RELIV INTERNATIONAL INC (Form: 10-Q, Received: 11/14/2018 09:19:38)

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 management believes are necessary to present fairly the financial position, results of operations and cash flows. 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, 2017, filed March 29, 2018 with the Securities and Exchange Commission.

Use of Estimates

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

New Accounting Pronouncements – Not Yet Adopted

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

As required, the Company will adopt ASU 2016-02 on January 1, 2019. The Company expects to apply certain practical expedients permitted in the standard, as well as the prospective transition method. The Company expects the adoption of this standard to result in the recognition of right-of-use assets and lease liabilities not currently recorded in the Company’s consolidated financial statements. The Company continues to evaluate the amounts and other effects that the new standard will have on its consolidated financial statements and related disclosures.

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

1. Accounting Policies (continued)

New Accounting Pronouncements – Adopted January 1, 2018

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

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

	Balance at			Adjustments			Balance at
	December 31			Due to			January 1
	2017			ASU 2014-09			2018
Liabilities and stockholders' equity
Accumulated deficit	$	(10,040,229	)	$	(367,568	)	$	(10,407,797	)
Deferred revenue		-			367,568			367,568

	Three Months Ended September 30, 2018
				Without			Effect of
				Adoption of			Change
	As Reported			ASU 2014-09			Higher/(Lower)
Operating results
Net sales	$	8,337,045		$	8,327,054		$	9,991
Net income (loss)		(542,301	)		(552,292	)		9,991

	Nine Months Ended September 30, 2018
				Without			Effect of
				Adoption of			Change
	As Reported			ASU 2014-09			Higher/(Lower)
Operating results
Net sales	$	26,800,025		$	26,779,055		$	20,970
Net income (loss)		(1,758,560	)		(1,779,530	)		20,970

The new revenue standard defines a five step process to recognize revenues. Under this new standard, the Company determined that the timeframe for recognizing the revenue performance obligation for membership-fee type revenue would be lengthened to more closely correlate with the distributor and customer membership terms of generally twelve months. Based upon all contracts still in existence as of December 31, 2017, the adoption of the new revenue standard resulted in the recognition of a deferred revenue liability balance of $367,568.

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

1. Accounting Policies (continued)

New Accounting Pronouncements – Adopted January 1, 2018 (continued)

Prior to adoption of the new revenue standard, the Company’s primary source of revenue has been from the sale of nutritional products to the Company’s independent distributors whereby revenue is recognized when product is shipped and risk of loss has passed to the customer; and the Company’s nutritional product revenue recognition policy does not change under the new revenue standard.

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

Description of Products and Services by Region and Category

The Company operates in one reportable segment, a network marketing segment consisting of six operating units that sell nutritional and dietary products to a sales force of independent distributors that sell the products directly to customers. These operating units are based on geographic regions, as follows:

	Three months ended				Nine months ended
	September 30				September 30
	2018		2017		2018		2017
Net sales to external customers
United States	$	6,498,778	$	7,082,540	$	20,505,226	$	24,791,337
Australia/New Zealand		155,663		224,419		565,126		710,877
Canada		153,189		199,877		556,866		681,265
Mexico		127,859		105,021		347,641		351,559
Europe ⁽¹⁾		807,097		890,783		3,002,528		3,398,941
Asia ⁽²⁾		594,459		566,683		1,822,638		1,919,754
Total net sales	$	8,337,045	$	9,069,323	$	26,800,025	$	31,853,733

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

The Company classifies its sales into two categories of sales products plus handling & freight income. Net sales by product category, as follows:

	Three months ended				Nine months ended
	September 30				September 30
	2018		2017		2018		2017
Net sales by product category
Nutritional and dietary supplements	$	7,514,349	$	8,032,308	$	24,190,379	$	28,369,246
Sales aids and other		303,177		353,691		939,124		1,110,678
Handling & freight income		519,519		683,324		1,670,522		2,373,809
Total net sales	$	8,337,045	$	9,069,323	$	26,800,025	$	31,853,733

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

2. Basic and Diluted Loss per Share

Basic loss per common share is computed using the weighted average number of common shares outstanding during the period. Diluted loss per common share is computed using the weighted average number of common shares and potential dilutive common shares that were outstanding during the period. Potential dilutive common shares consist of outstanding stock options, outstanding stock warrants, and convertible preferred stock.

