Note 1 - Nature of Business and Significant Accounting Policies	12 Months Ended
Dec. 31, 2019
Notes to Financial Statements
Significant Accounting Policies [Text Block]	1. Nature of Business and Significant Accounting Policies Nature of Business Reliv’ International, Inc. (the Company) produces a proprietary line of nutritional supplements addressing basic nutrition, specific wellness needs, weight management, and sports nutrition. These products are sold by subsidiaries of the Company to a sales force of independent distributors of the Company that sell products directly to consumers. The Company and its subsidiaries sell products to distributors throughout the United States and in Australia, Austria, Canada, France, Germany, Ireland, Malaysia, Mexico, the Netherlands, New Zealand, the Philippines, and the United Kingdom. Basis of Presentation The consolidated financial statements include the accounts of the Company and its foreign and domestic subsidiaries. All significant intercompany accounts and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Reclassifications Certain previously reported 2018 amounts have been reclassified to conform to the current year presentation. Cash Equivalents Our policy is to consider the following as cash and cash equivalents: demand deposits and short-term investments with a maturity of three months or less when purchased. Property, Plant, and Equipment Property, plant, and equipment are stated on the cost basis. Depreciation is computed using the straight-line or an accelerated method over the useful life of the related assets. Generally, computer equipment and software are depreciated over 3 to 5 years, office and other equipment over 7 years, and real property over 39 years. Inventories Inventories are valued at the lower of cost or market and are accounted for on a first -in, first -out basis. Effective January 1, 2019, finished goods inventories primarily consist of purchased products held for resale. Prior to 2019, finished goods inventories were primarily comprised of internally manufactured products consisting of the costs associated with raw materials, labor, and overhead. On a periodic basis, we review inventory levels, as compared to future demand requirements and the shelf life of the various products. Based on this review, we record inventory write-downs when necessary. Sales aids and promotional materials inventories represent distributor kits, product brochures, and other sales and business development materials which are held for sale to distributors. Cost of the sales aids and promotional materials held for sale are capitalized as inventories and subsequently recorded to cost of goods sold upon recognition of revenue when sold to distributors. All other advertising and promotional costs are expensed when incurred. Amortizable Intangible Assets Intangible assets are recorded based on management’s determination of the fair value of the respective assets at the time of acquisition. Determining the fair value of intangible assets is judgmental and involves the use of significant estimates and assumptions of future company operations. Our fair value estimates and related asset lives are based on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from these estimates. Intangible assets estimated to have finite lives are amortized over their estimated economic life under the straight-line method; such method correlates to management’s estimate of the assets’ economic benefit. Based on management’s estimates at origination, these lives range from two to seventeen years. Related amortization expense is presented within Selling, General, and Administrative in the accompanying consolidated statements of net loss and comprehensive loss. As of December 31, 2019, remaining lives of intangible assets range from five to ten years. 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. 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 no later than 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 a 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 the lessor accounting sections within this Note 1 and in Note 9. 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 December 31, 2019 and 2018, total returns as a percent of net sales were approximately 0.08% and 0.17%, respectively. Basic and Diluted Earnings (Loss) per Share Basic earnings (loss) per common share are computed using the weighted average number of common shares outstanding during the year. Diluted earnings (loss) per common share are 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. See Note 11 for additional information regarding earnings (loss) per share. Foreign Currency Translation and Transaction Gains or Losses All balance sheet accounts have been translated using the exchange rates in effect at the balance sheet date. Statements of net income (loss) amounts have been translated using the average exchange rate for the year. The gains and losses resulting from the changes in exchange rates from year to year have been reported in other comprehensive income (loss). The foreign currency translation adjustment is the only component of accumulated other comprehensive loss. If applicable, foreign currency translation adjustments exclude income tax expense (benefit) as certain of our investments in non-U.S. subsidiaries are deemed to be reinvested for an indefinite period of time. Foreign currency transaction gains (losses) were $( 11,450 ) and $32,577 for 2019 and 2018, respectively. Fair Value Measurements FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements required under other accounting pronouncements. See Note 7 for further discussion. Stock-Based Compensation We have stock-based incentive plans under which we may grant stock option, restricted stock, and unrestricted stock awards. We recognize stock-based compensation expense based on the grant date fair value of the award and the related vesting terms. Depending upon the characteristics of the option, the fair value of stock-based awards is primarily determined using the Black-Scholes model, which incorporates assumptions and management estimates including the risk-free interest rate, expected volatility, expected option life, and dividend yield. We recognize forfeitures when incurred. See Note 10 for additional information. Income Taxes The provision for income taxes is computed using the liability method. The primary differences between financial statement and taxable income result from financial statement accruals and reserves and differences between depreciation and amortization for book