10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the quarterly period ended March 31, 2019

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)

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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting 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 the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes ☐     No ☑

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001	RELV	NASDAQ Capital Market

The number of shares outstanding of the Registrant’s common stock as of May 6, 2019 was 1,746,449 (excluding treasury shares).

INDEX  

Part I – Financial Information
Item No. 1	Financial Statements (Unaudited)	1
Item No. 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item No. 4	Controls and Procedures	26
Part II – Other Information
Item No. 6	Exhibits	26

PART I -- FINANCIAL INFORMATION

Item No. 1 - Financial Statements

Reliv International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

	March 31		December 31
	2019		2018
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	2,381,087	$	1,989,974
Accounts receivable, less allowances of $5,000 in 2019 and 2018		245,999		400,759
Notes & accounts receivables and deposits - related parties		1,269,527		151,222
Inventories
Finished goods		1,959,535		2,460,563
Raw materials		176,481		372,865
Sales aids and promotional materials		127,653		121,519
Total inventories		2,263,669		2,954,947
Refundable income taxes		20,794		22,712
Assets held for sale		-		2,124,939
Prepaid expenses and other current assets		693,749		441,453
Total current assets		6,874,825		8,086,006
Other assets		388,655		338,974
Notes and accounts receivables - related parties		2,897,249		1,282,072
Operating lease right-to-use assets		394,287		-
Intangible assets, net		1,891,767		1,948,263
Equity investment		505,000		-
Property, plant and equipment:
Land and land improvements		905,190		905,190
Building		10,103,321		9,964,523
Office & other equipment		1,226,971		1,337,911
Computer equipment & software		2,227,664		2,212,935
		14,463,146		14,420,559
Less: Accumulated depreciation		9,813,657		9,722,009
Net property, plant and equipment		4,649,489		4,698,550
Total assets	$	17,601,272	$	16,353,865

See notes to financial statements.

1

Reliv International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

	March 31			December 31
	2019			2018
	(unaudited)
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses:
Trade accounts payable and other accrued expenses	$	2,171,407		$	2,105,814
Distributors' commissions payable		855,664			1,030,948
Sales taxes payable		168,430			195,802
Payroll and payroll taxes payable		271,927			210,288
Total accounts payable and accrued expenses		3,467,428			3,542,852
Income taxes payable		77,534			35,304
Deferred revenue		365,447			337,234
Operating lease liabilities		229,700			-
Deferred rent liability		187,500			-
Revolving line of credit		500,000			-
Total current liabilities		4,827,609			3,915,390
Noncurrent liabilities:
Operating lease liabilities		158,751			-
Other noncurrent liabilities		483,750			445,611
Total noncurrent liabilities		642,501			445,611
Stockholders' equity:
Preferred stock, par value $.001 per share; 500,000 shares authorized; -0- shares issued and outstanding in 2019 and 2018		-			-
Common stock, par value $.001 per share; 5,000,000 authorized; 2,110,013 shares issued and 1,746,449 shares outstanding as of 3/31/2019; 2,110,013 shares issued and 1,845,160 shares outstanding as of 12/31/2018		2,110			2,110
Additional paid-in capital		30,627,853			30,622,547
Accumulated deficit		(11,687,494	)		(12,311,138	)
Accumulated other comprehensive loss:
Foreign currency translation adjustment		(959,884	)		(982,095	)
Treasury stock		(5,851,423	)		(5,338,560	)
Total stockholders' equity		12,131,162			11,992,864
Total liabilities and stockholders' equity	$	17,601,272		$	16,353,865

See notes to financial statements.

2

Reliv International, Inc. and Subsidiaries

Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss)

(unaudited)	Three months ended March 31
	2019			2018
Product sales	$	8,810,997		$	9,391,381
Freight income		519,941			611,858
Other revenue		158,566			-
Net sales		9,489,504			10,003,239
Costs and expenses:
Cost of goods sold		2,433,732			2,349,742
Distributor royalties and commissions		3,117,572			3,391,745
Selling, general and administrative		3,739,527			4,485,895
Total costs and expenses		9,290,831			10,227,382
Income (loss) from operations		198,673			(224,143	)
Other income (expense):
Interest income		49,262			23,952
Interest expense		(5,412	)		(31,565	)
Other income (expense)		(5,428	)		6,651
Gain on sale of fixed assets		434,549			3,800
Income (loss) before income taxes		671,644			(221,305	)
Provision for income taxes		48,000			17,000
Net income (loss)	$	623,644		$	(238,305	)
Other comprehensive income (loss):
Foreign currency translation adjustment		22,211			25,228
Comprehensive income (loss)	$	645,855		$	(213,077	)
Earnings (loss) per common share - Basic	$	0.36		$	(0.13	)
Weighted average shares		1,746,000			1,845,000
Earnings (loss) per common share - Diluted	$	0.36		$	(0.13	)
Weighted average shares		1,746,000			1,845,000

See notes to financial statements.

3

Reliv International, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited)

	Three months ended March 31
	2019			2018
Operating activities:
Net income (loss)	$	623,644		$	(238,305	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		144,893			201,634
Stock-based compensation		5,306			7,535
Non-cash life insurance policy reduction / (accretion)		-			(6,617	)
Non-cash other revenue		(86,433	)		-
Non-cash miscellaneous loss		24,618			-
(Gain) loss on sale of property, plant and equipment		(434,549	)		(3,800	)
Foreign currency transaction (gain) loss		5,925			341
(Increase) decrease in trade, accounts & notes receivable, and deposits from related parties		(839,989	)		(104,767	)
(Increase) decrease in inventories		705,371			393,576
(Increase) decrease in refundable income taxes		1,918			(3,550	)
(Increase) decrease in prepaid expenses and other current assets		(251,056	)		(320,175	)
(Increase) decrease in other assets		(49,681	)		(6,052	)
Increase (decrease) in income taxes payable		42,522			18,664
Increase (decrease) in accounts payable & accrued expenses, deferred revenue, and other noncurrent liabilities		(19,235	)		561,297
Net cash provided by (used in) operating activities		(126,746	)		499,781
Investing activities:
Purchase of property, plant and equipment		(38,890	)		(15,383	)
Proceeds from the sale of property, plant and equipment		-			3,888
Payments received on notes receivables - related parties		49,691			28,326
Net cash provided by investing activities		10,801			16,831
Financing activities:
Proceeds from line of credit borrowings		500,000			-
Principal payments on long-term borrowings		-			(108,320	)
Net cash provided by (used in) financing activities		500,000			(108,320	)
Effect of exchange rate changes on cash and cash equivalents		7,058			(4,240	)
Increase (decrease) in cash and cash equivalents		391,113			404,052
Cash and cash equivalents at beginning of period		1,989,974			3,272,788
Cash and cash equivalents at end of period	$	2,381,087		$	3,676,840
Supplementary disclosure of cash flow information:
Noncash investing & financing transactions (Note 3):

See notes to financial statements.

4

Reliv International, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity

(unaudited)

										Accumulated
					Additional					Other
	Common Stock				Paid-In		Accumulated			Comprehensive			Treasury Stock
	Shares		Amount		Capital		Deficit			Loss			Shares			Amount			Total
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
Net income		-		-		-		623,644			-			-			-			623,644
Other comprehensive income (loss):
Foreign currency translation adjustment		-		-		-		-			22,211			-			-			22,211
Total comprehensive income																				645,855
Treasury stock acquired (Note 2)		-		-		-		-			-			99,200			(540,144	)		(540,144	)
Other		-		-		-		-			-			(489	)		27,281			27,281
Stock-based compensation		-		-		5,306		-			-			-			-			5,306
Balance at March 31, 2019		2,110,013	$	2,110	$	30,627,853	$	(11,687,494	)	$	(959,884	)		363,564		$	(5,851,423	)	$	12,131,162

										Accumulated
					Additional					Other
	Common Stock				Paid-In		Accumulated			Comprehensive			Treasury Stock
	Shares		Amount		Capital		Deficit			Loss			Shares		Amount			Total
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		-		-		-		(238,305	)		-			-		-			(238,305	)
Other comprehensive income (loss):
Foreign currency translation adjustment		-		-		-		-			25,228			-		-			25,228
Total comprehensive loss																			(213,077	)
Adoption of Accounting Standards Update 2014-09		-		-		-		(367,568	)		-			-		-			(367,568	)
Stock-based compensation		-		-		7,534		-			-			-		-			7,534
Balance at March 31, 2018		2,110,013	$	2,110	$	30,606,454	$	(10,646,102	)	$	(832,426	)		264,853	$	(5,338,560	)	$	13,791,476

See notes to financial statements.

5

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

March 31, 2019

1. Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and notes thereto have been prepared in accordance with the instructions to Form 10-Q and reflect all adjustments (which primarily include normal recurring accruals) which we believe are necessary to present fairly the financial position, results of operations and cash flows. All significant intercompany accounts and transactions have been eliminated. These statements, however, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States. Interim results may not necessarily be indicative of results that may be expected for any other interim period or for the year as a whole. These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the annual report on Form 10-K for the year ended December 31, 2018, filed March 29, 2019 with the Securities and Exchange Commission.

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.

Reclassifications

To conform to the current year presentation, certain previously reported 2018 amounts have been reclassified. 

Inventories

Inventories are valued at the lower of cost or market and are accounted for on a first-in, first-out basis. Effective January 1, 2019, finished goods inventories primarily consist of purchased products held for resale. Prior to 2019, finished goods inventories were primarily comprised of internally manufactured products consisting of the costs associated with raw materials, labor, and overhead. On a periodic basis we review our inventory levels, as compared to future demand requirements and the shelf life of the various products. Based on this review, we record 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 costs of goods sold upon recognition of revenue when sold to distributors. All other advertising and promotional costs are expensed when incurred.

6

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

1. Accounting Policies (continued)

Variable Interest Entities (VIE) - Unconsolidated

Effective January 1, 2019, we have a financial interest in Nutracom LLC (Nutracom). If we are the primary beneficiary of a VIE, we are required to consolidate the VIE in our consolidated financial statements. To determine if we are the primary beneficiary, we evaluate whether we have the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our VIE evaluation requires significant assumptions and judgments.

We do not have the power to direct the significant activities of Nutracom, primarily because we do not have governance rights. We also do not participate in the annual profits or losses of Nutracom. Therefore, we do not consolidate the financial results of Nutracom in our consolidated financial statements. We account for our financial interest in Nutracom as an equity investment measured at cost minus impairment, if any. A cost method equity investment is subject to periodic impairment review using the other-than-temporary impairment model, which considers the severity and duration of a decline in fair value below cost and our ability and intent to hold the investment for a sufficient period of time to allow for recovery.

See Note 2 and Note 3 for further information on our financial relationship with Nutracom.

Concentrations of Risk

Effective January 1, 2019, we have entered into outsourcing agreements with Nutracom to manufacture our nutritional and dietary supplements and for warehousing and fulfillment services for the U.S. distribution of our products. Nutracom has also issued promissory notes to us for the acquisition of our manufacturing and fulfillment operations. Any inability of Nutracom to deliver these contracted services or to repay the promissory notes could adversely impact our future operating results. See Note 2 and Note 3 for further discussion of our relationship with Nutracom.

New Accounting Pronouncements – Not Yet Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updated (“ASU”) No. 2016-13, Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which requires entities to use a current lifetime expected credit loss methodology to measure impairments of certain financial assets. Using this methodology may result in earlier recognition of losses than under the current incurred loss approach, which requires waiting to recognize a loss until it is probable of having been incurred. There are other provisions within the standard that affect how impairments of other financial assets may be recorded and presented, and that expand disclosures. This standard will be effective for our interim and annual financial periods beginning January 1, 2020, with early adoption permitted. Adoption of this standard must be applied on a modified retrospective basis. We are evaluating the potential impact of this standard on our consolidated financial statements and related disclosures.

