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 June 30, 2020
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 (State or other jurisdiction of incorporation or organization)	371172197 (I.R.S. Employer Identification Number)
136 Chesterfield Industrial Boulevard,    Chesterfield, Missouri (Address of principal executive offices)	63005 (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 August 7, 2020 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	28
Part II – Other Information
Item No. 6	Exhibits	28

PART I -- FINANCIAL INFORMATION

Item No. 1 - Financial Statements

Reliv International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

	June 30		December 31
	2020		2019
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	2,730,672	$	1,630,779
Accounts receivable, less allowances of $5,000 in 2020 and 2019		279,920		107,369
Notes & accounts receivables and deposits - related parties		889,022		1,099,228
Inventories
Finished goods		2,816,982		2,275,306
Raw materials		114,023		305,571
Sales aids and promotional materials		97,026		120,811
Total inventories		3,028,031		2,701,688
Refundable income taxes		249,959		22,406
Prepaid expenses and other current assets		605,782		304,048
Total current assets		7,783,386		5,865,518
Notes and accounts receivables - related parties		2,361,910		2,418,921
Operating lease right-to-use assets		317,099		354,440
Intangible assets, net		1,609,285		1,722,277
Equity investment		505,000		505,000
Property, plant and equipment:
Land and land improvements		905,190		905,190
Building		10,147,386		10,145,005
Office & other equipment		1,241,860		1,237,142
Computer equipment & software		2,202,627		2,240,063
		14,497,063		14,527,400
Less: Accumulated depreciation		10,215,740		10,086,560
Net property, plant and equipment		4,281,323		4,440,840
Total assets	$	16,858,003	$	15,306,996

See notes to financial statements.

1

Reliv International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

	June 30			December 31
	2020			2019
	(unaudited)
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses:
Trade accounts payable and other accrued expenses	$	1,819,772		$	1,565,198
Distributors' commissions payable		971,449			891,492
Sales taxes payable		181,184			139,542
Payroll and payroll taxes payable		198,747			212,716
Total accounts payable and accrued expenses		3,171,152			2,808,948
Income taxes payable		50,955			121,177
Deferred revenue		317,630			322,261
Operating lease liabilities		201,980			236,771
Revolving line of credit		500,000			500,000
Current portion of long-term debt		333,649			-
Total current liabilities		4,575,366			3,989,157
Noncurrent liabilities:
Operating lease liabilities		102,260			103,580
Long-term debt, less current portion		528,351			-
Other noncurrent liabilities		140,511			112,616
Total noncurrent liabilities		771,122			216,196
Stockholders' equity:
Preferred stock, par value $.001 per share; 500,000 shares authorized; -0- shares issued and outstanding		-			-
Common stock, par value $.001 per share; 5,000,000 authorized; 2,110,013 shares issued and 1,746,449 shares outstanding		2,110			2,110
Additional paid-in capital		30,643,771			30,643,771
Accumulated deficit		(12,292,216	)		(12,755,495	)
Accumulated other comprehensive loss:
Foreign currency translation adjustment		(990,727	)		(937,320	)
Treasury stock		(5,851,423	)		(5,851,423	)
Total stockholders' equity		11,511,515			11,101,643
Total liabilities and stockholders' equity	$	16,858,003		$	15,306,996

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 June 30						Six months ended June 30
	2020			2019			2020			2019
Product sales	$	7,371,162		$	7,603,041		$	16,919,979		$	16,414,038
Freight income		446,707			479,881			1,004,802			999,822
Other revenue		198,691			174,091			374,444			332,657
Net sales		8,016,560			8,257,013			18,299,225			17,746,517
Costs and expenses:
Cost of goods sold		2,202,488			2,268,992			4,857,331			4,702,723
Distributor royalties and commissions		2,590,078			2,665,093			5,918,533			5,782,665
Selling, general and administrative		3,501,104			3,688,944			7,278,786			7,428,472
Total costs and expenses		8,293,670			8,623,029			18,054,650			17,913,860
Income (loss) from operations		(277,110	)		(366,016	)		244,575			(167,343	)
Other income (expense):
Interest income		39,048			46,218			78,710			95,480
Interest expense		(7,933	)		(10,075	)		(14,038	)		(15,487	)
Other income (expense)		100,938			4,768			30,032			(660	)
Gain on sale of fixed assets		-			-			-			434,549
Income (loss) before income taxes		(145,057	)		(325,105	)		339,279			346,539
Provision (benefit) for income taxes		54,000			63,000			(124,000	)		111,000
Net income (loss)	$	(199,057	)	$	(388,105	)	$	463,279		$	235,539
Other comprehensive income (loss):
Foreign currency translation adjustment		(13,796	)		(10,458	)		(53,407	)		11,753
Comprehensive income (loss)	$	(212,853	)	$	(398,563	)	$	409,872		$	247,292
Earnings (loss) per common share - Basic & Diluted	$	(0.11	)	$	(0.22	)	$	0.27		$	0.13
Weighted average shares		1,746,000			1,746,000			1,746,000			1,746,000

See notes to financial statements.

3

Reliv International, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited)
	Six months ended June 30
	2020			2019
Operating activities:
Net income	$	463,279		$	235,539
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		288,273			292,842
Stock-based compensation		-			10,612
Non-cash other revenue		-			(172,866	)
Non-cash miscellaneous loss		-			24,618
(Gain) loss on sale of property, plant and equipment		-			(434,549	)
Foreign currency transaction (gain) loss		21,694			1,149
(Increase) decrease in trade, accounts & notes receivable, and deposits from related parties		30,349			(715,018	)
(Increase) decrease in inventories		(380,827	)		758,798
(Increase) decrease in refundable income taxes		(227,553	)		(3,295	)
(Increase) decrease in prepaid expenses and other current assets		(304,407	)		(295,925	)
(Increase) decrease in other assets		-			(68,807	)
Increase (decrease) in income taxes payable		(71,132	)		16,148
Increase (decrease) in accounts payable & accrued expenses, deferred revenue, and other noncurrent liabilities		402,018			(293,111	)
Net cash provided by (used in) operating activities		221,694			(643,865	)
Investing activities:
Purchase of property, plant and equipment		(17,363	)		(50,180	)
Payments received on notes receivables - related parties		64,337			109,984
Net cash provided by investing activities		46,974			59,804
Financing activities:
Proceeds from line of credit borrowings		-			500,000
Proceeds from long-term borrowings		862,000			-
Net cash provided by financing activities		862,000			500,000
Effect of exchange rate changes on cash and cash equivalents		(30,775	)		12,808
Increase (decrease) in cash and cash equivalents		1,099,893			(71,253	)
Cash and cash equivalents at beginning of period		1,630,779			1,989,974
Cash and cash equivalents at end of period	$	2,730,672		$	1,918,721
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, 2019		2,110,013	$	2,110	$	30,643,771	$	(12,755,495	)	$	(937,320	)		363,564	$	(5,851,423	)	$	11,101,643
Net income		-		-		-		662,336			-			-		-			662,336
Other comprehensive income (loss):
Foreign currency translation adjustment		-		-		-		-			(39,611	)		-		-			(39,611	)
Total comprehensive income																			622,725
Balance at March 31, 2020		2,110,013		2,110		30,643,771		(12,093,159	)		(976,931	)		363,564		(5,851,423	)		11,724,368
Net loss		-		-		-		(199,057	)		-			-		-			(199,057	)
Other comprehensive income (loss):
Foreign currency translation adjustment		-		-		-		-			(13,796	)		-		-			(13,796	)
Total comprehensive loss																			(212,853	)
Balance at June 30, 2020		2,110,013	$	2,110	$	30,643,771	$	(12,292,216	)	$	(990,727	)		363,564	$	(5,851,423	)	$	11,511,515

										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
Net loss		-		-		-		(388,105	)		-			-			-			(388,105	)
Other comprehensive income (loss):
Foreign currency translation adjustment		-		-		-		-			(10,458	)		-			-			(10,458	)
Total comprehensive loss																				(398,563	)
Stock-based compensation		-		-		5,306		-			-			-			-			5,306
Balance at June 30, 2019		2,110,013	$	2,110	$	30,633,159	$	(12,075,599	)	$	(970,342	)		363,564		$	(5,851,423	)	$	11,737,905

See notes to financial statements.

5

Reliv’ International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

June 30, 2020

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, 2019, filed March 27, 2020 with the Securities and Exchange Commission.

Impact of COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, which continues to spread throughout the U.S. and the world and has resulted in government authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. While we are unable to accurately predict the full impact that COVID-19 will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures, our compliance with these measures has impacted our day-to-day operations and could disrupt our business and operations, as well as that of our distributors, customers, suppliers (including contract manufacturers) and other counterparties, for an indefinite period of time. To support the health and well-being of our employees, customers, partners and communities, a vast majority of our employees have been working remotely since March 2020.

The ultimate impact of the COVID-19 pandemic on our worldwide operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments may direct resulting in an extended period of continued business disruption and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time but may have a material adverse impact on our business, financial condition and results of operations.

6

Reliv’ International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

1. Accounting Policies (continued)

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.

Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. We are not aware of any specific event or circumstance that would require updates to our estimates or judgments or require us to revise the carrying value of our assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under unanticipated conditions or assumptions.

Concentrations of Risk

Effective January 1, 2019, we have entered into outsourcing agreements with Nutracom LLC (“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 and valuation of our Nutracom equity investment. See Note 2 and Note 3 for further discussion of our relationship with Nutracom.

Variable Interest Entities (VIE) - Unconsolidated

Effective January 1, 2019, we have a financial interest in 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.

7

Reliv’ International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

1. Accounting Policies (continued)

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, 2023, 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.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which adds new guidance for accounting for tax law changes, year-to-date losses in interim periods, and certain franchise-type taxes, as well as other changes to simplify accounting for income taxes. This standard will be effective for our interim and annual financial periods beginning January 1, 2021, with early adoption permitted. The adoption methodologies for this standard vary; subject to the specific provision(s) within the standard being adopted. We are evaluating the potential impact of this standard on our consolidated financial statements and related disclosures.

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 June 30, 2020, we had $2,730,672 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.

In the event that we do not generate sufficient liquidity from operations and 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.

8

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 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. (See June 1, 2019 note modification within this Note 2).

● $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. (See October 1, 2019 note modification within this Note 2).

● 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. (In June 2020, Nutracom increased its total equity membership interests; reducing our Nutracom equity membership interest from 15% to 5%).

● Commencing January 1, 2020, our Class B interest is 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 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.

We accounted for the aforementioned Nutracom transactions in our first quarter 2019 financial results.

