policies (Details Textual) - USD ($)	1 Months Ended	12 Months Ended
	Jan. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Mar. 25, 2019	Jan. 01, 2019	Sep. 11, 2018	Apr. 11, 2018	Jan. 01, 2018	Dec. 31, 2016	Sep. 30, 2015
Foreign Currency Transaction Gain (Loss), Unrealized		$ 32,577	$ 20,659
Advertising Expense		19,300	22,300
Research and Development Expense, Total		473,000	488,000
Contract with Customer, Liability, Total		$ 337,234	$ 367,568
Sales Returns, Goods, Percentage of Refund		100.00%
Sales Returns, Goods, Percentage		0.17%	0.25%
Cash and Cash Equivalents, at Carrying Value, Ending Balance		$ 1,989,974	$ 3,272,788						$ 3,606,817
Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity						$ 750,000	$ 2,000,000			$ 3,500,000
Subsequent Event [Member] | Nutracom, LLC [Member]
Purchase Agreement, Payments Made Per Year	$ 200,000
Subsequent Event [Member] | Revolving Credit Facility [Member]
Long-term Line of Credit, Total	500,000
Line of Credit Facility, Maximum Borrowing Capacity	$ 750,000			$ 750,000
Accounting Standards Update 2014-09 [Member]
New Accounting Pronouncement or Change in Accounting Principle, Cumulative Effect of Change on Equity or Net Assets								$ 367,568
Accounting Standards Update 2016-02 [Member] | Subsequent Event [Member]
Operating Lease, Right-of-Use Asset					$ 460,000
Operating Lease, Liability, Total					$ 460,000
Minimum [Member]
Finite-Lived Intangible Asset, Useful Life		2 years
Finite-Lived Intangible Assets, Remaining Amortization Period		6 years
Maximum [Member]
Finite-Lived Intangible Asset, Useful Life		17 years
Finite-Lived Intangible Assets, Remaining Amortization Period		11 years
Computer Equipment and Software [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life		3 years
Computer Equipment and Software [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life		5 years
Office Equipment and Machinery [Member]
Property, Plant and Equipment, Useful Life		7 years
Real Property [Member]
Property, Plant and Equipment, Useful Life		39 years

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Note 1 - Nature of Business and Significant Accounting Policies - Adoption of ASU No. 2014-09, Results from Operations (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Net sales	$ 36,115,741	$ 41,788,782
Net loss	(1,903,341)	$ (696,912)
Calculated under Revenue Guidance in Effect before Topic 606 [Member]
Net sales	36,086,633
Net loss	(1,932,449)
Difference between Revenue Guidance in Effect before and after Topic 606 [Member]
Net sales	29,108
Net loss	$ 29,108