7

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

1. Accounting Policies (continued)

New Accounting Pronouncements – Adopted January 1, 2019

Lessee Accounting

On January 1, 2019, we adopted ASU No. 2016-02, Leases (Topic 842) (including subsequent issued lease-related ASU’s), and applied the new lease accounting standard to all lessee operating leases using the prospective transition method. Under this method, prior financial reporting periods are not restated. The adoption of the new lease accounting standard resulted in the recording of assets and obligations of our operating leases of approximately $451,000 and $457,000, respectively, on our consolidated balance sheets. Certain amounts previously recorded for prepaid and accrued rent associated with historical operating leases were reclassified to the newly captioned Operating lease right-to-use assets.

At adoption, we used the new lease accounting standard’s package of practical expedients permitted under the transition guidance that allowed us to not reassess: (a) whether any expired or existing contracts are or contain leases, (b) lease classification for any expired or existing leases, and (c) initial direct costs for any expired or existing leases. We also used the lease standard’s practical expedient that allows lessees to treat the lease and implicit non-lease components of our leases as a single lease component and we do not record on the balance sheet leases with an initial term of twelve months or less. Fixed lease expense on all of our operating leases is recognized on a straight-line basis over the contractual lease term, including our estimate of any renewal or early termination lease terms. Operating lease expense is presented within Selling, General and Administrative expense in our operating results.

Operating lease liabilities and related operating lease right-to-use assets are recognized at commencement date of the lease based on the present value of lease payments over the lease term. When leases do not provide an implicit discount rate, we use a country specific incremental borrowing rate based upon the lease term.

See Note 7 for additional lease disclosures.

Lessor Accounting – Other Revenue

Other revenue consists of revenue derived from our leasing a portion of our headquarters building to Nutracom, LLC (Nutracom). We recognize lessor rent revenue on a straight-line basis over the term of the lease. As part of this straight-line methodology, the cumulative rental billings may be greater or less than the financial period’s recognized revenue; such timing differences are recognized on the balance sheet as an accrued other liability or an unbilled rent revenue receivable.

Also included in other revenue are billings to the tenant for its share of the facility’s common area costs such as real estate taxes, maintenance, and utilities. These same common area costs plus the tenant’s share of the facilities’ depreciation are recorded as cost of goods sold.

See Note 2 and Note 3 for further information on our financial relationship with Nutracom. See Note 7 for further information on our leases.

8

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

1. Accounting Policies (continued)

Going Concern

We have incurred operating losses, declining net sales, and negative net cash flows over our most recent five years. Our management estimates that these unfavorable trends are more likely than not to continue for the foreseeable future, and as a result, we will require additional financial support to fund our operations and execute our business plan. As of March 31, 2019, we had $2,381,087 in cash and cash equivalents which may not be sufficient to fund our planned operations through one year subsequent to the date of the issuance of these condensed financial statements, and accordingly, there is substantial doubt about our ability to continue as a going concern. The analysis used to determine our ability to continue as a going concern does not include cash sources outside of our direct control that our management expects to be available within the next twelve months.

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 the 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 we believe are favorable.

We have taken several steps in 2019 which we believe will result in improvement to our financial position, operating results, and cash flows. We have borrowed $500,000 of our available $750,000 revolving line of credit balance. In addition, our lender has agreed to extend the available $750,000 revolving line of credit agreement to April 28, 2020.

As detailed in Note 2 of these condensed consolidated financial statements, on January 1, 2019, we sold the assets previously used by us in our manufacturing operations to Nutracom LLC (Nutracom). We financed the assets purchased by Nutracom from 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. Our 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 from these Nutracom transactions and their impact to our operations.

Should the aforementioned changes to our 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) seek to monetize our headquarters building via traditional bank lending or a sale and leaseback-type transaction; (ii) monetizing the note receivable from a distributor; (iii) modify our distributor 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 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 or shut down our operations if our business operating performance does not improve. These condensed 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 we can no longer continue as a going concern.

9

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

2. Sale of Manufacturing Operations’ Assets

On January 1, 2019, we entered into a Purchase Agreement with Nutracom, LLC (Nutracom) pursuant to which Nutracom purchased the following assets previously used by us in our 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 approximately $435,000).

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

Prior to its approval of the transaction, our Board of Directors formed a special committee consisting of the Board’s independent directors to review the transaction. To assist in its review, the special committee engaged a qualified third-party expert to render a fairness opinion on the transaction.

Concurrently with the execution of the Purchase Agreement, we 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 our headquarters building from us 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 over the seven-year term.

Nutracom provided the following consideration to us 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 under the facility lease agreement.

● Nutracom management transferred to us its ownership of 99,200 shares of our common stock valued at $540,144.

● Nutracom issued to us 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, our 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 us).

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

At December 31, 2018, we 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 condensed consolidated balance sheets. We have accounted for the Nutracom transactions in our first quarter 2019 financial results.

10

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Related Parties

The following summarizes our related party activities with Nutracom and a significant distributor of the Company.

	March 31		December 31
Assets and liabilities - related parties	2019		2018
Notes & accounts receivables and deposits - current
Deposits with Nutracom for inventory	$	1,010,696	$	-
Notes receivable - distributor		124,895		123,040
Notes receivable - Nutracom secured		121,553		-
Other miscellaneous receivables		12,383		28,182
	$	1,269,527	$	151,222
Notes & accounts receivables - non-current
Notes receivable - distributor	$	1,250,144	$	1,282,072
Notes receivable - Nutracom secured		858,828		-
Notes receivable - Nutracom unsecured		764,344		-
Unbilled receivables: Straight line rent revenue greater than rental billings		23,933		-
	$	2,897,249	$	1,282,072
Equity investment in Nutracom	$	505,000		-
Liability captions with Nutracom balances included therein
Trade accounts payable and other accrued expenses	$	257,396		-
Deferred rent liability		187,500		-

11

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Related Parties (continued)

	Three months ended March 31
Revenue and expense - related parties	2019		2018
Other revenue	$	158,566	$	-
Selling, general and administrative expense:
Fullfillment & professional fees		151,102		-
Interest income on promissory notes		47,843		22,603
Gain on sale of fixed assets		434,549		-
Finished goods inventory purchased from Nutracom	$	979,900		-

At March 31, 2019, we had $1.3 million in commitments (net of deposits) to purchase finished goods inventory from Nutracom.

The following table presents scheduled principal payments to be received on the distributor and Nutracom promissory notes receivable:

Remainder of 2019	$	183,504
2020		257,289
2021		327,217
2022		374,274
2023		368,571
Thereafter		1,635,909
	$	3,146,764

Supplementary Disclosure of Cash Flows Information:

We incurred the following noncash investing and financing transactions on January 1, 2019 relating to our transactions with Nutracom:

	2019
Sale of fixed assets	$	1,000,000
Sale of inventories		1,559,488
First year building rental received in advance		250,000
Acquire company common stock for treasury		540,144
Acquire equity investment in Nutracom		505,000
Secured promissory note received		1,000,000
Unsecured promissory note received		764,344

12

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

4. Basic and Diluted Earnings (Loss) per Share

Basic earnings (loss) per common share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per common share is 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.

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

	Three months ended March 31
	2019		2018
Numerator:
Net income (loss)	$	623,644	$	(238,305	)
Denominator:
Denominator for basic earnings (loss) per share – weighted average shares		1,746,000		1,845,000
Dilutive effect of employee stock options and other warrants		-		-
Denominator for diluted earnings (loss) per share – adjusted weighted average shares		1,746,000		1,845,000
Basic earnings (loss) per share	$	0.36	$	(0.13	)
Diluted earnings (loss) per share	$	0.36	$	(0.13	)

Options and warrants to purchase 85,203 shares and 120,242 shares of common stock for the three months ended March 31, 2019 and 2018, respectively, were not included in the denominator for diluted earnings (loss) per share because their effect would be antidilutive or because the shares were deemed contingently issuable.

5. Fair Value of Financial Instruments

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.

13

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

5. Fair Value of Financial Instruments (continued)

The carrying amount and fair value of financial instruments were approximately as follows:

	Carrying		Fair
Description	Amount		Value		Level 1		Level 2		Level 3
March 31, 2019
Revolving line of credit	$	500,000	$	500,000		-	$	500,000		-
Note receivable - distributor		1,375,039		1,511,000		-		1,511,000		-
Notes receivable - Nutracom		1,744,725		1,744,725		-		1,744,725		-
Marketable securities		389,000		389,000	$	389,000		-		-
December 31, 2018
Note receivable - distributor	$	1,405,112	$	1,529,000		-	$	1,529,000		-
Marketable securities		339,000		339,000	$	339,000		-		-

Revolving line of credit: The fair value of our revolver loan approximates carrying value as this loan was amended within the past year and has a variable market-based interest rate that resets every thirty days.

Note receivable - distributor: The note receivable - distributor 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.

Notes receivable - Nutracom: The fair value of the notes receivable – Nutracom balance approximates carrying value as these notes were received at fair value within the current fiscal year.

Marketable securities: The assets (trading securities) of the our 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.

6. Debt

On September 30, 2015, we entered into a series of lending agreements with our primary lender which included agreements for a term loan and a revolving credit facility. The term loan was repaid in 2018 and the revolver has been periodically amended and extended.

Effective with a September 11, 2018 amendment, the revolving line of credit’s maximum borrowing amount was $750,000. The revolver’s maturity date was April 29, 2019 and the revolver’s interest rate was 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.

14

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

6. Debt (continued)

Effective with a March 25, 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. At March 31, 2019, outstanding borrowings under the revolving line of credit are $500,000 at an interest rate of 4.73%.

Borrowings under the lending agreement continue to be secured by all of our tangible and intangible assets and by a mortgage on the real estate of our headquarters facility. At March 31, 2019, the Company was in compliance with its loan covenant requirements.

7. Leases

Lessee

The Company leases certain office facilities, storage, and equipment. These leases have varying terms, are generally one to five years in length, and certain real estate leases have options to extend or early terminate. Several of our operating leases are subject to annual changes in the Consumer Price or similar indexes (CPI). The changes to the lease payment due to CPI changes are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred.

The following table represents the maturity of our operating lease liabilities as of March 31, 2019:

Remainder of 2019	$	185,574
2020		184,384
2021		16,872
2022		14,364
2023		5,704
Thereafter		-
Total operating lease payments		406,898
Less: imputed interest		(18,447	)
Total operating lease liabilities	$	388,451

Operating lease expense:	Three months ended
	March 31, 2019
Fixed	$	64,702
Variable		5,449
Short-term		9,771
Total	$	79,922
Supplemental cash flow information:
Cash paid towards lease liabilities:
Operating cash flows from operating leases	$	68,561

15

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

7. Leases (continued)

Lessee (continued)

	March 31, 2019
Operating lease liabilities:
Weighted average remaining lease term (years)		2.0
Weighted average discount rate		5.1	%

Lessor – Other Revenue

Other revenue consists of revenue derived from our leasing a portion of our headquarters building to Nutracom, LLC (Nutracom) effective January 1, 2019. The leased space, encompassing manufacturing, warehouse, and certain office space, is for a term of seven years, with a tenant option for an additional five-year term. Annual lease amounts range from $193,000 to $410,000 over the seven-year term.

