RELIV INTERNATIONAL INC [RELV] Filings

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________

 

FORM 10-Q

(Mark One)

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

 

For the transition period from _________to_________

 

Commission File Number

000-19932

 

RELIV’ INTERNATIONAL, INC.

(Exact name of Registrant as specified in its charter)

 

Delaware	371172197
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
136 Chesterfield Industrial Boulevard,    Chesterfield, Missouri	63005
(Address of principal executive offices)	(Zip Code)

 

(636) 537-9715

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☑     No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☑     No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ☐     Accelerated filer ☐      Non-accelerated filer ☐    Smaller reporting company ☑   Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes ☐     No ☑

 

Securities registered pursuant to Section 12(b) of the Act:

 

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

 

The number of shares outstanding of the Registrant’s common stock as of November 6, 2020 was 1,746,449 (excluding treasury shares).

 

 

 

 

 

		September 30				December 31
		2020				2019
		(unaudited)
Assets
Current assets:
Cash and cash equivalents		$	3,339,675			$	1,630,779
Accounts receivable, less allowances of $5,000 in 2020 and 2019			58,157				107,369
Notes & accounts receivables and deposits - related parties			1,106,221				1,099,228
Inventories
Finished goods			2,515,500				2,275,306
Raw materials			205,740				305,571
Sales aids and promotional materials			107,498				120,811
Total inventories			2,828,738				2,701,688
Refundable income taxes			25,243				22,406
Prepaid expenses and other current assets			465,377				304,048
Total current assets			7,823,411				5,865,518
Notes and accounts receivables - related parties			2,331,844				2,418,921
Operating lease right-to-use assets			285,450				354,440
Intangible assets, net			1,552,788				1,722,277
Equity investment			505,000				505,000
Property, plant and equipment:
Land and land improvements			905,190				905,190
Building			10,153,222				10,145,005
Office & other equipment			1,246,779				1,237,142
Computer equipment & software			2,209,269				2,240,063
			14,514,460				14,527,400
Less: Accumulated depreciation			10,306,452				10,086,560
Net property, plant and equipment			4,208,008				4,440,840
Total assets		$	16,706,501			$	15,306,996

 

		September 30				December 31
		2020				2019
		(unaudited)
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses:
Trade accounts payable and other accrued expenses		$	1,682,660			$	1,565,198
Distributors' commissions payable			1,024,724				891,492
Sales taxes payable			130,020				139,542
Payroll and payroll taxes payable			321,453				212,716
Total accounts payable and accrued expenses			3,158,857				2,808,948
Income taxes payable			46,013				121,177
Deferred revenue			309,016				322,261
Operating lease liabilities			182,565				236,771
Revolving line of credit			500,000				500,000
Current portion of long-term debt			477,229				-
Total current liabilities			4,673,680				3,989,157
Noncurrent liabilities:
Operating lease liabilities			87,889				103,580
Long-term debt, less current portion			384,771				-
Other noncurrent liabilities			126,320				112,616
Total noncurrent liabilities			598,980				216,196
Stockholders' equity:
Preferred stock, par value $.001 per share; 500,000 shares authorized; -0- shares issued and outstanding			-				-
Common stock, par value $.001 per share; 5,000,000 authorized; 2,110,013 shares issued and 1,746,449 shares outstanding			2,110				2,110
Additional paid-in capital			30,643,771				30,643,771
Accumulated deficit			(12,416,931	)			(12,755,495	)
Accumulated other comprehensive loss:
Foreign currency translation adjustment			(943,686	)			(937,320	)
Treasury stock			(5,851,423	)			(5,851,423	)
Total stockholders' equity			11,433,841				11,101,643
Total liabilities and stockholders' equity		$	16,706,501			$	15,306,996

 

