~~Note~~ 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),~~Reliv International, Inc. 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:~~Subsidiaries

	Condensed Consolidated Statements of
	~~Level~~ 1:	~~Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.~~ Stockholders' Equity

	~~Level~~ 2:	~~Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.~~(unaudited)
		~~These include quoted prices for similar assets or liabilities in active markets or similar assets or~~

										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

										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

~~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 the Company's financial instruments are approximately as follows:~~

Description

Carrying Value

Fair Value

Level 1

Level 2

Level 3

September 30, 2017

Long-term debt
$ 2,626,661 $ 2,626,661 - $ 2,626,661 -
Note receivable
1,548,910 1,742,000 - 1,742,000 -
Marketable securities
327,000 327,000 $ 327,000 - -

December 31, 2016

Long-term debt
$ 2,907,437 $ 2,907,437 - $ 2,907,437 -
Note receivable
1,630,164 1,812,000 - 1,812,000 -
Marketable securities
296,000 296,000 $ 296,000 - -


	~~Long-term debt~~~~: The fair value of the Company's term and revolver loans approximate carrying value as these loans were incurred within the past~~ ~~two~~ ~~years and have variable market-based interest rates which reset every~~ ~~thirty~~ ~~days.~~

	~~Note receivable~~~~: The Company's note receivable is a variable rate residential mortgage-based~~See notes to 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 their respective balances.statements.

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

March 31, 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.

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.

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 March 31, 2020, we had $2,828,639 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.

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.

●

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

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

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.

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

3. Related Parties

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

	March 31		December 31
Assets and liabilities - related parties	2020		2019

Notes & accounts receivables and deposits - current
Deposits with Nutracom for inventory	$	887,887	$	941,154
Note receivable - distributor		132,598		130,629
Note receivable - Nutracom unsecured DTD 6/1/2019		19,904		-
Note receivable - Nutracom unsecured DTD 10/1/2019		12,398		-
Other miscellaneous receivables		38,460		27,445
	$	1,091,247	$	1,099,228


Notes & accounts receivables - non-current
Note receivable - distributor	$	1,117,546	$	1,151,443
Note receivable - Nutracom unsecured DTD 6/1/2019		440,679		460,583
Note receivable - Nutracom unsecured DTD 10/1/2019		698,765		711,163
Unbilled receivables: Straight line rent revenue greater than rental billings		133,940		95,732
	$	2,390,930	$	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	$	459,978	$	430,907

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

Remainder of 2020	$	98,701
2021		271,037
2022		288,294
2023		306,655
2024		326,190
Thereafter		1,131,013
	$	2,421,890

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

3. Related Parties (continued)

	Three months ended March 31
Revenue and expense - related parties	2020		2019

Other revenue	$	175,753	$	158,566

Selling, general and administrative expense:
Fullfillment & professional fees		159,984		151,102

Interest income on promissory notes		38,346		47,843
Royalty income (other income/expense)		13,872		-
Gain on sale of fixed assets		-		434,549

Finished goods inventory purchased from Nutracom	$	2,036,600	$	979,900

At March 31, 2020, we had $1.01 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

~~Note~~ 4--

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

~~Debt~~

September 30

December 31

2017

2016

Term loan
$ 2,626,661 $ 2,843,301
Notes payable
- 64,136
2,626,661 2,907,437
Less current portion
2,626,661 389,096
Total long-term debt
$ - $ 2,518,341

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

March 31, 2020
Revolving line of credit	$	500,000	$	500,000		-	$	500,000		-
Note receivable - distributor		1,250,144		1,372,000		-		1,372,000		-
Notes receivable - Nutracom		1,171,746		1,235,000		-		-	$	1,235,000


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).

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)

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).

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

4.Fair Value of Financial Instruments (continued)

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

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. At March 31, 2020, outstanding borrowings under the revolving line of credit were $500,000 at an interest rate of 4.36%.

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.

Borrowings under the lending agreement continue to be secured by all of our tangible and intangible assets and by a mortgage on the real estate of our headquarters facility. At March 31, 2020, we were in compliance with our loan covenant requirements.

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.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act became effective in the U.S. Under the 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, at March 31, 2020, we have recorded a $225,000 estimated income tax benefit for NOL carryback.

The effective income tax rate was (36.8)% and 7.1% for the year to date periods ended March 31, 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.

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

6. Income Taxes (continued)

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.

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 March 31, 2020 and 2019, total returns as a percent of net sales were each 0.04%, respectively.

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
	March 31
	2020		2019
Net sales by product category
Nutritional and dietary supplements	$	8,843,151	$	8,497,350
Other supplements		417,229		-
Sales aids, membership fees, and other		288,437		313,647
Freight income		558,095		519,941
Other revenue		175,753		158,566
Total net sales	$	10,282,665	$	9,489,504

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

	Three months ended
	March 31
	2020		2019
Net sales by geographic region
United States	$	7,842,435	$	7,111,773
Australia/New Zealand		170,122		177,048
Canada		158,661		199,399
Mexico		128,621		136,026
Europe ⁽¹⁾		962,092		938,668
Asia ⁽²⁾		1,020,734		926,590
Total net sales	$	10,282,665	$	9,489,504

	~~Effective~~ ~~September 30, 2015,~~ ⁽¹⁾	Europe consists of United Kingdom, Ireland, France, Germany, Austria, and the ~~Company entered into a series of lending agreements with a new primary lender which include agreements for a~~ ~~$3.25~~ ~~million term loan and a~~ ~~$3.5~~ ~~million revolving credit facility.~~ ~~These lending agreements replaced similar borrowings under agreements with the Company’s former primary lender.~~Netherlands.

⁽²⁾	~~The~~ ~~$3.25~~ ~~million term loan is for a period~~Asia consists of ~~three~~ ~~years~~Philippines and ~~requires monthly term loan payments, under a~~ ~~ten~~~~-year amortization, consisting of principal of~~ ~~$27,080~~ ~~plus interest with a balloon payment for the outstanding balance due and payable on~~ ~~September 30, 2018.~~ ~~Accordingly, the outstanding term loan balance is presented as a current liability in the~~ ~~September 30, 2017~~ ~~consolidated balance sheet. The term loan's interest rate is based on the~~ 30~~-day LIBOR plus~~ ~~2.25%~~ ~~and was~~ ~~3.48%~~ at ~~September 30, 2017.~~

	~~The~~ ~~$3.5~~ ~~million revolving line of credit agreement, originally dated~~ ~~September 30, 2015,~~ ~~accrues interest at a floating interest rate based on the~~ 30~~-day LIBOR plus~~ ~~2.25%~~ ~~and had an original term of~~ ~~one~~ ~~year.~~ ~~Effective~~ ~~September 30, 2016,~~ ~~the revolving line of credit agreement was extended under similar terms to~~ ~~April 30, 2018.~~ ~~As of~~ ~~September 30, 2017,~~ ~~there were~~ no ~~outstanding borrowings on the revolving line of credit. In~~ ~~October 2017,~~ ~~the Company borrowed~~ ~~$500,000~~ ~~under the revolving line of credit.~~

	Borrowings under the lending agreements are secured by all tangible and intangible assets of the Company, a whole life insurance policy on the life of the Company's Chief Executive Officer, and by a mortgage on the real estate of the Company's headquarters.

	~~The lending agreements include quarterly financial covenants requiring the Company to maintain net tangible worth of~~ ~~not~~ ~~less than~~ ~~$9.5~~ ~~million, and~~ ~~i) a cumulative minimum EBITDA requirement of~~ ~~$600,000~~ ~~and~~ ~~$800,000~~ ~~for the fiscal periods ending~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2017,~~ ~~respectively; and ii) a minimum EBITDA of~~ ~~$200,000~~ ~~for the quarter ended~~ ~~March 31, 2018.~~

	As defined, EBITDA equals the Company's consolidated net income for such period, before interest expense, income tax expense, depreciation and amortization, and management fees, and further adjusted to exclude any gain or loss on the sale of assets, other extraordinary gains or losses, and any ~~one~~~~-time adjustment approved by the lender.~~ At ~~September 30, 2017,~~ ~~the Company was in compliance with its loan covenant requirements.~~

	The Company anticipates it will be able to refinance its term loan and renew its revolving line of credit with its current lender prior to the respective maturity dates of each agreement; however, there can be no ~~assurance that the Company will be successful in refinancing its outstanding loan balances prior to maturity.~~ Company management believes that the Company's cash on hand and its ability, if necessary, to borrow a significant portion of or liquidate the cash surrender value of the Company's key-man life insurance policy, will be sufficient to meet the Company's working capital requirements and debt service requirements for the next ~~twelve~~ ~~months.~~Malaysia.