We recognize lessor rent revenue on a straight-line basis over the term of the lease. As part of this straight-line methodology, the cumulative rental billings may be greater or less than the financial period’s recognized revenue; such timing differences are recognized on the balance sheet as an accrued other liability or an unbilled rent revenue receivable.

Also included in other revenue are billings to the tenant for its share of the facility’s common area costs such as real estate taxes, maintenance, and utilities. These same common area costs plus the tenant’s share of the facilities’ depreciation are recorded as cost of goods sold.

The following table details lessor’s estimated remaining straight-line rent revenue over the seven-year lease term as compared with fixed rent amounts under the lease agreement.

	Estimated
	Straight-line		Lease Agreement
	Rent Revenue		Fixed Rent
Remainder of 2019	$	259,299	$	187,500
2020		345,732		192,900
2021		345,732		385,800
2022		345,732		385,800
2023		345,732		385,800
Thereafter		691,464		819,825
Total	$	2,333,691	$	2,357,625

16

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

8. Income Taxes

During the fiscal years of 2016 through 2018, we determined that it was more likely than not that U.S. federal and various state net operating losses generated in those years will not be realized based on projections of future U.S. taxable income, estimated reversals of existing taxable timing differences, and other considerations.

In prior years, we recorded a valuation allowance on all of our domestic and foreign deferred tax assets. The effective income tax rate was 7.1% and (7.7)% for the quarter ended March 31, 2019 and 2018, respectively. The income tax provision amounts primarily represent estimated income taxes for one of the Company’s foreign subsidiaries and certain U.S. states.

One of our 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. In consultation with our legal counsel, we believe that there are strong legal grounds that we should not be liable to pay the majority of the alleged tax deficiencies. In 2011, we made good faith deposits of approximately $173,000 to the local tax authority under the tax agency’s administrative judicial resolution process.

As of December 31, 2018, our estimated reserve (net of deposits) for this matter was approximately $172,500 and remains unchanged in 2019. In May 2018, we received a formal notice of denial of one of our appeals under the tax agency’s administrative judicial resolution process; however, we continue to pursue other available legal processes as we continue to maintain our position that we are not liable for the majority of the alleged tax deficiencies.

9. Revenue Recognition

We recognize revenue from product sales under a five step process 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 the 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.

We recognize the performance obligation for membership fees-type revenue over the membership term of generally twelve months. We receive payment for membership fees revenue at the beginning of the 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. Our remaining unearned membership fees obligation is reported as deferred revenue liability.

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

Other revenue is defined in Note 7 - Leases.

17

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

9. Revenue Recognition (continued)

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 product returns 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 commissions received relating to the original purchase of the returned products. For the year to date periods ending March 31, 2019 and 2018, total returns as a percent of net sales were approximately 0.04% and 0.27%, respectively.

We classify our net sales into two categories of sales products, plus freight income, and other revenue:

	Three months ended March 31
	2019		2018
Net sales by product category
Nutritional and dietary supplements	$	8,497,350	$	9,069,356
Sales aids, membership fees, and other		313,647		322,025
Freight income		519,941		611,858
Other revenue		158,566		-
Total net sales	$	9,489,504	$	10,003,239

We operate 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, as follows:

	Three months ended March 31
	2019		2018
Net sales by geographic region
United States	$	7,111,773	$	7,670,061
Australia/New Zealand		177,048		231,928
Canada		199,399		242,120
Mexico		136,026		107,371
Europe (1)		938,668		1,164,884
Asia (2)		926,590		586,875
Total net sales	$	9,489,504	$	10,003,239

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

18

FORWARD-LOOKING STATEMENTS

This quarterly 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 quarterly report on Form 10-Q. 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.

Item No. 2 - 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 Quarterly Report on Form 10-Q. 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, manufacturer 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 74.9% of worldwide net sales for the three months ended March 31, 2019 and 76.7% of worldwide net sales for the three months ended March 31, 2018. 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 March 31, 2019, consisted of approximately 32,300 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. U.S. generally accepted 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 purchased by our foreign subsidiaries are acquired in U.S. dollars and sold in local country currency. 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. 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. Other revenue included in net sales now includes the leasing revenue, plus common area expense billings, on the lease of the manufacturing portion of our building to Nutracom, LLC (“Nutracom”) as of January 1, 2019 after the adoption of ASU 2016-02.

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

19

In 2018, our cost of goods 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 goods sold is impacted by the cost of the ingredients used in our products, the cost of shipping distributors’ orders, along with our efficiency in managing the production of our products. For 2019, we no longer manufacture our products; therefore, the costs consist of the purchase price of the products, along with shipping costs, and duties and taxes where applicable. Cost of goods sold also include the costs related to leasing income now included in net sales after the adoption of ASU 2016-02.

Distributor royalties and commissions are monthly payments made to distributors based on products sold in their downline organization. Based on our distributor agreements, these expenses have typically approximated 23% of sales at suggested retail. Wholesale pricing discounts on distributor orders are based on the retail value of the product. 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 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.

Selling, general and administrative expenses include the compensation and benefits paid to our employees, all other selling expenses, marketing, promotional expenses, travel and other corporate administrative expenses. These other corporate administrative expenses include professional fees, 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  

Net Sales. Overall net sales decreased by 5.1% in the three months ended March 31, 2019 compared to the same period in 2018. During the first quarter of 2019 (“Q1 2019”), sales in the United States decreased by 7.3% and international sales increased by 1.9% over the prior-year period. International sales, when reported in U.S. dollars, were negatively impacted by a stronger U.S. dollar versus all of the currencies in which we conduct business. Excluding the impact of currency exchange fluctuation, international sales increased by 6.7%.

          The following table summarizes net sales by geographic market for the three months ended March 31, 2019 and 2018.

	Three months ended March 31,
	2019					2018					Change from prior year
	Amount		% of Net Sales			Amount		% of Net Sales			Amount			%
	(dollars in thousands)
United States	$	7,112		74.9	%	$	7,670		76.7	%	$	(558	)		(7.3	)%
Australia/New Zealand		177		1.9			232		2.3			(55	)		(23.7	)
Canada		199		2.1			242		2.4			(43	)		(17.8	)
Mexico		136		1.4			107		1.1			29			27.1
Europe		939		9.9			1,165		11.6			(226	)		(19.4	)
Asia		927		9.8			587		5.9			340			57.9
Consolidated total	$	9,490		100.0	%	$	10,003		100.0	%	$	(513	)		(5.1	)%

20

The following table sets forth, as of March 31, 2019 and 2018, 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 7,009 and 4,780 of the Active Distributor count as of March 31, 2019 and 2018, respectively.

	March 31, 2019				March 31, 2018				% Change
	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		19,600		1,880		21,800		2,240		(10.1	)%		(16.1	)%
Australia/New Zealand		930		70		1,070		80		(13.1	)		(12.5	)
Canada		540		60		630		80		(14.3	)		(25.0	)
Mexico		1,130		80		660		60		71.2			33.3
Europe		2,940		300		3,630		350		(19.0	)		(14.3	)
Asia		7,160		350		4,310		330		66.1			6.1
Consolidated total		32,300		2,740		32,100		3,140		0.6	%		(12.7	)%

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):
Quarter ended 3/31/2019	$	7,112		$	177		$	199		$	136		$	939		$	927		$	2,378
Quarter ended 3/31/2018	$	7,670		$	232		$	242		$	107		$	1,165		$	587		$	2,333
% change in sales-Q1 2019 vs. Q1 2018:
in USD		-7.3	%		-23.7	%		-17.8	%		27.1	%		-19.4	%		57.9	%		1.9	%
due to currency fluctuation		-			-7.4	%		-4.4	%		-2.7	%		-5.5	%		-2.9	%		-4.8	%
Sales in local currency (non-GAAP)		-7.3	%		-16.3	%		-13.4	%		29.8	%		-13.9	%		60.8	%		6.7	%
# of new distributors-Q1 2019 (1)		902			28			12			251			261			2,495			3,047
# of new distributors-Q1 2018 (1)		978			41			38			83			342			539			1,043
% change		-7.8	%		-31.7	%		-68.4	%		202.4	%		-23.7	%		362.9	%		192.1	%
# of new Master Affiliates-Q1 2019		140			1			0			8			19			99			127
# of new Master Affiliates-Q1 2018		100			6			7			10			30			54			107
% change		40.0	%		-83.3	%		-100.0	%		-20.0	%		-36.7	%		83.3	%		18.7	%
# of Product orders-Q1 2019		25,758			975			558			975			3,031			10,663			16,202
# of Product orders-Q1 2018		26,637			1,204			631			751			3,607			6,553			12,746
% change		-3.3	%		-19.0	%		-11.6	%		29.8	%		-16.0	%		62.7	%		27.1	%

⁽¹⁾ The new distributor totals for Q1 2019 and Q1 2018 include 2,495 and 782, respectively, new worldwide preferred customers.

21

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.

United States

● Net sales in the United States declined by 7.3% in Q1 2019 compared to the prior-year quarter. New distributor and preferred customer enrollments declined by 7.8% in Q1 2019 compared to the prior-year quarter, commensurate with the decline in net sales.

● Products in the LunaRich line, including Reliv Now® and LunaRich X™, continued to perform well, constituting 15.1% and 12.8% of net sales in the United States, respectively, in Q1 2019. Reliv NOW and LunaRich X represented 17.1% and 12.4%, respectively, of net sales in the United States in the prior-year quarter.

● As previously mentioned, new distributor and preferred customer enrollments decreased by 7.8% in Q1 2019 compared to the prior year quarter; however, new Master Affiliate qualifications increased by 40% in Q1 2019 in response to a cash bonus incentive in place during the quarter.

● Distributor retention was 76.8% for the twelve month period ended March 31, 2019 compared to 73.5% for all of 2018. Distributor retention is determined by the percentage of active distributors from 2018 that renewed their distributorships in 2019.

● Our average order size in Q1 2019 increased by 1.8% to $384 at suggested retail value compared to the prior-year quarter. In addition, the number of product orders decreased by 3.3% in Q1 2019 compared to the prior year quarter.

● In March 2019, we introduced a feature in our compensation plan in the United States to pay the wholesale profit earned by distributors on a weekly basis. This does not alter the timing of the expense recognition of the commission earnings, but does speed up the timing of the payment.

● In January 2019, we sold substantially all of the machinery, equipment, inventory, tools and other assets and materials used in our manufacturing operations to Nutracom. Nutracom is substantially owned and is controlled by former officers/employees. 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.

International Operations

● The average foreign exchange rate for the U.S. dollar for Q1 2019 was stronger against all of the currencies in which we conduct business.

● Australia/New Zealand and Canadian net sales in Q1 2019 decreased by 16.3% and 13.4%, respectively, in local currency compared to the prior-year quarter as the result of decreased distributor activity in the market.

● Net sales in Mexico increased by 29.8% in local currency in Q1 2019 compared to the prior-year quarter. Distributor activity has increased dramatically in recent quarters subsequent to retaining a sales consultant with prior experience in network marketing sales in Mexico. New distributor enrollments increased by 202% in Q1 2019 compared to the prior-year quarter. Product order count increased by 29.8% in Q1 2019 as well.

● Net sales in Europe decreased by 13.9% in local currency in Q1 2019 compared to the prior-year quarter. Distributor activity continues to decline 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 60.8% in local currency in Q1 2019 compared to the prior-year quarter, driven primarily by sales growth in the Philippines, our largest market in the region. All measures of distributor and preferred customer activity have grown rapidly. New distributor and preferred customer enrollments grew to nearly 2,500 in Q1 2019 compared to just over 500 in the prior-year quarter. The number of new Master Affiliate qualifications grew by 83.3% and the product order count grew by 62.7% in Q1 2019.