(unaudited)		Three months ended September 30								Nine months ended September 30
		2020				2019				2020				2019
Product sales		$	7,935,387			$	8,395,941			$	24,855,366			$	24,809,979
Freight income			489,479				521,192				1,494,281				1,521,014
Other revenue			243,478				231,732				617,922				564,389
Net sales			8,668,344				9,148,865				26,967,569				26,895,382
Costs and expenses:
Cost of goods sold			2,290,223				2,497,993				7,147,554				7,200,716
Distributor royalties and commissions			2,801,005				2,939,187				8,719,538				8,721,852
Selling, general and administrative			3,744,220				3,796,276				11,023,006				11,224,748
Total costs and expenses			8,835,448				9,233,456				26,890,098				27,147,316
Income (loss) from operations			(167,104	)			(84,591	)			77,471				(251,934	)
Other income (expense):
Interest income			45,904				41,548				124,614				137,028
Interest expense			(6,717	)			(24,250	)			(20,755	)			(39,737	)
Other income (expense)			56,202				(12,564	)			86,234				(13,224	)
Gain on sale of fixed assets			-				-				-				434,549
Income (loss) before income taxes			(71,715	)			(79,857	)			267,564				266,682
Provision (benefit) for income taxes			53,000				86,000				(71,000	)			197,000
Net income (loss)		$	(124,715	)		$	(165,857	)		$	338,564			$	69,682
Other comprehensive income (loss):
Foreign currency translation adjustment			47,041				(27,307	)			(6,366	)			(15,554	)
Comprehensive income (loss)		$	(77,674	)		$	(193,164	)		$	332,198			$	54,128
Earnings (loss) per common share - Basic & Diluted		$	(0.07	)		$	(0.09	)		$	0.19			$	0.04
Weighted average shares			1,746,000				1,746,000				1,746,000				1,746,000

 

		Nine months ended September 30
		2020				2019
Operating activities:
Net income		$	338,564			$	69,682
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			429,274				437,816
Stock-based compensation			-				15,918
Non-cash other revenue			-				(259,299	)
Non-cash miscellaneous loss			-				24,618
(Gain) loss on sale of property, plant and equipment			-				(434,549	)
Foreign currency transaction (gain) loss			12,548				18,942
(Increase) decrease in trade, accounts & notes receivable, and deposits from related parties			33,249				(812,477	)
(Increase) decrease in inventories			(140,366	)			1,090,895
(Increase) decrease in refundable income taxes			(2,837	)			(2,251	)
(Increase) decrease in prepaid expenses and other current assets			(159,437	)			(45,501	)
(Increase) decrease in other assets			-				(76,128	)
Increase (decrease) in income taxes payable			(78,136	)			11,323
Increase (decrease) in accounts payable & accrued expenses, deferred revenue, and other noncurrent liabilities			338,665				(12,350	)
Net cash provided by operating activities			771,524				26,639
Investing activities:
Purchase of property, plant and equipment			(26,995	)			(84,457	)
Payments received on notes receivables - related parties			97,235				131,003
Net cash provided by investing activities			70,240				46,546
Financing activities:
Proceeds from line of credit borrowings			-				500,000
Proceeds from long-term borrowings			862,000				-
Net cash provided by financing activities			862,000				500,000
Effect of exchange rate changes on cash and cash equivalents			5,132				(22,380	)
Increase (decrease) in cash and cash equivalents			1,708,896				550,805
Cash and cash equivalents at beginning of period			1,630,779				1,989,974
Cash and cash equivalents at end of period		$	3,339,675			$	2,540,779
Supplementary disclosure of cash flow information:
Noncash investing & financing transactions (Note 3):

 

																		Accumulated
										Additional								Other
		Common Stock								Paid-In				Accumulated				Comprehensive				Treasury Stock
		Shares				Amount				Capital				Deficit				Loss				Shares				Amount				Total
Balance at December 31, 2019			2,110,013			$	2,110			$	30,643,771			$	(12,755,495	)		$	(937,320	)			363,564			$	(5,851,423	)		$	11,101,643
Net income			-				-				-				662,336				-				-				-				662,336
Other comprehensive income (loss):
Foreign currency translation adjustment			-				-				-				-				(39,611	)			-				-				(39,611	)
Total comprehensive income																															622,725
Balance at March 31, 2020			2,110,013				2,110				30,643,771				(12,093,159	)			(976,931	)			363,564				(5,851,423	)			11,724,368
Net loss			-				-				-				(199,057	)			-				-				-				(199,057	)
Other comprehensive income (loss):
Foreign currency translation adjustment			-				-				-				-				(13,796	)			-				-				(13,796	)
Total comprehensive loss																															(212,853	)
Balance at June 30, 2020			2,110,013				2,110				30,643,771				(12,292,216	)			(990,727	)			363,564				(5,851,423	)			11,511,515
Net loss			-				-				-				(124,715	)			-				-				-				(124,715	)
Other comprehensive income (loss):
Foreign currency translation adjustment			-				-				-				-				47,041				-				-				47,041
Total comprehensive loss																															(77,674	)
Balance at September 30, 2020			2,110,013			$	2,110			$	30,643,771			$	(12,416,931	)		$	(943,686	)			363,564			$	(5,851,423	)		$	11,433,841