and tax purposes. Unrecognized tax benefits are accounted for as required by FASB ASC Topic 740 which prescribes a more likely than not threshold for financial statement presentation and measurement of a tax position taken or expected to be taken in a tax return. See Note 13 for further discussion. Advertising Costs of sales aids and promotional materials are capitalized as inventories. All other advertising and promotional costs are expensed when incurred. Advertising expenses were $16,800 and $19,300 in 2019 and 2018, respectively. Research and Development Expenses Research and development expenses, which are charged to selling, general, and administrative expenses as incurred, were $185,000 and $473,000 in 2019 and 2018, respectively. New Accounting Pronouncement – Leases Adopted in 2019 On January 1, 2019, we adopted Accounting Standards Update (ASU) No. 2016 - 02, Leases (Topic 842 ) (including subsequent issued lease-related ASU’s). Lessee Accounting We applied the new lease accounting standard to all lessee operating leases using the prospective transition method. Under this method, prior financial reporting periods are not restated. The adoption of the new lease accounting standard resulted in the recording of assets and obligations of our operating leases of approximately $451,000 and $457,000, respectively, on our consolidated balance sheets. Certain amounts previously recorded for prepaid and accrued rent associated with historical operating leases were reclassified to the newly captioned Operating lease right-to-use assets. At adoption, we used the new lease accounting standard’s package of practical expedients permitted under the transition guidance that allowed us to not reassess: (a) whether any expired or existing contracts are or contain leases, (b) lease classification for any expired or existing leases, and (c) initial direct costs for any expired or existing leases. We also used the lease standard’s practical expedient that allows lessees to treat the lease and implicit non-lease components of our leases as a single lease component and we do not record on the balance sheet leases with an initial term of twelve months or less. Fixed lease expense on all of our operating leases is recognized on a straight-line basis over the contractual lease term, including our estimate of any renewal or early termination lease terms. Operating lease expense is presented within Selling, General and Administrative expense in our operating results. Operating lease liabilities and related operating lease right-to-use assets are recognized at commencement date of the lease based on the present value of lease payments over the lease term. When leases do not provide an implicit discount rate, we use a country specific incremental borrowing rate based upon the lease term. See Note 9 for additional lease disclosures. Lessor Accounting – Other Revenue Other revenue consists of revenue derived from our leasing a portion of our headquarters building to Nutracom. We recognize lessor rent revenue on a straight-line basis over the term of the lease. As part of this straight-line methodology, the cumulative rental billings may be greater or less than the financial period’s recognized revenue; such timing differences are recognized on the balance sheet as an accrued other liability or an unbilled rent revenue receivable. Also included in other revenue are billings to the tenant for its share of the facility’s common area costs such as real estate taxes, maintenance, and utilities. These same common area costs plus the tenant’s share of the facilities’ depreciation are recorded as cost of goods sold. See Note 2 and Note 3 for further information on our financial relationship with Nutracom. See Note 9 for further information on our leases. New Accounting Pronouncements – Not Yet Adopted In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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 December 31, 2019, we had $1,630,779 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 financial statements, and accordingly, there is substantial doubt about our ability to continue as a going concern. The analysis used to determine our ability to continue as a going concern does not include cash sources outside of our direct control that our management expects to be available within the next twelve months. We may not be able to obtain sufficient additional funding through monetizing certain of our existing assets, sourcing additional borrowings, and issuing additional equity, or any other means, and if we are able to do so, these available sources of funds may not be on satisfactory terms. Our ability to raise additional capital in the equity markets, should we choose to do so, is dependent on a number of factors, including, but not limited to, the market demand for our common stock, which itself is subject to a number of business risks and uncertainties, as well as the uncertainty that we would be able to raise such additional capital at a price or on terms that we believe are favorable. We have taken several steps in 2019 which we believe will result in improvement to our financial position, operating results, and cash flows. We have borrowed $500,000 of our available $750,000 revolving line of credit balance. In addition, our lender has agreed to extend the available $750,000 revolving line of credit agreement to April 28, 2020. As detailed in Note 2 of these consolidated financial statements, on January 1, 2019, we sold the assets previously used by us in our manufacturing operations to Nutracom. We financed the assets purchased by Nutracom from us under payment terms scheduled to provide incoming funds to us of $100,000 or more per year. We have also entered into an agreement for Nutracom to lease a significant portion of our headquarters building. Our management believes that these transactions with Nutracom will be favorable to our financial position, operating results, and cash flows; however, there are risks and uncertainties which arise from these Nutracom transactions and their impact to our operations. Should the aforementioned changes to our operations not provide sufficient cash flow improvement or should we be unable to obtain sufficient additional capital or borrowings, we may have to engage in any or all of the following activities: (i) seek to monetize our headquarters building via traditional bank lending or a sale and leaseback-type transaction; (ii) seek to monetize 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 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.