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.

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements
(Unaudited)

8. Lease Revenue (continued)

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 $89,000 and $72,000 for the three month periods ending March 31, 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	$	259,299	$	144,675
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	$	1,987,960	$	2,121,900

~~Note~~ 5-- 9. Subsequent Events	~~Taxes~~

	~~The interim financial statement provision (benefit) for income taxes is different from the amounts computed by applying the~~
	~~United States federal statutory income tax rate of~~ ~~34%.~~ ~~In summary, the reasons for these differences are as follows:~~

Nine months ended September 30

2017

2016

Income taxes (benefit) at U.S. statutory rate
$ (98,000 ) $ (293,000 )
Change in valuation allowance
201,000 363,000
State income taxes, net of federal benefit
11,000 20,000
Higher / (lower) effective taxes on earnings/losses in certain foreign countries
(103,000 ) (50,000 )
Foreign corporate income taxes
28,000 66,000
Other, net
(11,000 ) (71,000 )

$ 28,000 $ 35,000

As described in Note 5, on April 28, 2020, our revolving line of credit agreement with our primary lender was extended six months to October 28, 2020.

	~~For fiscal year~~ ~~2016,~~ ~~beginning in the~~ ~~second~~ ~~quarter, the Company determined that it was more likely than~~ ~~not~~ ~~that~~ ~~2016~~ ~~U.S. federal and various state net operating losses primarily generated in~~ ~~2016~~ ~~would~~ ~~not~~ ~~be realized based on projections of future U.S. taxable income, estimated reversals of existing taxable timing differences, and other considerations.~~ ~~Accordingly, the Company's full year~~ ~~2016~~ ~~income tax provision included the impact of recording a total valuation allowance of~~ ~~$292,000~~ ~~against all U.S. net deferred tax assets, including the~~ ~~2016~~ ~~losses generated, from a U.S. tax perspective.~~

	~~From a U.S. tax perspective, for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017,~~ ~~the Company increased its valuation allowance for the portion of federal and state net operating losses it estimates to generate in~~ ~~2017.~~

	~~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 is~~ ~~not~~ ~~liable to pay the majority of the alleged tax deficiencies. As of~~ ~~December 31, 2010,~~ ~~management estimated and reserved approximately~~ ~~$185,000~~ ~~in taxes and interest for resolution of this matter and recorded this amount within Selling, General, and Administrative expense in the~~ ~~2010~~ ~~Consolidated Statement of Income. In~~ ~~2011,~~ ~~the Company made good faith deposits to the local tax authority under the tax agency's administrative judicial resolution process. As of~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016,~~ ~~management's estimated reserve (net of deposits) for this matter is approximately~~ ~~$171,000~~ ~~and~~ ~~$158,000,~~ ~~respectively. There has been~~ no ~~change in this matter during the~~ ~~first~~~~nine~~ ~~months of~~ ~~2017.~~

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 recently enacted CARES Act Payroll Protection Program (“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.

~~Note~~ 6--	~~Restructuring Activities -~~ ~~2016~~

	In ~~May 2016,~~ ~~the Company implemented an employee headcount cost reduction program resulting in the reduction of approximately~~ 9% ~~of the Company's worldwide employees.~~ ~~The total cost of this program, representing severance and benefits, was approximately~~ ~~$275,000,~~ ~~and was included in the company's operating results for the quarter ended~~ ~~June 30, 2016.~~ ~~The aggregate annual salaries of the affected employees was approximately~~ ~~$1,100,000.~~

	At ~~June 30, 2016,~~ ~~the remaining reserve for severance and benefits under this program was approximately~~ ~~$47,000,~~ ~~and was paid out in the~~ ~~third~~ ~~quarter of~~ ~~2016.~~

~~Note~~ 7--	~~Recent Accounting Standards~~

	~~Adopted in~~ ~~2017~~

	In ~~July 2015,~~ ~~the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)~~ ~~No.~~~~2015~~-~~11,~~~~Inventory (Topic~~ ~~330~~~~): Simplifying the Measurement of Inventory,~~ which requires inventory within the scope of this update to be measured at the lower of its cost or net realizable value, with net realizable value being the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. As required, the Company adopted this new standard effective ~~January 1, 2017.~~ ~~The Company's adoption of this standard did~~ ~~not~~ ~~have any impact on its consolidated financial statements and related disclosures.~~

	In ~~March 2016,~~ ~~the FASB issued ASU~~ ~~No.~~~~2016~~-~~09,~~~~Compensation - Stock Compensation (Topic~~ ~~781~~~~): Improvements to Employee Share-Based Payment Accounting.~~ This amendment is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liability, forfeitures, and classification on the statement of cash flows. As required, the Company adopted this new standard effective ~~January 1, 2017.~~ Concurrently with the adoption of this new standard, the Company revised its accounting policy to recognize share-based compensation costs based on actual stock option forfeitures versus previous accounting guidance which required the Company to recognize share-based compensation costs based on management's estimate of future stock option forfeitures. The Company's adoption of this standard did ~~not~~ ~~have any impact on its consolidated financial statements and related disclosures.~~

	~~Not~~ ~~Yet Adopted~~

	In ~~May 2014,~~ ~~the FASB issued ASU~~ ~~No.~~~~2014~~-~~09,~~~~Revenue from Contracts with Customers~~, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing U.S. GAAP revenue recognition guidance and will be adopted by the Company, when required, on ~~January 1, 2018.~~ The new standard permits the use of either the retrospective or modified retrospective transition method. The Company anticipates selecting the modified retrospective method. The Company's primary source of revenue is from the sale of nutritional products to the Company's independent distributors whereby revenue is currently recognized when product is shipped and risk of loss has passed to the customer. Upon adoption of this new standard, the Company believes that the timing of revenue recognition related to nutritional products sales will remain materially consistent with its current practice. Based on the evaluation completed to date, the Company has identified membership fee-type revenue as an area that will be affected by the new standard resulting in, upon adoption on ~~January 1, 2018,~~ ~~an estimated reduction to retained earnings ranging from~~ ~~$350,000~~ to ~~$400,000;~~ ~~(with such amount subject to final~~ ~~2017~~ ~~fiscal year balances). Overall, the Company continues to finalize its evaluation of the standard's adoption will have on its consolidated financial statements and related disclosures.~~

	In ~~February 2016,~~ ~~the FASB issued ASU~~ ~~No.~~~~2016~~-2,~~Leases (Topic~~ ~~842~~) ~~which supercedes 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 term greater than~~ ~~twelve~~ ~~months on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. This update is effective for fiscal years beginning after~~ ~~December 15, 2018~~ and interim periods within those fiscal years, with earlier application permitted. 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 is evaluating its transition method and other effects that the new standard on its consolidated financial statements and related disclosures.

~~FORWARD-LOOKING~~FORWARD-LOOKING STATEMENTS

This quarterly report includes both historical and ~~“forward-looking~~“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~~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 ~~manufacturer~~ 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 ~~network marketing~~direct selling system utilizing independent distributors. Sales in the United States represented approximately ~~77.8%~~76.3% of worldwide net sales for the ~~nine~~three months ended ~~September 30, 2017 and 78.0% of worldwide net sales~~March 31, 2020 compared to approximately 74.9% for the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2019. Our international operations currently generate sales through distributor networks with facilities in Australia, Canada, ~~Indonesia,~~ 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, 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, 2017,~~March 31, 2020, consisted of approximately ~~34,490~~13,680 registered customers and 25,550 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. ~~U.S. generally accepted accounting~~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.

Impact of COVID-19 Pandemic

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 ~~10%~~20% to 40% of suggested retail price, depending on the rank of a particular distributor. ~~Handling and freight~~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.