																		Accumulated
										Additional								Other
		Common Stock								Paid-In				Accumulated				Comprehensive				Treasury Stock
		Shares				Amount				Capital				Deficit				Loss				Shares				Amount				Total
Balance at December 31, 2018			2,110,013			$	2,110			$	30,622,547			$	(12,311,138	)		$	(982,095	)			264,853			$	(5,338,560	)		$	11,992,864
Net income			-				-				-				623,644				-				-				-				623,644
Other comprehensive income (loss):
Foreign currency translation adjustment			-				-				-				-				22,211				-				-				22,211
Total comprehensive income																															645,855
Treasury stock acquired (Note 2)			-				-				-				-				-				99,200				(540,144	)			(540,144	)
Other			-				-				-				-				-				(489	)			27,281				27,281
Stock-based compensation			-				-				5,306				-				-				-				-				5,306
Balance at March 31, 2019			2,110,013				2,110				30,627,853				(11,687,494	)			(959,884	)			363,564				(5,851,423	)			12,131,162
Net loss			-				-				-				(388,105	)			-				-				-				(388,105	)
Other comprehensive income (loss):
Foreign currency translation adjustment			-				-				-				-				(10,458	)			-				-				(10,458	)
Total comprehensive loss																															(398,563	)
Stock-based compensation			-				-				5,306				-				-				-				-				5,306
Balance at June 30, 2019			2,110,013				2,110				30,633,159				(12,075,599	)			(970,342	)			363,564				(5,851,423	)			11,737,905
Net loss			-				-				-				(165,857	)			-				-				-				(165,857	)
Other comprehensive income (loss):
Foreign currency translation adjustment			-				-				-				-				(27,307	)			-				-				(27,307	)
Total comprehensive loss																															(193,164	)
Stock-based compensation			-				-				5,306				-				-				-				-				5,306
Balance at September 30, 2019			2,110,013			$	2,110			$	30,638,465			$	(12,241,456	)		$	(997,649	)			363,564			$	(5,851,423	)		$	11,550,047

 

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

September 30, 2020

 

1. Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements and notes thereto have been prepared in accordance with the instructions to Form 10-Q and reflect all adjustments (which primarily include normal recurring accruals) which we believe are necessary to present fairly the financial position, results of operations and cash flows. All significant intercompany accounts and transactions have been eliminated. These statements, however, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States. Interim results may not necessarily be indicative of results that may be expected for any other interim period or for the year as a whole. These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the annual report on Form 10-K for the year ended December 31, 2019, filed March 27, 2020 with the Securities and Exchange Commission.

 

Impact of COVID-19 Pandemic

 

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

 

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

 

 

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)

 

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 September 30, 2020, we had $3.3 million in cash and cash equivalents which may not be sufficient to fund our planned operations through one year subsequent to the date of the issuance of these condensed financial statements, and accordingly, there is substantial doubt about our ability to continue as a going concern.

 

We have taken steps during 2020 which we believe will result in improvement in our financial position, operating results, and cash flows. These steps include:

 

	●	Obtaining a loan under the Payroll Protection Program in April 2020 for $862,000. See Note 5—PPP SBA Note for further details.
	●	Obtaining a new term loan on November 5, 2020 for $4.0 million from our primary lender. See Note 5—Term Loan for further details. Proceeds from the term loan agreement were used to pay off our $500,000 outstanding revolving line of credit balance, fund our stock split transactions and loan guarantor payments as described in Note 9, as well as provide funds for general working capital purposes.