9

Reliv’ International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

2. Sale of Manufacturing Operations’ Assets (continued)

Promissory Note Modification – June 1, 2019

On June 1, 2019, we entered into an Agreement with Nutracom to modify the Secured Promissory Note originally issued to us by Nutracom on January 1, 2019, as follows:

● Effective June 1, 2019, the outstanding balance of the Secured Promissory Note was reduced by $500,000 to $460,583 with a corresponding reduction of $500,000 to our outstanding vendor obligation due Nutracom under our ongoing product supply agreement.

● The $460,583 remaining Secured Promissory Note was exchanged with Nutracom for a newly issued June 1, 2019 Nutracom unsecured promissory note for the same amount under the following terms: fixed interest rate of 6.0% with interest only payable monthly through December 2020. Beginning January 1, 2021, principal and interest of $8,904 will be payable monthly for 60 months.

Promissory Note Modification – October 1, 2019

In December 2019, we entered into an Agreement with Nutracom to modify the Unsecured Promissory Note originally issued to us by Nutracom on January 1, 2019, as follows:

● Effective October 1, 2019, the outstanding balance of the January 1, 2019 Unsecured Promissory Note of $764,344 was reduced to $711,163. The reduction of $53,181 in the Note’s balance represents Nutracom’s return to us of now-expired inventories originally acquired by Nutracom from us on January 1, 2019.

● The $711,163 remaining balance of the January 1, 2019 Unsecured Promissory Note was exchanged with Nutracom for a newly issued October 1, 2019 Nutracom Unsecured Promissory Note for the same amount under the following terms: fixed interest rate of 7.0% with interest only payable monthly through December 2020. Beginning January 1, 2021, principal and interest of $8,257, under a ten-year amortization schedule, will be payable monthly for 60 months, with a balloon payment of all remaining principal and interest due January 1, 2026.

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.

	June 30		December 31
Assets and liabilities - related parties	2020		2019
Notes & accounts receivables and deposits - current
Deposits with Nutracom for inventory	$	657,087	$	941,154
Note receivable - distributor		134,597		130,629
Note receivable - Nutracom unsecured DTD 6/1/2019		40,107		-
Note receivable - Nutracom unsecured DTD 10/1/2019		25,015		-
Other miscellaneous receivables		32,216		27,445
	$	889,022	$	1,099,228
Notes & accounts receivables - non-current
Note receivable - distributor	$	1,083,138	$	1,151,443
Note receivable - Nutracom unsecured DTD 6/1/2019		420,476		460,583
Note receivable - Nutracom unsecured DTD 10/1/2019		686,148		711,163
Unbilled receivables: Straight line rent revenue greater than rental billings		172,148		95,732
	$	2,361,910	$	2,418,921
Equity investment in Nutracom	$	505,000	$	505,000
Liability captions with Nutracom balances included therein
Trade accounts payable and other accrued expenses	$	278,385	$	430,907

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

Remainder of 2020	$	66,292
2021		271,037
2022		288,294
2023		306,655
2024		326,190
Thereafter		1,131,013
	$	2,389,481

11

Reliv’ International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

3. Related Parties (continued)

	Six months ended June 30
Revenue and expense - related parties	2020		2019
Other revenue	$	374,444	$	332,657
Selling, general and administrative expense:
Fullfillment & professional fees		316,910		305,910
Interest income on promissory notes		76,210		92,668
Royalty income (other income/expense)		30,504		-
Gain on sale of fixed assets		-		434,549
Finished goods inventory purchased from Nutracom	$	3,768,800	$	2,763,000

At June 30, 2020, we had $1.27 million in commitments (net of deposits) to purchase finished goods inventory from Nutracom.

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
January 1, 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
June 1, 2019
Secured promissory note receivable balance decreased; applied as reduction to outstanding trade accounts payable		500,000
Unsecured promissory note received in exchange for remaining secured promissory note balance and other considerations		460,583

12

Reliv’ International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

4. 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
June 30, 2020
Revolving line of credit	$	500,000	$	500,000		-	$	500,000		-
PPP SBA note		862,000		862,000	$	862,000		-		-
Note receivable - distributor		1,217,735		1,348,000		-		1,348,000		-
Notes receivable - Nutracom		1,171,746		1,231,000		-		-	$	1,231,000
December 31, 2019
Revolving line of credit	$	500,000	$	500,000		-	$	500,000		-
Note receivable - distributor		1,282,072		1,400,000		-		1,400,000		-
Notes receivable - Nutracom		1,171,746		1,169,000		-		-	$	1,169,000

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. (Fair value is only disclosed).

PPP SBA note: The fair value of our PPP SBA note approximates carrying value as the lending terms of this promissory note payable continue to be offered by the SBA under the CARES Act as of this financial report date. (Fair value is only disclosed).

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. (Fair value is only disclosed).

13

Reliv’ International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

4. Fair Value of Financial Instruments (continued)

Notes receivable - Nutracom: The notes receivable - Nutracom represent two fixed rate promissory notes issued by a privately-held entity (PHE). We developed an estimated market discount rate based upon the PHE’s third party incremental variable borrowing rate plus a risk-adjustment factor to estimate the fair value of these notes receivable under a discounted cash flow model. (Fair value is only disclosed).

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.

5. Debt

	June		December 31
	2020		2019
Revolving line of credit	$	500,000	$	500,000
PPP SBA note		862,000		-
		1,362,000		500,000
Less current portion		833,649		500,000
Total long-term debt	$	528,351	$	-

Revolving Line of Credit

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%. In January 2019, we borrowed $500,000 under the 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.

On April 28, 2020, our revolving line of credit agreement was extended six months to October 28, 2020 under the same terms and conditions as the expiring agreement. At June 30, 2020, outstanding borrowings under the revolving line of credit were $500,000 at an interest rate of 3.18%.

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 June 30, 2020, we were in compliance with our loan covenant requirements.

14

Reliv’ International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

5. Debt (continued)

PPP SBA Note

On May 4, 2020, we executed a promissory note (“SBA Note”) dated April 20, 2020 in the amount of $862,000 with our primary lender under the March 2020 U.S enacted Coronavirus Aid, Relief, and Economic Security (CARES) Act Payroll Protection Program (“PPP”). In accordance with the PPP, we used the loan proceeds of $862,000 primarily for payroll costs. The PPP SBA Note is scheduled to mature April 20, 2022 and has an interest rate of 1.0%. The PPP SBA Note is subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act which include:

● A deferral of principal repayment and interest for six months from loan origination, and

● The opportunity to apply for possible loan forgiveness for some or all of the loan amount.

Our PPP SBA loan forgiveness accounting policy is to recognize, if applicable, any loan forgiveness amounts only when we have applied for loan forgiveness, forgiveness realization is probable, and the forgiveness amount is reasonably determinable. At June 30, 2020 we have not applied for PPP SBA loan forgiveness.

6. Income Taxes

During the fiscal years of 2016 through 2019, we determined that it was more likely than not losses generated in the U.S. and certain foreign jurisdictions will not be realized based on projections of future 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.

Under the March 2020 U.S. CARES Act, U.S. Net Operating Losses (NOLs) arising in our calendar tax years 2018, 2019, and 2020 may be carried back to each of the five tax years preceding the tax year of such loss. Based on this new legislation, in the first quarter ended March 31, 2020, we have recorded a $225,000 income tax benefit for NOL carryback. In July 2020, we have received our requested NOL carryback refund from the Internal Revenue Service.

The effective income tax rate was (36.5)% and 32.0% for the year to date periods ended June 30, 2020 and 2019, respectively. In addition to the CARES Act tax benefit previously described, for each year to date period, the income tax provision amounts include estimated income taxes for one of the Company’s foreign subsidiaries and certain U.S. states.

Tax Audits

One of our foreign subsidiaries had been under local country audit for greater than ten years for alleged deficiencies in various tax types for the years 2004 through 2006. We settled the 2005 and 2006 tax year audits in November 2019. In December 2019, we had an agreement in principle with the local tax authority to settle the tax year 2004 audit. At December 31, 2019, we had an estimated full reserve of approximately $84,000 for resolution of this matter; with such amount remitted to the tax authority in February 2020.

During the third quarter of 2019, the U.S. Internal Revenue Service (IRS) commenced an examination of our 2017 U.S. federal income tax return.

15

Reliv’ International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

7. 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 8 – Lease Revenue.

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 June 30, 2020 and 2019, total returns as a percent of net sales were 0.05% and 0.07%, respectively.

16

Reliv’ International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

7. Revenue Recognition (continued)

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

	Three months ended				Six months ended
	June 30				June 30
	2020		2019		2020		2019
Net sales by product category
Nutritional and dietary supplements	$	6,814,003	$	7,144,604	$	15,657,153	$	15,641,954
Other supplements		266,013		140,293		683,242		140,293
Sales aids, membership fees, and other		291,146		318,144		579,584		631,791
Freight income		446,707		479,881		1,004,802		999,822
Other revenue		198,691		174,091		374,444		332,657
Total net sales	$	8,016,560	$	8,257,013	$	18,299,225	$	17,746,517

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				Six months ended
	June 30				June 30
	2020		2019		2020		2019
Net sales by geographic region
United States	$	6,087,586	$	5,904,605	$	13,930,021	$	13,016,378
Australia/New Zealand		118,749		132,330		288,871		309,377
Canada		125,996		140,029		284,657		339,428
Mexico		124,554		152,569		253,175		288,595
Europe (1)		602,533		756,264		1,564,625		1,694,933
Asia (2)		957,142		1,171,216		1,977,876		2,097,806
Total net sales	$	8,016,560	$	8,257,013	$	18,299,225	$	17,746,517

⁽¹⁾ Europe consists of United Kingdom, Ireland, France, Germany, Austria, and the Netherlands.

⁽²⁾ Asia consists of Philippines and Malaysia.

17

Reliv’ International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

8. Lease Revenue

Other revenue consists of revenue derived from leasing a portion of our headquarters building to 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; totaling approximately $201,600 and $159,800 for the six month periods ending June 30, 2020 and 2019, respectively. 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 2020	$	172,866	$	96,450
2021		345,732		385,800
2022		345,732		385,800
2023		345,732		385,800
2024		345,732		409,913
Thereafter		345,733		409,912
Total	$	1,901,527	$	2,073,675

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 quarterly 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 and marketer of a proprietary line of nutritional supplements addressing basic nutrition, specific wellness needs, weight management and sports nutrition. In 2019, we introduced a line of hemp-extract products under the RLV brand name. We sell our products through an international direct selling system utilizing independent distributors. Sales in the United States represented approximately 76.1% of worldwide net sales for the six months ended June 30, 2020 compared to approximately 73.4% for the six months ended June 30, 2019. 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, and in New Zealand from our Australia office.