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

	Three months ended						Nine months ended
	September 30						September 30
	2018			2017			2018			2017
Numerator:
Net loss	$	(542,301	)	$	(319,103	)	$	(1,758,560	)	$	(314,975	)
Denominator:
Denominator for basic loss per share – weighted average shares		1,845,000			1,845,000			1,845,000			1,845,000

Dilutive effect of employee stock options and other warrants		-			-			-			-

Denominator for diluted loss per share – adjusted weighted average shares		1,845,000			1,845,000			1,845,000			1,845,000

Basic loss per share	$	(0.29	)	$	(0.17	)	$	(0.95	)	$	(0.17	)
Diluted loss per share	$	(0.29	)	$	(0.17	)	$	(0.95	)	$	(0.17	)

Options and warrants to purchase 120,242 shares of common stock for the three months and nine months ended September 30, 2018, respectively, were not included in the denominator for diluted loss per share because their effect would be antidilutive or because the shares were deemed contingently issuable. Options and warrants to purchase 146,715 shares of common stock for the three months and nine months ended September 30, 2017, respectively, were not included in the denominator for diluted loss per share because their effect would be antidilutive or because the shares were deemed contingently issuable.

3. 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.

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Fair Value of Financial Instruments (continued)

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

September 30, 2018
Long-term debt	$	-	$	-		-	$	-		-
Note receivable		1,434,739		1,536,000		-		1,536,000		-
Marketable securities		400,000		400,000	$	400,000		-		-

December 31, 2017
Long-term debt	$	3,045,421	$	3,045,421		-	$	3,045,421		-
Note receivable		1,521,005		1,684,000		-		1,684,000		-
Marketable securities		330,000		330,000	$	330,000		-		-

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

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

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

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

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

5. Income Taxes

During 2016 and 2017, the Company determined that it was more likely than not that U.S. federal and various state net operating losses primarily generated in 2016 and 2017 will not be realized based on projections of future U.S. taxable income, estimated reversals of existing taxable timing differences, and other considerations.

In prior years, the Company recorded a valuation allowance on all of its domestic and foreign deferred tax assets. The effective income tax rate was (2.8)% and (9.8)% for the nine months ended September 30, 2018 and 2017, respectively. The income tax provision amounts for the nine months ended September 30, 2018 and 2017, respectively, primarily represent estimated income taxes in certain U.S. states and one of the Company’s foreign subsidiaries.

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

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

5. Income Taxes (continued)

Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) 118 to provide guidance to companies on the reporting of the impacts of TCJA in their financial statements. Under SAB 118, the Company is recording affected items as provisional to allow additional time for clarifying technical guidance from Treasury and analysis of the effect to the Company’s current tax positions.

One of the Company’s foreign subsidiaries is presently under local country audit for alleged deficiencies (totaling approximately $800,000 plus interest at 20% per annum) in value-added tax (VAT) and withholding tax for the years 2004 through 2006. The Company, in consultation with its legal counsel, believes that there are strong legal grounds that it should not be liable to pay the majority of the alleged tax deficiencies. In 2011, the Company made good faith deposits of approximately $173,000 to the local tax authority under the tax agency’s administrative judicial resolution process.

As of December 31, 2017, management’s estimated reserve (net of deposits) for this matter was approximately $181,000 and remains unchanged in 2018. In May 2018, the Company received a formal notice of denial of one of its appeals under the tax agency’s administrative judicial resolution process; however, management continues to pursue other available legal processes as the Company maintains its position that it is not liable for the majority of the alleged tax deficiencies.

This quarterly report includes both historical and “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations and projections about future results. Words such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or similar words are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Although we believe that our opinions and expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements, and our actual results may differ substantially from the views and expectations set forth in this quarterly report on Form 10-Q. We disclaim any intent or obligation to update any forward-looking statements after the date of this annual report to conform such statements to actual results or to changes in our opinions or expectations.