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Note 2 - Assets Held For Sale (Details Textual) - USD ($)	Jan. 01, 2019	Jan. 01, 2020
Nutracom, LLC [Member] | Minimum [Member] | Scenario, Forecast [Member]
Percentage of Annual Revenues of Non-related Parties from Equity Interest		1.00%
Nutracom, LLC [Member] | Maximum [Member] | Scenario, Forecast [Member]
Percentage of Annual Revenues of Non-related Parties from Equity Interest		1.25%
Subsequent Event [Member] | Nutracom, LLC [Member]
Supply Commitment, Term	7 years
Lessor, Operating Lease, Term of Contract	7 years
Lessor, Operating Lease, Renewal Term	5 years
Shares Transferred From Related Parties	99,200
Shares Transferred From Related Parties, Value	$ 540,144
Equity Interest Issued from Related Parties as Consideration	15.00%
Equity Interest Issued from Related Parties as Consideration, Value	$ 505,000
Subsequent Event [Member] | Nutracom, LLC [Member] | Secured Promissory Note [Member]
Notes Receivable, Related Parties, Noncurrent	$ 1,000,000
Notes Receivable, Related Parties, Term	7 years
Notes Receivable, Related Parties, Interest Rate	5.50%
Subsequent Event [Member] | Nutracom, LLC [Member] | Unsecured Promissory Note [Member]
Notes Receivable, Related Parties, Noncurrent	$ 764,344
Notes Receivable, Related Parties, Term	7 years
Notes Receivable, Related Parties, Interest Rate	7.00%
Notes Receivable, Interest Only Period	2 years
Notes Receivable, Related Parties, Amortization Period	10 years
Subsequent Event [Member] | Nutracom, LLC [Member] | Minimum [Member]
Operating Lease, Lease Income, Lease Payments	$ 193,000
Subsequent Event [Member] | Nutracom, LLC [Member] | Maximum [Member]
Operating Lease, Lease Income, Lease Payments	410,000
Subsequent Event [Member] | Machinery and Other Equipment Sold to Nutracom [Member]
Disposal Group, Not Discontinued Operation, Gain (Loss) on Disposal	435,000
Disposal Group, Disposed of by Sale, Not Discontinued Operations [Member] | Subsequent Event [Member] | Inventories Sold to Nutracom [Member]
Disposal Group, Including Discontinued Operation, Consideration	1,560,000
Disposal Group, Disposed of by Sale, Not Discontinued Operations [Member] | Subsequent Event [Member] | Machinery and Other Equipment Sold to Nutracom [Member]
Disposal Group, Including Discontinued Operation, Consideration	1,000,000
Disposal Group, Including Discontinued Operation, Property, Plant and Equipment, Current	$ 565,000

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Note 3 - Property, Plant, and Equipment (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Property, Plant and Equipment, Gross, Ending Balance	$ 14,420,559	$ 19,055,260
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment, Ending Balance	9,722,009	13,378,021
Depreciation, Total	584,457	$ 674,141
Disposal Group, Held-for-sale, Not Discontinued Operations [Member]
Disposal Group, Including Discontinued Operation, Property, Plant and Equipment, Current	560,000
Property, Plant and Equipment, Gross, Ending Balance	4,700,000
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment, Ending Balance	$ 4,140,000

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Note 3 - Property, Plant, and Equipment - Summary of Property, Plant, and Equipment (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Property, plant, and equipment, gross	$ 14,420,559	$ 19,055,260
Less accumulated depreciation	9,722,009	13,378,021
Property, plant, and equipment, net	4,698,550	5,677,239
Land and Land Improvements [Member]
Property, plant, and equipment, gross	905,190	905,190
Building [Member]
Property, plant, and equipment, gross	9,964,523	9,950,190
Machinery and Equipment [Member]
Property, plant, and equipment, gross	180,519	4,755,727
Office Equipment [Member]
Property, plant, and equipment, gross	1,157,392	1,183,115
Computer Equipment and Software [Member]
Property, plant, and equipment, gross	$ 2,212,935	$ 2,261,038

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Note 4 - Accounts Payable and Accrued Expenses - Summary of Accounts Payable and Accrued Expenses (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Trade payables	$ 2,105,814	$ 1,667,495
Distributors' commissions	1,030,948	1,115,649
Sales taxes	195,802	154,958
Deferred revenue	337,234
Payroll and payroll taxes	210,288	261,916
	$ 3,880,086	$ 3,200,018

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Note 5 - Amortizable Intangible Assets (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Amortization of Intangible Assets, Total	$ 225,985	$ 225,985

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Note 5 - Amortizable Intangible Assets - Summary of Amortizable Intangible Assets (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Gross carrying amount	$ 4,014,661	$ 4,014,661
Accumulated amortization	2,066,398	1,840,413
Distributorship and Related Agreements [Member]
Gross carrying amount	2,060,000	2,060,000
Accumulated amortization	1,437,423	1,327,556
Lunasin Technology License [Member]
Gross carrying amount	1,954,661	1,954,661
Accumulated amortization	$ 628,975	$ 512,857

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Note 5 - Amortizable Intangible Assets - Amortization Expense Over the Next Five Years (Details)	Dec. 31, 2018 USD ($)
2019	$ 226,000
2020	226,000
2021	226,000
2022	226,000
2023	$ 226,000