22

Costs and Expenses

The following table sets forth selected results of our operations expressed as a percentage of net sales for the three-month periods ended March 31, 2019 and 2018. Our results of operations for the periods described below are not necessarily indicative of results of operations for future periods.

Income statement data
(amounts in thousands)	Q1 2019						Q1 2018
	Amount			% of net sales			Amount			% of net sales
Net sales	$	9,490			100.0	%	$	10,003			100.0	%
Costs and expenses:
Cost of goods sold		2,434			25.6			2,349			23.5
Distributor royalties and commissions		3,118			32.9			3,392			33.9
Selling, general and adminstrative		3,739			39.4			4,486			44.8
Income (loss) from operations		199			2.1			(224	)		(2.2	)
Interest income		49			0.6			24			0.2
Interest expense		(5	)		(0.1	)		(32	)		(0.3	)
Other income (expense)		(6	)		(0.1	)		7			0.1
Gain on sale of fixed assets		435			4.6			4			-
Income (loss) before income taxes		672			7.1			(221	)		(2.2	)
Provision for income taxes		48			0.5			17			0.2
Net income (loss)	$	624			6.6	%	$	(238	)		(2.4	)%
Earnings (loss) per common share-Basic	$	0.36					$	(0.13	)
Earnings (loss) per common share-Diluted	$	0.36					$	(0.13	)

Cost of Goods Sold:

● The cost of goods sold as a percentage of net sales in Q1 2019 increased by 2.1% compared to the prior-year period. The cost of goods sold as a percentage of net sales in Q1 2019 was negatively impacted by several factors, including promotions in the United States that reduced our freight income and the cost of sales associated with the leasing income now included in net sales subsequent to the adoption of ASU 2016-02.

Distributor Royalties and Commissions:

● Distributor royalties and commissions as a percentage of net sales for Q1 2019 decreased by 1.0% of net sales when compared to the prior-year period. This decrease is due to the inclusion of leasing revenue in net sales on which distributor commissions are not paid.

Selling, General and Administrative Expenses:

● Selling, general and administrative (“SGA”) expenses declined by $747,000 in Q1 2019 compared to the prior-year period.

● SGA expenses, including salaries and other staffing expenses, related to the manufacturing/Nutracom operations represent a net decrease of $295,000 of the SGA decrease in Q1 2019, compared to the prior-year period.

23

● Other SGA salaries, other staffing expenses, benefits, and incentive compensation decreased in the aggregate by $161,000 in Q1 2019, compared to the prior-year period.

● Sales and marketing expenses decreased by $270,000 in Q1 2019 compared to the prior-year period. Components of the decrease include:

o $190,000 decrease in promotions expense, as we did not sponsor an incentive trip in the United States in Q1 2019 in contrast to the prior-year quarter.

o $51,000 decrease in distributor conferences and meeting expenses.

o $21,000 decrease in Star Director and other distributor bonuses, credit card fees, and other expenses related to the level of sales.

● Other general and administrative expenses decreased by $11,000 in Q1 2019 versus the prior-year period.

Other Income/Expense:

● The other income/expense in Q1 2019 and Q1 2018 is primarily the result of foreign currency exchange gains (losses) on intercompany debt denominated in U.S. dollars in certain of our subsidiaries.

● Q1 2019 includes $435,000 in income from on the sale of our manufacturing equipment as part of the asset sale with Nutracom.

Income Taxes:

● We reported an income tax expense of $48,000 for Q1 2019 related to income taxes on our earnings in our Philippine entity and minimum U.S. state income tax expense.

● See Note 8 of the Condensed Consolidated Financial Statements for additional detail regarding income taxes.

Net Income:

● We reported net income of $624,000 in Q1 2019 compared to a net loss of $238,000 in the prior-year quarter primarily the result of the decrease in SGA expenses, coupled with the gain on the sale of fixed assets as part of the purchase agreement with Nutracom.

Financial Condition, Liquidity and Capital Resources 

During the first three months of 2019, we used $127,000 of net cash in operating activities, $11,000 of net cash was provided by investing activities, and financing activities provided $500,000 of net cash. This compares to $500,000 of net cash provided by operating activities, $17,000 provided by investing activities, and $108,000 used in financing activities in the same period of 2018. Cash and cash equivalents increased by $391,000 to $2.38 million as of March 31, 2019 compared to December 31, 2018.

Significant changes in working capital items consisted of an increase of $840,000 in accounts/notes receivable and deposits, a decrease in inventory of $705,000, and an increase in prepaid expenses/other current assets of $251,000 in the first three months of 2019. The increase in accounts/notes receivable and deposits is primarily the result of deposits required on production purchase orders to Nutracom, in accordance with the supply agreement executed as of January 1, 2019. The decrease in inventory is the result of the timing of the transfer of finished goods from Nutracom to us under the terms of the supply agreement, and the increase in prepaid expenses/other current assets primarily represents the annual premium payments made in the first quarter of 2019 on most of the corporate business insurance policies.

Investing activities during the first three months of 2019 consisted of a net investment of $39,000 for capital expenditures, offset by payments received on notes receivable with related parties of $50,000. Financing activities during the first three months of 2019 consisted of $500,000 in proceeds from line of credit borrowings.

Stockholders’ equity increased to $12.13 million at March 31, 2019 compared to $11.99 million at December 31, 2018. The increase is primarily due to our net income during the first three months of 2019 of $624,000; offset by treasury stock of $540,000 acquired under the purchase agreement with Nutracom. Our working capital balance was $2.05 million at March 31, 2019 compared to $4.17 million at December 31, 2018. The current ratio at March 31, 2019 was 1.42 compared to 2.07 at December 31, 2018.

24

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 March 31, 2019, we have 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 have 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.

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; (iii) modify our distributor 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 

A summary of our critical accounting policies and estimates is presented in our 2018 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 29, 2019. Except for the required adoption of ASU No. 2016-02, our critical accounting policies remain unchanged as of March 31, 2019.

25

Item No. 4 - 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 March 31, 2019. 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 March 31, 2019, 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. There were no material changes in our internal control over financial reporting during the first quarter of 2019 that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

PART II – OTHER INFORMATION

Item No. 6 – Exhibits

Exhibit Number Document

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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, formatted in XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss), (iii) the Condensed Consolidated Statements of Cash Flows, (iv) Condensed Consolidated Statements of Stockholders’ Equity, and (v) the Notes to Condensed Consolidated Financial Statements.

26

SIGNATURES

Pursuant to the requirements 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:  May 15, 2019

By:	/s/ Steven D. Albright
	Steven D. Albright, Chief Financial Officer (and accounting officer)

Date:  May 15, 2019

27

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Ryan A. Montgomery, certify that:

1.     I have reviewed this quarterly report on Form 10-Q 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: May 15, 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 quarterly report on Form 10-Q 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: May 15, 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 Quarterly Report on Form 10-Q of Reliv’ International, Inc. (the “Company”) for the quarterly period ended March 31, 2019, 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: May 15, 2019

/s/ Steven D. Albright

Steven D. Albright

Chief Financial Officer

Date: May 15, 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-Q 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 - shares	3 Months Ended
	Mar. 31, 2019	May 06, 2019
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 Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding (in shares)		1,746,449
Document Type	10-Q
Document Period End Date	Mar. 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 2,381,087	$ 1,989,974
Accounts receivable, less allowances of $5,000 in 2019 and 2018	245,999	400,759
Notes & accounts receivables and deposits - related parties	1,269,527	151,222
Inventories
Finished goods	1,959,535	2,460,563
Raw materials	176,481	372,865
Sales aids and promotional materials	127,653	121,519
Total inventories	2,263,669	2,954,947
Refundable income taxes	20,794	22,712
Assets held for sale		2,124,939
Prepaid expenses and other current assets	693,749	441,453
Total current assets	6,874,825	8,086,006
Other assets	388,655	338,974
Notes and accounts receivables - related parties	2,897,249	1,282,072
Operating lease right-to-use assets	394,287
Intangible assets, net	1,891,767	1,948,263
Equity investment	505,000
Property, plant and equipment:
Land and land improvements	905,190	905,190
Building	10,103,321	9,964,523
Office & other equipment	1,226,971	1,337,911
Computer equipment & software	2,227,664	2,212,935
Property, plant and equipment, Gross, Total	14,463,146	14,420,559
Less: Accumulated depreciation	9,813,657	9,722,009
Net property, plant and equipment	4,649,489	4,698,550
Total assets	17,601,272	16,353,865
Current liabilities:
Trade accounts payable and other accrued expenses	2,171,407	2,105,814
Distributors' commissions payable	855,664	1,030,948
Sales taxes payable	168,430	195,802
Payroll and payroll taxes payable	271,927	210,288
Total accounts payable and accrued expenses	3,467,428	3,542,852
Income taxes payable	77,534	35,304
Deferred revenue	365,447	337,234
Operating lease liabilities, current	229,700
Deferred rent liability	187,500
Revolving line of credit	500,000
Total current liabilities	4,827,609	3,915,390
Noncurrent liabilities:
Operating lease liabilities, noncurrent	158,751
Other noncurrent liabilities	483,750	445,611
Total noncurrent liabilities	642,501	445,611
Stockholders' equity:
Preferred stock, par value $.001 per share; 500,000 shares authorized; -0- shares issued and outstanding in 2019 and 2018	0	0
Common stock, par value $.001 per share; 5,000,000 authorized; 2,110,013 shares issued and 1,746,449 shares outstanding as of 3/31/2019; 2,110,013 shares issued and 1,845,160 shares outstanding as of 12/31/2018	2,110	2,110
Additional paid-in capital	30,627,853	30,622,547
Accumulated deficit	(11,687,494)	(12,311,138)
Accumulated other comprehensive loss:
Foreign currency translation adjustment	(959,884)	(982,095)
Treasury stock	(5,851,423)	(5,338,560)
Total stockholders' equity	12,131,162	11,992,864
Total liabilities and stockholders' equity	$ 17,601,272	$ 16,353,865

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Accounts receivable, allowances	$ 5,000	$ 5,000
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)	1,746,449	1,845,160

XML

Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss) (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Net Revenues	$ 9,489,504	$ 10,003,239
Costs and expenses:
Cost of goods sold	2,433,732	2,349,742
Distributor royalties and commissions	3,117,572	3,391,745
Selling, general and administrative	3,739,527	4,485,895
Total costs and expenses	9,290,831	10,227,382
Income (loss) from operations	198,673	(224,143)
Other income (expense):
Interest income	49,262	23,952
Interest expense	(5,412)	(31,565)
Other income (expense)	(5,428)	6,651
Gain on sale of fixed assets	434,549	3,800
Income (loss) before income taxes	671,644	(221,305)
Provision for income taxes	48,000	17,000
Net income (loss)	623,644	(238,305)
Other comprehensive income (loss):
Foreign currency translation adjustment	22,211	25,228
Comprehensive income (loss)	$ 645,855	$ (213,077)
Basic earnings (loss) per share (in dollars per share)	$ 0.36	$ (0.13)
Weighted average shares (in shares)	1,746,000	1,845,000
Diluted earnings (loss) per share (in dollars per share)	$ 0.36	$ (0.13)
Weighted average shares (in shares)	1,746,000	1,845,000
Product [Member]
Net Revenues	$ 8,810,997	$ 9,391,381
Freight Income [Member]
Net Revenues	519,941	611,858
Product and Service, Other [Member]
Net Revenues	$ 158,566