We derive our revenues principally through product sales made by our global independent distributor base, which, as of June 30, 2020, consisted of approximately 13,020 registered customers and 25,490 active distributors. 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. Our foreign subsidiaries primarily source their nutritional and dietary inventories in U.S. dollars from our U.S. manufacturer. As a result, exchange rate fluctuations may have an effect on sales and gross margins. Accounting practices require that our results from operations be converted to U.S. dollars for reporting purposes. Consequently, our reported earnings may be significantly affected by fluctuations in currency exchange rates, generally increasing with a weaker U.S. dollar and decreasing with a strengthening U.S. dollar. From time to time, we enter into foreign exchange forward contracts to mitigate our foreign currency exchange risk.

Impact of COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, which continues to spread throughout the U.S. and the world and has resulted in government authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. While we are unable to accurately predict the full impact that COVID-19 will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures, our compliance with these measures has impacted our day-to-day operations and could disrupt our business and operations, as well as that of our distributors, customers, suppliers (including contract manufacturers) and other counterparties, for an indefinite period of time. To support the health and well-being of our employees, customers, partners and communities, a vast majority of our employees have been working remotely since March 2020.

19

The ultimate impact of the COVID-19 pandemic on our worldwide operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments may direct resulting in an extended period of continued business disruption and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time but may have a material adverse impact on our business, financial condition and results of operations.

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 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.

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

Our cost of goods sold consists 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.

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 suggested retail price of each product. Also, we include other sales leadership bonuses, such as Ambassador bonuses, within this caption. Overall, distributor royalties and commissions remain directly related to the level of our sales and should continue at comparable levels as a percentage of net sales going forward.

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.

20

Results of Operations  

Net Sales. Overall net sales decreased by 2.9% in the three months ended June 30, 2020 compared to the same period in 2019. During the second quarter of 2020 (“Q2 2020”), sales in the United States increased by 3.1%, and international sales decreased by 18.0% over the prior-year period. International sales, when reported in U.S. dollars, were negatively impacted by a stronger U.S. dollar versus most of the currencies of the markets where we do business. Excluding the impact of currency exchange fluctuation, international sales decreased by 16.5%.

          The following table summarizes net sales by geographic market for the three months ended June 30, 2020 and 2019.

	Three months ended June 30,
	2020					2019					Change from prior year
	Amount		% of Net Sales			Amount		% of Net Sales			Amount			%
	(dollars in thousands)
United States	$	6,088		75.9	%	$	5,905		71.5	%	$	183			3.1	%
Australia/New Zealand		119		1.5			132		1.6			(13	)		(9.8	)
Canada		126		1.6			140		1.7			(14	)		(10.0	)
Mexico		125		1.6			153		1.8			(28	)		(18.3	)
Europe		602		7.5			756		9.2			(154	)		(20.4	)
Asia		957		11.9			1,171		14.2			(214	)		(18.3	)
Consolidated total	$	8,017		100.0	%	$	8,257		100.0	%	$	(240	)		(2.9	)%

The following table summarizes net sales by geographic market for the six months ended June 30, 2020 and 2019.

	Six months ended June 30,
	2020					2019					Change from prior year
	Amount		% of Net Sales			Amount		% of Net Sales			Amount			%
	(dollars in thousands)
United States	$	13,930		76.1	%	$	13,016		73.4	%	$	914			7.0	%
Australia/New Zealand		289		1.6			309		1.7			(20	)		(6.5	)
Canada		285		1.6			340		1.9			(55	)		(16.2	)
Mexico		253		1.4			289		1.6			(36	)		(12.5	)
Europe		1,564		8.5			1,695		9.6			(131	)		(7.7	)
Asia		1,978		10.8			2,098		11.8			(120	)		(5.7	)
Consolidated total	$	18,299		100.0	%	$	17,747		100.0	%	$	552			3.1	%

21

The following tables set forth, as of June 30, 2020 and 2019, the number of our Retail Customers/ Preferred Customers/Active Distributors and Master Affiliates and above. The total number of active distributors includes Master Affiliates and above. We define an active retail or preferred customer as one that has placed a product order in the prior twelve months, and we define an active distributor as one that enrolls as a distributor or renews his or her distributorship during the prior twelve months. We believe the actual number of customers is much higher as many distributors (approximately 74% in the U.S.) join Reliv to purchase our products at a discount and do not participate in the business opportunity. The following tables also do not include those customers that buy product directly from distributors rather than from us. 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.

Retail and Preferred Customers/Active Distributors/Master Affiliates and Above by Market

	As of 6/30/2020
	Retail Customers		Preferred Customers		Active Distributors		Total Customers and Distributors		Master Affiliates and Above
United States		3,650		1,740		17,370		22,760		1,950
Australia/New Zealand		50		240		660		950		80
Canada		90		20		450		560		70
Mexico		30		110		1,110		1,250		80
Europe		710		580		1,610		2,900		270
Asia		1,050		4,750		4,290		10,090		700
Consolidated Total		5,580		7,440		25,490		38,510		3,150

	As of 6/30/2019
	Retail Customers		Preferred Customers		Active Distributors		Total Customers and Distributors		Master Affiliates and Above
United States		3,730		1,540		17,750		23,020		1,980
Australia/New Zealand		40		230		680		950		70
Canada		90		30		500		620		60
Mexico		10		90		1,100		1,200		100
Europe		810		820		1,710		3,340		300
Asia		2,690		4,810		3,610		11,110		470
Consolidated Total		7,370		7,520		25,350		40,240		2,980

	Change in %
	Retail Customers			Preferred Customers			Active Distributors			Total Customers and Distributors			Master Affiliates and Above
United States		-2.1	%		13.0	%		-2.1	%		-1.1	%		-1.5	%
Australia/New Zealand		25.0	%		4.3	%		-2.9	%		0.0	%		14.3	%
Canada		0.0	%		-33.3	%		-10.0	%		-9.7	%		16.7	%
Mexico		200.0	%		22.2	%		0.9	%		4.2	%		-20.0	%
Europe		-12.3	%		-29.3	%		-5.8	%		-13.2	%		-10.0	%
Asia		-61.0	%		-1.2	%		18.8	%		-9.2	%		48.9	%
Consolidated Total		-24.3	%		-1.1	%		0.6	%		-4.3	%		5.7	%

22

The following table provides key statistics related to customer and 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 6/30/2020	$	6,088		$	119		$	126		$	125		$	602		$	957		$	1,929
Quarter ended 6/30/2019	$	5,905		$	132		$	140		$	153		$	756		$	1,171		$	2,352
% change in sales-Q2 2020 vs. Q2 2019:
in USD		3.1	%		-9.8	%		-10.0	%		-18.3	%		-20.4	%		-18.3	%		-18.0	%
due to currency fluctuation		-			-5.4	%		-3.5	%		-16.6	%		-3.4	%		2.3	%		-1.5	%
Sales in local currency (non-GAAP)		3.1	%		-4.4	%		-6.5	%		-1.7	%		-17.0	%		-20.6	%		-16.5	%
# of new Preferred Customers-Q2 2020		556			58			7			33			90			537			725
# of new Preferred Customers-Q2 2019		314			25			9			26			139			1,056			1,255
% change		77.1	%		132.0	%		-22.2	%		26.9	%		-35.3	%		-49.1	%		-42.2	%
# of new distributors-Q2 2020		796			11			15			235			129			551			941
# of new distributors-Q2 2019		747			10			13			167			123			663			976
% change		6.6	%		10.0	%		15.4	%		40.7	%		4.9	%		-16.9	%		-3.6	%
# of new Master Affiliates-Q2 2020		132			5			5			8			13			135			166
# of new Master Affiliates-Q2 2019		124			2			2			14			14			118			150
% change		6.5	%		150.0	%		150.0	%		-42.9	%		-7.1	%		14.4	%		10.7	%
# of Product orders-Q2 2020		25,716			836			496			1,120			2,556			7,016			12,024
# of Product orders-Q2 2019		24,900			916			558			1,100			2,715			10,512			15,801
% change		3.3	%		-8.7	%		-11.1	%		1.8	%		-5.9	%		-33.3	%		-23.9	%

																			International
	United States			AUS/NZ			Canada			Mexico			Europe			Asia			-- Total
Sales in USD (in 000's):
YTD ended 6/30/2020	$	13,930		$	289		$	285		$	253		$	1,564		$	1,978		$	4,369
YTD ended 6/30/2019	$	13,016		$	309		$	340		$	289		$	1,695		$	2,098		$	4,731
% change in sales-YTD 2020 vs. YTD 2019:
in USD		7.0	%		-6.5	%		-16.2	%		-12.5	%		-7.7	%		-5.7	%		-7.6	%
due to currency fluctuation		-			-6.8	%		-2.0	%		-10.6	%		-2.5	%		2.6	%		-0.9	%
Sales in local currency (non-GAAP)		7.0	%		0.3	%		-14.2	%		-1.9	%		-5.2	%		-8.3	%		-6.7	%
# of new Preferred Customers-YTD 2020		844			70			10			48			177			946			1,251
# of new Preferred Customers-YTD 2019		643			42			15			38			283			3,043			3,421
% change		31.3	%		66.7	%		-33.3	%		26.3	%		-37.5	%		-68.9	%		-63.4	%
# of new distributors-YTD 2020		1,494			21			28			334			256			1,046			1,685
# of new distributors-YTD 2019		1,320			21			19			406			240			1,171			1,857
% change		13.2	%		0.0	%		47.4	%		-17.7	%		6.7	%		-10.7	%		-9.3	%
# of new Master Affiliates-YTD 2020		306			14			15			11			35			234			309
# of new Master Affiliates-YTD 2019		264			3			2			22			33			217			277
% change		15.9	%		366.7	%		650.0	%		-50.0	%		6.1	%		7.8	%		11.6	%
# of Product orders-YTD 2020		53,183			1,830			1,044			2,086			5,675			15,548			26,183
# of Product orders-YTD 2019		50,658			1,891			1,116			2,075			5,746			21,175			32,003
% change		5.0	%		-3.2	%		-6.5	%		0.5	%		-1.2	%		-26.6	%		-18.2	%

23

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 increased by 3.1% in Q2 2020 compared to the prior-year quarter, and net sales increased by 7.0% in YTD 2020 compared to the prior-year period. All measurements of distributor activity increased in Q2 and YTD 2020 compared to the prior-year periods. Sales activity declined in April 2020 due to COVID-19 related business downturn but gradually improved in successive months as distributor activity and corporate training programs shifted to an online model.