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Note 6 - Fair Value of Financial Instruments - Summary of Financial Instruments (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Reported Value Measurement [Member]
Note receivable	$ 1,405,112	$ 1,521,005
Marketable securities	339,000	330,000
Long-term debt		3,045,421
Estimate of Fair Value Measurement [Member]
Note receivable	1,529,000	1,684,000
Marketable securities	339,000	330,000
Long-term debt		3,045,421
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Note receivable
Marketable securities	339,000	330,000
Long-term debt
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Note receivable	1,529,000	1,684,000
Marketable securities
Long-term debt		3,045,421
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Note receivable
Marketable securities
Long-term debt

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Note 7 - Debt (Details Textual) - USD ($)			1 Months Ended		12 Months Ended
	Sep. 11, 2018	Sep. 30, 2015	Mar. 28, 2019	Jul. 31, 2018	Dec. 31, 2018	Dec. 31, 2017	Mar. 25, 2019	Jan. 31, 2019	Apr. 11, 2018
Proceeds from Life Insurance Policy				$ 3,070,000	$ 3,066,193
Repayments of Debt				2,860,000
Cash Surrender Value of Life Insurance				0		3,086,522
Line of Credit, Current						500,000
Loans Payable, Current, Total						$ 2,545,421
Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 750,000	$ 3,500,000							$ 2,000,000
Debt Instrument, Term		1 year
Line of Credit, Current					$ 0
Revolving Credit Facility [Member] | Subsequent Event [Member]
Line of Credit Facility, Maximum Borrowing Capacity							$ 750,000	$ 750,000
Line of Credit, Current								$ 500,000
Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate	2.25%	2.25%
Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member] | Subsequent Event [Member]
Debt Instrument, Basis Spread on Variable Rate			3.00%
Term Loan [Member]
Debt Instrument, Face Amount		$ 3,250,000
Debt Instrument, Term		3 years
Debt Instrument, Amortization Term		10 years
Debt Instrument, Periodic Payment, Principal		$ 27,080
Loans Payable, Current, Total				0
Term Loan [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate		2.25%
Line of Credit [Member]
Line of Credit, Current				$ 0

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Note 7 - Debt - Summary of Debt (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Long-term debt		$ 3,045,421
Long-term debt		3,045,421
Less current maturities		3,045,421
Long-term portion
Term Loan [Member]
Long-term debt		2,545,421
Long-term debt		2,545,421
Line of Credit [Member]
Long-term debt		500,000
Long-term debt		$ 500,000

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Note 8 - Stockholders' Equity (Details Textual) - USD ($)	1 Months Ended	12 Months Ended
	Jul. 31, 2009	Dec. 31, 2018	Dec. 31, 2017	May 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value		$ 0
Allocated Share-based Compensation Expense, Total		21,000	$ 27,000
Allocated Share-based Compensation Expense, Net of Tax		$ 21,000	27,000
The 2014 Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized		142,857
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options		$ 19,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options, Net of Tax		$ 19,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition		1 year 62 days
The 2014 Stock Incentive Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		10 years
The 2017 Incentive Stock Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized				200,000
The 2009 Distributor Stock Purchase Plan [Member]
Allocated Share-based Compensation Expense, Total		$ 3,000	$ 6,600
Percentage of Monthly Distributor Compensation That Can Be Used to Purchase Common Stock	10.00%
Class of Warrant or Right, Issued During Period, Percentage of Total Shares Purchased	25.00%
The 2009 Distributor Stock Purchase Plan [Member] | Warrant [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Outstanding		$ 0

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Note 8 - Stockholders' Equity - Summary of Stock Option Activity (Details) - $ / shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Options outstanding, beginning of year (in shares)	140,424	236,844
Options outstanding, beginning of year, weighted average exercise price (in dollars per share)	$ 7.85	$ 8.14
Options granted (in shares)
Options granted, weighted average exercise price (in dollars per share)
Options exercised (in shares)
Options exercised, weighted average exercise price (in dollars per share)
Options expired and forfeited (in shares)	(58,998)	(96,420)
Options expired and forfeited, weighted average exercise price (in dollars per share)	$ 7.96	$ 8.57
Options outstanding, end of year (in shares)	81,426	140,424
Options outstanding, end of year, weighted average exercise price (in dollars per share)	$ 7.77	$ 7.85
Options exercisable (in shares)	14,655	13,713
Options exercisable, weighted average exercise price (in dollars per share)	$ 7.77	$ 7.77