Item No. 2 - Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

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

We are a developer, manufacturer and marketer of a proprietary line of nutritional supplements addressing basic nutrition, specific wellness needs, weight management and sports nutrition. We sell our products through an international network marketing system utilizing independent distributors. Sales in the United States represented approximately 76.5% of worldwide net sales for the nine months ended September 30, 2018 and 77.8% of worldwide net sales for the nine months ended September 30, 2017. Our international operations currently generate sales through distributor networks with facilities in Australia, Canada, Malaysia, Mexico, the Philippines, and the United Kingdom. We also operate in Ireland, France, Germany, Austria and the Netherlands from our United Kingdom distribution center, in New Zealand from our Australia office, and in Singapore from our Malaysia office.

We derive our revenues principally through product sales made by our global independent distributor base, which, as of September 30, 2018, consisted of approximately 30,550 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. As a result, exchange rate fluctuations may have an effect on sales and gross margins. U.S. generally accepted accounting practices require that our results from operations be converted to U.S. dollars for reporting purposes. Consequently, our reported earnings may be significantly affected by fluctuations in currency exchange rates, generally increasing with a weaker U.S. dollar and decreasing with a strengthening U.S. dollar. Products manufactured by us for sale to our foreign subsidiaries are transacted in U.S. dollars. From time to time, we enter into foreign exchange forward contracts to mitigate our foreign currency exchange risk.

Product sales represent the actual product purchase price typically paid by our distributors, after giving effect to distributor allowances, which can range from 10% to 40% of suggested retail price, depending on the rank of a particular distributor. Handling and freight income represents the amounts billed to distributors for shipping costs. We record net sales and the related commission expense when the merchandise is shipped.

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

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

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

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

Net Sales. Overall net sales decreased by 8.1% in the three months ended September 30, 2018 compared to the same period in 2017. During the third quarter of 2018 (“Q3 2018”), sales in the United States decreased by 8.2%, and international sales decreased by 7.5% 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 3.3%.

The following table summarizes net sales by geographic market for the three months ended September 30, 2018 and 2017.

The following table summarizes net sales by geographic market for the nine months ended September 30, 2018 and 2017.

The following table sets forth, as of September 30, 2018 and 2017, the number of our active distributors and Master Affiliates and above. The total number of active distributors includes Master Affiliates and above. We define an active distributor as one that enrolls as a distributor or renews his or her distributorship during the prior twelve months. Master Affiliates and above are distributors that have attained the highest level of discount and are eligible for royalties generated by Master Affiliate groups in their downline organization. We include Preferred Customers as part of our Active Distributor count, and Preferred Customers represent approximately 4,840 and 5,010 of the Active Distributor count as of September 30, 2018 and 2017, respectively.

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 United States dollar, which our local management has no ability to influence. This is a meaningful measurement to management, and we believe this is a useful measurement to provide to shareholders.

The following table provides key statistics related to distributor activity by market and should be read in conjunction with the following discussion. Adjusted results should be considered only in conjunction with results reported according to accounting principles generally accepted in the United States.

Delaware		371172197
(State or other jurisdiction of		(I.R.S. Employer Identification Number)
incorporation or organization)

136 Chesterfield Industrial Boulevard
Chesterfield, Missouri		63005
(Address of principal executive offices)		(Zip Code)

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	12
Item No. 4	Controls and Procedures	20

Part II – Other Information

Item No. 6	Exhibits	20

	September 30		December 31
	2018		2017
	(unaudited)
Assets

Current assets:
Cash and cash equivalents	$	2,372,837	$	3,272,788
Accounts receivable, less allowances of $25,000 in 2018 and $26,300 in 2017		326,572		29,760
Accounts and note due from employees and distributors		140,562		138,497
Inventories
Finished goods		2,263,325		2,762,249
Raw materials		2,092,336		1,653,466
Sales aids and promotional materials		122,126		139,770
Total inventories		4,477,787		4,555,485

Refundable income taxes		23,179		26,552
Prepaid expenses and other current assets		573,918		372,602
Total current assets		7,914,855		8,395,684

Other assets		400,493		337,190
Cash surrender value of life insurance		-		3,086,522
Note receivable due from distributor		1,313,526		1,405,113
Intangible assets, net		2,004,759		2,174,248

Property, plant and equipment:
Land and land improvements		905,190		905,190
Building		9,945,344		9,950,190
Machinery & equipment		4,790,063		4,755,727
Office equipment		1,159,362		1,183,115
Computer equipment & software		2,243,587		2,261,038
		19,043,546		19,055,260
Less: Accumulated depreciation		13,710,855		13,378,021
Net property, plant and equipment		5,332,691		5,677,239