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Operating activities:
Net income (loss)	$ 623,644	$ (238,305)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	144,893	201,634
Stock-based compensation	5,306	7,535
Non-cash life insurance policy reduction / (accretion)		(6,617)
Non-cash other revenue	(86,433)
Non-cash miscellaneous loss	24,618
(Gain) loss on sale of property, plant and equipment	(434,549)	(3,800)
Foreign currency transaction (gain) loss	5,925	341
(Increase) decrease in trade, accounts & notes receivable, and deposits from related parties	(839,989)	(104,767)
(Increase) decrease in inventories	705,371	393,576
(Increase) decrease in refundable income taxes	1,918	(3,550)
(Increase) decrease in prepaid expenses and other current assets	(251,056)	(320,175)
(Increase) decrease in other assets	(49,681)	(6,052)
Increase (decrease) in income taxes payable	42,522	18,664
Increase (decrease) in accounts payable & accrued expenses, deferred revenue, and other noncurrent liabilities	(19,235)	561,297
Net cash provided by (used in) operating activities	(126,746)	499,781
Investing activities:
Purchase of property, plant and equipment	(38,890)	(15,383)
Proceeds from the sale of property, plant and equipment		3,888
Payments received on notes receivables - related parties	49,691	28,326
Net cash provided by investing activities	10,801	16,831
Financing activities:
Proceeds from line of credit borrowings	500,000
Principal payments on long-term borrowings		(108,320)
Net cash provided by (used in) financing activities	500,000	(108,320)
Effect of exchange rate changes on cash and cash equivalents	7,058	(4,240)
Increase (decrease) in cash and cash equivalents	391,113	404,052
Cash and cash equivalents at beginning of period	1,989,974	3,272,788
Cash and cash equivalents at end of period	$ 2,381,087	$ 3,676,840

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - 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, 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 income (loss)			(238,305)			(238,305)
Foreign currency translation adjustment				25,228		25,228
Total comprehensive income						(213,077)
Stock-based compensation		7,534				7,534
Balance (in shares) at Mar. 31, 2018	2,110,013				264,853
Balance at Mar. 31, 2018	$ 2,110	30,606,454	(10,646,102)	(832,426)	$ (5,338,560)	13,791,476
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
Net income (loss)			623,644			623,644
Foreign currency translation adjustment				22,211		22,211
Total comprehensive income						645,855
Treasury stock acquired (Note 2) (in shares)					99,200
Treasury stock acquired (Note 2)					$ (540,144)	(540,144)
Other (in shares)					(489)
Other					$ 27,281	27,281
Stock-based compensation		5,306				5,306
Balance (in shares) at Mar. 31, 2019	2,110,013				363,564
Balance at Mar. 31, 2019	$ 2,110	$ 30,627,853	$ (11,687,494)	$ (959,884)	$ (5,851,423)	$ 12,131,162

XML

Note 1 - Accounting Policies

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Significant Accounting Policies [Text Block]

1.

Accounting Polic

ies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and notes thereto have been prepared in accordance with the instructions to Form

10

-Q and reflect all adjustments (which primarily include normal recurring accruals) which we believe are necessary to present fairly the financial position, results of operations and cash flows. All significant intercompany accounts and transactions have been eliminated. These statements, however, do

not

include all information and footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States. Interim results

may

not

necessarily be indicative of results that

may

be expected for any other interim period or for the year as a whole. These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the annual report on Form

10

-K for the year ended

December 31, 2018,

filed

March 29, 2019

with the Securities and Exchange Commission.

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.

Reclassifications

To conform to the current year presentation, certain previously reported

2018

amounts have been reclassified. 

Inventories

Inventories are valued at the lower of cost or market and are accounted for on a

first

-in,

first

-out basis. Effective

January 1, 2019,

finished goods inventories primarily consist of purchased products held for resale. Prior to

2019,

finished goods inventories were primarily comprised of internally manufactured products consisting of the costs associated with raw materials, labor, and overhead. On a periodic basis we review our inventory levels, as compared to future demand requirements and the shelf life of the various products. Based on this review, we record 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 costs of goods sold upon recognition of revenue when sold to distributors. All other advertising and promotional costs are expensed when incurred.

Variable Interest Entities (VIE) - Unconsolidated

Effective

January 1, 2019,

we have a financial interest in Nutracom LLC (Nutracom). If we are the primary beneficiary of a VIE, we are required to consolidate the VIE in our consolidated financial statements. To determine if we are the primary beneficiary, we evaluate whether we have the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our VIE evaluation requires significant assumptions and judgments.

We do

not

have the power to direct the significant activities of Nutracom, primarily because we do

not

have governance rights. We also do

not

participate in the annual profits or losses of Nutracom. Therefore, we do

not

consolidate the financial results of Nutracom in our consolidated financial statements. We account for our financial interest in Nutracom as an equity investment measured at cost minus impairment, if any. A cost method equity investment is subject to periodic impairment review using the other-than-temporary impairment model, which considers the severity and duration of a decline in fair value below cost and our ability and intent to hold the investment for a sufficient period of time to allow for recovery.

See Note

2

and Note

3

for further information on our financial relationship with Nutracom.

Concentrations of Risk

Effective

January 1, 2019,

we have entered into outsourcing agreements with Nutracom to manufacture our nutritional and dietary supplements and for warehousing and fulfillment services for the U.S. distribution of our products. Nutracom has also issued promissory notes to us for the acquisition of our manufacturing and fulfillment operations. Any inability of Nutracom to deliver these contracted services or to repay the promissory notes could adversely impact our future operating results. See Note

2

and Note

3

for further discussion of our relationship with Nutracom.

New Accounting Pronouncements –

Not

Yet Adopted

In

June 2016,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updated (“ASU”)

No.

2016

-

13,

Credit Losses

(Topic

326

): Measurement of Credit Losses on Financial Instruments

which requires entities to use a current lifetime expected credit loss methodology to measure impairments of certain financial assets. Using this methodology

may

result in earlier recognition of losses than under the current incurred loss approach, which requires waiting to recognize a loss until it is probable of having been incurred. There are other provisions within the standard that affect how impairments of other financial assets

may

be recorded and presented, and that expand disclosures. This standard will be effective for our interim and annual financial periods beginning

January 1, 2020,

with early adoption permitted. Adoption of this standard must be applied on a modified retrospective basis. We are evaluating the potential impact of this standard on our consolidated financial statements and related disclosures.

New Accounting Pronouncements – Adopted

January 1, 2019

Lessee Accounting

On

January 1, 2019,

we adopted ASU

No.

2016

-

02,

Leases (Topic

842

)

(including subsequent issued lease-related ASU’s), and applied the new lease accounting standard to all lessee operating leases using the prospective transition method. Under this method, prior financial reporting periods are

not

restated. The adoption of the new lease accounting standard resulted in the recording of assets and obligations of our operating leases of approximately

$451,000

and

$457,000,

respectively, on our consolidated balance sheets. Certain amounts previously recorded for prepaid and accrued rent associated with historical operating leases were reclassified to the newly captioned Operating lease right-to-use assets.

At adoption, we used the new lease accounting standard’s package of practical expedients permitted under the transition guidance that allowed us to

not

reassess: (a) whether any expired or existing contracts are or contain leases, (b) lease classification for any expired or existing leases, and (c) initial direct costs for any expired or existing leases. We also used the lease standard’s practical expedient that allows lessees to treat the lease and implicit non-lease components of our leases as a single lease component and we do

not

record on the balance sheet leases with an initial term of

twelve

months or less. Fixed lease expense on all of our operating leases is recognized on a straight-line basis over the contractual lease term, including our estimate of any renewal or early termination lease terms. Operating lease expense is presented within Selling, General and Administrative expense in our operating results.

Operating lease liabilities and related operating lease right-to-use assets are recognized at commencement date of the lease based on the present value of lease payments over the lease term. When leases do

not

provide an implicit discount rate, we use a country specific incremental borrowing rate based upon the lease term.

See Note

7

for additional lease disclosures.

Less

or

Accounting

– Other Revenue

Other revenue consists of revenue derived from our leasing a portion of our headquarters building to Nutracom, LLC (Nutracom). We recognize lessor rent revenue on a straight-line basis over the term of the lease. As part of this straight-line methodology, the cumulative rental billings

may

be greater or less than the financial period’s recognized revenue; such timing differences are recognized on the balance sheet as an accrued other liability or an unbilled rent revenue receivable.

Also included in other revenue are billings to the tenant for its share of the facility’s common area costs such as real estate taxes, maintenance, and utilities. These same common area costs plus the tenant’s share of the facilities’ depreciation are recorded as cost of goods sold.

See Note

2

and Note

3

for further information on our financial relationship with Nutracom. See Note

7

for further information on our leases.

Going Concern

We have incurred operating losses, declining net sales, and negative net cash flows over our most recent

five

years. Our management estimates that these unfavorable trends are more likely than

not

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

March 31, 2019,

we had

$2,381,087

in cash and cash equivalents which

may

not

be sufficient to fund our planned operations through

one

year subsequent to the date of the issuance of these condensed financial statements, and accordingly, there is substantial doubt about our ability to continue as a going concern. The analysis used to determine our ability to continue as a going concern does

not

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

twelve

months.

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 the 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 we believe are favorable.

We have taken several steps in

2019

which we believe will result in improvement to our financial position, operating results, and cash flows. We have borrowed

$500,000

of our available

$750,000

revolving line of credit balance. In addition, our lender has agreed to extend the available

$750,000

revolving line of credit agreement to

April 28, 2020.

As detailed in Note

2

of these condensed consolidated financial statements, on

January 1, 2019,

we sold the assets previously used by us in our manufacturing operations to Nutracom LLC (Nutracom). We financed the assets purchased by Nutracom from 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. Our 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 from these Nutracom transactions and their impact to our operations.

Should the aforementioned changes to our 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) seek to monetize our headquarters building via traditional bank lending or a sale and leaseback-type transaction; (ii) monetizing the note receivable from a distributor; (iii) modify our distributor 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 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 or shut down our operations if our business operating performance does

not

improve. These condensed 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 we can

no

longer continue as a going concern.

XML

Note 2 - Sale of Manufacturing Operations' Assets

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

2.

Sale of Manufacturing Operations’ Assets

On

January 1, 2019,

we entered into a Purchase Agreement with Nutracom, LLC (Nutracom) pursuant to which Nutracom purchased the following assets previously used by us in our 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 approximately $435,000 ).

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

Prior to its approval of the transaction, our Board of Directors formed a special committee consisting of the Board’s independent directors to review the transaction. To assist in its review, the special committee engaged a qualified

third

-party expert to render a fairness opinion on the transaction.

Concurrently with the execution of the Purchase Agreement, we 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 our headquarters building from us 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

over the

seven

-year term.

Nutracom provided the following consideration to us 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 under the facility lease agreement.

● Nutracom management transferred to us its ownership of 99,200 shares of our common stock valued at $540,144.

● Nutracom issued to us 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, our 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 us).

Our non-voting Class B

15%

equity membership interest in Nutracom was valued by the aforementioned

third

-party expert at

$505,000.

As our non-voting membership interest does

not

participate in the management of Nutracom, nor do we share in any Nutracom operating profits or losses, we are accounting for our Nutracom equity investment under the cost method.

At

December 31, 2018,

we 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 condensed consolidated balance sheets. We have accounted for the Nutracom transactions in our

first

quarter

2019

financial results.

XML

Note 3 - Related Parties

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

3.

Related Parties

The following summarizes our related party activities with Nutracom and a significant distributor of the Company.