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Note 8 - Stockholders' Equity - Summary of Warrant Activity (Details) - Warrant [Member] - $ / shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Warrants outstanding, beginning of year (in shares)	5,960	6,291
Warrants outstanding, beginning of year, weighted average exercise price (in dollars per share)	$ 4.46	$ 5.34
Warrants granted (in shares)	1,113	1,258
Warrants granted, weighted average exercise price (in dollars per share)	$ 4.24	$ 4.77
Warrants exercised (in shares)
Warrants exercised, weighted average exercise price (in dollars per share)
Warrants expired (in shares)	(2,183)	(1,589)
Warrants expired, weighted average exercise price (in dollars per share)	$ 4.06	$ 8.19
Warrants outstanding, end of year (in shares)	4,890	5,960
Warrants outstanding, end of year, weighted average exercise price (in dollars per share)	$ 4.58	$ 4.46
Warrants exercisable (in shares)	4,890	5,960
Warrants exercisable, weighted average exercise price (in dollars per share)

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Note 8 - Stockholders' Equity - Summary of Warrants Outstanding and Exercisable (Details) - Warrant [Member] - $ / shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Exercise prices (in dollars per share)		$ 4.46	$ 5.34
Warrants Outstanding (in shares)	4,890	5,960	6,291
Weighted Avg. Remaining Life (Year)	1 year 259 days
Weighted Average [Member]
Exercise prices (in dollars per share)	$ 4.58
Minimum [Member]
Exercise prices (in dollars per share)	4.24
Maximum [Member]
Exercise prices (in dollars per share)	4.77
Exercise Price Range 1 [Member]
Exercise prices (in dollars per share)	$ 4.24
Warrants Outstanding (in shares)	1,113
Weighted Avg. Remaining Life (Year)	3 years
Exercise Price Range 1 [Member] | Weighted Average [Member]
Exercise prices (in dollars per share)	$ 4.24
Exercise Price Range 2 [Member]
Exercise prices (in dollars per share)	$ 4.64
Warrants Outstanding (in shares)	2,519
Weighted Avg. Remaining Life (Year)	1 year
Exercise Price Range 2 [Member] | Weighted Average [Member]
Exercise prices (in dollars per share)	$ 4.64
Exercise Price Range 3 [Member]
Exercise prices (in dollars per share)	$ 4.77
Warrants Outstanding (in shares)	1,258
Weighted Avg. Remaining Life (Year)	2 years
Exercise Price Range 3 [Member] | Weighted Average [Member]
Exercise prices (in dollars per share)	$ 4.77

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Note 8 - Stockholders' Equity - Fair Value of Warrants (Details) - Warrants [Member]	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Expected warrant life (Year)	3 years	3 years
Risk-free weighted average interest rate	2.46%	1.98%
Stock price volatility	55.80%	73.80%
Dividend yield	0.00%	0.00%

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Note 9 - Loss Per Share (Details Textual) - shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	86,316	146,384

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Note 9 - Loss Per Share - Basic and Diluted Earnings (Loss) Per Share (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Net loss	$ (1,903,341)	$ (696,912)
Denominator for basic loss per share – weighted average shares (in shares)	1,845,000	1,845,000
Dilutive effect of employee stock options and other warrants (in shares)
Denominator for diluted loss per share – adjusted weighted average shares (in shares)	1,845,000	1,845,000
Loss per common share - Basic (in dollars per share)	$ (1.03)	$ (0.38)
Loss per common share - Diluted (in dollars per share)	$ (1.03)	$ (0.38)

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Note 10 - Leases (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Operating Leases, Rent Expense, Total	$ 326,724	$ 338,734

