UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C.   20549








FORM
10-Q





(Mark
One)


x
                    QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the quarterly period ended June 30, 2009OR ̈
                    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
                  
                  (I.R.S.
      Employer Identification Number)incorporation
      or organization)136
      Chesterfield Industrial BoulevardChesterfield, 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 þ     No o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted 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 and post such
files).   Yes o     No o





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” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





Large
accelerated filer o     Accelerated
filer o      Non-accelerated
filer o Smaller reporting company  þ




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





The number of shares outstanding of the
Registrant’s common stock as of July 31, 2009 was 12,233,612 (excluding treasury
shares).





INDEX





PART
      I – FINANCIAL INFORMATIONItem
      No. 1
                    Financial
      Statements (Unaudited)
                    2Item
      No. 2
                    Management’s
      Discussion and Analysis ofFinancial
      Condition and Results of Operations
                    10Item
      No. 4
                    Controls
      and Procedures
                    15PART
      II – OTHER INFORMATIONItem
      No. 1A
                    Risk
      Factors
                    16Item
      No. 2
                    Unregistered
      Sales of Equity Securities and Use of Proceeds
                    16Item
      No. 4
                    Submission
      of Matters to a Vote of Security Holders
                    16Item
      No. 6
                    Exhibits
                    18







PART
I — FINANCIAL INFORMATION
 
 Item No. 1 - Financial
Statements
 
 Reliv
International, Inc. and Subsidiaries
 
 Consolidated
Balance Sheets
 
 June 30
                    
                    
                    December 312009
                    
                    
                    2008(unaudited)AssetsCurrent
      assets:Cash
      and cash equivalents
                    
                    $
                    6,120,380
                    
                    
                    $
                    4,460,637Accounts
      and notes receivable, less allowances of$15,900
      in 2009 and $10,200 in 2008
                    
                    
                    318,463
                    
                    
                    
                    494,689Accounts
      due from employees and distributors
                    
                    
                    205,056
                    
                    
                    
                    241,532InventoriesFinished
      goods
                    
                    
                    3,860,524
                    
                    
                    
                    3,533,371Raw
      materials
                    
                    
                    1,628,510
                    
                    
                    
                    1,710,319Sales
      aids and promotional materials
                    
                    
                    810,001
                    
                    
                    
                    978,264Total
      inventories
                    
                    
                    6,299,035
                    
                    
                    
                    6,221,954Refundable
      income taxes
                    
                    
                    80,516
                    
                    
                    
                    129,137Prepaid
      expenses and other current assets
                    
                    
                    1,115,634
                    
                    
                    
                    1,525,665Deferred
      income taxes
                    
                    
                    446,000
                    
                    
                    
                    522,000Total
      current assets
                    
                    
                    14,585,084
                    
                    
                    
                    13,595,614Other
      assets
                    
                    
                    1,488,681
                    
                    
                    
                    1,220,546Accounts
      due from employees and distributors
                    
                    
                    119,920
                    
                    
                    
                    164,462Property,
      plant and equipment:Land
      and land improvements
                    
                    
                    852,147
                    
                    
                    
                    852,147Building
                    
                    
                    9,834,020
                    
                    
                    
                    9,786,037Machinery
      & equipment
                    
                    
                    3,393,118
                    
                    
                    
                    3,293,526Office
      equipment
                    
                    
                    1,498,849
                    
                    
                    
                    1,452,015Computer
      equipment & software
                    
                    
                    2,864,874
                    
                    
                    
                    2,904,84618,443,008
                    
                    
                    
                    18,288,571Less:
      Accumulated depreciation
                    
                    
                    9,782,651
                    
                    
                    
                    9,376,414Net
      property, plant and equipment
                    
                    
                    8,660,357
                    
                    
                    
                    8,912,157Total
      assets
                    
                    $
                    24,854,042
                    
                    
                    $
                    23,892,779
 
 See notes
to financial statements.
  2
 
 Reliv
International, Inc. and Subsidiaries
 
 Consolidated
Balance Sheets
 
 June 30
                              
                              
                              December 312009
                              
                              
                              2008(unaudited)Liabilities
      and stockholders' equityCurrent
      liabilities:Accounts
      payable and accrued expenses:Trade
      accounts payable and other accrued expenses
                              
                              $
                              3,839,734
                              
                              
                              $
                              2,948,467Distributors
      commissions payable
                              
                              
                              2,728,198
                              
                              
                              
                              2,809,164Sales
      taxes payable
                              
                              
                              297,033
                              
                              
                              
                              374,643Interest
      payable
                              
                              
                              11,827
                              
                              
                              
                              -Payroll
      and payroll taxes payable
                              
                              
                              583,431
                              
                              
                              
                              648,550Total
      accounts payable and accrued expenses
                              
                              
                              7,460,223
                              
                              
                              
                              6,780,824Notes
      payable
                              
                              
                              1,106,919
                              
                              
                              
                              -Revolving
      line of credit
                              
                              
                              880,000
                              
                              
                              