~~Cost~~Our cost of ~~products~~goods sold ~~primarily~~ consists of ~~expenses related to raw materials, labor, quality control and overhead directly associated~~the purchase price of the products, along 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.~~where applicable. Cost of ~~products~~goods sold ~~is impacted by~~also include 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.~~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, ~~except for those in manufacturing,~~ all other selling expenses, marketing, promotional expenses, travel and other corporate administrative expenses. These other corporate administrative expenses include professional fees, ~~non-manufacturing~~ depreciation and amortization, occupancy costs, communication costs and other similar operating expenses. Selling, general and administrative expenses can be affected by a number of factors, including staffing levels and the cost of providing competitive salaries and benefits; the amount we decide to invest in distributor training and motivational initiatives; and the cost of regulatory compliance.

Results of Operations

Net Sales. Overall net sales ~~decreased~~increased by ~~15.9%~~8.4% in the three months ended ~~September 30, 2017~~March 31, 2020 compared to the same period in ~~2016.~~2019. During the ~~third~~first quarter of ~~2017~~2020 (“~~Q3 2017”~~Q1 2020”), sales in the United States ~~decreased~~increased by ~~17.5%,~~10.3% and international sales ~~decreased~~increased by ~~9.8%~~2.6% over the prior-year period. International sales, when reported in U.S. dollars, were ~~positively~~negatively impacted in the aggregate by a ~~weaker~~stronger U.S. dollar versus most of the currencies ~~of the markets where~~in which we doconduct business. Excluding the impact of currency exchange fluctuation, international sales ~~decreased~~increased by ~~10.6%~~2.9%.

The following table summarizes net sales by geographic market for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016.~~2019.

Three months ended September 30,

2017

2016

Change from prior year

Amount

% of Net
Sales

Amount

% of Net
Sales

Amount

%

(dollars in thousands)

United States
$ 7,082 78.1
%
$ 8,581 79.6
%
$ (1,499
)
(17.5
)%
Australia/New Zealand
224 2.5 242 2.2 (18
)
(7.4
)
Canada
200 2.2 250 2.3 (50
)
(20.0
)
Mexico
105 1.2 119 1.1 (14
)
(11.8
)
Europe
891 9.8 1,166 10.8 (275
)
(23.6
)
Asia
567 6.2 427 4.0 140 32.8
Consolidated total
$ 9,069 100.0
%
$ 10,785 100.0
%
$ (1,716
)
(15.9
)%

Three months ended March 31,

2020

2019

Change from prior year

Amount

% of Net Sales

Amount

% of Net
Sales

Amount

%

(dollars in thousands)

United States
$ 7,842 76.3
%
$ 7,112 74.9
%
$ 730 10.3
%
Australia/New Zealand
170 1.6 177 1.9 (7
)
(4.0
)
Canada
159 1.5 199 2.1 (40
)
(20.1
)
Mexico
129 1.3 136 1.4 (7
)
(5.1
)
Europe
962 9.4 939 9.9 23 2.4
Asia
1,021 9.9 927 9.8 94 10.1

Consolidated total
$ 10,283 100.0
%
$ 9,490 100.0
%
$ 793 8.4
%

The following ~~table summarizes net sales by geographic market for the nine months ended September 30, 2017 and 2016.~~

Nine months ended September 30,

2017

2016

Change from prior year

Amount

% of Net
Sales

Amount

% of Net
Sales

Amount

%

(dollars in thousands)

United States
$ 24,791 77.8
%
$ 27,191 78.0
%
$ (2,400
)
(8.8
)%
Australia/New Zealand
711 2.2 825 2.4 (114
)
(13.8
)
Canada
681 2.2 799 2.3 (118
)
(14.8
)
Mexico
352 1.1 419 1.2 (67
)
(16.0
)
Europe
3,399 10.7 4,344 12.4 (945
)
(21.8
)
Asia
1,920 6.0 1,297 3.7 623 48.0

Consolidated total
$ 31,854 100.0
%
$ 34,875 100.0
%
$ (3,021
)
(8.7
)%
~~The following table sets~~tables set forth, as of ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, the number of our ~~active distributors~~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. Many individuals join Reliv as distributors to obtain our products at a discount and may not participate in the Reliv business opportunity. 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. In February 2016, we introduced a formal Preferred Customer program in the United States and Canada. As a result, we are including Preferred Customers as part of our Active Distributor count. Preferred Customer programs were previously in place in Europe and other foreign markets. Preferred Customers represent approximately 5,010 and 4,720 of the Active Distributor count as of September 30, 2017 and 2016, respectively.

September 30, 2017

September 30, 2016

% 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
23,860 2,750 28,700 4,110 (16.9
)%
(33.1
)%
Australia/New Zealand
1,180 110 1,580 130 (25.3
)
(15.4
)
Canada
710 80 890 140 (20.2
)
(42.9
)
Mexico
730 60 1,010 90 (27.7
)
(33.3
)
Europe
3,940 440 5,230 520 (24.7
)
(15.4
)
Asia
4,070 370 3,040 330 33.9 12.1

Consolidated total
34,490 3,810 40,450 5,320 (14.7
)%
(28.4
)%
Retail and Preferred Customers/Active Distributors/Master Affiliates and Above by Market

As of 3/31/2020

Retail
Customers

Preferred
Customers

Active
Distributors

Total Customers
and Distributors

Master
Affiliates and
Above

United States
3,580 1,450 17,460 22,490 1,860
Australia/New Zealand
50 210 650 910 80
Canada
80 30 470 580 60
Mexico
20 100 1,050 1,170 80
Europe
690 660 1,620 2,970 260
Asia
1,370 5,440 4,300 11,110 610

Consolidated Total
5,790 7,890 25,550 39,230 2,950
20

As of 3/31/2019

Retail
Customers

Preferred
Customers

Active
Distributors

Total Customers
and Distributors

Master
Affiliates and
Above

United States
3,960 1,560 18,040 23,560 1,880
Australia/New Zealand
40 220 710 970 70
Canada
100 20 520 640 60
Mexico
10 110 1,020 1,140 80
Europe
560 1,140 1,800 3,500 300
Asia
3,020 3,950 3,210 10,180 350

Consolidated Total
7,690 7,000 25,300 39,990 2,740

Change in %

Retail
Customers

Preferred
Customers

Active
Distributors

Total Customers
and Distributors

Master
Affiliates and
Above

United States
-9.6 % -7.1 % -3.2 % -4.5 % -1.1 %
Australia/New Zealand
25.0 % -4.5 % -8.5 % -6.2 % 14.3 %
Canada
-20.0 % 50.0 % -9.6 % -9.4 % 0.0 %
Mexico
100.0 % -9.1 % 2.9 % 2.6 % 0.0 %
Europe
23.2 % -42.1 % -10.0 % -15.1 % -13.3 %
Asia
-54.6 % 37.7 % 34.0 % 9.1 % 74.3 %

Consolidated Total
-24.7 % 12.7 % 1.0 % -1.9 % 7.7 %
21
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 3/31/2020
$ 7,842 $ 170 $ 159 $ 129 $ 962 $ 1,021 $ 2,441
Quarter ended 3/31/2019
$ 7,112 $ 177 $ 199 $ 136 $ 939 $ 927 $ 2,378

% change in sales-Q1 2020 vs. Q1 2019:

in USD
10.3 % -4.0 % -20.1 % -5.1 % 2.4 % 10.1 % 2.6 %
due to currency fluctuation
- -7.7 % -0.4 % -2.8 % -1.8 % 3.0 % -0.3 %
Sales in local currency (non-GAAP)
10.3 % 3.7 % -19.7 % -2.3 % 4.2 % 7.1 % 2.9 %

# of new Preferred Customers-Q1 2020
288 12 3 15 87 409 526
# of new Preferred Customers-Q1 2019
329 17 6 12 144 1,987 2,166
% change
-12.5 % -29.4 % -50.0 % 25.0 % -39.6 % -79.4 % -75.7 %

# of new distributors-Q1 2020
694 10 13 99 127 495 744
# of new distributors-Q1 2019
573 11 6 239 117 508 881
% change
21.1 % -9.1 % 116.7 % -58.6 % 8.5 % -2.6 % -15.6 %

# of new Master Affiliates-Q1 2020
175 9 10 3 22 99 143
# of new Master Affiliates-Q1 2019
140 1 0 8 19 99 127
% change
25.0 % 800.0 % --- -62.5 % 15.8 % 0.0 % 12.6 %

# of Product orders-Q1 2020
27,467 994 548 966 3,119 8,532 14,159
# of Product orders-Q1 2019
25,758 975 558 975 3,031 10,663 16,202
% change
6.6 % 1.9 % -1.8 % -0.9 % 2.9 % -20.0 % -12.6 %
22
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 ~~United States~~U.S. dollar, which our local management has no ability to influence. This is a meaningful measurement to management, and we believe this is a useful measurement to provide to shareholders.