 

Coupled with cash generated from operations, we believe these steps will provide us with sufficient liquidity. However, depending on future operating results, we may have to engage in any or all of the following activities to provide adequate working capital: (i) monetizing the note receivable from a distributor; (ii) modify our distributor promotions, incentives, and other activities; (iii) cease operations in certain geographic regions, and (iv) reduce employee compensation and benefits.

 

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.

 

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.

 

 

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

1. Accounting Policies (continued)

 

New Accounting Pronouncements – Not Yet Adopted (continued)

 

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.

 

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.

 

 

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

2. Sale of Manufacturing Operations’ Assets (continued)

 

	●	Nutracom issued to us a non-voting Class B 15% equity membership interest in Nutracom, LLC. The Class B interest does not share in any profits or losses from operations of Nutracom. As defined within the Nutracom Operating Agreement, upon any merger, consolidation, disposition, or liquidation of Nutracom, the Class B equity membership interest converts to a Class A equity membership interest. (In June 2020, Nutracom increased its total equity membership interests; reducing our Nutracom equity membership interest from 15% to 5%).
	●	Commencing January 1, 2020, our Class B interest is entitled to receive a percentage, (ranging from 1.0% to 1.25%) of Nutracom’s annual revenues (excluding Nutracom’s revenues from sales to us).

 

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

 

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

 

Promissory Note Modification – June 1, 2019

 

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

 

	●	Effective June 1, 2019, the outstanding balance of the Secured Promissory Note was reduced by $500,000 to $460,583 with a corresponding reduction of $500,000 to our outstanding vendor obligation due Nutracom under our ongoing product supply agreement.
	●	The $460,583 remaining Secured Promissory Note was exchanged with Nutracom for a newly issued June 1, 2019 Nutracom unsecured promissory note for the same amount under the following terms: fixed interest rate of 6.0% with interest only payable monthly through December 2020. Beginning January 1, 2021, principal and interest of $8,904 will be payable monthly for 60 months.

 

Promissory Note Modification – October 1, 2019

 

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

 

●

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

●

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

 

 

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. 

 

 

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

 

 

 

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

3. Related Parties (continued)

 

 

At September 30, 2020, we had $1.0 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:

 

 

 

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

4. Fair Value of Financial Instruments

 

Fair value can be measured using valuation techniques such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). Accounting standards utilize a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those levels:

 

Level 1:

Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2:

Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets or similar assets or liabilities in markets that are not active.

 

Level 3:

Unobservable inputs that reflect the reporting entity’s own assumptions.

 

The carrying amount and fair value of financial instruments were approximately as follows:

 

 

Revolving line of credit: The fair value of our revolver loan approximates carrying value as this loan was amended within the past year and has a variable market-based interest rate that resets every thirty days. (Fair value is only disclosed).

 

PPP SBA note: The fair value of our PPP SBA note approximates carrying value as the lending terms of this promissory note payable were under the 2020 CARES Act. (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).

 

 

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

4. Fair Value of Financial Instruments (continued)

 

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

 

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

 

 

5. Debt

 

 

Term Loan

 

On November 5, 2020, we entered into a new $4,000,000 term loan agreement with our primary lender. The new term loan is for a period of five years, with a fixed interest rate of 4.25%, and requires monthly payments of principal and interest under a twenty-year amortization, with a balloon payment for the outstanding balance due and payable at the end of the term.

 

Borrowings under the new term loan agreement are secured by all of our tangible and intangible assets and by a mortgage on the real estate of our headquarters facility. In addition, the term loan is secured by a personal guarantee(s) by three of our significant shareholders (“Guarantors”). In consideration for the personal guarantee(s), we will pay a one-time aggregate payment of $200,000 to be shared among the Guarantors.

 

Proceeds from the term loan agreement were used to pay off our $500,000 outstanding revolving line of credit balance and to fund our loan guarantor payments. The remaining term loan proceeds are anticipated to fund our stock split transactions as described in Note 9, as well as provide funds for general working capital purposes.

 

 

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

5. Debt (continued)

 

Revolving Line of Credit

 

On September 30, 2015, we entered into a series of lending agreements with our primary lender which included agreements for a term loan and a revolving credit facility. The term loan was repaid in 2018 and the revolver has been periodically amended and extended.