Nature of Business and Significant Accounting Policies

Nature of Business

Reliv’ International, Inc. (the Company) produces a proprietary line of nutritional supplements addressing basic nutrition, specific wellness needs, weight management, and sports nutrition. These products are sold by subsidiaries of the Company to a sales force of independent distributors of the Company that sell products directly to consumers. The Company and its subsidiaries sell products to distributors throughout the United States and in Australia, Austria, Canada, France, Germany, Ireland, Malaysia, Mexico, the Netherlands, New Zealand, the Philippines, and the United Kingdom.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its foreign and domestic subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

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

Reclassifications

Certain previously reported

2018

amounts have been reclassified to conform to the current year presentation.

Cash Equivalents

Our policy is to consider the following as cash and cash equivalents: demand deposits and short-term investments with a maturity of

three

months or less when purchased.

Property, Plant, and Equipment

Property, plant, and equipment are stated on the cost basis. Depreciation is computed using the straight-line or an accelerated method over the useful life of the related assets. Generally, computer equipment and software are depreciated over

years, office and other equipment over

years, and real property over

years.

Inventories

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

first

-in,

first

-out basis. Effective

January 1, 2019,

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

2019,

finished goods inventories were primarily comprised of internally manufactured products consisting of the costs associated with raw materials, labor, and overhead. On a periodic basis, we review inventory levels, as compared to future demand requirements and the shelf life of the various products. Based on this review, we record inventory write-downs when necessary.

Sales aids and promotional materials inventories represent distributor kits, product brochures, and other sales and business development materials which are held for sale to distributors. Cost of the sales aids and promotional materials held for sale are capitalized as inventories and subsequently recorded to cost of goods sold upon recognition of revenue when sold to distributors. All other advertising and promotional costs are expensed when incurred.

Amortizable Intangible Assets

Intangible assets are recorded based on management’s determination of the fair value of the respective assets at the time of acquisition. Determining the fair value of intangible assets is judgmental and involves the use of significant estimates and assumptions of future company operations. Our fair value estimates and related asset lives are based on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual future results

may

differ from these estimates.

Intangible assets estimated to have finite lives are amortized over their estimated economic life under the straight-line method; such method correlates to management’s estimate of the assets’ economic benefit. Based on management’s estimates at origination, these lives range from

two

seventeen

years. Related amortization expense is presented within Selling, General, and Administrative in the accompanying consolidated statements of net loss and comprehensive loss. As of

December 31, 2019,

remaining lives of intangible assets range from

five

ten

years.

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

and Note

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

and Note

for further information on our financial relationship with Nutracom.

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

percent to

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

later than 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 a 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 the lessor accounting sections within this Note

and in Note

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

December 31, 2019

and

2018,

total returns as a percent of net sales were approximately

0.08%

and

0.17%,

respectively.

Basic and Diluted Earnings (Loss) per Share

Basic earnings (loss) per common share are computed using the weighted average number of common shares outstanding during the year. Diluted earnings (loss) per common share are 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. See Note

for additional information regarding earnings (loss) per share.

