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

-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

-K for the year ended

December 31, 2017,

filed

March 29, 2018

with the Securities and Exchange Commission.

Use of Estimates

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

New Accounting Pronouncements –

Not

Yet Adopted

February 2016,

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

No.

2016

02,

Leases (Topic

842

)

which supersedes the existing lease guidance. This update requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a lease term greater than

twelve

months on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. Subsequent to ASU

No.

2016

02,

the FASB issued related ASU’s, including ASU

No.

2018

11,

Leases (Topic

842

)

: Targeted Improvements

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

No.

2016

02.

This option under ASU

No.

2018

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

As required, the Company will adopt ASU

2016

January 1, 2019.

The Company expects to apply certain practical expedients permitted in the standard, as well as the prospective transition method. The Company expects the adoption of this standard to result in the recognition of right-of-use assets and lease liabilities

not

currently recorded in the Company’s consolidated financial statements. The Company continues to evaluate the amounts and other effects that the new standard will have on its consolidated financial statements and related disclosures.

New Accounting Pronouncements – Adopted

January 1, 2018

January 1, 2018,

the Company adopted ASU

No.

2014

09,

Revenue from Contracts with Customers

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

not

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

$367,568

(with

zero

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

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

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

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

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

The new revenue standard defines a

five

step process to recognize revenues. Under this new standard, the Company determined that the timeframe for recognizing the revenue performance obligation for membership-fee type revenue would be lengthened to more closely correlate with the distributor and customer membership terms of generally

twelve

months. Based upon all contracts still in existence as of

December 31, 2017,

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

$367,568.

Prior to adoption of the new revenue standard, the Company’s primary source of revenue has been from the sale of nutritional products to the Company’s independent distributors whereby revenue is recognized when product is shipped and risk of loss has passed to the customer; and the Company’s nutritional product revenue recognition policy does

not

change under the new revenue standard.

The Company does

not

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

Description of Products and Services by

Region and Category

The Company operates in

one

reportable segment, a network marketing segment consisting of

six

operating units that sell nutritional and dietary products to a sales force of independent distributors that sell the products directly to customers. These operating units are based on geographic regions, as follows:

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

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

The Company classifies its sales into

two

categories of sales products plus handling & freight income. Net sales by product category, as follows:

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