Total assets	$	16,966,324	$	21,075,996

	September 30			December 31
	2018			2017
	(unaudited)
Liabilities and stockholders' equity

Current liabilities:
Accounts payable and accrued expenses:
Trade accounts payable and other accrued expenses	$	2,434,298		$	1,667,495
Distributors' commissions payable		975,083			1,115,649
Sales taxes payable		129,542			154,958
Deferred revenue		345,929			-
Payroll and payroll taxes payable		348,706			261,916
Total accounts payable and accrued expenses		4,233,558			3,200,018

Income taxes payable		6,131			12,616
Revolving line of credit		-			500,000
Current portion of long-term debt		-			2,545,421
Total current liabilities		4,239,689			6,258,055

Noncurrent liabilities:
Other noncurrent liabilities		518,180			453,354
Total noncurrent liabilities		518,180			453,354

Stockholders' equity:
Preferred stock, par value $.001 per share; 500,000 shares authorized; -0- shares issued and outstanding in 2018 and 2017		-			-
Common stock, par value $.001 per share; 5,000,000 authorized; 2,110,013 shares issued and 1,845,160 shares outstanding as of 9/30/2018; 2,110,013 shares issued and 1,845,160 shares outstanding as of 12/31/2017		2,110			2,110
Additional paid-in capital		30,621,523			30,598,920
Accumulated deficit		(12,166,358	)		(10,040,229	)
Accumulated other comprehensive loss:
Foreign currency translation adjustment		(910,260	)		(857,654	)
Treasury stock		(5,338,560	)		(5,338,560	)

Total stockholders' equity		12,208,455			14,364,587

Total liabilities and stockholders' equity	$	16,966,324		$	21,075,996

(unaudited)	Three months ended September 30						Nine months ended September 30
	2018			2017			2018			2017



Product sales	$	7,817,526		$	8,385,999		$	25,129,503		$	29,479,924
Handling & freight income		519,519			683,324			1,670,522			2,373,809

Net sales		8,337,045			9,069,323			26,800,025			31,853,733

Costs and expenses:
Cost of products sold		2,383,942			1,949,670			7,089,958			7,113,647
Distributor royalties and commissions		2,639,863			3,199,596			8,858,965			11,252,922
Selling, general and administrative		3,845,304			4,253,675			12,546,840			13,811,814

Total costs and expenses		8,869,109			9,402,941			28,495,763			32,178,383

Loss from operations		(532,064	)		(333,618	)		(1,695,738	)		(324,650	)

Other income (expense):
Interest income		22,633			25,277			70,132			76,630
Interest expense		(16,408	)		(27,183	)		(93,195	)		(79,472	)
Other income (expense)		(8,462	)		(4,579	)		8,241			40,517

Loss before income taxes		(534,301	)		(340,103	)		(1,710,560	)		(286,975	)
Provision (benefit) for income taxes		8,000			(21,000	)		48,000			28,000

Net loss	$	(542,301	)	$	(319,103	)	$	(1,758,560	)	$	(314,975	)

Other comprehensive income (loss):
Foreign currency translation adjustment		757			43,666			(52,606	)		134,300

Comprehensive loss	$	(541,544	)	$	(275,437	)	$	(1,811,166	)	$	(180,675	)


Loss per common share - Basic	$	(0.29	)	$	(0.17	)	$	(0.95	)	$	(0.17	)
Weighted average shares		1,845,000			1,845,000			1,845,000			1,845,000

Loss per common share - Diluted	$	(0.29	)	$	(0.17	)	$	(0.95	)	$	(0.17	)
Weighted average shares		1,845,000			1,845,000			1,845,000			1,845,000

	September 30		June 30		December 31
	2018		2018		2017

Term loan	$	-	$	2,355,861	$	2,545,421
Revolving line of credit		-		500,000		500,000
		-		2,855,861		3,045,421
Less current portion		-		2,855,861		3,045,421
Total long-term debt	$	-	$	-	$	-