● Products in the LunaRich line, including Reliv Now® and LunaRich X™, continued to perform well, constituting 14.1% and 11.1% of net sales in the United States, respectively, in Q2 2020. Reliv NOW and LunaRich X represented 14.9% and 11.9%, respectively, of net sales in the United States in the prior-year quarter.

● Sales of our RLV line of hemp-extract products, introduced in June 2019, represented 4.5% of net sales in the United States in Q2 2020. Initially, the RLV line included three liquid tinctures and one balm, and a new sleep-aid tincture with melatonin was introduced in Q1 2020. All of the RLV products are derived from organically-grown, non-GMO hemp. The RLV line represented 4.9% of net sales in United States in 2019.

● New distributor enrollments and new Master Affiliate qualifications increased by 6.6% and 6.5%, respectively, in Q2 2020 compared to the prior-year quarter.

● Distributor retention remained steady at 80.9% for the twelve-month period ended June 30, 2020 as compared to all of 2019. Distributor retention is determined by the percentage of active distributors from 2019 that renewed their distributorships in 2020.

● Our average order size in Q2 2020 decreased by 0.7% to $315 at suggested retail value compared to the prior-year quarter. However, the number of product orders increased by 3.3% in Q2 2020 compared to the prior-year quarter.

International Operations 

● The average foreign exchange rate for the U.S. dollar for Q2 2020 was stronger against all of the currencies in which we conduct business except for the Philippine peso. Activity in certain markets has been severely impacted by more restrictive COVID-19 guidelines. Sales have gradually improved in the foreign markets overall as the restrictions have been eased.

● Australia/New Zealand net sales in Q2 2020 decreased by 4.4% in local currency compared to the prior-year quarter as the result of an 8.7% decrease in product orders.

● Net sales in Canada decreased in Q2 2020 by 6.5% in local currency as the result of a decrease in most forms of distributor activity.

● Net sales in Mexico decreased by 1.7% in local currency in Q2 2020 compared to the prior-year quarter. Distributor activity was mixed during the quarter as new Preferred Customer and distributor enrollments were up, along with a slight increase in product orders. However, average order size and new Master Affiliate qualifications both showed decreases.

● Net sales in Europe decreased by 17.0% in local currency in Q2 2020 compared to the prior-year quarter, with most distributor activity measurements showing decreases in the current-year quarter.

● Sales in Asia decreased by 20.6% in local currency in Q2 2020 compared to the prior-year quarter. Activity in the region is driven primarily by the Philippines, our largest market in the region. However, the COVID-19 guidelines implemented in the Philippines were extremely restrictive and has severely impaired our sales and distributor activity in the market since mid-March. Restrictions were gradually lifted, allowing for improved activity in June 2020.  

24

Costs and Expenses

The following table sets forth selected results of our operations expressed as a percentage of net sales for the three- and six-month periods ended June 30, 2020 and 2019. Our results of operations for the periods described below are not necessarily indicative of results of operations for future periods.

Statement of Operations data
(amounts in thousands)	Three months ended
	June 30, 2020						June 30, 2019
	Amount			% of net sales			Amount			% of net sales
Net sales	$	8,017			100.0	%	$	8,257			100.0	%
Costs and expenses:
Cost of goods sold		2,203			27.5			2,269			27.5
Distributor royalties and commissions		2,590			32.3			2,665			32.3
Selling, general and administrative		3,501			43.7			3,689			44.6
Loss from operations		(277	)		(3.5	)		(366	)		(4.4	)
Interest income		39			0.5			46			0.5
Interest expense		(8	)		(0.1	)		(10	)		(0.1	)
Other income		101			1.3			5			0.1
Loss before income taxes		(145	)		(1.8	)		(325	)		(3.9	)
Provision for income taxes		54			0.7			63			0.8
Net loss	$	(199	)		(2.5	)%	$	(388	)		(4.7	)%
Loss per common share-Basic and Diluted	$	(0.11	)				$	(0.22	)

	Six months ended
	June 30, 2020						June 30, 2019
	Amount			% of net sales			Amount			% of net sales
Net sales	$	18,299			100.0	%	$	17,747			100.0	%
Costs and expenses:
Cost of goods sold		4,857			26.6			4,703			26.5
Distributor royalties and commissions		5,919			32.3			5,783			32.6
Selling, general and administrative		7,279			39.8			7,428			41.8
Income (loss) from operations		244			1.3			(167	)		(0.9	)
Interest income		79			0.4			95			0.5
Interest expense		(14	)		(0.1	)		(15	)		(0.1	)
Other income (loss)		30			0.2			(1	)		-
Gain on sale of fixed assets		-			-			435			2.4
Income before income taxes		339			1.8			347			1.9
Provision (benefit) for income taxes		(124	)		(0.7	)		111			0.6
Net income	$	463			2.5	%	$	236			1.3	%
Earnings per common share-Basic and Diluted	$	0.27					$	0.13

25

Cost of Goods Sold:    

● The cost of goods sold as a percentage of net sales in Q2 2020 remained constant at 27.5% compared to the prior-year period. On a six-month YTD basis, the percentage increased by 0.1% in 2020, as the cost of goods sold was negatively impacted by promotions in the United States that reduced our freight income and increases in shipping rates by our primary outbound shipping vendor.

Distributor Royalties and Commissions:

● Distributor royalties and commissions as a percentage of net sales for Q2 2020 remained at 32.3% when compared to the prior-year period. On a six-month YTD basis, the percentage decreased by 0.3% in 2020. This decrease is due to price increases in the United States and other markets in the latter half of 2019 in which distributor commissions were not increased.

Selling, General and Administrative Expenses:

● Selling, general and administrative (“SGA”) expenses decreased by $188,000 in Q2 2020 compared to the prior-year period. On a six-month YTD basis, SGA expenses decreased by $150,000.

● SGA salaries, other staffing expenses, benefits, and incentive compensation decreased in the aggregate by $59,000 in YTD 2020, compared to the prior-year period.

● Sales and marketing expenses, excluding compensation, decreased in the aggregate by $130,000 in YTD 2020 compared to the prior-year period. Sales and marketing expenses decreased overall as travel and in-person distributor events have been halted during the pandemic. Components of the decrease include:

○ $98,000 decrease in distributor conferences and meeting expenses.

○ $39,000 decrease in promotion expenses

○ $9,000 decrease in other sales and marketing expenses, including travel and video production expenses.

○ Offsetting these decreases is a $16,000 increase in Star Director and other distributor bonuses, credit card fees, and other expenses related to the level of sales.

● Other general and administrative expenses increased by $40,000 in YTD 2020 versus the prior-year period.

Other Income/Expense:

● The other income in Q2 2020 is primarily the result of foreign currency exchange gains on intercompany debt denominated in U.S. dollars in certain of our subsidiaries. On a year-to-date basis in 2020, the other income is primarily the result of the royalty income from Nutracom.

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

Income Taxes:

● We reported income tax expense of $54,000 for Q2 2020 and an income tax benefit of $124,000 for YTD 2020. The Coronavirus Aid, Relief, and Economic Security (CARES) Act allowed us to carry our net operating loss that arose in 2018 back five years, generating an income tax benefit of $225,000 in Q1 2020. The remaining expense is related to income taxes on our earnings in our Philippine entity and minimum U.S. state income tax expense.

● See Note 6 of the Condensed Consolidated Financial Statements for additional detail regarding income taxes.

Net Income:

● We reported a net loss of $199,000 in Q2 2020 compared to a net loss of $388,000 in the prior-year quarter. On a six-month YTD basis, we reported net income of $463,000 compared to $236,000 in the prior-year period. On a YTD basis, profitability is improved as the result of improved sales and lower SGA expenses in the period, coupled with the income tax benefit recognized under the CARES Act.

26

Financial Condition, Liquidity and Capital Resources 

During the first six months of 2020, operating activities provided $222,000 of net cash, $47,000 of net cash provided by investing activities, and $862,000 was provided by financing activities. This compares to $644,000 of net cash used in operating activities, $60,000 provided by investing activities, and $500,000 provided by financing activities in the same period of 2019. Cash and cash equivalents increased by $1.10 million to $2.73 million as of June 30, 2020 compared to December 31, 2019.

Significant changes in working capital items consisted of an increase in inventory of $381,000, an increase in refundable income taxes of $228,000, an increase in prepaid expenses/other current assets of $304,000, and an increase in accounts payable and accrued expenses of $402,000 in the first six months of 2020. The increase in inventory is the result of an increased safety stock as a precaution to potential pandemic-related supply chain delays, the increase in refundable income taxes is due to the net operating loss carryback that will generate an estimated refund of $225,000, and the increase in prepaid expenses/other current assets primarily represents the annual premium payments made in the first quarter of 2020 on most of the corporate business insurance policies. The increase in accounts payable and accrued expenses is related to higher vendor balances on inventory purchases, financing related to the business insurance renewals, and higher accrued commissions and sales taxes payable as the result of the increase in sales in June 2020 relative to December 2019.

Investing activities during the first six months of 2020 consisted of an investment of $17,000 for capital expenditures, offset by payments received on notes receivable with related parties of $64,000. Financing activities during the first six months of 2020 consist of a loan of $862,000 with our primary lender under the CARES Act Payroll Protection Program (“PPP”), the details of which are described later in this section.

Stockholders’ equity increased to $11.51 million at June 30, 2020 compared to $11.10 million at December 31, 2019. The increase is due to our net income during the first six months of 2020 of $463,000. Our working capital balance was $3.21 million at June 30, 2020 compared to $1.88 million at December 31, 2019. The current ratio at June 30, 2020 was 1.70 compared to 1.47 at December 31, 2019.

Effective with a renewal agreement as of April 28, 2020, our revolving line of credit with our primary lender was extended for six months with a new maturity date of October 28, 2020 and the borrowing limit continued at $750,000. As renewed, the revolver’s interest rate continued to be based on the 30-day LIBOR plus 3.00%. As of June 30, 2020, we have borrowed $500,000 under our revolving line of credit. 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.

On May 4, 2020, we executed a promissory note (“SBA Note”) dated April 20, 2020 in the amount of $862,000 with our primary lender under the PPP. In accordance with the PPP, we will use the loan proceeds of $862,000 primarily for payroll costs. The PPP SBA Note is scheduled to mature April 20, 2022 and has an interest rate of 1.0%. The PPP SBA Note is subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act.