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Note 10 - Leases - Summary of Future Minimum Payments (Details)	Dec. 31, 2018 USD ($)
2019	$ 268,652
2020	186,168
2021	16,479
2022	16,479
2023	6,681
Thereafter
	$ 494,459

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Note 11 - Note Receivable Due From Distributor (Details Textual) - USD ($)	Dec. 31, 2018	Dec. 31, 2017	May 31, 2012	Mar. 31, 2012
Loan Modification Agreement [Member]
Due from Related Parties, Total			$ 2,000,000
Notes Receivable, Interest Rate, Stated Percentage			6.00%
Financing Receivable, Net, Total	$ 1,405,112	$ 1,521,005
Real Estate Investment [Member]
Due from Related Parties, Total				$ 2,000,000

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Note 12 - Income Taxes (Details Textual) - USD ($)		12 Months Ended		36 Months Ended
	Dec. 31, 2010	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2006
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent		21.00%	34.00%
Effective Income Tax Rate Reconciliation, Change in Deferred Tax Assets Valuation Allowance, Amount		$ 186,000	$ 707,000
Operating Loss Carryforwards, Valuation Allowance, Total		451,000
Operating Loss Carryforwards Subject to Expiration		188,000
Deferred Tax Assets, Operating Loss Carryforwards, Foreign		3,118,000	3,413,000
Unrecognized Tax Benefits, Cumulative Amount		32,000	36,000
Unrecognized Tax Benefits that Would Impact Effective Tax Rate		22,000
Unrecognized Tax Benefits, Income Tax Penalties and Interest Expense, Total		10,000	11,000
VAT and Withholding Taxes				$ 800,000
Interest Penalty Percentage				20.00%
Reserve for Tax Deficiencies of Subsidiaries [Member]
Loss Contingency Accrual, Ending Balance		172,500
Selling, General and Administrative Expenses [Member] | Reserve for Tax Deficiencies of Subsidiaries [Member]
Loss Contingency Accrual, Period Increase (Decrease), Total	$ 185,000
Domestic Tax Authority [Member]
Effective Income Tax Rate Reconciliation, Change in Deferred Tax Assets Valuation Allowance, Amount		$ 186,000	198,000
Foreign Tax Authority [Member]
Effective Income Tax Rate Reconciliation, Change in Deferred Tax Assets Valuation Allowance, Amount			$ 509,000

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Note 12 - Income Taxes - Components of Loss Before Income Taxes (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
United States	$ (1,694,301)	$ (30,606)
Foreign	(111,040)	(121,306)
	$ (1,805,341)	$ (151,912)

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Note 12 - Income Taxes - Components of Provision (Benefit) for Income Taxes (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Current:
Federal	$ (3,000)	$ (2,000)
State	4,000	5,000
Foreign	97,000	33,000
Total current	98,000	36,000
Deferred:
Federal
State
Foreign		509,000
Total deferred		509,000
	$ 98,000	$ 545,000

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Note 12 - Income Taxes - Income Tax Rate Reconciliation (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Income taxes at U.S. statutory rate	$ (379,000)	$ (52,000)
State income taxes, net of federal benefit	7,000	11,000
Higher/(lower) effective taxes on earnings/losses in foreign countries	38,000	(65,000)
Foreign corporate income taxes	97,000	33,000
Foreign tax credit carryover		(66,000)
Life insurance settlement	118,000
GILTI	34,000
Nondeductible meals and entertainment expense	9,000	13,000
Valuation allowance, net	186,000	707,000
Other	(12,000)	(36,000)
	$ 98,000	$ 545,000

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Note 12 - Income Taxes - Components of Deferred Tax Assets and Liabilities (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Deferred tax assets:
Inventory obsolescence reserve	$ 53,000	$ 62,000
Product refund reserve		7,000
Deferred revenue	91,000
Organization costs	117,000	127,000
Deferred compensation	97,000	94,000
Depreciation and amortization, deferred tax assets	2,000
Miscellaneous accrued expenses	23,000	13,000
Domestic net operating loss carryforwards	451,000	186,000
Foreign net operating loss carryforwards	3,118,000	3,413,000
Valuation allowance	(3,845,000)	(3,767,000)
	107,000	135,000
Deferred tax liabilities:
Depreciation and amortization, deferred tax liabilities		28,000
Foreign currency exchange	107,000	107,000
	107,000	135,000
Net deferred tax assets (liabilities)