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

International

United States

AUS/NZ

Canada

Mexico

Europe

Asia

-- Total

Sales in USD (in 000's):

Quarter ended 9/30/2017
$ 7,082 $ 224 $ 200 $ 105 $ 891 $ 567 $ 1,987
Quarter ended 9/30/2016
$ 8,581 $ 242 $ 250 $ 119 $ 1,166 $ 427 $ 2,204

% change in sales-Q3 2017 vs. Q3 2016:

in USD
-17.5 % -7.4 % -20.0 % -11.8 % -23.6 % 32.8 % -9.8 %
due to currency fluctuation
- 3.1 % 3.8 % 6.7 % 3.1 % -10.2 % 0.8 %
Sales in local currency (non-GAAP)
-17.5 % -10.5 % -23.8 % -18.5 % -26.7 % 43.0 % -10.6 %

# of new distributors-Q3 2017 ⁽¹⁾
1,066 33 32 66 313 722 1,166
# of new distributors-Q3 2016 ⁽¹⁾
1,437 66 34 94 394 377 965
% change
-25.8 % -50.0 % -5.9 % -29.8 % -20.6 % 91.5 % 20.8 %

# of new Master Affiliates-Q3 2017
112 1 3 5 18 26 53
# of new Master Affiliates-Q3 2016
129 6 5 3 26 17 57
% change
-13.2 % -83.3 % -40.0 % 66.7 % -30.8 % 52.9 % -7.0 %

# of Product orders-Q3 2017
30,681 1,375 693 766 3,079 6,810 12,723
# of Product orders-Q3 2016
35,824 1,557 891 868 4,480 3,334 11,130
% change
-14.4 % -11.7 % -22.2 % -11.8 % -31.3 % 104.3 % 14.3 %

International

United States

AUS/NZ

Canada

Mexico

Europe

Asia

-- Total

Sales in USD (in 000's):

YTD ended 9/30/2017
$ 24,791 $ 711 $ 681 $ 352 $ 3,399 $ 1,920 $ 7,063
YTD ended 9/30/2016
$ 27,191 $ 825 $ 799 $ 419 $ 4,344 $ 1,297 $ 7,684

% change in sales-YTD 2017 vs. YTD 2016:

in USD
-8.8 % -13.8 % -14.8 % -16.0 % -21.8 % 48.0 % -8.1 %
due to currency fluctuation
- 2.8 % 0.8 % -2.2 % -7.2 % -10.1 % -5.5 %
Sales in local currency (non-GAAP)
-8.8 % -16.6 % -15.6 % -13.8 % -14.6 % 58.1 % -2.6 %

# of new distributors-YTD 2017 ⁽²⁾
3,661 138 117 205 1,308 2,111 3,879
# of new distributors-YTD 2016
4,442 266 111 321 1,639 1,240 3,577
% change
-17.6 % -48.1 % 5.4 % -36.1 % -20.2 % 70.2 % 8.4 %

# of new Master Affiliates-YTD 2017
406 6 8 13 92 184 303
# of new Master Affiliates-YTD 2016
626 27 18 16 122 97 280
% change
-35.1 % -77.8 % -55.6 % -18.8 % -24.6 % 89.7 % 8.2 %

# of Product orders-YTD 2017
97,413 4,266 2,334 2,561 12,359 19,692 41,212
# of Product orders-YTD 2016
110,871 5,253 2,827 2,863 16,304 9,064 36,311
% change
-12.1 % -18.8 % -17.4 % -10.5 % -24.2 % 117.3 % 13.5 %
⁽¹⁾
~~The new distributor totals for Q3 2017 and Q3 2016 include 815 and 810, respectively, of new worldwide preferred customers.~~
⁽²⁾
~~The new distributor totals for YTD 2017 and YTD 2016 include 2,798 and 2,573, respectively, of new worldwide preferred customers.~~

United States

●
Net sales ~~declined~~ in the United States increased by 10.3% in Q~~3 2017~~Q1 2020 compared to the prior-year ~~quarter, as new distributor/preferred customer enrollments declined. Additionally, net sales~~quarter. Most measurements of ~~the new Fit3 products declined~~distributor activity increased in ~~Q3 2017~~Q1 2020 compared to the ~~net sales when launched~~prior-year quarter. Sales activity, particularly in March, was driven by strong consumer demand for our products in the ~~first quarter of 2017 (“Q1 2017”).~~
●
In ~~February 2017, we launched Fit3~~^TM~~, a new fitness and weight loss program. Net sales~~early stages of the ~~Fit3~~COVID-19 pandemic, as shown by a 6.6% increase in product ~~line represented 10.1% of net U.S. sales~~orders in Q1 ~~2017; however, net sales have declined and only represented 4.3% of net sales in the U.S. in Q3 2017.~~2020.

●
Products in the LunaRich line, including Reliv Now® and LunaRich X™, continued to perform well, constituting 1~~6.8%~~14.5% and ~~13.9%~~11.1% of net sales in the United States, respectively, in ~~Q3 2017.~~Q1 2020. Reliv NOW and LunaRich X represented ~~17.7%~~15.1% and ~~15.6%~~12.8%, respectively, of net sales in the United States in the prior-year quarter.

●
~~For the~~ ~~nine months ended September 30, 2017 (“YTD 2017”),~~Sales of our RLV line of hemp-extract products, introduced in June 2019, represented 6.6% of net sales in the ~~U.S. declined by 8.8% for~~United States in Q1 2020. Initially, the ~~same reasons as~~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 ~~decline~~RLV products are derived from organically-grown, non-GMO hemp. The RLV line represented 4.9% of net sales in ~~the Q3 2017 sales.~~United States in 2019.

●
Sales of Reliv Now and LunaRich X represented 16.4% and 13.5%, respectively, of YTD 2017 net sales in the United States. Sales of the Fit3 product line represented 6.9% of net sales in the United States for the YTD 2017 period.
●
~~Distributor/preferred customer~~New distributor enrollments ~~decreased by 25.8%~~ and new Master Affiliate qualifications ~~decreased~~increased by ~~13.2%~~21.1% and 25.0%, respectively, in ~~Q3 2017~~Q1 2020 compared to the ~~prior year~~prior-year quarter. Once again, this growth was driven by consumer demand and recruiting activities.

●
Distributor retention ~~was~~ ~~70.0%~~remained steady at 80.3% for the ~~twelve month~~twelve-month period ended ~~September 30, 2017~~March 31, 2020 as compared to ~~66.9% for~~ all of ~~2016.~~2019. Distributor retention is determined by the percentage of active distributors from ~~2016~~2019 that renewed their distributorships in ~~2017.~~2020.

●
Our average order size in Q~~3 2017 decreased~~Q1 2020 increased by ~~5.1%~~3.7% to ~~$312~~$398 at suggested retail value compared to the prior-year quarter. ~~The~~In addition, the number of product orders ~~decreased~~increased by ~~14.4%~~6.6% in ~~Q3 2017~~Q1 2020 compared to the prior year ~~quarter for the same reasons as the overall decrease in sales.~~quarter.

International Operations

●
The average foreign exchange rate for the U.S. dollar for ~~YTD 2017~~Q1 2020 was stronger ~~versus~~against all of the ~~British pound, Philippine peso, and Mexican peso when compared with the average exchange rates~~currencies in which we conduct business except for the ~~same period~~Philippine peso. Activity in ~~2016. The average exchange rates for~~certain markets has been severely impacted by more restrictive COVID-19 guidelines. In particular, activity in Mexico and the ~~Australian, New Zealand,~~Philippines were impacted more severely and ~~Canadian dollars increased versus the U.S. dollar~~earlier than in ~~YTD 2017.~~
●
~~We continue to review prices and margins in all of our international markets and~~ ~~have increased prices in nearly all foreign markets during 2017. We are also reviewing sales by product to phase out products with lower sales levels and gross margins as strategically appropriate.~~other markets.

●
Australia/New Zealand ~~and Canadian~~ net sales in Q~~3 2017 decreased~~Q1 2020 increased by ~~10.5% and 23.8%, respectively,~~3.7% in local currency compared to the prior-year quarter as the result of a 1.9% increase in product orders and an increase in new Master Affiliate qualifications.
●
Net sales in Canada decreased in Q1 2020 by 19.7% in local currency as the result of a decrease in most forms of distributor ~~activity in the market.~~activity.