Foreign Currency Translation and Transaction Gains or Losses

All balance sheet accounts have been translated using the exchange rates in effect at the balance sheet date. Statements of net income (loss) amounts have been translated using the average exchange rate for the year. The gains and losses resulting from the changes in exchange rates from year to year have been reported in other comprehensive income (loss). The foreign currency translation adjustment is the only component of accumulated other comprehensive loss. If applicable, foreign currency translation adjustments exclude income tax expense (benefit) as certain of our investments in non-U.S. subsidiaries are deemed to be reinvested for an indefinite period of time. Foreign currency transaction gains (losses) were $(

11,450

) and

$32,577

for

2019

and

2018,

respectively.

Fair Value Measurements

FASB ASC Topic

820,

“Fair Value Measurements and Disclosures,” defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements required under other accounting pronouncements. See Note

for further discussion.

Stock-Based Compensation

We have stock-based incentive plans under which we

may

grant stock option, restricted stock, and unrestricted stock awards. We recognize stock-based compensation expense based on the grant date fair value of the award and the related vesting terms. Depending upon the characteristics of the option, the fair value of stock-based awards is primarily determined using the Black-Scholes model, which incorporates assumptions and management estimates including the risk-free interest rate, expected volatility, expected option life, and dividend yield. We recognize forfeitures when incurred. See Note

for additional information.

Income Taxes

The provision for income taxes is computed using the liability method. The primary differences between financial statement and taxable income result from financial statement accruals and reserves and differences between depreciation and amortization for book and tax purposes.

Unrecognized tax benefits are accounted for as required by FASB ASC Topic

740

which prescribes a more likely than

not

threshold for financial statement presentation and measurement of a tax position taken or expected to be taken in a tax return. See Note

for further discussion.

Advertising

Costs of sales aids and promotional materials are capitalized as inventories. All other advertising and promotional costs are expensed when incurred. Advertising expenses were

$16,800

and

$19,300

2019

and

2018,

respectively.

Research and Development Expenses

Research and development expenses, which are charged to selling, general, and administrative expenses as incurred, were

$185,000

and

$473,000

2019

and

2018,

respectively.

New Accounting Pronouncement – Leases Adopted in

2019

January 1, 2019,

we adopted Accounting Standards Update (ASU)

No.

2016

02,

Leases (Topic

842

)

(including subsequent issued lease-related ASU’s).

Lessee Accounting

We applied the new lease accounting standard to all lessee operating leases using the prospective transition method. Under this method, prior financial reporting periods are

not

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

$451,000

and

$457,000,

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

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

not

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

not

record on the balance sheet leases with an initial term of

twelve

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

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

not

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

See Note

for additional lease disclosures.

Lessor Accounting – Other Revenue

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

may

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

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

See Note

and Note

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

for further information on our leases.

New Accounting Pronouncements –

Not

Yet Adopted

June 2016,

the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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.

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

December 31, 2019,

we had

$1,630,779

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 financial statements, and accordingly, there is substantial doubt about our ability to continue as a going concern. The analysis used to determine our ability to continue as a going concern does

not

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

twelve

months.

may

not

be able to obtain sufficient additional funding through monetizing certain of our existing assets, sourcing additional borrowings, and issuing additional equity, or any other means, and if we are able to do so, these available sources of funds

may

not

be on satisfactory terms. Our ability to raise additional capital in the equity markets, should we choose to do so, is dependent on a number of factors, including, but

not

limited to, the market demand for our common stock, which itself is subject to a number of business risks and uncertainties, as well as the uncertainty that we would be able to raise such additional capital at a price or on terms that we believe are favorable.

We have taken several steps in

2019

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

$500,000

of our available

$750,000

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

$750,000

revolving line of credit agreement to

April 28, 2020.

As detailed in Note

of these consolidated financial statements, on

January 1, 2019,

we sold the assets previously used by us in our manufacturing operations to Nutracom. We financed the assets purchased by Nutracom from us under payment terms scheduled to provide incoming funds to us of

$100,000

or more per year. We have also entered into an agreement for Nutracom to lease a significant portion of our headquarters building. Our management believes that these transactions with Nutracom will be favorable to our financial position, operating results, and cash flows; however, there are risks and uncertainties which arise from these Nutracom transactions and their impact to our operations.

Should the aforementioned changes to our operations

not

provide sufficient cash flow improvement or should we be unable to obtain sufficient additional capital or borrowings, we

may

have to engage in any or all of the following activities: (i) seek to monetize our headquarters building via traditional bank lending or a sale and leaseback-type transaction; (ii) seek to monetize 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 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

longer continue as a going concern.