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 June 30, 2020, we had $2.73 million 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.

In the event that we do not generate sufficient liquidity from operations and 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.

27

Critical Accounting Policies

A summary of our critical accounting policies and estimates is presented in our 2019 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 27, 2020. Our critical accounting policies remain unchanged as of June 30, 2020.

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 June 30, 2020. 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 June 30, 2020, 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 second quarter of 2020 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

10.1 Promissory Note between Enterprise Bank and Trust and Reliv International, Inc. dated April 20, 2020 (incorporated by reference to Exhibit 10.1 to the Form 8-K of the Registrant filed May 6, 2020).

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 June 30, 2020, 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.

28

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: August 14, 2020

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

Date: August 14, 2020

29

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: August 14, 2020

/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: August 14, 2020

/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 June 30, 2020, 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: August 14, 2020

/s/ Steven D. Albright              

Steven D. Albright

Chief Financial Officer

Date: August 14, 2020

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	6 Months Ended
	Jun. 30, 2020	Aug. 07, 2020
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 Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding (in shares)		1,746,499
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Jun. 30, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Amendment Flag	false
Title of 12(b) Security	Common Stock, par value $0.001

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Jun. 30, 2020	Dec. 31, 2019
Assets
Cash and cash equivalents	$ 2,730,672	$ 1,630,779
Accounts receivable, less allowances of $5,000 in 2020 and 2019	279,920	107,369
Notes & accounts receivables and deposits - related parties	889,022	1,099,228
Inventories
Finished goods	2,816,982	2,275,306
Raw materials	114,023	305,571
Sales aids and promotional materials	97,026	120,811
Total inventories	3,028,031	2,701,688
Refundable income taxes	249,959	22,406
Prepaid expenses and other current assets	605,782	304,048
Total current assets	7,783,386	5,865,518
Notes and accounts receivables - related parties	2,361,910	2,418,921
Operating lease right-to-use assets	317,099	354,440
Intangible assets, net	1,609,285	1,722,277
Equity investment	505,000	505,000
Property, plant and equipment:
Land and land improvements	905,190	905,190
Building	10,147,386	10,145,005
Office & other equipment	1,241,860	1,237,142
Computer equipment & software	2,202,627	2,240,063
Property, Plant and Equipment, Gross, Ending Balance	14,497,063	14,527,400
Less: Accumulated depreciation	10,215,740	10,086,560
Net property, plant and equipment	4,281,323	4,440,840
Total assets	16,858,003	15,306,996
Accounts payable and accrued expenses:
Trade accounts payable and other accrued expenses	1,819,772	1,565,198
Distributors' commissions payable	971,449	891,492
Sales taxes payable	181,184	139,542
Payroll and payroll taxes payable	198,747	212,716
Total accounts payable and accrued expenses	3,171,152	2,808,948
Income taxes payable	50,955	121,177
Deferred revenue	317,630	322,261
Operating lease liabilities, current	201,980	236,771
Revolving line of credit	500,000	500,000
Current portion of long-term debt	333,649
Total current liabilities	4,575,366	3,989,157
Noncurrent liabilities:
Operating lease liabilities, noncurrent	102,260	103,580
Long-term debt, less current portion	528,351
Other noncurrent liabilities	140,511	112,616
Total noncurrent liabilities	771,122	216,196
Stockholders' equity:
Preferred stock, par value $.001 per share; 500,000 shares authorized; -0- shares issued and outstanding	0	0
Common stock, par value $.001 per share; 5,000,000 authorized; 2,110,013 shares issued and 1,746,449 shares outstanding	2,110	2,110
Additional paid-in capital	30,643,771	30,643,771
Accumulated deficit	(12,292,216)	(12,755,495)
Accumulated other comprehensive loss:
Foreign currency translation adjustment	(990,727)	(937,320)
Treasury stock	(5,851,423)	(5,851,423)
Total stockholders' equity	11,511,515	11,101,643
Total liabilities and stockholders' equity	$ 16,858,003	$ 15,306,996

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	Jun. 30, 2020	Dec. 31, 2019
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	1,746,449

XML

Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss) (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Net sales	$ 8,016,560	$ 8,257,013	$ 18,299,225	$ 17,746,517
Costs and expenses:
Cost of goods sold	2,202,488	2,268,992	4,857,331	4,702,723
Distributor royalties and commissions	2,590,078	2,665,093	5,918,533	5,782,665
Selling, general and administrative	3,501,104	3,688,944	7,278,786	7,428,472
Total costs and expenses	8,293,670	8,623,029	18,054,650	17,913,860
Income (loss) from operations	(277,110)	(366,016)	244,575	(167,343)
Other income (expense):
Interest income	39,048	46,218	78,710	95,480
Interest expense	(7,933)	(10,075)	(14,038)	(15,487)
Other income (expense)	100,938	4,768	30,032	(660)
Gain on sale of fixed assets				434,549
Income (loss) before income taxes	(145,057)	(325,105)	339,279	346,539
Provision (benefit) for income taxes	54,000	63,000	(124,000)	111,000
Net income (loss)	(199,057)	(388,105)	463,279	235,539
Other comprehensive income (loss):
Foreign currency translation adjustment	(13,796)	(10,458)	(53,407)	11,753
Comprehensive income (loss)	$ (212,853)	$ (398,563)	$ 409,872	$ 247,292
Earnings (loss) per common share - Basic & Diluted (in dollars per share)	$ (0.11)	$ (0.22)	$ 0.27	$ 0.13
Weighted average shares (in shares)	1,746,000	1,746,000	1,746,000	1,746,000
Product [Member]
Net sales	$ 7,371,162	$ 7,603,041	$ 16,919,979	$ 16,414,038
Freight Income [Member]
Net sales	446,707	479,881	1,004,802	999,822
Product and Service, Other [Member]
Net sales	$ 198,691	$ 174,091	$ 374,444	$ 332,657

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Operating activities:
Net income (loss)	$ 463,279	$ 235,539
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	288,273	292,842
Stock-based compensation		10,612
Non-cash other revenue		(172,866)
Non-cash miscellaneous loss		24,618
(Gain) loss on sale of property, plant and equipment		(434,549)
Foreign currency transaction (gain) loss	21,694	1,149
(Increase) decrease in trade, accounts & notes receivable, and deposits from related parties	30,349	(715,018)
(Increase) decrease in inventories	(380,827)	758,798
(Increase) decrease in refundable income taxes	(227,553)	(3,295)
(Increase) decrease in prepaid expenses and other current assets	(304,407)	(295,925)
(Increase) decrease in other assets		(68,807)
Increase (decrease) in income taxes payable	(71,132)	16,148
Increase (decrease) in accounts payable & accrued expenses, deferred revenue, and other noncurrent liabilities	402,018	(293,111)
Net cash provided by (used in) operating activities	221,694	(643,865)
Investing activities:
Purchase of property, plant and equipment	(17,363)	(50,180)
Payments received on notes receivables - related parties	64,337	109,984
Net cash provided by investing activities	46,974	59,804
Financing activities:
Proceeds from line of credit borrowings		500,000
Proceeds from long-term borrowings	862,000
Net cash provided by financing activities	862,000	500,000
Effect of exchange rate changes on cash and cash equivalents	(30,775)	12,808
Increase (decrease) in cash and cash equivalents	1,099,893	(71,253)
Cash and cash equivalents at beginning of period	1,630,779	1,989,974
Cash and cash equivalents at end of period	$ 2,730,672	$ 1,918,721

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, 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
Comprehensive income (loss)						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
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)						235,539
Foreign currency translation adjustment						11,753
Comprehensive income (loss)						247,292
Balance (in shares) at Jun. 30, 2019	2,110,013				363,564
Balance at Jun. 30, 2019	$ 2,110	30,633,159	(12,075,599)	(970,342)	$ (5,851,423)	11,737,905
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
Net income (loss)			(388,105)			(388,105)
Foreign currency translation adjustment				(10,458)		(10,458)
Comprehensive income (loss)						(398,563)
Stock-based compensation		5,306				5,306
Balance (in shares) at Jun. 30, 2019	2,110,013				363,564
Balance at Jun. 30, 2019	$ 2,110	30,633,159	(12,075,599)	(970,342)	$ (5,851,423)	11,737,905
Balance (in shares) at Dec. 31, 2019	2,110,013				363,564
Balance at Dec. 31, 2019	$ 2,110	30,643,771	(12,755,495)	(937,320)	$ (5,851,423)	11,101,643
Net income (loss)			662,336			662,336
Foreign currency translation adjustment				(39,611)		(39,611)
Comprehensive income (loss)						622,725
Balance (in shares) at Mar. 31, 2020	2,110,013				363,564
Balance at Mar. 31, 2020	$ 2,110	30,643,771	(12,093,159)	(976,931)	$ (5,851,423)	11,724,368
Balance (in shares) at Dec. 31, 2019	2,110,013				363,564
Balance at Dec. 31, 2019	$ 2,110	30,643,771	(12,755,495)	(937,320)	$ (5,851,423)	11,101,643
Net income (loss)						463,279
Foreign currency translation adjustment						(53,407)
Comprehensive income (loss)						409,872
Balance (in shares) at Jun. 30, 2020	2,110,013				363,564
Balance at Jun. 30, 2020	$ 2,110	30,643,771	(12,292,216)	(990,727)	$ (5,851,423)	11,511,515
Balance (in shares) at Mar. 31, 2020	2,110,013				363,564
Balance at Mar. 31, 2020	$ 2,110	30,643,771	(12,093,159)	(976,931)	$ (5,851,423)	11,724,368
Net income (loss)			(199,057)			(199,057)
Foreign currency translation adjustment				(13,796)		(13,796)
Comprehensive income (loss)						(212,853)
Balance (in shares) at Jun. 30, 2020	2,110,013				363,564
Balance at Jun. 30, 2020	$ 2,110	$ 30,643,771	$ (12,292,216)	$ (990,727)	$ (5,851,423)	$ 11,511,515

XML

Note 1 - Accounting Policies

6 Months Ended

Jun. 30, 2020

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, 2019,

filed

March 27, 2020

with the Securities and Exchange Commission.

Impact of COVID-

19

Pandemic

In

March 2020,

the World Health Organization declared the outbreak of COVID-

19

a pandemic, which continues to spread throughout the U.S. and the world and has resulted in government authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. While we are unable to accurately predict the full impact that COVID-

19

will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures, our compliance with these measures has impacted our day-to-day operations and could disrupt our business and operations, as well as that of our distributors, customers, suppliers (including contract manufacturers) and other counterparties, for an indefinite period of time. To support the health and well-being of our employees, customers, partners and communities, a vast majority of our employees have been working remotely since

March 2020.