	Three months ended September 3 0 ,
	20 1 8					20 1 7					Change from prior year
	Amount		% of Net Sales			Amount		% of Net Sales			Amount			%
	(dollars in thousands)
United States	$	6,499		78.0	%	$	7,082		78.1	%	$	(583	)		(8.2	)%
Australia/New Zealand		156		1.9			224		2.5			(68	)		(30.4	)
Canada		153		1.8			200		2.2			(47	)		(23.5	)
Mexico		128		1.5			105		1.2			23			21.9
Europe		807		9.7			891		9.8			(84	)		(9.4	)
Asia		594		7.1			567		6.2			27			4.8
Consolidated total	$	8,337		100.0	%	$	9,069		100.0	%	$	(732	)		(8.1	)%

	Nine months ended September 30,
	201 8					201 7					Change from prior year
	Amount		% of Net Sales			Amount		% of Net Sales			Amount			%
	(dollars in thousands)
United States	$	20,505		76.5	%	$	24,791		77.8	%	$	(4,286	)		(17.3	)%
Australia/New Zealand		565		2.1			711		2.2			(146	)		(20.5	)
Canada		557		2.1			681		2.2			(124	)		(18.2	)
Mexico		348		1.3			352		1.1			(4	)		(1.1	)
Europe		3,002		11.2			3,399		10.7			(397	)		(11.7	)
Asia		1,823		6.8			1,920		6.0			(97	)		(5.1	)
Consolidated total	$	26,800		100.0	%	$	31,854		100.0	%	$	(5,054	)		(15.9	)%

	September 30, 201 8				September 30, 201 7				% Change
	Active Distributors and Preferred Customers		Master Affiliates and Above		Active Distributors and Preferred Customers		Master Affiliates and Above		Active Distributors and Preferred Customers			Master Affiliates and Above

United States		20,390		2,290		23,860		2,750		(14.5	)%		(16.7	)%
Australia/New Zealand		1,010		80		1,180		110		(14.4	)		(27.3	)
Canada		570		80		710		80		(19.7	)		---
Mexico		850		80		730		60		16.4			33.3
Europe		3,210		380		3,940		440		(18.5	)		(13.6	)
Asia		4,520		340		4,070		370		11.1			(8.1	)
Consolidated total		30,550		3,250		34,490		3,810		(11.4	)%		(14.7	)%

Distributor Activity by Market																			International
	United States			AUS/NZ			Canada			Mexico			Europe			Asia			-- Total
Sales in USD (in 000's):
Quarter ended 9/30/2018	$	6,499		$	156		$	153		$	128		$	807		$	594		$	1,838
Quarter ended 9/30/2017	$	7,082		$	224		$	200		$	105		$	891		$	567		$	1,987

% change in sales-Q3 2018 vs. Q3 2017:
in USD		-8.2	%		-30.4	%		-23.5	%		21.9	%		-9.4	%		4.8	%		-7.5	%
due to currency fluctuation		-			-6.8	%		-4.8	%		-7.0	%		-2.2	%		-5.5	%		-4.2	%
Sales in local currency (non-GAAP)		-8.2	%		-23.6	%		-18.7	%		28.9	%		-7.2	%		10.3	%		-3.3	%

# of new distributors-Q3 2018 ⁽¹⁾		892			42			22			139			253			763			1,219
# of new distributors-Q3 2017 ⁽¹⁾		1,066			33			32			66			313			722			1,166
% change		-16.3	%		27.3	%		-31.3	%		110.6	%		-19.2	%		5.7	%		4.5	%

# of new Master Affiliates-Q3 2018		60			1			1			14			7			31			54
# of new Master Affiliates-Q3 2017		112			1			3			5			18			26			53
% change		-46.4	%		0.0	%		-66.7	%		180.0	%		-61.1	%		19.2	%		1.9	%

# of Product orders-Q3 2018		25,354			1,093			538			956			2,909			7,645			13,141
# of Product orders-Q3 2017		30,681			1,375			693			766			3,079			6,810			12,723
% change		-17.4	%		-20.5	%		-22.4	%		24.8	%		-5.5	%		12.3	%		3.3	%

Income statement data
(amounts in thousands)	Three months ended
	September 30, 2018						September 30, 2017
	Amount			% of net sales			Amount			% of net sales