	March 31		December 31
Assets and liabilities - related parties	2019		2018
Notes & accounts receivables and deposits - current
Deposits with Nutracom for inventory	$	1,010,696	$	-
Notes receivable - distributor		124,895		123,040
Notes receivable - Nutracom secured		121,553		-
Other miscellaneous receivables		12,383		28,182
	$	1,269,527	$	151,222
Notes & accounts receivables - non-current
Notes receivable - distributor	$	1,250,144	$	1,282,072
Notes receivable - Nutracom secured		858,828		-
Notes receivable - Nutracom unsecured		764,344		-
Unbilled receivables: Straight line rent revenue greater than rental billings		23,933		-
	$	2,897,249	$	1,282,072
Equity investment in Nutracom	$	505,000		-
Liability captions with Nutracom balances included therein
Trade accounts payable and other accrued expenses	$	257,396		-
Deferred rent liability		187,500		-

	Three months ended March 31
Revenue and expense - related parties	2019		2018
Other revenue	$	158,566	$	-
Selling, general and administrative expense:
Fullfillment & professional fees		151,102		-
Interest income on promissory notes		47,843		22,603
Gain on sale of fixed assets		434,549		-
Finished goods inventory purchased from Nutracom	$	979,900		-

At

March 31, 2019,

we had

$1.3

million in commitments (net of deposits) to purchase finished goods inventory from Nutracom.

The following table presents scheduled principal payments to be received on the distributor and Nutracom promissory notes receivable:

Remainder of 2019	$	183,504
2020		257,289
2021		327,217
2022		374,274
2023		368,571
Thereafter		1,635,909
	$	3,146,764

S

upplementary Disclosure of Cash Flows Information

:

We incurred the following noncash investing and financing transactions on

January 1, 2019

relating to our transactions with Nutracom:

	2019
Sale of fixed assets	$	1,000,000
Sale of inventories		1,559,488
First year building rental received in advance		250,000
Acquire company common stock for treasury		540,144
Acquire equity investment in Nutracom		505,000
Secured promissory note received		1,000,000
Unsecured promissory note received		764,344

XML

Note 4 - Basic and Diluted Earnings (Loss) Per Share

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Earnings Per Share [Text Block]

4.

Basic and Diluted Earnings (Loss) per Share

Basic earnings (loss) per common share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per common share is 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.

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

	Three months ended March 31
	2019		2018
Numerator:
Net income (loss)	$	623,644	$	(238,305	)
Denominator:
Denominator for basic earnings (loss) per share – weighted average shares		1,746,000		1,845,000
Dilutive effect of employee stock options and other warrants		-		-
Denominator for diluted earnings (loss) per share – adjusted weighted average shares		1,746,000		1,845,000
Basic earnings (loss) per share	$	0.36	$	(0.13	)
Diluted earnings (loss) per share	$	0.36	$	(0.13	)

Options and warrants to purchase

85,203

shares and

120,242

shares of common stock for the

three

months ended

March 31, 2019

and

2018,

respectively, were

not

included in the denominator for diluted earnings (loss) per share because their effect would be antidilutive or because the shares were deemed contingently issuable.

XML

Note 5 - Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

5

.

Fair Value of Financial Instruments

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.

The carrying amount and fair value of financial instruments were approximately as follows:

	Carrying		Fair
Description	Amount		Value		Level 1		Level 2		Level 3
March 31, 2019
Revolving line of credit	$	500,000	$	500,000		-	$	500,000		-
Note receivable - distributor		1,375,039		1,511,000		-		1,511,000		-
Notes receivable - Nutracom		1,744,725		1,744,725		-		1,744,725		-
Marketable securities		389,000		389,000	$	389,000		-		-
December 31, 2018
Note receivable - distributor	$	1,405,112	$	1,529,000		-	$	1,529,000		-
Marketable securities		339,000		339,000	$	339,000		-		-

Revolving line of credit

: The fair value of our revolver loan approximates carrying value as this loan was amended within the past year and has a variable market-based interest rate that resets every

thirty

days.

Note receivable

- distributor

: The note receivable - distributor 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.

Note

s

receivable

- Nutracom

: The fair value of the notes receivable – Nutracom balance approximates carrying value as these notes were received at fair value within the current fiscal year.

Marketable securities

: The assets (trading securities) of the our 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.

XML

Note 6 - Debt

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Debt Disclosure [Text Block]

6

. Debt

On

September 30, 2015,

we entered into a series of lending agreements with our primary lender which included agreements for a term loan and a revolving credit facility. The term loan was repaid in

2018

and the revolver has been periodically amended and extended.

Effective with a

September 11, 2018

amendment, the revolving line of credit’s maximum borrowing amount was

$750,000.

The revolver’s maturity date was

April 29, 2019

and the revolver’s interest rate was 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 25, 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.

At

March 31, 2019,

outstanding borrowings under the revolving line of credit are

$500,000

at an interest rate of

4.73%.

Borrowings under the lending agreement continue to be secured by all of our tangible and intangible assets and by a mortgage on the real estate of our headquarters facility. At

March 31, 2019,

the Company was in compliance with its loan covenant requirements.

XML

Note 7 - Leases

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Lessee and Lessor, Operating Leases [Text Block]

7.

Leases

Less

ee

The Company leases certain office facilities, storage, and equipment. These leases have varying terms, are generally

one

to

five

years in length, and certain real estate leases have options to extend or early terminate. Several of our operating leases are subject to annual changes in the Consumer Price or similar indexes (CPI). The changes to the lease payment due to CPI changes are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred.

The following table represents the maturity of our operating lease liabilities as of

March 31, 2019:

Remainder of 2019	$	185,574
2020		184,384
2021		16,872
2022		14,364
2023		5,704
Thereafter		-
Total operating lease payments		406,898
Less: imputed interest		(18,447	)
Total operating lease liabilities	$	388,451

Operating lease expense:	Three months ended
	March 31, 2019
Fixed	$	64,702
Variable		5,449
Short-term		9,771
Total	$	79,922
Supplemental cash flow information:
Cash paid towards lease liabilities:
Operating cash flows from operating leases	$	68,561

	March 31, 2019
Operating lease liabilities:
Weighted average remaining lease term (years)		2.0
Weighted average discount rate		5.1	%

Less

or

– Other Revenue

Other revenue consists of revenue derived from our leasing a portion of our headquarters building to Nutracom, LLC (Nutracom) effective

January 1, 2019.

The leased space, encompassing manufacturing, warehouse, and certain office space, is for a term of

seven

years, with a tenant option for an additional

five

-year term. Annual lease amounts range from

$193,000

to

$410,000

over the

seven

-year term.

We recognize lessor rent revenue on a straight-line basis over the term of the lease. As part of this straight-line methodology, the cumulative rental billings

may

be greater or less than the financial period’s recognized revenue; such timing differences are recognized on the balance sheet as an accrued other liability or an unbilled rent revenue receivable.

Also included in other revenue are billings to the tenant for its share of the facility’s common area costs such as real estate taxes, maintenance, and utilities. These same common area costs plus the tenant’s share of the facilities’ depreciation are recorded as cost of goods sold.

The following table details lessor’s estimated remaining straight-line rent revenue over the

seven

-year lease term as compared with fixed rent amounts under the lease agreement.

	Estimated
	Straight-line		Lease Agreement
	Rent Revenue		Fixed Rent
Remainder of 2019	$	259,299	$	187,500
2020		345,732		192,900
2021		345,732		385,800
2022		345,732		385,800
2023		345,732		385,800
Thereafter		691,464		819,825
Total	$	2,333,691	$	2,357,625

XML

Note 8 - Income Taxes

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Income Tax Disclosure [Text Block]

8

. Income Taxes

During the fiscal years of

2016

through

2018,

we determined that it was more likely than

not

that U.S. federal and various state net operating losses generated in those years will

not

be realized based on projections of future U.S. taxable income, estimated reversals of existing taxable timing differences, and other considerations.

In prior years, we recorded a valuation allowance on all of our domestic and foreign deferred tax assets. The effective income tax rate was

7.1%

and (

7.7

)% for the quarter ended

March 31, 2019

and

2018,

respectively. The income tax provision amounts primarily represent estimated income taxes for

one

of the Company’s foreign subsidiaries and certain U.S. states.

One of our 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.

In consultation with our legal counsel, we believe that there are strong legal grounds that we should

not

be liable to pay the majority of the alleged tax deficiencies. In

2011,

we made good faith deposits of approximately

$173,000

to the local tax authority under the tax agency’s administrative judicial resolution process.

As of

December 31, 2018,

our estimated reserve (net of deposits) for this matter was approximately

$172,500

and remains unchanged in

2019.

In

May 2018,

we received a formal notice of denial of

one

of our appeals under the tax agency’s administrative judicial resolution process; however, we continue to pursue other available legal processes as we continue to maintain our position that we are

not

liable for the majority of the alleged tax deficiencies.

XML

Note 9 - Revenue Recognition

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

9

.

Revenue Recognition

We recognize revenue from product sales under a

five

step process 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 the 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.

We recognize the performance obligation for membership fees-type revenue over the membership term of generally

twelve

months. We receive payment for membership fees revenue at the beginning of the 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. Our remaining unearned membership fees obligation is reported as deferred revenue liability.

We record freight income as a component of net sales and record freight costs as a component of cost of goods sold. Total sales do

not

include sales tax as we consider ourselves a pass-through conduit for collecting and remitting applicable sales taxes.

Other revenue is defined in Note

7

- Leases.

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 product returns 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 commissions received relating to the original purchase of the returned products. For the year to date periods ending

March 31, 2019

and

2018,

total returns as a percent of net sales were approximately

0.04%

and

0.27%,

respectively.

We classify our net sales into

two

categories of sales products, plus freight income, and other revenue:

	Three months ended March 31
	2019		2018
Net sales by product category
Nutritional and dietary supplements	$	8,497,350	$	9,069,356
Sales aids, membership fees, and other		313,647		322,025
Freight income		519,941		611,858
Other revenue		158,566		-
Total net sales	$	9,489,504	$	10,003,239

We operate 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, as follows:

	Three months ended March 31
	2019		2018
Net sales by geographic region
United States	$	7,111,773	$	7,670,061
Australia/New Zealand		177,048		231,928
Canada		199,399		242,120
Mexico		136,026		107,371
Europe (1)		938,668		1,164,884
Asia (2)		926,590		586,875
Total net sales	$	9,489,504	$	10,003,239

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

XML

Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and notes thereto have been prepared in accordance with the instructions to Form

10

-Q and reflect all adjustments (which primarily include normal recurring accruals) which we believe are necessary to present fairly the financial position, results of operations and cash flows. All significant intercompany accounts and transactions have been eliminated. These statements, however, do

not

include all information and footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States. Interim results

may

not

necessarily be indicative of results that

may

be expected for any other interim period or for the year as a whole. These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the annual report on Form

10

-K for the year ended

December 31, 2018,

filed

March 29, 2019

with the Securities and Exchange Commission.

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.

Reclassification, Policy [Policy Text Block]

Reclassifications

To conform to the current year presentation, certain previously reported

2018

amounts have been reclassified. 

Inventory, Policy [Policy Text Block]

Inventories

Inventories are valued at the lower of cost or market and are accounted for on a

first

-in,

first

-out basis. Effective

January 1, 2019,

finished goods inventories primarily consist of purchased products held for resale. Prior to

2019,

finished goods inventories were primarily comprised of internally manufactured products consisting of the costs associated with raw materials, labor, and overhead. On a periodic basis we review our inventory levels, as compared to future demand requirements and the shelf life of the various products. Based on this review, we record 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 costs of goods sold upon recognition of revenue when sold to distributors. All other advertising and promotional costs are expensed when incurred.