The ultimate impact of the COVID-

19

pandemic on our worldwide operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-

19

outbreak, new information which

may

emerge concerning the severity of the COVID-

19

pandemic, and any additional preventative and protective actions that governments

may

direct resulting in an extended period of continued business disruption and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time but

may

have a material adverse impact on our business, financial condition and results of operations.

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.

Due to the COVID-

19

pandemic, there has been uncertainty and disruption in the global economy and financial markets. We are

not

aware of any specific event or circumstance that would require updates to our estimates or judgments or require us to revise the carrying value of our assets or liabilities as of the date of issuance of this Quarterly Report on Form

10

-Q. These estimates

may

change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under unanticipated conditions or assumptions.

Concentrations of Risk

Effective

January 1, 2019,

we have entered into outsourcing agreements with Nutracom LLC (“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 and valuation of our Nutracom equity investment. See Note

2

and Note

3

for further discussion of our relationship with Nutracom.

Variable Interest Entities (VIE) - Unconsolidated

Effective

January 1, 2019,

we have a financial interest in 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.

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, 2023,

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.

In

December 2019,

the FASB issued ASU

No.

2019

-

12,

Income Taxes (Topic

740

): Simplifying the Accounting for Income Taxes

which adds new guidance for accounting for tax law changes, year-to-date losses in interim periods, and certain franchise-type taxes, as well as other changes to simplify accounting for income taxes. This standard will be effective for our interim and annual financial periods beginning

January 1, 2021,

with early adoption permitted. The adoption methodologies for this standard vary; subject to the specific provision(s) within the standard being adopted. We are evaluating the potential impact of this standard on our consolidated financial statements and related disclosures.

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

June 30, 2020,

we had

$2,730,672

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.

In the event that we do

not

generate sufficient liquidity from operations and 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

6 Months Ended

Jun. 30, 2020

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 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. (See June 1, 2019 note modification within this Note 2 ).

● $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. (See October 1, 2019 note modification within this Note 2 ).

● 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. (In June 2020, Nutracom increased its total equity membership interests; reducing our Nutracom equity membership interest from 15% to 5% ).

● Commencing January 1, 2020, our Class B interest is 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 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.

We accounted for the aforementioned Nutracom transactions in our

first

quarter

2019

financial results.

Promissory Note Modification –

June 1, 2019

On

June 1, 2019,

we entered into an Agreement with Nutracom to modify the Secured Promissory Note originally issued to us by Nutracom on

January 1, 2019,

as follows:

● Effective June 1, 2019, the outstanding balance of the Secured Promissory Note was reduced by $500,000 to $460,583 with a corresponding reduction of $500,000 to our outstanding vendor obligation due Nutracom under our ongoing product supply agreement.

● The $460,583 remaining Secured Promissory Note was exchanged with Nutracom for a newly issued June 1, 2019 Nutracom unsecured promissory note for the same amount under the following terms: fixed interest rate of 6.0% with interest only payable monthly through December 2020. Beginning January 1, 2021, principal and interest of $8,904 will be payable monthly for 60 months.

Promissory Note Modification –

October 1, 2019

In

December 2019,

we entered into an Agreement with Nutracom to modify the Unsecured Promissory Note originally issued to us by Nutracom on

January 1, 2019,

as follows:

● Effective October 1, 2019, the outstanding balance of the January 1, 2019 Unsecured Promissory Note of $764,344 was reduced to $711,163. The reduction of $53,181 in the Note's balance represents Nutracom's return to us of now-expired inventories originally acquired by Nutracom from us on January 1, 2019.

● The $711,163 remaining balance of the January 1, 2019 Unsecured Promissory Note was exchanged with Nutracom for a newly issued October 1, 2019 Nutracom Unsecured Promissory Note for the same amount under the following terms: fixed interest rate of 7.0% with interest only payable monthly through December 2020. Beginning January 1, 2021, principal and interest of $8,257, under a ten -year amortization schedule, will be payable monthly for 60 months, with a balloon payment of all remaining principal and interest due January 1, 2026.

XML

Note 3 - Related Parties

6 Months Ended

Jun. 30, 2020

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.

	June 30		December 31
Assets and liabilities - related parties	2020		2019
Notes & accounts receivables and deposits - current
Deposits with Nutracom for inventory	$	657,087	$	941,154
Note receivable - distributor		134,597		130,629
Note receivable - Nutracom unsecured DTD 6/1/2019		40,107		-
Note receivable - Nutracom unsecured DTD 10/1/2019		25,015		-
Other miscellaneous receivables		32,216		27,445
	$	889,022	$	1,099,228
Notes & accounts receivables - non-current
Note receivable - distributor	$	1,083,138	$	1,151,443
Note receivable - Nutracom unsecured DTD 6/1/2019		420,476		460,583
Note receivable - Nutracom unsecured DTD 10/1/2019		686,148		711,163
Unbilled receivables: Straight line rent revenue greater than rental billings		172,148		95,732
	$	2,361,910	$	2,418,921
Equity investment in Nutracom	$	505,000	$	505,000
Liability captions with Nutracom balances included therein
Trade accounts payable and other accrued expenses	$	278,385	$	430,907

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

Remainder of 2020	$	66,292
2021		271,037
2022		288,294
2023		306,655
2024		326,190
Thereafter		1,131,013
	$	2,389,481

	Six months ended June 30
Revenue and expense - related parties	2020		2019
Other revenue	$	374,444	$	332,657
Selling, general and administrative expense:
Fullfillment & professional fees		316,910		305,910
Interest income on promissory notes		76,210		92,668
Royalty income (other income/expense)		30,504		-
Gain on sale of fixed assets		-		434,549
Finished goods inventory purchased from Nutracom	$	3,768,800	$	2,763,000

At

June 30, 2020,

we had

$1.27

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

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
January 1, 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
June 1, 2019
Secured promissory note receivable balance decreased; applied as reduction to outstanding trade accounts payable		500,000
Unsecured promissory note received in exchange for remaining secured promissory note balance and other considerations		460,583

XML

Note 4 - Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Fair Value Disclosures [Text Block]

4

.

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
June 30, 2020
Revolving line of credit	$	500,000	$	500,000		-	$	500,000		-
PPP SBA note		862,000		862,000	$	862,000		-		-
Note receivable - distributor		1,217,735		1,348,000		-		1,348,000		-
Notes receivable - Nutracom		1,171,746		1,231,000		-		-	$	1,231,000
December 31, 2019
Revolving line of credit	$	500,000	$	500,000		-	$	500,000		-
Note receivable - distributor		1,282,072		1,400,000		-		1,400,000		-
Notes receivable - Nutracom		1,171,746		1,169,000		-		-	$	1,169,000

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. (Fair value is only disclosed).

PPP SBA note

: The fair value of our PPP SBA note approximates carrying value as the lending terms of this promissory note payable continue to be offered by the SBA under the CARES Act as of this financial report date. (Fair value is only disclosed).

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. (Fair value is only disclosed).

Note

s

receivable

- Nutracom

: The notes receivable - Nutracom represent

two

fixed rate promissory notes issued by a privately-held entity (PHE). We developed an estimated market discount rate based upon the PHE's

third

party incremental variable borrowing rate plus a risk-adjustment factor to estimate the fair value of these notes receivable under a discounted cash flow model. (Fair value is only disclosed).

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 5 - Debt

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Debt Disclosure [Text Block]

5

. Debt

	June		December 31
	2020		2019
Revolving line of credit	$	500,000	$	500,000
PPP SBA note		862,000		-
		1,362,000		500,000
Less current portion		833,649		500,000
Total long-term debt	$	528,351	$	-

Revolving

L

ine of

C

redit

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%.

In

January 2019,

we borrowed

$500,000

under the 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.

On

April 28, 2020,

our revolving line of credit agreement was extended

six

months to

October 28, 2020

under the same terms and conditions as the expiring agreement. At

June 30, 2020,

outstanding borrowings under the revolving line of credit were

$500,000

at an interest rate of

3.18%.

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

June 30, 2020,

we were in compliance with our loan covenant requirements.

PPP SBA Note

On

May 4, 2020,

we executed a promissory note (“SBA Note”) dated

April 20, 2020

in the amount of

$862,000

with our primary lender under the

March 2020

U.S enacted Coronavirus Aid, Relief, and Economic Security (CARES) Act Payroll Protection Program (“PPP”). In accordance with the PPP, we used the loan proceeds of

$862,000

primarily for payroll costs. The PPP SBA Note is scheduled to mature

April 20, 2022

and has an interest rate of

1.0%.

The PPP SBA Note is subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act which include:

● A deferral of principal repayment and interest for six months from loan origination, and

● The opportunity to apply for possible loan forgiveness for some or all of the loan amount.

Our PPP SBA loan forgiveness accounting policy is to recognize, if applicable, any loan forgiveness amounts only when we have applied for loan forgiveness, forgiveness realization is probable, and the forgiveness amount is reasonably determinable. At

June 30, 2020

we have

not

applied for PPP SBA loan forgiveness.

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Note 6 - Income Taxes

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

6

. Income Taxes

During the fiscal years of

2016

through

2019,

we determined that it was more likely than

not

losses generated in the U.S. and certain foreign jurisdictions will

not

be realized based on projections of future 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.

Under the

March 2020

U.S. CARES Act, U.S. Net Operating Losses (NOLs) arising in our calendar tax years

2018,

2019,

and

2020

may

be carried back to each of the

five

tax years preceding the tax year of such loss. Based on this new legislation, in the

first

quarter ended

March 31, 2020,

we have recorded a

$225,000

income tax benefit for NOL carryback. In

July 2020,

we have received our requested NOL carryback refund from the Internal Revenue Service.

The effective income tax rate was (

36.5

)% and

32.0%

for the year to date periods ended

June 30, 2020

and

2019,

respectively. In addition to the CARES Act tax benefit previously described, for each year to date period, the income tax provision amounts include estimated income taxes for

one

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

Tax Audits

One of our foreign subsidiaries had been under local country audit for greater than

ten

years for alleged deficiencies in various tax types for the years

2004

through

2006.

We settled the

2005

and

2006

tax year audits in

November 2019.

In

December 2019,

we had an agreement in principle with the local tax authority to settle the tax year

2004

audit. At

December 31, 2019,

we had an estimated full reserve of approximately

$84,000

for resolution of this matter; with such amount remitted to the tax authority in

February 2020.

During the

third

quarter of

2019,

the U.S. Internal Revenue Service (IRS) commenced an examination of our

2017

U.S. federal income tax return.