●
Net sales in Mexico decreased by ~~18.5%~~2.3% in local currency in ~~Q3 2017~~Q1 2020 compared to the prior-year quarter. ~~Sales~~Distributor activity generally decreased during the quarter as new distributor enrollments and new Master Affiliate qualifications decreased by 58.6% and 62.5%, respectively, in Q1 2020 compared to the ~~number of product orders~~prior-year quarter. Product order count decreased by 0.9% in ~~Q3 2017 declined by 29.8% and 11.8%, respectively.~~Q1 2020 as well.

●
Net sales in Europe ~~decreased~~increased by ~~26.7%~~4.2% in local currency in ~~Q3 2017~~Q1 2020 compared to the prior-year quarter. ~~Distributor activity declined both~~Similar to the United States, consumer demand was up, particularly in ~~the form of new distributor and preferred customer enrollments and in new Master Affiliate qualifications in the region.~~March, with product orders up 2.9%.

●
Sales in Asia increased by ~~43.0%~~7.1% in local currency in ~~Q3 2017~~Q1 2020 compared to the prior-year ~~quarter led by strong sales growth~~quarter. Activity in the ~~Philippines. Local currency sales~~region is driven primarily by the Philippines, our largest market in the region. However, the COVID-19 guidelines implemented in the Philippines ~~improved 48.8% in Q3 2017 as all measures of distributor~~are extremely restrictive and have severely impaired our sales and activity ~~showed strong increases~~ in the ~~market. Regional incentive promotions and local sales campaigns involving our NOW for Kids nutritional product continue to show good success.~~market since mid-March.

23

Costs and Expenses

The following table sets forth selected results of our operations expressed as a percentage of net sales for the ~~three- and nine-month~~three-month periods ended ~~September 30, 2017~~March 31, 2020 and ~~2016.~~2019. Our results of operations for the periods described below are not necessarily indicative of results of operations for future periods.

Income statement data

(amounts in thousands)

Three months ended

September 30, 2017

September 30, 2016

Amount

% of net sales

Amount

% of net sales

Net sales
$ 9,069 100.0 % $ 10,785 100.0
%
Costs and expenses:

Cost of products sold
1,950 21.5 2,215 20.5
Distributor royalties and commissions
3,199 35.3 3,800 35.3
Selling, general and administrative
4,254 46.9 4,737 43.9

Income (loss) from operations
(334 ) (3.7 ) 33 0.3
Interest income
25 0.3 26 0.2
Interest expense
(27 ) (0.3 ) (29 ) (0.3 )
Other income (expense)
(4 ) (0.1 ) 42 0.4

Income (loss) before income taxes
(340 ) (3.8 ) 72 0.6
Benefit for income taxes
(21 ) (0.3 ) (62 ) (0.6 )

Net income (loss)
$ (319 ) (3.5 )% $ 134 1.2
%

Earnings (loss) per common share- Basic and Diluted⁽¹⁾
$ (0.17 ) $ 0.07

Nine months ended

September 30, 2017

September 30, 2016

Amount

% of net sales

Amount

% of net sales

Net sales
$ 31,854 100.0 % $ 34,875 100.0
%
Costs and expenses:

Cost of products sold
7,114 22.3 7,729 22.2
Distributor royalties and commissions
11,253 35.3 12,345 35.4
Selling, general and administrative
13,812 43.4 15,888 45.5

Loss from operations
(325 ) (1.0 ) (1,087 ) (3.1 )
Interest income
77 0.2 81 0.2
Interest expense
(79 ) (0.2 ) (82 ) (0.2 )
Other income
40 0.1 226 0.6

Loss before income taxes
(287 ) (0.9 ) (862 ) (2.5 )
Provision for income taxes
28 0.1 35 0.1

Net loss
$ (315 ) (1.0 )% $ (897 ) (2.6)
%

Loss per common share- Basic and Diluted⁽¹⁾
$ (0.17 ) $ (0.49 )
⁽¹⁾
~~The three- and nine-month per share amounts for 2016 have been adjusted for the 1-for-7 reverse stock split effective on October 4, 2016.~~
Income statement data

(amounts in thousands)

Q1 2020

Q1 2019

Amount

% of net sales

Amount

% of net sales

Net sales
$ 10,283 100.0
%
$ 9,490 100.0
%

Costs and expenses:

Cost of goods sold
2,655 25.8 2,434 25.6
Distributor royalties and commissions
3,328 32.4 3,118 32.9
Selling, general and adminstrative
3,778 36.7 3,739 39.4

Income from operations
522 5.1 199 2.1
Interest income
39 0.4 49 0.6
Interest expense
(6 ) (0.1 ) (5 ) (0.1 )
Other expense
(71 ) (0.7 ) (6 ) (0.1 )
Gain on sale of fixed assets
- - 435 4.6

Income before income taxes
484 4.7 672 7.1
Provision (benefit) for income taxes
(178 ) (1.7 ) 48 0.5

Net income
$ 662 6.4
%
$ 624 6.6
%

Earnings per common share-Basic & Diluted
$ 0.38 $ 0.36

24

Cost of ~~Products~~Goods Sold:

●
The cost of ~~products~~goods sold as a percentage of net sales in Q~~3 2017~~Q1 2020 increased by ~~1.0% compared to the prior-year period, and for YTD 2017, the percentage increased very slightly~~0.2% compared to the prior-year period. ~~For Q3 2017, the~~The cost of ~~products~~goods sold as a percentage of net sales in Q1 2020 was negatively impacted by ~~a free shipping promotion~~promotions in the ~~U.S.~~United States that reduced our freight income and increases in shipping rates by ~~slightly lower plant utilization.~~our primary outbound shipping vendor.

Distributor Royalties and Commissions:

●
D~~istributor~~Distributor royalties and commissions as a percentage of net sales for ~~Q3 2017 and YTD 2017 remained relatively steady~~Q1 2020 decreased by 0.5% of net sales when compared to the prior-year ~~periods. Overall,~~period. This decrease is due to price increases in the United States and other markets in the latter half of 2019 in which 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.~~were not increased.

Selling, General and Administrative Expenses:

●
Selling, general and administrative (“SGA”) expenses ~~declined~~increased by $~~484,000~~$38,000 in ~~Q3 2017 and declined by $2.08 million in YTD 2017~~Q1 2020 compared to the prior-year ~~periods.~~period.

●
~~Salaries,~~SGA salaries, other staffing expenses, benefits, and incentive compensation ~~decreased~~increased in the aggregate by $~~887,000~~$28,000 in ~~YTD 2017,~~Q1 2020, compared to the prior-year period. ~~Total compensation expense decreased as the result of continued headcount reductions in the United States through attrition and a worldwide workforce reduction that took place in May 2016.~~

●
Sales and marketing expenses, excluding compensation, decreased in the aggregate by ~~$624,000~~$2,000 in ~~YTD 2017 vs.~~Q1 2020 compared to the prior-year period. ~~Significant components~~Components of the decrease include:

o
~~Conference~~$26,000 decrease in promotions expense, distributor conferences and ~~other corporate-sponsored distributor~~ meeting ~~expenses decreased by $280,000 as we have reduced the quantity of corporate-sponsored events and the cost of our major distributor conference.~~expenses.

o
$14,000 decrease in other sales and marketing expenses, including travel and video production expenses.
o
Offsetting these decreases is a $38,000 increase in Star Director and other distributor bonuses, credit card fees, and other expenses related to the level of ~~sales decreased by $308,000.~~sales.

●
Other general and administrative expenses ~~decreased~~increased by $~~543,000~~$13,000 in ~~YTD 2017~~Q1 2020 versus the prior-year period.
o
~~Research & development expenses, along with other foreign product compliance requirements decreased by $241,000 in YTD 2017 compared to the prior-year period.~~
o
~~Other~~ ~~significant decreases from YTD 2017 vs. YTD 2016 include:~~
■
~~Consulting, legal, and accounting fees decreased by $119,000.~~
■
~~Utility expenses decreased by $33,000.~~
■
~~Computer software maintenance expenses decreased by $55,000.~~
■
~~Shareholder communication and other SEC-related expenses decreased by $62,000.~~
o
~~Offsetting increases include an increase in directors’ fees of $52,000.~~

Other Income/Expense:

●
The other ~~income~~expense in ~~YTD~~ ~~2017 and YTD 2016~~Q1 2020 is primarily the result of foreign currency exchange ~~gains~~losses on intercompany debt denominated in U.S. dollars in certain of our subsidiaries.
●
Q1 2019 includes $435,000 in income on the sale of our manufacturing equipment as part of the asset sale with Nutracom.