Consolidation, Variable Interest Entity, Policy [Policy Text Block]

Variable Interest Entities (VIE) - Unconsolidated

Effective

January 1, 2019,

we have a financial interest in Nutracom LLC (Nutracom). If we are the primary beneficiary of a VIE, we are required to consolidate the VIE in our consolidated financial statements. To determine if we are the primary beneficiary, we evaluate whether we have the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our VIE evaluation requires significant assumptions and judgments.

We do

not

have the power to direct the significant activities of Nutracom, primarily because we do

not

have governance rights. We also do

not

participate in the annual profits or losses of Nutracom. Therefore, we do

not

consolidate the financial results of Nutracom in our consolidated financial statements. We account for our financial interest in Nutracom as an equity investment measured at cost minus impairment, if any. A cost method equity investment is subject to periodic impairment review using the other-than-temporary impairment model, which considers the severity and duration of a decline in fair value below cost and our ability and intent to hold the investment for a sufficient period of time to allow for recovery.

See Note

2

and Note

3

for further information on our financial relationship with Nutracom.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentrations of Risk

Effective

January 1, 2019,

we have entered into outsourcing agreements with Nutracom to manufacture our nutritional and dietary supplements and for warehousing and fulfillment services for the U.S. distribution of our products. Nutracom has also issued promissory notes to us for the acquisition of our manufacturing and fulfillment operations. Any inability of Nutracom to deliver these contracted services or to repay the promissory notes could adversely impact our future operating results. See Note

2

and Note

3

for further discussion of our relationship with Nutracom.

New Accounting Pronouncements, Policy [Policy Text Block]

New Accounting Pronouncements –

Not

Yet Adopted

In

June 2016,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updated (“ASU”)

No.

2016

-

13,

Credit Losses

(Topic

326

): Measurement of Credit Losses on Financial Instruments

which requires entities to use a current lifetime expected credit loss methodology to measure impairments of certain financial assets. Using this methodology

may

result in earlier recognition of losses than under the current incurred loss approach, which requires waiting to recognize a loss until it is probable of having been incurred. There are other provisions within the standard that affect how impairments of other financial assets

may

be recorded and presented, and that expand disclosures. This standard will be effective for our interim and annual financial periods beginning

January 1, 2020,

with early adoption permitted. Adoption of this standard must be applied on a modified retrospective basis. We are evaluating the potential impact of this standard on our consolidated financial statements and related disclosures.

New Accounting Pronouncements – Adopted

January 1, 2019

Lessee Accounting

On

January 1, 2019,

we adopted ASU

No.

2016

-

02,

Leases (Topic

842

)

(including subsequent issued lease-related ASU’s), and applied the new lease accounting standard to all lessee operating leases using the prospective transition method. Under this method, prior financial reporting periods are

not

restated. The adoption of the new lease accounting standard resulted in the recording of assets and obligations of our operating leases of approximately

$451,000

and

$457,000,

respectively, on our consolidated balance sheets. Certain amounts previously recorded for prepaid and accrued rent associated with historical operating leases were reclassified to the newly captioned Operating lease right-to-use assets.

At adoption, we used the new lease accounting standard’s package of practical expedients permitted under the transition guidance that allowed us to

not

reassess: (a) whether any expired or existing contracts are or contain leases, (b) lease classification for any expired or existing leases, and (c) initial direct costs for any expired or existing leases. We also used the lease standard’s practical expedient that allows lessees to treat the lease and implicit non-lease components of our leases as a single lease component and we do

not

record on the balance sheet leases with an initial term of

twelve

months or less. Fixed lease expense on all of our operating leases is recognized on a straight-line basis over the contractual lease term, including our estimate of any renewal or early termination lease terms. Operating lease expense is presented within Selling, General and Administrative expense in our operating results.

Operating lease liabilities and related operating lease right-to-use assets are recognized at commencement date of the lease based on the present value of lease payments over the lease term. When leases do

not

provide an implicit discount rate, we use a country specific incremental borrowing rate based upon the lease term.

See Note

7

for additional lease disclosures.

Less

or

Accounting

– Other Revenue

Other revenue consists of revenue derived from our leasing a portion of our headquarters building to Nutracom, LLC (Nutracom). We recognize lessor rent revenue on a straight-line basis over the term of the lease. As part of this straight-line methodology, the cumulative rental billings

may

be greater or less than the financial period’s recognized revenue; such timing differences are recognized on the balance sheet as an accrued other liability or an unbilled rent revenue receivable.

Also included in other revenue are billings to the tenant for its share of the facility’s common area costs such as real estate taxes, maintenance, and utilities. These same common area costs plus the tenant’s share of the facilities’ depreciation are recorded as cost of goods sold.

See Note

2

and Note

3

for further information on our financial relationship with Nutracom. See Note

7

for further information on our leases.

Going Concern [Policy Text Block]

Going Concern

We have incurred operating losses, declining net sales, and negative net cash flows over our most recent

five

years. Our management estimates that these unfavorable trends are more likely than

not

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

March 31, 2019,

we had

$2,381,087

in cash and cash equivalents which

may

not

be sufficient to fund our planned operations through

one

year subsequent to the date of the issuance of these condensed financial statements, and accordingly, there is substantial doubt about our ability to continue as a going concern. The analysis used to determine our ability to continue as a going concern does

not

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

twelve

months.

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 the 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 we believe are favorable.

We have taken several steps in

2019

which we believe will result in improvement to our financial position, operating results, and cash flows. We have borrowed

$500,000

of our available

$750,000

revolving line of credit balance. In addition, our lender has agreed to extend the available

$750,000

revolving line of credit agreement to

April 28, 2020.

As detailed in Note

2

of these condensed consolidated financial statements, on

January 1, 2019,

we sold the assets previously used by us in our manufacturing operations to Nutracom LLC (Nutracom). We financed the assets purchased by Nutracom from 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. Our 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 from these Nutracom transactions and their impact to our operations.

Should the aforementioned changes to our 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) seek to monetize our headquarters building via traditional bank lending or a sale and leaseback-type transaction; (ii) monetizing the note receivable from a distributor; (iii) modify our distributor 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 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 or shut down our operations if our business operating performance does

not

improve. These condensed 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 we can

no

longer continue as a going concern.

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Note 3 - Related Parties (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Related Party Transactions [Table Text Block]

	March 31		December 31
Assets and liabilities - related parties	2019		2018
Notes & accounts receivables and deposits - current
Deposits with Nutracom for inventory	$	1,010,696	$	-
Notes receivable - distributor		124,895		123,040
Notes receivable - Nutracom secured		121,553		-
Other miscellaneous receivables		12,383		28,182
	$	1,269,527	$	151,222
Notes & accounts receivables - non-current
Notes receivable - distributor	$	1,250,144	$	1,282,072
Notes receivable - Nutracom secured		858,828		-
Notes receivable - Nutracom unsecured		764,344		-
Unbilled receivables: Straight line rent revenue greater than rental billings		23,933		-
	$	2,897,249	$	1,282,072
Equity investment in Nutracom	$	505,000		-
Liability captions with Nutracom balances included therein
Trade accounts payable and other accrued expenses	$	257,396		-
Deferred rent liability		187,500		-

	Three months ended March 31
Revenue and expense - related parties	2019		2018
Other revenue	$	158,566	$	-
Selling, general and administrative expense:
Fullfillment & professional fees		151,102		-
Interest income on promissory notes		47,843		22,603
Gain on sale of fixed assets		434,549		-
Finished goods inventory purchased from Nutracom	$	979,900		-

Schedule of Principal Payments on Notes Receivables - Related Parties [Table Text Block]

Remainder of 2019	$	183,504
2020		257,289
2021		327,217
2022		374,274
2023		368,571
Thereafter		1,635,909
	$	3,146,764

Schedule of Cash Flow, Supplemental Disclosures [Table Text Block]

	2019
Sale of fixed assets	$	1,000,000
Sale of inventories		1,559,488
First year building rental received in advance		250,000
Acquire company common stock for treasury		540,144
Acquire equity investment in Nutracom		505,000
Secured promissory note received		1,000,000
Unsecured promissory note received		764,344

XML

Note 4 - Basic and Diluted Earnings (Loss) Per Share (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three months ended March 31
	2019		2018
Numerator:
Net income (loss)	$	623,644	$	(238,305	)
Denominator:
Denominator for basic earnings (loss) per share – weighted average shares		1,746,000		1,845,000
Dilutive effect of employee stock options and other warrants		-		-
Denominator for diluted earnings (loss) per share – adjusted weighted average shares		1,746,000		1,845,000
Basic earnings (loss) per share	$	0.36	$	(0.13	)
Diluted earnings (loss) per share	$	0.36	$	(0.13	)

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Note 5 - Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Fair Value, by Balance Sheet Grouping [Table Text Block]

	Carrying		Fair
Description	Amount		Value		Level 1		Level 2		Level 3
March 31, 2019
Revolving line of credit	$	500,000	$	500,000		-	$	500,000		-
Note receivable - distributor		1,375,039		1,511,000		-		1,511,000		-
Notes receivable - Nutracom		1,744,725		1,744,725		-		1,744,725		-
Marketable securities		389,000		389,000	$	389,000		-		-
December 31, 2018
Note receivable - distributor	$	1,405,112	$	1,529,000		-	$	1,529,000		-
Marketable securities		339,000		339,000	$	339,000		-		-

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Note 7 - Leases (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

Remainder of 2019	$	185,574
2020		184,384
2021		16,872
2022		14,364
2023		5,704
Thereafter		-
Total operating lease payments		406,898
Less: imputed interest		(18,447	)
Total operating lease liabilities	$	388,451

Lease, Cost [Table Text Block]

Operating lease expense:	Three months ended
	March 31, 2019
Fixed	$	64,702
Variable		5,449
Short-term		9,771
Total	$	79,922
Supplemental cash flow information:
Cash paid towards lease liabilities:
Operating cash flows from operating leases	$	68,561

Lessee, Operating Lease, Weighted Average Remaining Lease Term and Discount Rate [Table Text Block]

	March 31, 2019
Operating lease liabilities:
Weighted average remaining lease term (years)		2.0
Weighted average discount rate		5.1	%

Lessor, Operating Lease, Payments to be Received, Maturity [Table Text Block]

	Estimated
	Straight-line		Lease Agreement
	Rent Revenue		Fixed Rent
Remainder of 2019	$	259,299	$	187,500
2020		345,732		192,900
2021		345,732		385,800
2022		345,732		385,800
2023		345,732		385,800
Thereafter		691,464		819,825
Total	$	2,333,691	$	2,357,625

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Note 9 - Revenue Recognition (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three months ended March 31
	2019		2018
Net sales by product category
Nutritional and dietary supplements	$	8,497,350	$	9,069,356
Sales aids, membership fees, and other		313,647		322,025
Freight income		519,941		611,858
Other revenue		158,566		-
Total net sales	$	9,489,504	$	10,003,239

Revenue from External Customers by Geographic Areas [Table Text Block]

	Three months ended March 31
	2019		2018
Net sales by geographic region
United States	$	7,111,773	$	7,670,061
Australia/New Zealand		177,048		231,928
Canada		199,399		242,120
Mexico		136,026		107,371
Europe (1)		938,668		1,164,884
Asia (2)		926,590		586,875
Total net sales	$	9,489,504	$	10,003,239