XML

Note 7 - Revenue Recognition

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

7

.

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

8

– Lease Revenue.

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

June 30, 2020

and

2019,

total returns as a percent of net sales were

0.05%

and

0.07%,

respectively.

We classify our net sales into

three

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

	Three months ended				Six months ended
	June 30				June 30
	2020		2019		2020		2019
Net sales by product category
Nutritional and dietary supplements	$	6,814,003	$	7,144,604	$	15,657,153	$	15,641,954
Other supplements		266,013		140,293		683,242		140,293
Sales aids, membership fees, and other		291,146		318,144		579,584		631,791
Freight income		446,707		479,881		1,004,802		999,822
Other revenue		198,691		174,091		374,444		332,657
Total net sales	$	8,016,560	$	8,257,013	$	18,299,225	$	17,746,517

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				Six months ended
	June 30				June 30
	2020		2019		2020		2019
Net sales by geographic region
United States	$	6,087,586	$	5,904,605	$	13,930,021	$	13,016,378
Australia/New Zealand		118,749		132,330		288,871		309,377
Canada		125,996		140,029		284,657		339,428
Mexico		124,554		152,569		253,175		288,595
Europe (1)		602,533		756,264		1,564,625		1,694,933
Asia (2)		957,142		1,171,216		1,977,876		2,097,806
Total net sales	$	8,016,560	$	8,257,013	$	18,299,225	$	17,746,517

( 1 ) Europe consists of United Kingdom, Ireland, France, Germany, Austria, and the Netherlands.

( 2 ) Asia consists of Philippines and Malaysia.

XML

Note 8 - Lease Revenue

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Lessor, Leases [Policy Text Block]

8.

Lease Revenue

Other revenue consists of revenue derived from leasing a portion of our headquarters building to 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; totaling approximately

$201,600

and

$159,800

for the

six

month periods ending

June 30, 2020

and

2019,

respectively. 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 2020	$	172,866	$	96,450
2021		345,732		385,800
2022		345,732		385,800
2023		345,732		385,800
2024		345,732		409,913
Thereafter		345,733		409,912
Total	$	1,901,527	$	2,073,675

XML

Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2020

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, 2019,

filed

March 27, 2020

with the Securities and Exchange Commission.

Effect of Covid-19 Pandemic Policy Text Block

Impact of COVID-

19

Pandemic

In

March 2020,

the World Health Organization declared the outbreak of COVID-

19

a pandemic, which continues to spread throughout the U.S. and the world and has resulted in government authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. While we are unable to accurately predict the full impact that COVID-

19

will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures, our compliance with these measures has impacted our day-to-day operations and could disrupt our business and operations, as well as that of our distributors, customers, suppliers (including contract manufacturers) and other counterparties, for an indefinite period of time. To support the health and well-being of our employees, customers, partners and communities, a vast majority of our employees have been working remotely since

March 2020.

The ultimate impact of the COVID-

19

pandemic on our worldwide operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-

19

outbreak, new information which

may

emerge concerning the severity of the COVID-

19

pandemic, and any additional preventative and protective actions that governments

may

direct resulting in an extended period of continued business disruption and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time but

may

have a material adverse impact on our business, financial condition and results of operations.

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.

Due to the COVID-

19

pandemic, there has been uncertainty and disruption in the global economy and financial markets. We are

not

aware of any specific event or circumstance that would require updates to our estimates or judgments or require us to revise the carrying value of our assets or liabilities as of the date of issuance of this Quarterly Report on Form

10

-Q. These estimates

may

change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under unanticipated conditions or assumptions.

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

Concentrations of Risk

Effective

January 1, 2019,

we have entered into outsourcing agreements with Nutracom LLC (“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 and valuation of our Nutracom equity investment. See Note

2

and Note

3

for further discussion of our relationship with Nutracom.

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

Variable Interest Entities (VIE) - Unconsolidated

Effective

January 1, 2019,

we have a financial interest in 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.

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, 2023,

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.

In

December 2019,

the FASB issued ASU

No.

2019

-

12,

Income Taxes (Topic

740

): Simplifying the Accounting for Income Taxes

which adds new guidance for accounting for tax law changes, year-to-date losses in interim periods, and certain franchise-type taxes, as well as other changes to simplify accounting for income taxes. This standard will be effective for our interim and annual financial periods beginning

January 1, 2021,

with early adoption permitted. The adoption methodologies for this standard vary; subject to the specific provision(s) within the standard being adopted. We are evaluating the potential impact of this standard on our consolidated financial statements and related disclosures.

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

June 30, 2020,

we had

$2,730,672

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.

In the event that we do

not

generate sufficient liquidity from operations and 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 3 - Related Parties (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Schedule of Related Party Transactions [Table Text Block]

	June 30		December 31
Assets and liabilities - related parties	2020		2019
Notes & accounts receivables and deposits - current
Deposits with Nutracom for inventory	$	657,087	$	941,154
Note receivable - distributor		134,597		130,629
Note receivable - Nutracom unsecured DTD 6/1/2019		40,107		-
Note receivable - Nutracom unsecured DTD 10/1/2019		25,015		-
Other miscellaneous receivables		32,216		27,445
	$	889,022	$	1,099,228
Notes & accounts receivables - non-current
Note receivable - distributor	$	1,083,138	$	1,151,443
Note receivable - Nutracom unsecured DTD 6/1/2019		420,476		460,583
Note receivable - Nutracom unsecured DTD 10/1/2019		686,148		711,163
Unbilled receivables: Straight line rent revenue greater than rental billings		172,148		95,732
	$	2,361,910	$	2,418,921
Equity investment in Nutracom	$	505,000	$	505,000
Liability captions with Nutracom balances included therein
Trade accounts payable and other accrued expenses	$	278,385	$	430,907

	Six months ended June 30
Revenue and expense - related parties	2020		2019
Other revenue	$	374,444	$	332,657
Selling, general and administrative expense:
Fullfillment & professional fees		316,910		305,910
Interest income on promissory notes		76,210		92,668
Royalty income (other income/expense)		30,504		-
Gain on sale of fixed assets		-		434,549
Finished goods inventory purchased from Nutracom	$	3,768,800	$	2,763,000

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

Remainder of 2020	$	66,292
2021		271,037
2022		288,294
2023		306,655
2024		326,190
Thereafter		1,131,013
	$	2,389,481

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

	2019
January 1, 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
June 1, 2019
Secured promissory note receivable balance decreased; applied as reduction to outstanding trade accounts payable		500,000
Unsecured promissory note received in exchange for remaining secured promissory note balance and other considerations		460,583

XML

Note 4 - Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

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

	Carrying		Fair
Description	Amount		Value		Level 1		Level 2		Level 3
June 30, 2020
Revolving line of credit	$	500,000	$	500,000		-	$	500,000		-
PPP SBA note		862,000		862,000	$	862,000		-		-
Note receivable - distributor		1,217,735		1,348,000		-		1,348,000		-
Notes receivable - Nutracom		1,171,746		1,231,000		-		-	$	1,231,000
December 31, 2019
Revolving line of credit	$	500,000	$	500,000		-	$	500,000		-
Note receivable - distributor		1,282,072		1,400,000		-		1,400,000		-
Notes receivable - Nutracom		1,171,746		1,169,000		-		-	$	1,169,000

XML

Note 5 - Debt (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Schedule of Debt [Table Text Block]

	June		December 31
	2020		2019
Revolving line of credit	$	500,000	$	500,000
PPP SBA note		862,000		-
		1,362,000		500,000
Less current portion		833,649		500,000
Total long-term debt	$	528,351	$	-

XML

Note 7 - Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three months ended				Six months ended
	June 30				June 30
	2020		2019		2020		2019
Net sales by product category
Nutritional and dietary supplements	$	6,814,003	$	7,144,604	$	15,657,153	$	15,641,954
Other supplements		266,013		140,293		683,242		140,293
Sales aids, membership fees, and other		291,146		318,144		579,584		631,791
Freight income		446,707		479,881		1,004,802		999,822
Other revenue		198,691		174,091		374,444		332,657
Total net sales	$	8,016,560	$	8,257,013	$	18,299,225	$	17,746,517

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

	Three months ended				Six months ended
	June 30				June 30
	2020		2019		2020		2019
Net sales by geographic region
United States	$	6,087,586	$	5,904,605	$	13,930,021	$	13,016,378
Australia/New Zealand		118,749		132,330		288,871		309,377
Canada		125,996		140,029		284,657		339,428
Mexico		124,554		152,569		253,175		288,595
Europe (1)		602,533		756,264		1,564,625		1,694,933
Asia (2)		957,142		1,171,216		1,977,876		2,097,806
Total net sales	$	8,016,560	$	8,257,013	$	18,299,225	$	17,746,517

XML

Note 8 - Lease Revenue (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Lessor, Operating Lease, Payment to be Received, Fiscal Year Maturity [Table Text Block]

	Estimated
	Straight-line		Lease Agreement
	Rent Revenue		Fixed Rent
Remainder of 2020	$	172,866	$	96,450
2021		345,732		385,800
2022		345,732		385,800
2023		345,732		385,800
2024		345,732		409,913
Thereafter		345,733		409,912
Total	$	1,901,527	$	2,073,675

XML

Note 1 - Accounting Policies (Details Textual) - USD ($)	Jun. 30, 2020	Dec. 31, 2019
Cash and Cash Equivalents, at Carrying Value, Ending Balance	$ 2,730,672	$ 1,630,779