Net sales	$	8,337			100.0	%	$	9,069			100.0	%
Costs and expenses:
Cost of products sold		2,384			28.6			1,950			21.5
Distributor royalties and commissions		2,640			31.7			3,199			35.3
Selling, general and administrative		3,845			46.1			4,254			46.9

Loss from operations		(532	)		(6.4	)		(334	)		(3.7	)
Interest income		23			0.3			25			0.3
Interest expense		(16	)		(0.2	)		(27	)		(0.3	)
Other expense		(9	)		(0.1	)		(4	)		(0.1	)

Loss before income taxes		(534	)		(6.4	)		(340	)		(3.8	)
Provision (benefit) for income taxes		8			0.1			(21	)		(0.3	)

Net loss	$	(542	)		(6.5	%)	$	(319	)		(3.5	%)

Loss per common share-Basic and Diluted	$	(0.29	)				$	(0.17	)

	Nine months ended
	September 30, 2018						September 30, 2017
	Amount			% of net sales			Amount			% of net sales

Net sales	$	26,800			100.0	%	$	31,854			100.0	%
Costs and expenses:
Cost of products sold		7,090			26.4			7,114			22.3
Distributor royalties and commissions		8,859			33.1			11,253			35.3
Selling, general and administrative		12,547			46.8			13,812			43.4

Loss from operations		(1,696	)		(6.3	)		(325	)		(1.0	)
Interest income		70			0.3			77			0.2
Interest expense		(93	)		(0.4	)		(79	)		(0.2	)
Other income		8			-			40			0.1

Loss before income taxes		(1,711	)		(6.4	)		(287	)		(0.9	)
Provision for income taxes		48			0.2			28			0.1

Net loss	$	(1,759	)		(6.6	%)	$	(315	)		(1.0	%)

Loss per common share-Basic and Diluted	$	(0.95	)				$	(0.17	)

10.2	Change in Terms Agreement (revolving credit facility) dated September 11, 2018 among Reliv International, Inc., Reliv, Inc., Reliv World Corporation, and SL Technology, Inc., as Borrowers and Enterprise Bank & Trust (filed herewith).

31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended (filed herewith).

31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended (filed herewith).

32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

RELIV’ INTERNATIONAL, INC.


By:	/s/ Ryan A. Montgomery
	Ryan A. Montgomery, Chief Executive Officer

	Date: November 14, 2018


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

Date: November 14, 2018

	I, Ryan A. Montgomery, certify that:

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

																			International
	United States			AUS/NZ			Canada			Mexico			Europe			Asia			-- Total
Sales in USD (in 000's):
YTD ended 9/30/2018	$	20,505		$	565		$	557		$	348		$	3,002		$	1,823		$	6,295
YTD ended 9/30/2017	$	24,791		$	711		$	681		$	352		$	3,399		$	1,920		$	7,063

% change in sales-YTD 2018 vs. YTD 2017:
in USD		-17.3	%		-20.5	%		-18.2	%		-1.1	%		-11.7	%		-5.1	%		-10.9	%
due to currency fluctuation		-			-1.1	%		1.2	%		-1.1	%		4.9	%		-3.6	%		1.3	%
Sales in local currency (non-GAAP)		-17.3	%		-19.4	%		-19.4	%		0.0	%		-16.6	%		-1.5	%		-12.2	%

# of new distributors-YTD 2018 ⁽²⁾		2,849			120			80			362			968			1,966			3,496
# of new distributors-YTD 2017 ⁽²⁾		3,661			138			117			205			1,308			2,111			3,879
% change		-22.2	%		-13.0	%		-31.6	%		76.6	%		-26.0	%		-6.9	%		-9.9	%

# of new Master Affiliates-YTD 2018		244			7			11			39			68			112			237
# of new Master Affiliates-YTD 2017		406			6			8			13			92			184			303
% change		-39.9	%		16.7	%		37.5	%		200.0	%		-26.1	%		-39.1	%		-21.8	%

# of Product orders-YTD 2018		78,083			3,390			1,773			2,594			9,863			21,311			38,931
# of Product orders-YTD 2017		97,413			4,266			2,334			2,561			12,359			19,692			41,212
% change		-19.8	%		-20.5	%		-24.0	%		1.3	%		-20.2	%		8.2	%		-5.5	%

	I, Steven D. Albright, certify that:

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