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Note 1 - Accounting Policies (Details Textual) - USD ($)	Jan. 01, 2019	Mar. 31, 2019	Mar. 25, 2019	Jan. 31, 2019	Dec. 31, 2018	Sep. 11, 2018	Mar. 31, 2018	Dec. 31, 2017
Operating Lease, Right-of-Use Asset		$ 394,287
Operating Lease, Liability, Total		388,451
Cash and Cash Equivalents, at Carrying Value, Ending Balance		2,381,087			$ 1,989,974		$ 3,676,840	$ 3,272,788
Nutracom, LLC [Member]
Purchase Agreement, Payments Made Per Year	$ 200,000
Revolving Credit Facility [Member]
Long-term Line of Credit, Total				$ 500,000
Line of Credit Facility, Maximum Borrowing Capacity		$ 750,000	$ 750,000	$ 750,000		$ 750,000
Accounting Standards Update 2016-02 [Member]
Operating Lease, Right-of-Use Asset	451,000
Operating Lease, Liability, Total	$ 457,000

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Note 2 - Sale of Manufacturing Operations' Assets (Details Textual) - USD ($)	Jan. 01, 2019	Jan. 01, 2020	Mar. 31, 2019	Dec. 31, 2018
Lessor, Operating Lease, Term of Contract	7 years
Lessor, Operating Lease, Renewal Term	5 years
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
Nutracom, LLC [Member] | Secured Promissory Note [Member]
Notes Receivable, Related Parties, Noncurrent	$ 1,000,000		$ 858,828
Notes Receivable, Related Parties, Term	7 years
Notes Receivable, Related Parties, Interest Rate	5.50%
Nutracom, LLC [Member] | Unsecured Promissory Note [Member]
Notes Receivable, Related Parties, Noncurrent	$ 764,344		$ 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
Nutracom, LLC [Member] | Minimum [Member]
Operating Lease, Lease Annual Income	$ 193,000
Nutracom, LLC [Member] | Minimum [Member] | Forecast [Member]
Percentage of Annual Revenues of Non-related Parties from Equity Interest		1.00%
Nutracom, LLC [Member] | Maximum [Member]
Operating Lease, Lease Annual Income	410,000
Nutracom, LLC [Member] | Maximum [Member] | Forecast [Member]
Percentage of Annual Revenues of Non-related Parties from Equity Interest		1.25%
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] | Inventories Sold to Nutracom [Member]
Disposal Group, Including Discontinued Operation, Consideration	1,560,000
Disposal Group, Disposed of by Sale, Not Discontinued Operations [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 - Related Parties (Details Textual) $ in Millions	Mar. 31, 2019 USD ($)
Nutracom, LLC [Member]
Purchase Obligation, Total	$ 1.3

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Note 3 - Related Parties - Related Party Activities (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Jan. 01, 2019	Dec. 31, 2018
Total notes & accounts receivables and deposits	$ 1,269,527			$ 151,222
Total noncurrent notes receivables	2,897,249			1,282,072
Equity investment in Nutracom	505,000
Other revenue	158,566
Fullfillment & professional fees	151,102
Interest income on promissory notes	47,843	22,603
Gain on sale of fixed assets	434,549	3,800
Unbilled Revenues [Member]
Unbilled receivables: Straight line rent revenue greater than rental billings	23,933
Nutracom, LLC [Member]
Deposits with Nutracom for inventory	1,010,696
Equity investment in Nutracom	505,000
Trade accounts payable and other accrued expenses	257,396
Deferred rent liability	187,500
Gain on sale of fixed assets	434,549
Finished goods inventory purchased from Nutracom	979,900
Nutracom, LLC [Member] | Secured Promissory Note [Member]
Notes receivable	121,553
Notes Receivable, Related Parties, Noncurrent	858,828		$ 1,000,000
Nutracom, LLC [Member] | Unsecured Promissory Note [Member]
Notes Receivable, Related Parties, Noncurrent	764,344		$ 764,344
Distributor [Member]
Notes receivable	124,895			123,040
Notes Receivable, Related Parties, Noncurrent	1,250,144			1,282,072
Nutracom LLC and Distributor [Member]
Total notes & accounts receivables and deposits	$ 12,383			$ 28,182

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Note 3 - Related Parties - Schedule of Principal Payments (Details) - Nutracom LLC and Distributor [Member]	Mar. 31, 2019 USD ($)
Remainder of 2019	$ 183,504
2020	257,289
2021	327,217
2022	374,274
2023	368,571
Thereafter	1,635,909
Total Notes Receivables	$ 3,146,764

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Note 3 - Related Parties - Supplemental Cash Flow Information (Details)	3 Months Ended
	Mar. 31, 2019 USD ($)
Acquire company common stock for treasury	$ 540,144
Nutracom, LLC [Member]
Acquire company common stock for treasury	540,144
Acquire equity investment in Nutracom	505,000
Nutracom, LLC [Member] | Machinery and Other Equipment Sold to Nutracom [Member]
Sale of fixed assets	1,000,000
Nutracom, LLC [Member] | Inventories Sold to Nutracom [Member]
Sale of fixed assets	1,559,488
Nutracom, LLC [Member] | First Year Building Rental Received in Advance [Member]
First year building rental received in advance	250,000
Nutracom, LLC [Member] | Secured Promissory Note [Member]
Promissory note received	1,000,000
Nutracom, LLC [Member] | Unsecured Promissory Note Received [Member]
Promissory note received	$ 764,344

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Note 4 - Basic and Diluted Earnings (Loss) Per Share (Details Textual) - shares	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	85,203	120,242

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Note 4 - Basic and Diluted Earnings (Loss) Per Share - Basic and Diluted Earnings (Loss) Per Share (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Net income (loss)	$ 623,644	$ (238,305)
Denominator for basic earnings (loss) per share – weighted average shares (in shares)	1,746,000	1,845,000
Dilutive effect of employee stock options and other warrants (in shares)
Denominator for diluted earnings (loss) per share – adjusted weighted average shares (in shares)	1,746,000	1,845,000
Basic earnings (loss) per share (in dollars per share)	$ 0.36	$ (0.13)
Diluted earnings (loss) per share (in dollars per share)	$ 0.36	$ (0.13)

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Note 5 - Fair Value of Financial Instruments - Summary of Financial Instruments (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Reported Value Measurement [Member]
Revolving line of credit	$ 500,000
Marketable securities	389,000	$ 339,000
Reported Value Measurement [Member] | Distributor [Member]
Note receivable	1,375,039	1,405,112
Reported Value Measurement [Member] | Nutracom, LLC [Member]
Note receivable	1,744,725
Estimate of Fair Value Measurement [Member]
Revolving line of credit	500,000
Marketable securities	389,000	339,000
Estimate of Fair Value Measurement [Member] | Distributor [Member]
Note receivable	1,511,000	1,529,000
Estimate of Fair Value Measurement [Member] | Nutracom, LLC [Member]
Note receivable	1,744,725
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Revolving line of credit
Marketable securities	389,000	339,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member] | Distributor [Member]
Note receivable
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member] | Nutracom, LLC [Member]
Note receivable
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Revolving line of credit	500,000
Marketable securities
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member] | Distributor [Member]
Note receivable	1,511,000	1,529,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member] | Nutracom, LLC [Member]
Note receivable	1,744,725
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Revolving line of credit
Marketable securities
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member] | Distributor [Member]
Note receivable
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member] | Nutracom, LLC [Member]
Note receivable

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Note 6 - Debt (Details Textual) - USD ($)	Mar. 25, 2019	Sep. 11, 2018	Mar. 31, 2019	Jan. 31, 2019	Dec. 31, 2018
Line of Credit, Current			$ 500,000
Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 750,000	$ 750,000	750,000	$ 750,000
Line of Credit, Current			$ 500,000	$ 500,000	$ 0
Debt Instrument, Interest Rate, Stated Percentage			4.73%
Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate	3.00%	2.25%

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Note 7 - Leases (Details Textual) - USD ($)	Jan. 01, 2019	Mar. 31, 2019
Lessor, Operating Lease, Term of Contract	7 years
Lessor, Operating Lease, Renewal Term	5 years
Minimum [Member]
Lessee, Operating Lease, Term of Contract		1 year
Operating Lease, Lease Income, Lease Payments	$ 193,000
Maximum [Member]
Lessee, Operating Lease, Term of Contract		5 years
Operating Lease, Lease Income, Lease Payments	$ 410,000

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Note 7 - Leases - Maturity of Operating Lease Liability (Details)	Mar. 31, 2019 USD ($)
Remainder of 2019	$ 185,574
2020	184,384
2021	16,872
2022	14,364
2023	5,704
Thereafter
Total operating lease payments	406,898
Less: imputed interest	(18,447)
Total operating lease liabilities	$ 388,451

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Note 7 - Leases - Operating Lease Liability Cost (Details)	3 Months Ended
	Mar. 31, 2019 USD ($)
Fixed	$ 64,702
Variable	5,449
Short-term	9,771
Total	79,922
Operating cash flows from operating leases	$ 68,561

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Note 7 - Leases - Weighted Average (Details)	Mar. 31, 2019
Weighted average remaining lease term (years) (Year)	2 years
Weighted average discount rate	5.10%

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Note 7 - Leases - Operating Lease, Payments to be Received (Details)	Mar. 31, 2019 USD ($)
Fixed-price Contract [Member]
Remainder of 2019	$ 187,500
2020	192,900
2021	385,800
2022	385,800
2023	385,800
Thereafter	819,825
Total	2,357,625
Valuation Technique, Straight-Line [Member]
Remainder of 2019	259,299
2020	345,732
2021	345,732
2022	345,732
2023	345,732
Thereafter	691,464
Total	$ 2,333,691

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Note 8 - Income Taxes (Details Textual) - USD ($)	3 Months Ended		12 Months Ended	36 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2011	Dec. 31, 2006	Dec. 31, 2018
Effective Income Tax Rate Reconciliation, Percent, Total	7.10%	(7.70%)
VAT and Withholding Taxes				$ 800,000
Interest Penalty Percentage				20.00%
Payments for Good Faith Deposits to Local Tax Authority Under Tax Agency's Adminstrative Judicial Resolution Process			$ 173,000
Reserve for Tax Deficiencies of Subsidiaries [Member]
Loss Contingency Accrual, Ending Balance					$ 172,500

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Note 9 - Revenue Recognition (Details Textual)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Contract with Customer, Returns as Percent of Net Sales	0.04%	0.27%
Number of Reportable Segments	1
Number of Operating Segments	6
Minimum [Member]
Contract with Customer, Distributor Discount	20.00%
Maximum [Member]
Contract with Customer, Distributor Discount	40.00%

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Note 9 - Revenue Recognition - Net Sales by Product Category (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Net Revenues	$ 9,489,504	$ 10,003,239
Nutritional and Dietary Supplements [Member]
Net Revenues	8,497,350	9,069,356
Sales Aids, Membership Fees, and Other [Member]
Net Revenues	313,647	322,025
Freight Income [Member]
Net Revenues	519,941	611,858
Service, Other [Member]
Net Revenues	$ 158,566

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Note 9 - Revenue Recognition - Net Sales by Geographic Region (Details) - USD ($)		3 Months Ended
		Mar. 31, 2019	Mar. 31, 2018
Net Revenues		$ 9,489,504	$ 10,003,239
UNITED STATES
Net Revenues		7,111,773	7,670,061
Australia, New Zealand [Member]
Net Revenues		177,048	231,928
CANADA
Net Revenues		199,399	242,120
MEXICO
Net Revenues		136,026	107,371
Europe [Member]
Net Revenues	[1]	938,668	1,164,884
Asia [Member]
Net Revenues	[2]	$ 926,590	$ 586,875

[1] Europe consists of United Kingdom, Ireland, France, Germany, Austria, and the Netherlands.

[2] Asia consists of Philippines, Malaysia, and Singapore.