Income Taxes:

●
We reported an income tax benefit of $178,000 for Q1 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. The remaining expense ~~of $28,000 for YTD 2017.~~is related to income taxes on our earnings in our Philippine entity and minimum U.S. state income tax expense.

●
See Note 56 of the Condensed Consolidated Financial Statements for additional detail regarding income ~~taxes, including a reconciliation of the income tax expense/benefit to the U.S. statutory rate for each period.~~taxes.

Net ~~Income~~Incom~~/Loss~~e:

●
We reported a net ~~loss~~income of ~~$319,000~~$662,000 in ~~Q3 2017~~Q1 2020 compared to net income of ~~$134,000~~$624,000 in the prior-year quarter. For YTD 2017, we reported a net loss of $315,000 compared to a net loss of $897,000 in the prior year-to-date period. The results from operations were significantly impacted by the decrease in net sales of 15.9% in Q3 2017 vs. Q3 2016, partially offset by lower expensesquarter as the result of improved sales and gross margin in the ~~continuing impact of~~quarter, coupled with the ~~reduction in selling, general and administrative expenses from last year’s cost reduction initiative.~~income tax benefit recognized under the CARES Act.

25

Financial Condition, Liquidity and Capital Resources

During the first ~~nine~~three months of ~~2017, we used $593,000~~2020, operating activities provided $1.26 million of net cash ~~from operating activities, $336,000~~and $23,000 of net cash was ~~used in~~provided by investing ~~activities, and we used $282,000 in financing~~ activities. This compares to ~~$763,000~~$127,000 of net cash ~~provided by~~used in operating activities, ~~$59,000~~$11,000 provided by investing activities, and ~~$904,000 used in~~$500,000 provided by financing activities in the same period of ~~2016.~~2019. Cash and cash equivalents ~~decreased~~increased by ~~$1.14~~$1.20 million to ~~$2.47~~$2.83 million as of ~~September 30, 2017~~March 31, 2020 compared to December 31, ~~2016.~~2019.

Significant changes in working capital items consisted of anan increase in inventory of ~~$313,000,~~$190,000, an increase in refundable income taxes of $223,000, an increase in prepaid expenses/other current assets of $365,000, and ~~a decrease~~an increase in accounts payable and accrued expenses ~~and other noncurrent liabilities~~ of ~~$633,000~~$1.21 million in the first ~~nine~~three months of ~~2017.~~2020. The increase in inventory is needed to manage the inventory levels in light of the growth in first quarter 2020 net sales, 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 ~~timing of production and shortfall of sales compared to forecast, and the decrease in accounts payable/accrued expenses is the result of reduced accrued distributor commissions related to the decline~~increase in sales in ~~September 2017 and reduced trade payables as of September 30, 2017 compared~~March 2020 relative to December ~~31, 2016.~~2019.

Investing activities during the first ~~nine~~three months of ~~2017~~2020 consisted of an investment of ~~$430,000~~$9,000 for capital expenditures, offset by payments received on ~~a distributor note~~notes receivable with related parties of ~~$81,000 and proceeds from the sale of equipment for $13,000. Financing~~$32,000. There were no financing activities during the first ~~nine~~three months of ~~2017 consisted of principal payments of $282,000 on long-term borrowings.~~2020.

Stockholders’ equity ~~decreased~~increased to ~~$14.8~~$11.72 million at ~~September 30, 2017~~March 31, 2020 compared to ~~$14.9~~$11.10 million at December 31, ~~2016.~~2019. The ~~decrease~~increase is due to our net ~~loss~~income during the first ~~nine~~three months of ~~2017~~2020 of ~~$315,000 offset by a favorable adjustment in foreign currency translation of $134,000.~~$662,000. Our working capital balance was ~~$1.80~~$2.73 million at ~~September 30, 2017~~March 31, 2020 compared to ~~$4.31~~$1.88 million at December 31, ~~2016.~~2019. The current ratio at ~~September 30, 2017~~March 31, 2020 was ~~1.29~~1.53 compared to ~~1.93~~1.47 at December 31, ~~2016. The decrease in our working capital is primarily due to the classification of our long-term debt as a current liability as the maturity of the term loan is within one year.~~2019.

~~Our~~ ~~$3.25 million term loan has a term of three years and requires monthly term loan payments, under a ten-year amortization, consisting of principal of $27,080 plus interest~~Effective with a ~~balloon payment~~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 ~~outstanding balance due and payable on September 30, 2018. The term loan's~~borrowing limit continued at $750,000. As renewed, the revolver’s interest rate iscontinued to be based on the 30-day LIBOR plus ~~2.25% and was 3.48% at September 30, 2017.~~
~~Our~~ ~~$3.5 million revolving line of credit agreement accrues interest at a floating interest rate based on the 30-day LIBOR plus 2.25% and has a maturity date of April 30, 2018.~~3.00%. As of ~~September 30, 2017, there were no outstanding borrowings on the~~March 31, 2020, we have borrowed $500,000 under our revolving line of credit. ~~In October 2017, we borrowed $500,000 under the revolving line of credit.~~
Borrowings under the ~~new~~ lending ~~agreements are~~agreement continue to be secured by all our tangible and intangible assets ~~a whole life insurance policy on the life of our Chief Executive Officer,~~ 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 recently enacted CARES Act Payroll Protection Program (“PPP”). In accordance with the PPP, we will use the loan proceeds of $862,000 primarily for payroll costs. The ~~lending agreements include quarterly covenants requiring us~~PPP SBA Note is scheduled to ~~maintain net tangible worth~~mature April 20, 2022 and has an interest rate of ~~not less than $9.5 million,~~1.0%. The PPP SBA Note is subject to the terms and i) a cumulative minimum EBITDA requirement of $600,000 and $800,000 for the fiscal periods ending September 30, 2017 and December 31, 2017, respectively; and ii) a minimum EBITDA of $200,000 for the quarter ended March 31, 2018.
~~As defined, EBITDA means~~ ~~our consolidated net income for such period, before interest expense, income tax expense, depreciation and amortization, and management fees, and further adjusted~~conditions applicable to ~~exclude any gain or loss on the sale of assets, other extraordinary gains or losses, and any one-time adjustment approved~~loans administered by the ~~lender. At September 30, 2017, we were in compliance with all applicable covenants.~~U.S. Small Business Administration under the CARES Act.

We ~~anticipate~~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 ~~be able~~require additional financial support to ~~refinance~~fund our ~~term loan~~operations and ~~renew~~execute our ~~revolving line~~business plan. As of ~~credit with our current lender prior to the respective maturity dates of each agreement; however, there can be no assurance that~~March 31, 2020, we ~~will be able to do so. Management believes~~ ~~that the~~had $2.83 million in cash ~~on hand~~ and ~~our ability, if necessary, to borrow a significant portion of or liquidate the~~ cash ~~surrender value of our key-man life insurance policy, will~~equivalents which may not be sufficient to ~~meet~~fund our ~~working~~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 ~~requirements~~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 ~~debt service requirements for~~leaseback-type transaction; (ii) monetizing the ~~next twelve months.~~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.

26

Critical Accounting Policies

A summary of our critical accounting policies and estimates is presented in our ~~2016~~2019 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March ~~28, 2017.~~27, 2020. Our critical accounting policies remain unchanged as of ~~September 30, 2017.~~March 31, 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 ~~September 30, 2017.~~March 31, 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 ~~September 30, 2017,~~March 31, 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 ~~third~~first quarter of ~~2017~~2020 that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

PART II – OTHER INFORMATION

I~~tem~~Item No. 6 – ~~Exhibits~~Exhibits

Exhibit
~~Number~~

Number
Document

10.1
Change in Terms Agreement (revolving credit facility) dated April 28, 2020 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).

101
Interactive Data Files, including the following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2017,~~March 31, 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 ~~(iv)~~(v) the Notes to Condensed Consolidated Financial Statements.