 

Effective with a September 11, 2018 amendment, the revolving line of credit’s maximum borrowing amount was $750,000. The revolver’s maturity date was April 29, 2019 and the revolver’s interest rate was based on the 30-day LIBOR plus 2.25%. In January 2019, we borrowed $500,000 under the revolving line of credit.

 

Effective with a March 25, 2019 amendment, the revolving line of credit’s maturity date was extended to April 28, 2020 and the interest rate was revised to the 30-day LIBOR plus 3.00%. As amended, the revolver’s maximum borrowing amount remained $750,000.

 

On April 28, 2020, our revolving line of credit agreement was extended six months to October 28, 2020 under the same terms and conditions as the expiring agreement. At September 30, 2020, outstanding borrowings under the revolving line of credit were $500,000 at an interest rate of 3.16%. On November 5, 2020, the $500,000 balance under the line of credit was paid off from the proceeds of the new term loan.

 

PPP SBA Note

 

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

 

	●	A deferral of principal repayment and interest for six months from loan origination, and
	●	The opportunity to apply for possible loan forgiveness for some or all of the loan amount.

 

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

 

6. Income Taxes

 

During the fiscal years of 2016 through 2019, we determined that it was more likely than not losses generated in the U.S. and certain foreign jurisdictions will not be realized based on projections of future taxable income, estimated reversals of existing taxable timing differences, and other considerations. In prior years, we recorded a valuation allowance on all of our domestic and foreign deferred tax assets.

 

 

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

6. Income Taxes (continued)

 

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

 

The effective income tax rate was (26.5)% and 73.9% for the year to date periods ended September 30, 2020 and 2019, respectively. In addition to the CARES Act tax benefit previously described, for each year to date period, the income tax provision amounts include estimated income taxes for one of the Company’s foreign subsidiaries and certain U.S. states. The 2019 income tax provision also includes approximately $25,000 for a 2017 tax year settlement by one of our foreign subsidiaries.

 

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. In October 2020, one of our foreign subsidiaries received notification from its local agency of the agency’s intent to commence an examination of its 2019 local country 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.

 

 

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

7. Revenue Recognition (continued)

 

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 September 30, 2020 and 2019, total returns as a percent of net sales were 0.07% and 0.10%, respectively.

 

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

 

 

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:

 

 

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

 

 

Reliv’ International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

8. Lease Revenue

 

Other revenue consists of revenue derived from leasing a portion of our headquarters building to Nutracom effective January 1, 2019. The leased space, encompassing manufacturing, warehouse, and certain office space, is for a term of seven years, with a tenant option for an additional five-year term. Annual lease amounts range from $193,000 to $410,000 over the seven-year term.

 

We recognize lessor rent revenue on a straight-line basis over the term of the lease. As part of this straight-line methodology, the cumulative rental billings may be greater or less than the financial period’s recognized revenue; such timing differences are recognized on the balance sheet as an accrued other liability or an unbilled rent revenue receivable.

 

Also included in other revenue are billings to the tenant for its share of the facility’s common area costs such as real estate taxes, maintenance, and utilities; totaling approximately $358,600 and $305,100 for the nine month periods ending September 30, 2020 and 2019, respectively. These same common area costs plus the tenant’s share of the facilities’ depreciation are recorded as cost of goods sold.

 

The following table details lessor’s estimated remaining straight-line rent revenue over the seven-year lease term as compared with fixed rent amounts under the lease agreement.

 

 

 

9. Subsequent Events

 

As described in Note 5, on October 28, 2020, our revolving line of credit agreement with our primary lender was verbally extended to November 5, 2020. On November 5, 2020, we entered into a new term loan agreement with our primary lender.

 

In October 2020 and November 2020, in a series of filings with the U.S. Securities and Exchange Commission (SEC), we announced our intention to effect a reverse stock split of our common stock and a forward stock split of our common stock (collectively “Stock Split”) during the fourth quarter of 2020, as defined and described within the aforementioned SEC filings. The Stock Split is being undertaken as part of our plan to suspend our obligations to file periodic and current reports and other information with the SEC as our Board of Directors has determined that the costs of being a public reporting company outweigh the benefits thereof.