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Note 12 - Income Taxes - Summary of Gross Unrecognized Tax Benefits (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Beginning of year	$ 26,000	$ 32,000
Settlements and effective settlements with tax authorities
Lapse of statute of limitations	(7,000)	(6,000)
Decrease to tax positions taken during prior periods	(3,000)	(6,000)
Increase to tax positions taken during current period	6,000	6,000
End of year	$ 22,000	$ 26,000

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Note 13 - Employee Benefit Plans (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Defined Contribution Plan, Contributions By Plan Participants Percentage	15.00%
Defined Contribution Plan, Employer Matching Contribution, Percent of Match	10.00%	10.00%
Defined Contribution Plan, Employer Discretionary Contribution Amount	$ 36,800	$ 35,400
Employee Stock Ownership Plan (ESOP), Cash Contributions to ESOP	$ 0	$ 0

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Note 14 - Incentive Compensation Plans (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Supplemental Employee Retirement Plan [Member]
Supplemental Executive Retirement Plan, Employer Matching Contribution, Percentage		100.00%
Asset Retirement Obligation, Legally Restricted Assets, Fair Value	$ 339,000	$ 330,000
Deferred Compensation Liability, Classified, Noncurrent, Total	$ 341,000	$ 332,000
Incentive Compensation Plan [Member]
Maximum Percentage of Bonus Under Incentive Compensation PLan	18.00%
Minimum Quarterly Income From Operations	$ 500,000
Percentage of Bonus Under Incentive Compensation Plan	18.00%	18.00%
Incentive Compensation Expense Annual	$ 0	$ 109,500

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Note 15 - Segment Information (Details Textual)	12 Months Ended
	Dec. 31, 2018
Number of Operating Segments	6

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Note 15 - Segment Information - Summary of Geographic Area Data (Details) - USD ($)		12 Months Ended
		Dec. 31, 2018	Dec. 31, 2017
Net sales		$ 36,115,741	$ 41,788,782
Assets by area		16,353,865	21,075,996
UNITED STATES
Net sales		27,673,352	32,474,797
Assets by area		13,584,424	18,100,872
Australia, New Zealand [Member]
Net sales		732,227	922,594
Assets by area		540,591	572,368
CANADA
Net sales		718,560	914,775
Assets by area		166,533	265,629
MEXICO
Net sales		474,372	445,299
Assets by area		179,713	219,501
Europe [Member]
Net sales	[1]	3,972,381	4,578,095
Assets by area	[1]	867,008	1,032,641
Asia [Member]
Net sales	[2]	2,544,849	2,453,222
Assets by area	[2]	$ 1,015,596	$ 884,985

[1] Europe consists of United Kingdom, Ireland, France, Germany, Austria, and the Netherlands.

[2] Asia consists of Philippines, Malaysia, and Singapore.

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Note 15 - Segment Information - Net Sales by Product Category (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Net sales	$ 36,115,741	$ 41,788,782
Nutritional and Dietary Supplements [Member]
Net sales	32,670,362	37,326,863
Sales Aids, Membership Fees, and Other [Member]
Net sales	1,247,807	1,424,494
Handling and Freight Income [Member]
Net sales	$ 2,197,572	$ 3,037,425

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Note 16 - Restructuring Activities (Details Textual)	3 Months Ended
	Jun. 30, 2018 USD ($)
Closing of Reliv Indonesia Subsidiary [Member]
Restructuring Charges, Total	$ 77,000

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Note 17 - Subsequent Events (Details Textual) - USD ($)	1 Months Ended	12 Months Ended
	Jan. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Proceeds from Lines of Credit, Total			$ 500,000
Revolving Credit Facility [Member] | Subsequent Event [Member]
Proceeds from Lines of Credit, Total	$ 500,000