27

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/ Robert L.~~/s/ Ryan A. Montgomery
~~Robert L.~~Ryan A. Montgomery, ~~Chairman of the Board of Directors and~~ Chief Executive Officer

Date: ~~November 14, 2017~~
May 15, 2020

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

Date: ~~November 14, 2017~~
May 15, 2020

19
28

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

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

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

~~INDEX~~Part I – Financial Information


~~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	10 18
Item No. 4		Controls and Procedures	18 27

Part II – Other Information
~~Part II~~ ~~– Other Information~~

Item No. 6	Exhibits	~~Exhibits~~	18 27

PART I -- FINANCIAL INFORMATION

Item No. 1 - Financial Statements

Reliv International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

	September 30		December 31
	2017		2016
	(unaudited)
Assets

Current assets:
Cash and cash equivalents	$	2,465,411	$	3,606,817
Accounts receivable, less allowances of $25,800 in 2017 and $26,700 in 2016		33,705		126,113
Accounts and note due from employees and distributors		138,684		139,931
Inventories
Finished goods		2,702,561		2,629,541
Raw materials		2,035,138		1,728,136
Sales aids and promotional materials		139,895		130,153
Total inventories		4,877,594		4,487,830

Refundable income taxes		48,247		97,194
Prepaid expenses and other current assets		500,458		474,183
Total current assets		8,064,099		8,932,068

Other assets		335,711		305,137
Cash surrender value of life insurance		3,056,387		2,965,981
Note receivable due from distributor		1,434,739		1,521,005
Deferred income taxes		535,000		487,000
Intangible assets, net		2,230,745		2,400,234

Property, plant and equipment:
Land and land improvements		905,190		905,190
Building		9,943,531		9,943,512
Machinery & equipment		4,707,262		4,329,329
Office equipment		1,181,443		1,203,868
Computer equipment & software		2,250,209		2,218,766
		18,987,635		18,600,665
Less: Accumulated depreciation		13,189,768		12,746,363
Net property, plant and equipment		5,797,867		5,854,302

Total assets	$	21,454,548	$	22,465,727

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the ~~quarterly~~quarterly period ended March 31, 2020~~September~~ ~~30, 2017~~

(unaudited)	Three months ended September 30						Nine months ended September 30						Three months ended March 31
	2017			2016			2017			2016			2020			2019

Product sales	$	8,385,999		$	9,972,547		$	29,479,924		$	32,181,585		$	9,548,817		$	8,810,997
Handling & freight income		683,324			812,868			2,373,809			2,693,602
Freight income														558,095			519,941
Other revenue														175,753			158,566

Net sales		9,069,323			10,785,415			31,853,733			34,875,187			10,282,665			9,489,504

Costs and expenses:
Cost of products sold		1,949,670			2,214,633			7,113,647			7,729,508
Cost of goods sold														2,654,843			2,433,732
Distributor royalties and commissions		3,199,596			3,799,791			11,252,922			12,345,171			3,328,455			3,117,572
Selling, general and administrative		4,253,675			4,737,305			13,811,814			15,887,901			3,777,682			3,739,527

Total costs and expenses		9,402,941			10,751,729			32,178,383			35,962,580			9,760,980			9,290,831

Income (loss) from operations		(333,618	)		33,686			(324,650	)		(1,087,393	)
Income from operations														521,685			198,673

Other income (expense):
Interest income		25,277			26,199			76,630			80,689			39,662			49,262
Interest expense		(27,183	)		(28,982	)		(79,472	)		(82,161	)		(6,105	)		(5,412	)
Other income / (expense)		(4,579	)		41,575			40,517			226,519
Other income (expense)														(70,906	)		(5,428	)
Gain on sale of fixed assets														-			434,549

Income (loss) before income taxes		(340,103	)		72,478			(286,975	)		(862,346	)
Income before income taxes														484,336			671,644
Provision (benefit) for income taxes		(21,000	)		(62,000	)		28,000			35,000			(178,000	)		48,000

Net income (loss)	$	(319,103	)	$	134,478		$	(314,975	)	$	(897,346	)
Net income													$	662,336		$	623,644

Other comprehensive income (loss):
Foreign currency translation adjustment		43,666			(74,503	)		134,300			(296,116	)		(39,611	)		22,211

Comprehensive income (loss)	$	(275,437	)	$	59,975		$	(180,675	)	$	(1,193,462	)
Comprehensive income													$	622,725		$	645,855


Earnings (loss) per common share - Basic	$	(0.17	)	$	0.07		$	(0.17	)	$	(0.49	)
Earnings per common share - Basic & Diluted													$	0.38		$	0.36
Weighted average shares		1,845,000			1,846,000			1,845,000			1,846,000			1,746,000			1,746,000

Earnings (loss) per common share - Diluted	$	(0.17	)	$	0.07		$	(0.17	)	$	(0.49	)
Weighted average shares		1,845,000			1,846,000			1,845,000			1,846,000

~~Reliv International, Inc. and Subsidiaries~~

~~Condensed Consolidated Statements of Cash Flows~~
~~(unaudited)~~

Reliv International, Inc. and Subsidiaries

~~Notes to~~ Condensed Consolidated ~~Financial~~ Statements of Cash Flows
~~(Unaudited)~~(unaudited)

~~September 30, 2017~~

~~Note~~ 1--	~~Accounting Policies~~

	~~Basis of Presentation~~

	~~The accompanying unaudited condensed consolidated~~See notes to 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, 2016,~~ ~~filed~~ ~~March 28, 2017~~ ~~with the Securities and Exchange Commission.~~

	On ~~October 4, 2016,~~ ~~the Company effected a~~ 1~~-for-~~7 ~~reverse stock split of the Company's common stock.~~ Each stockholder's percentage ownership and proportional voting power remained unchanged as a result of the reverse stock split. All applicable share data, per share amounts, and related information in these Condensed Consolidated Financial Statements and notes thereto have been adjusted retroactively to give effect to the 1~~-for-~~7 ~~reverse stock split.~~

~~Note~~ 2--	~~Basic and Diluted Earnings (Loss) per Share~~

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

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


	~~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 earnings (loss) per share because their effect would be antidilutive or because the shares were deemed contingently issuable.~~ ~~Options and warrants to purchase~~ ~~265,001~~ ~~and~~ ~~267,184~~ ~~shares of common stock for the~~ ~~three~~ ~~months and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2016,~~ ~~respectively, were~~ ~~not~~ ~~included in the denominator for diluted earnings (loss) per share because their effect would be antidilutive or because the shares were deemed contingently issuable.~~ statements.

	Three months ended September 30,
	2017					2016					Change from prior year
	Amount		% of Net Sales			Amount		% of Net Sales			Amount			%
	(dollars in thousands)
United States	$	7,082		78.1	%	$	8,581		79.6	%	$	(1,499	)		(17.5	)%
Australia/New Zealand		224		2.5			242		2.2			(18	)		(7.4	)
Canada		200		2.2			250		2.3			(50	)		(20.0	)
Mexico		105		1.2			119		1.1			(14	)		(11.8	)
Europe		891		9.8			1,166		10.8			(275	)		(23.6	)
Asia		567		6.2			427		4.0			140			32.8
Consolidated total	$	9,069		100.0	%	$	10,785		100.0	%	$	(1,716	)		(15.9	)%

	Three months ended March 31,
	2020					2019					Change from prior year
	Amount		% of Net Sales			Amount		% of Net Sales			Amount			%
	(dollars in thousands)
United States	$	7,842		76.3	%	$	7,112		74.9	%	$	730			10.3	%
Australia/New Zealand		170		1.6			177		1.9			(7	)		(4.0	)
Canada		159		1.5			199		2.1			(40	)		(20.1	)
Mexico		129		1.3			136		1.4			(7	)		(5.1	)
Europe		962		9.4			939		9.9			23			2.4
Asia		1,021		9.9			927		9.8			94			10.1

Consolidated total	$	10,283		100.0	%	$	9,490		100.0	%	$	793			8.4	%

	Nine months ended September 30,
	2017					2016					Change from prior year
	Amount		% of Net Sales			Amount		% of Net Sales			Amount			%
	(dollars in thousands)
United States	$	24,791		77.8	%	$	27,191		78.0	%	$	(2,400	)		(8.8	)%
Australia/New Zealand		711		2.2			825		2.4			(114	)		(13.8	)
Canada		681		2.2			799		2.3			(118	)		(14.8	)
Mexico		352		1.1			419		1.2			(67	)		(16.0	)
Europe		3,399		10.7			4,344		12.4			(945	)		(21.8	)
Asia		1,920		6.0			1,297		3.7			623			48.0