 

 

FORWARD-LOOKING STATEMENTS

 

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

 

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

 

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

 

Overview

 

We are a developer and marketer of a proprietary line of nutritional supplements addressing basic nutrition, specific wellness needs, weight management and sports nutrition. In 2019, we introduced a line of hemp-extract products under the RLV brand name. We sell our products through an international direct selling system utilizing independent distributors. Sales in the United States represented approximately 76.5% of worldwide net sales for the nine months ended September 30, 2020 compared to approximately 73.8% for the nine months ended September 30, 2019. Our international operations currently generate sales through distributor networks with facilities in Australia, Canada, Malaysia, Mexico, the Philippines, and the United Kingdom. We also operate in Ireland, France, Germany, Austria and the Netherlands from our United Kingdom distribution center, and in New Zealand from our Australia office.

 

We derive our revenues principally through product sales made by our global independent distributor base, which, as of September 30, 2020, consisted of approximately 13,200 registered customers and 24,850 active distributors. Our sales can be affected by several factors, including our ability to attract new distributors and retain our existing distributor base, our ability to properly train and motivate our distributor base and our ability to develop new products and successfully maintain our current product line.

 

All of our sales to distributors outside the United States are made in the respective local currency; therefore, our earnings and cash flows are subject to fluctuations due to changes in foreign currency rates as compared to the U.S. dollar. Our foreign subsidiaries primarily source their nutritional and dietary inventories in U.S. dollars from our U.S. manufacturer. As a result, exchange rate fluctuations may have an effect on sales and gross margins. Accounting practices require that our results from operations be converted to U.S. dollars for reporting purposes. Consequently, our reported earnings may be significantly affected by fluctuations in currency exchange rates, generally increasing with a weaker U.S. dollar and decreasing with a strengthening U.S. dollar. From time to time, we enter into foreign exchange forward contracts to mitigate our foreign currency exchange risk.

 

Impact of COVID-19 Pandemic

 

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

 

 

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

 

Components of Net Sales and Expense

 

Product sales represent the actual product purchase price typically paid by our distributors, after giving effect to distributor allowances, which can range from 20% to 40% of suggested retail price, depending on the rank of a particular distributor. Freight income represents the amounts billed to distributors for shipping costs. We record net sales and the related commission expense when the merchandise is shipped. Other revenue included in net sales includes the leasing revenue, plus common area expense billings, on the lease of the manufacturing portion of our building to Nutracom, LLC (“Nutracom”) as of January 1, 2019.

 

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

 

Our cost of goods sold consists of the purchase price of the products, along with shipping costs, and duties and taxes where applicable. Cost of goods sold also include the costs related to leasing income.

 

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

 

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

 

 

Results of Operations  

  

Net Sales. Overall net sales decreased by 5.3% in the three months ended September 30, 2020 compared to the same period in 2019. During the third quarter of 2020 (“Q3 2020”), sales in the United States decreased by 2.4%, and international sales decreased by 13.9% over the prior-year period. International sales, when reported in U.S. dollars, were favorably impacted by a weaker U.S. dollar versus most of the currencies of the markets where we do business. Excluding the impact of currency exchange fluctuation, international sales decreased by 17.0%.

 

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

 

		Three months ended September 30,
		2020								2019								Change from prior year
		Amount				% of Net Sales				Amount				% of Net Sales				Amount				%
		(dollars in thousands)
United States		$	6,682				77.1	%		$	6,843				74.8	%		$	(161	)			(2.4	)%
Australia/New Zealand			148				1.7				135				1.5				13				9.6
Canada			128				1.5				140				1.5				(12	)			(8.6	)
Mexico			166				1.9				156				1.7				10				6.4
Europe			629				7.3				727				7.9				(98	)			(13.5	)
Asia			915				10.5				1,148				12.6				(233	)			(20.3	)
Consolidated total		$	8,668				100.0	%		$	9,149				100.0	%		$	(481	)			(5.3	)%

 

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

 