XML

Note 2 - Sale of Manufacturing Operations' Assets (Details Textual) - USD ($)	Oct. 01, 2019	Jun. 01, 2019	Jan. 01, 2019	Jun. 30, 2020	Jan. 01, 2020	Dec. 31, 2019	Sep. 30, 2019
Lessor, Operating Lease, Term of Contract (Year)			7 years
Lessor, Operating Lease, Renewal Term (Year)			5 years
Nutracom, LLC [Member]
Supply Commitment, Term (Year)			7 years
Lessor, Operating Lease, Term of Contract (Year)			7 years
Lessor, Operating Lease, Renewal Term (Year)			5 years
Shares Transferred From Related Parties (in shares)			99,200
Shares Transferred From Related Parties, Value			$ 540,144
Equity Interest Issued from Related Parties as Consideration			15.00%
Equity Method Investment, Ownership Percentage				5.00%
Equity Interest Issued from Related Parties as Consideration, Value			$ 505,000
Increase (Decrease) in Notes Receivables		$ (500,000)
Secured Promissory Note Exchanged for Unsecured Promissory Note		460,583
Nutracom, LLC [Member] | Secured Promissory Note [Member]
Notes Receivable, Related Parties, Noncurrent			$ 1,000,000
Notes Receivable, Related Parties, Term (Year)			7 years
Notes Receivable, Related Parties, Interest Rate			5.50%
Increase (Decrease) in Notes Receivable, Related Parties		(500,000)
Nutracom, LLC [Member] | Unsecured Promissory Note, 7 Percent Interest Rate [Member]
Notes Receivable, Related Parties, Noncurrent	$ 711,163		$ 764,344	$ 686,148		$ 711,163	$ 764,344
Notes Receivable, Related Parties, Term (Year)	7 years
Notes Receivable, Related Parties, Interest Rate	7.00%		7.00%
Notes Receivable, Interest Only Period (Year)			2 years
Notes Receivable, Related Parties, Amortization Period (Year)	10 years		10 years
Increase (Decrease) in Notes Receivables	$ (53,181)
Notes Receivable, Principal and Interest Payments	$ 8,257
Notes Receivable, Payment Term (Month)	5 years
Unsecured Promissory Note Exchanged for Unsecured Promissory Note	$ 711,163
Nutracom, LLC [Member] | Unsecured Promissory Note, 6 Percent Interest Rate [Member]
Notes Receivable, Related Parties, Noncurrent		$ 460,583		$ 420,476		$ 460,583
Notes Receivable, Related Parties, Interest Rate		6.00%
Notes Receivable, Principal and Interest Payments		$ 8,904
Notes Receivable, Payment Term (Month)		5 years
Nutracom, LLC [Member] | Minimum [Member]
Operating Lease, Lease Annual Income			$ 193,000
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
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 Thousands	Jun. 30, 2020 USD ($)
Purchase Obligation, Total	$ 1,270

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Note 3 - Related Parties - Related Party Activities (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019	Oct. 01, 2019	Sep. 30, 2019	Jun. 01, 2019	Jan. 01, 2019
Total notes & accounts receivables and deposits	$ 889,022		$ 889,022		$ 1,099,228
Total noncurrent notes receivables	2,361,910		2,361,910		2,418,921
Equity investment in Nutracom	505,000		505,000		505,000
Other revenue			374,444	$ 332,657
Fullfillment & professional fees			316,910	305,910
Interest income on promissory notes			76,210	92,668
Gain on sale of fixed assets				434,549
Unbilled Revenues [Member]
Unbilled receivables: Straight line rent revenue greater than rental billings	172,148		172,148		95,732
Nutracom, LLC [Member]
Deposits with Nutracom for inventory	657,087		657,087		941,154
Equity investment in Nutracom	505,000		505,000		505,000
Trade accounts payable and other accrued expenses	278,385		278,385		430,907
Gain on sale of fixed assets				434,549
Finished goods inventory purchased from Nutracom			3,768,800	2,763,000
Nutracom, LLC [Member] | Other Income [Member]
Royalty income (other income/expense)			30,504
Nutracom, LLC [Member] | Unsecured Promissory Note, 6 Percent Interest Rate [Member]
Note receivable, current	40,107		40,107
Note receivable, noncurrent	420,476		420,476		460,583			$ 460,583
Nutracom, LLC [Member] | Unsecured Promissory Note, 7 Percent Interest Rate [Member]
Note receivable, current	25,015		25,015
Note receivable, noncurrent	686,148		686,148		711,163	$ 711,163	$ 764,344		$ 764,344
Distributor [Member]
Note receivable, current	134,597		134,597		130,629
Note receivable, noncurrent	1,083,138		1,083,138		1,151,443
Nutracom LLC and Distributor [Member]
Total notes & accounts receivables and deposits	$ 32,216		$ 32,216		$ 27,445

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Note 3 - Related Parties - Schedule of Principal Payments (Details) - Nutracom LLC and Distributor [Member]	Jun. 30, 2020 USD ($)
Remainder of 2020	$ 66,292
2021	271,037
2022	288,294
2023	306,655
2024	326,190
Thereafter	1,131,013
Total Notes Receivables	$ 2,389,481

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Note 3 - Related Parties - Supplemental Cash Flow Information (Details) - USD ($)			3 Months Ended
	Jun. 01, 2019	Jan. 01, 2019	Mar. 31, 2019
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
Secured promissory note receivable balance decreased; applied as reduction to outstanding trade accounts payable	$ 500,000
Unsecured promissory note received in exchange for remaining secured promissory note balance and other considerations	$ 460,583
Nutracom, LLC [Member] | Sale of Fixed Assets [Member]
Sale of fixed assets		1,000,000
Nutracom, LLC [Member] | Sale of Inventories [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 - Fair Value of Financial Instruments - Summary of Financial Instruments (Details) - USD ($)	Jun. 30, 2020	Dec. 31, 2019
Reported Value Measurement [Member]
Revolving line of credit	$ 500,000
Revolving line of credit		$ 500,000
Reported Value Measurement [Member] | Distributor [Member]
Note receivable	1,217,735	1,282,072
Reported Value Measurement [Member] | Nutracom, LLC [Member]
Note receivable	1,171,746	1,171,746
Reported Value Measurement [Member] | SBA CARES Act Paycheck Protection Program [Member]
Note payable	862,000
Estimate of Fair Value Measurement [Member]
Revolving line of credit	500,000
Revolving line of credit		500,000
Estimate of Fair Value Measurement [Member] | Distributor [Member]
Note receivable	1,348,000	1,400,000
Estimate of Fair Value Measurement [Member] | Nutracom, LLC [Member]
Note receivable	1,231,000	1,169,000
Estimate of Fair Value Measurement [Member] | SBA CARES Act Paycheck Protection Program [Member]
Note payable	862,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Revolving line of credit
Revolving line of credit
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 1 [Member] | SBA CARES Act Paycheck Protection Program [Member]
Note payable	862,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Revolving line of credit	500,000
Revolving line of credit		500,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member] | Distributor [Member]
Note receivable	1,348,000	1,400,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member] | Nutracom, LLC [Member]
Note receivable
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member] | SBA CARES Act Paycheck Protection Program [Member]
Note payable
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Revolving line of credit
Revolving line of credit
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	1,231,000	$ 1,169,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member] | SBA CARES Act Paycheck Protection Program [Member]
Note payable

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Note 5 - Debt (Details Textual) - USD ($)	Mar. 25, 2019	Sep. 11, 2018	Jun. 30, 2020	Apr. 20, 2020	Dec. 31, 2019	Jan. 31, 2019
Line of Credit, Current			$ 500,000		$ 500,000
Paycheck Protection Program CARES Act [Member]
Debt Instrument, Face Amount				$ 862,000
Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 750,000	$ 750,000
Line of Credit, Current			$ 500,000			$ 500,000
Debt Instrument, Interest Rate, Stated Percentage			3.18%
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 5 - Debt - Schedule of Debt (Details) - USD ($)	Jun. 30, 2020	Dec. 31, 2019
Revolving line of credit	$ 500,000	$ 500,000
Long-term debt	1,362,000	500,000
Less current portion	833,649	500,000
Total long-term debt	528,351
Paycheck Protection Program CARES Act [Member]
PPP SBA note	$ 862,000

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Note 6 - Income Taxes (Details Textual) - USD ($)	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Mar. 31, 2020	Dec. 31, 2019
Income Tax Expense (Benefit), Total			$ 225,000
Effective Income Tax Rate Reconciliation, Percent, Total	(36.50%)	32.00%
Foreign Tax Authority [Member] | Tax Year 2004 [Member]
Income Tax Examination, Liability (Refund) Adjustment from Settlement with Taxing Authority				$ 84,000

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Note 7 - Revenue Recognition (Details Textual)	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Contract with Customer, Returns as Percent of Net Sales	0.05%	0.07%
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 7 - Revenue Recognition - Net Sales by Product Category (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Net Revenues	$ 8,016,560	$ 8,257,013	$ 18,299,225	$ 17,746,517
Nutritional and Dietary Supplements [Member]
Net Revenues	6,814,003	7,144,604	15,657,153	15,641,954
Other Supplements [Member]
Net Revenues	266,013	140,293	683,242	140,293
Sales Aids, Membership Fees, and Other [Member]
Net Revenues	291,146	318,144	579,584	631,791
Freight Income [Member]
Net Revenues	446,707	479,881	1,004,802	999,822
Service, Other [Member]
Net Revenues	$ 198,691	$ 174,091	$ 374,444	$ 332,657

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Note 7 - Revenue Recognition - Net Sales by Geographic Region (Details) - USD ($)		3 Months Ended		6 Months Ended
		Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Net Revenues		$ 8,016,560	$ 8,257,013	$ 18,299,225	$ 17,746,517
UNITED STATES
Net Revenues		6,087,586	5,904,605	13,930,021	13,016,378
Australia, New Zealand [Member]
Net Revenues		118,749	132,330	288,871	309,377
CANADA
Net Revenues		125,996	140,029	284,657	339,428
MEXICO
Net Revenues		124,554	152,569	253,175	288,595
Europe [Member]
Net Revenues	[1]	602,533	756,264	1,564,625	1,694,933
Asia [Member]
Net Revenues	[2]	$ 957,142	$ 1,171,216	$ 1,977,876	$ 2,097,806

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

[2] Asia consists of Philippines and Malaysia.

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Note 8 - Lease Revenue (Details Textual) - USD ($)		3 Months Ended		6 Months Ended
	Jan. 01, 2019	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Lessor, Operating Lease, Term of Contract (Year)	7 years
Lessor, Operating Lease, Renewal Term (Year)	5 years
Revenue from Contract with Customer, Excluding Assessed Tax, Total		$ 8,016,560	$ 8,257,013	$ 18,299,225	$ 17,746,517
CAM Lease Revenue Billed [Member]
Revenue from Contract with Customer, Excluding Assessed Tax, Total				$ 201,600	$ 159,800
Minimum [Member]
Operating Lease, Lease Income, Lease Payments	$ 193,000
Maximum [Member]
Operating Lease, Lease Income, Lease Payments	$ 410,000

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Note 8 - Leases - Operating Lease, Payments to be Received (Details)	Jun. 30, 2020 USD ($)
Fixed-price Contract [Member]
Remainder of 2020	$ 96,450
2021	385,800
2022	385,800
2023	385,800
2024	409,913
Thereafter	409,912
Total	2,073,675
Valuation Technique, Straight-Line [Member]
Remainder of 2020	172,866
2021	345,732
2022	345,732
2023	345,732
2024	345,732
Thereafter	345,733
Total	$ 1,901,527