Consolidated total	$	31,854		100.0	%	$	34,875		100.0	%	$	(3,021	)		(8.7	)%

	September 30, 2017				September 30, 2016				% 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		23,860		2,750		28,700		4,110		(16.9	)%		(33.1	)%
Australia/New Zealand		1,180		110		1,580		130		(25.3	)		(15.4	)
Canada		710		80		890		140		(20.2	)		(42.9	)
Mexico		730		60		1,010		90		(27.7	)		(33.3	)
Europe		3,940		440		5,230		520		(24.7	)		(15.4	)
Asia		4,070		370		3,040		330		33.9			12.1

Consolidated total		34,490		3,810		40,450		5,320		(14.7	)%		(28.4	)%

	As of 3/31/2020
	Retail Customers		Preferred Customers		Active Distributors		Total Customers and Distributors		Master Affiliates and Above


United States		3,580		1,450		17,460		22,490		1,860
Australia/New Zealand		50		210		650		910		80
Canada		80		30		470		580		60
Mexico		20		100		1,050		1,170		80
Europe		690		660		1,620		2,970		260
Asia		1,370		5,440		4,300		11,110		610

Consolidated Total		5,790		7,890		25,550		39,230		2,950

	As of 3/31/2019
	Retail Customers		Preferred Customers		Active Distributors		Total Customers and Distributors		Master Affiliates and Above


United States		3,960		1,560		18,040		23,560		1,880
Australia/New Zealand		40		220		710		970		70
Canada		100		20		520		640		60
Mexico		10		110		1,020		1,140		80
Europe		560		1,140		1,800		3,500		300
Asia		3,020		3,950		3,210		10,180		350

Consolidated Total		7,690		7,000		25,300		39,990		2,740

	Change in %
	Retail Customers			Preferred Customers			Active Distributors			Total Customers and Distributors			Master Affiliates and Above


United States		-9.6	%		-7.1	%		-3.2	%		-4.5	%		-1.1	%
Australia/New Zealand		25.0	%		-4.5	%		-8.5	%		-6.2	%		14.3	%
Canada		-20.0	%		50.0	%		-9.6	%		-9.4	%		0.0	%
Mexico		100.0	%		-9.1	%		2.9	%		2.6	%		0.0	%
Europe		23.2	%		-42.1	%		-10.0	%		-15.1	%		-13.3	%
Asia		-54.6	%		37.7	%		34.0	%		9.1	%		74.3	%

Consolidated Total		-24.7	%		12.7	%		1.0	%		-1.9	%		7.7	%

Distributor Activity by Market																			International
	United States			AUS/NZ			Canada			Mexico			Europe			Asia			-- Total
Sales in USD (in 000's):
Quarter ended 3/31/2020	$	7,842		$	170		$	159		$	129		$	962		$	1,021		$	2,441
Quarter ended 3/31/2019	$	7,112		$	177		$	199		$	136		$	939		$	927		$	2,378

% change in sales-Q1 2020 vs. Q1 2019:
in USD		10.3	%		-4.0	%		-20.1	%		-5.1	%		2.4	%		10.1	%		2.6	%
due to currency fluctuation		-			-7.7	%		-0.4	%		-2.8	%		-1.8	%		3.0	%		-0.3	%
Sales in local currency (non-GAAP)		10.3	%		3.7	%		-19.7	%		-2.3	%		4.2	%		7.1	%		2.9	%

# of new Preferred Customers-Q1 2020		288			12			3			15			87			409			526
# of new Preferred Customers-Q1 2019		329			17			6			12			144			1,987			2,166
% change		-12.5	%		-29.4	%		-50.0	%		25.0	%		-39.6	%		-79.4	%		-75.7	%

# of new distributors-Q1 2020		694			10			13			99			127			495			744
# of new distributors-Q1 2019		573			11			6			239			117			508			881
% change		21.1	%		-9.1	%		116.7	%		-58.6	%		8.5	%		-2.6	%		-15.6	%

# of new Master Affiliates-Q1 2020		175			9			10			3			22			99			143
# of new Master Affiliates-Q1 2019		140			1			0			8			19			99			127
% change		25.0	%		800.0	%		---			-62.5	%		15.8	%		0.0	%		12.6	%

# of Product orders-Q1 2020		27,467			994			548			966			3,119			8,532			14,159
# of Product orders-Q1 2019		25,758			975			558			975			3,031			10,663			16,202
% change		6.6	%		1.9	%		-1.8	%		-0.9	%		2.9	%		-20.0	%		-12.6	%

Income statement data
(amounts in thousands)	Three months ended
	September 30, 2017						September 30, 2016
	Amount			% of net sales			Amount			% of net sales

Net sales	$	9,069			100.0	%	$	10,785			100.0	%
Costs and expenses:
Cost of products sold		1,950			21.5			2,215			20.5
Distributor royalties and commissions		3,199			35.3			3,800			35.3
Selling, general and administrative		4,254			46.9			4,737			43.9

Income (loss) from operations		(334	)		(3.7	)		33			0.3
Interest income		25			0.3			26			0.2
Interest expense		(27	)		(0.3	)		(29	)		(0.3	)
Other income (expense)		(4	)		(0.1	)		42			0.4

Income (loss) before income taxes		(340	)		(3.8	)		72			0.6
Benefit for income taxes		(21	)		(0.3	)		(62	)		(0.6	)

Net income (loss)	$	(319	)		(3.5	)%	$	134			1.2	%

Earnings (loss) per common share- Basic and Diluted⁽¹⁾	$	(0.17	)				$	0.07

	Nine months ended
	September 30, 2017						September 30, 2016
	Amount			% of net sales			Amount			% of net sales

Net sales	$	31,854			100.0	%	$	34,875			100.0	%
Costs and expenses:
Cost of products sold		7,114			22.3			7,729			22.2
Distributor royalties and commissions		11,253			35.3			12,345			35.4
Selling, general and administrative		13,812			43.4			15,888			45.5

Loss from operations		(325	)		(1.0	)		(1,087	)		(3.1	)
Interest income		77			0.2			81			0.2
Interest expense		(79	)		(0.2	)		(82	)		(0.2	)
Other income		40			0.1			226			0.6

Loss before income taxes		(287	)		(0.9	)		(862	)		(2.5	)
Provision for income taxes		28			0.1			35			0.1

Net loss	$	(315	)		(1.0	)%	$	(897	)		(2.6)	%

Loss per common share- Basic and Diluted⁽¹⁾	$	(0.17	)				$	(0.49	)

Income statement data
(amounts in thousands)	Q1 2020						Q1 2019
	Amount			% of net sales			Amount			% of net sales

Net sales	$	10,283			100.0	%	$	9,490			100.0	%

Costs and expenses:
Cost of goods sold		2,655			25.8			2,434			25.6
Distributor royalties and commissions		3,328			32.4			3,118			32.9
Selling, general and adminstrative		3,778			36.7			3,739			39.4

Income from operations		522			5.1			199			2.1
Interest income		39			0.4			49			0.6
Interest expense		(6	)		(0.1	)		(5	)		(0.1	)
Other expense		(71	)		(0.7	)		(6	)		(0.1	)
Gain on sale of fixed assets		-			-			435			4.6

Income before income taxes		484			4.7			672			7.1
Provision (benefit) for income taxes		(178	)		(1.7	)		48			0.5

Net income	$	662			6.4	%	$	624			6.6	%

Earnings per common share-Basic & Diluted	$	0.38					$	0.36

Exhibit ~~Number~~
Number	Document

10.1	Change in Terms Agreement (revolving credit facility) dated April 28, 2020 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).

101		Interactive Data Files, including the following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2017,~~March 31, 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 ~~(iv)~~(v) the Notes to Condensed Consolidated Financial Statements.

By:	~~/s/ Robert L.~~/s/ Ryan A. Montgomery
	~~Robert L.~~Ryan A. Montgomery, ~~Chairman of the Board of Directors and~~ Chief Executive Officer

Date: ~~November 14, 2017~~ May 15, 2020


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

Date: ~~November 14, 2017~~ May 15, 2020