		Nine months ended September 30,
		2020								2019								Change from prior year
		Amount				% of Net Sales				Amount				% of Net Sales				Amount				%
		(dollars in thousands)
United States		$	20,613				76.5	%		$	19,859				73.8	%		$	754				3.8	%
Australia/New Zealand			437				1.6				445				1.6				(8	)			(1.8	)
Canada			412				1.5				479				1.8				(67	)			(14.0	)
Mexico			420				1.6				444				1.7				(24	)			(5.4	)
Europe			2,193				8.1				2,422				9.0				(229	)			(9.5	)
Asia			2,893				10.7				3,246				12.1				(353	)			(10.9	)
Consolidated total		$	26,968				100.0	%		$	26,895				100.0	%		$	73				0.3	%

 

 

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

 

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

 

		As of 9/30/2020
		Retail Customers				Preferred Customers				Active Distributors				Total Customers and Distributors				Master Affiliates and Above
United States			3,680				2,050				17,000				22,730				2,060
Australia/New Zealand			50				280				660				990				80
Canada			90				30				460				580				70
Mexico			30				140				1,190				1,360				90
Europe			730				560				1,540				2,830				260
Asia			850				4,710				4,000				9,560				750
Consolidated Total			5,430				7,770				24,850				38,050				3,310

 

		As of 9/30/2019
		Retail Customers				Preferred Customers				Active Distributors				Total Customers and Distributors				Master Affiliates and Above
United States			3,610				1,540				17,810				22,960				2,070
Australia/New Zealand			50				220				670				940				70
Canada			90				30				500				620				70
Mexico			20				110				1,170				1,300				90
Europe			740				750				1,690				3,180				310
Asia			2,390				5,450				4,060				11,900				530
Consolidated Total			6,900				8,100				25,900				40,900				3,140

 

		Change in %
		Retail Customers				Preferred Customers				Active Distributors				Total Customers and Distributors				Master Affiliates and Above
United States			1.9	%			33.1	%			-4.5	%			-1.0	%			-0.5	%
Australia/New Zealand			0.0	%			27.3	%			-1.5	%			5.3	%			14.3	%
Canada			0.0	%			0.0	%			-8.0	%			-6.5	%			0.0	%
Mexico			50.0	%			27.3	%			1.7	%			4.6	%			0.0	%
Europe			-1.4	%			-25.3	%			-8.9	%			-11.0	%			-16.1	%
Asia			-64.4	%			-13.6	%			-1.5	%			-19.7	%			41.5	%
Consolidated Total			-21.3	%			-4.1	%			-4.1	%			-7.0	%			5.4	%

 

 

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 9/30/2020		$	6,682			$	148			$	128			$	166			$	629			$	915			$	1,986
Quarter ended 9/30/2019		$	6,843			$	135			$	140			$	156			$	727			$	1,148			$	2,306
% change in sales-Q3 2020 vs. Q3 2019:
in USD			-2.4	%			9.6	%			-8.6	%			6.4	%			-13.5	%			-20.3	%			-13.9	%
due to currency fluctuation			-				4.6	%			-0.6	%			-15.1	%			5.1	%			4.5	%			3.1	%
Sales in local currency (non-GAAP)			-2.4	%			5.0	%			-8.0	%			21.5	%			-18.6	%			-24.8	%			-17.0	%
# of new Preferred Customers-Q3 2020			584				68				8				45				43				1,011				1,175
# of new Preferred Customers-Q3 2019			286				13				6				20				80				986				1,105
% change			104.2	%			423.1	%			33.3	%			125.0	%			-46.3	%			2.5	%			6.3	%
# of new distributors-Q3 2020			716				13				22				233				78				499				845
# of new distributors-Q3 2019			913				16				22				178				121				748				1,085
% change			-21.6	%			-18.8	%			0.0	%			30.9	%			-35.5	%			-33.3	%			-22.1	%
# of new Master Affiliates-Q3 2020			151				2				8				9				8				89				116
# of new Master Affiliates-Q3 2019			114				-				4				8				17				86				115
% change			32.5	%		N/M					100.0	%			12.5	%			-52.9	%			3.5	%			0.9	%
# of Product orders-Q3 2020			26,274				951				522				1,353				2,338				8,383				13,547
# of Product orders-Q3 2019			27,034				937				514				1,033				2,484				10,248				15,216
% change			-2.8	%			1.5	%		<