                              -Current
      maturities of long-term debt
                              
                              
                              412,000
                              
                              
                              
                              569,375Total
      current liabilities
                              
                              
                              9,859,142
                              
                              
                              
                              7,350,199Noncurrent
      liabilities:Long-term
      debt, less current maturities
                              
                              
                              3,708,000
                              
                              
                              
                              -Deferred
      income taxes
                              
                              
                              -
                              
                              
                              
                              70,000Other
      noncurrent liabilities
                              
                              
                              390,865
                              
                              
                              
                              364,990Total
      noncurrent liabilities
                              
                              
                              4,098,865
                              
                              
                              
                              434,990Stockholders'
      equity:Preferred
      stock, par value $.001 per share; 3,000,000shares
      authorized; -0- shares issued and outstandingin
      2009 and 2008
                              
                              
                              -
                              
                              
                              
                              -Common
      stock, par value $.001 per share; 30,000,000authorized;
      14,425,185 shares issued and 12,230,187shares
      outstanding as of 6/30/2009; 14,425,185 sharesissued
      and 14,302,160 shares outstanding as of 12/31/2008
                              
                              
                              14,425
                              
                              
                              
                              14,425Additional
      paid-in capital
                              
                              
                              30,413,228
                              
                              
                              
                              30,321,066Accumulated
      deficit
                              
                              
                              (12,128,360
                              )
                              
                              
                              (12,938,430
                              )Accumulated
      other comprehensive loss:Foreign
      currency translation adjustment
                              
                              
                              (656,231
                              )
                              
                              
                              (663,478
                              )Treasury
      stock
                              
                              
                              (6,747,027
                              )
                              
                              
                              (625,993
                              )Total
      stockholders' equity
                              
                              
                              10,896,035
                              
                              
                              
                              16,107,590Total
      liabilities and stockholders' equity
                              
                              $
                              24,854,042
                              
                              
                              $
                              23,892,779
 
 See notes
to financial statements.
  3
 
 Reliv
International, Inc. and Subsidiaries
 
 Consolidated
Statements of Income
 (unaudited)
 
 Three months ended June 30
                  
                  
                  Six months ended June 302009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Product
      sales
                  
                  $
                  17,772,137
                  
                  
                  $
                  21,295,574
                  
                  
                  $
                  38,938,318
                  
                  
                  $
                  46,492,752Handling
      & freight income
                  
                  
                  2,280,992
                  
                  
                  
                  2,664,136
                  
                  
                  
                  4,905,801
                  
                  
                  
                  5,738,344Net
      sales
                  
                  
                  20,053,129
                  
                  
                  
                  23,959,710
                  
                  
                  
                  43,844,119
                  
                  
                  
                  52,231,096Costs
      and expenses:Cost
      of products sold
                  
                  
                  3,773,902
                  
                  
                  
                  4,110,910
                  
                  
                  
                  8,349,653
                  
                  
                  
                  8,945,436Distributor
      royalties and commissions
                  
                  
                  7,634,899
                  
                  
                  
                  9,422,481
                  
                  
                  
                  16,572,566
                  
                  
                  
                  20,544,853Selling,
      general and administrative
                  
                  
                  8,050,852
                  
                  
                  
                  9,589,478
                  
                  
                  
                  16,668,725
                  
                  
                  
                  19,521,277Total
      costs and expenses
                  
                  
                  19,459,653
                  
                  
                  
                  23,122,869
                  
                  
                  
                  41,590,944
                  
                  
                  
                  49,011,566Income
      from operations
                  
                  
                  593,476
                  
                  
                  
                  836,841
                  
                  
                  
                  2,253,175
                  
                  
                  
                  3,219,530Other
      income (expense):Interest
      income
                  
                  
                  14,704
                  
                  
                  
                  100,691
                  
                  
                  
                  35,419
                  
                  
                  
                  235,564Interest
      expense
                  
                  
                  (41,384
                  )
                  
                  
                  (9,981
                  )
                  
                  
                  (50,934
                  )
                  
                  
                  (10,394
                  )Other
      income (expense)
                  
                  
                  114,035
                  
                  
                  
                  17,523
                  
                  
                  
                  126,090
                  
                  
                  
                  (17,589
                  )Income
      before income taxes
                  
                  
                  680,831
                  
                  
                  
                  945,074
                  
                  
                  
                  2,363,750
                  
                  
                  
                  3,427,111Provision
      for income taxes
                  
                  
                  271,000
                  
                  
                  
                  376,000
                  
                  
                  
                  942,000
                  
                  
                  
                  1,332,000Net
      income
                  
                  $
                  409,831
                  
                  
                  $
                  569,074
                  
                  
                  $
                  1,421,750
                  
                  
                  $
                  2,095,111Earnings
      per common share - Basic
                  
                  $
                  0.03
                  
                  
                  $
                  0.04
                  
                  
                  $
                  0.10
                  
                  
                  $
                  0.13Weighted
      average shares
                  
                  
                  12,821,000
                  
                  
                  
                  15,821,000
                  
                  
                  
                  13,556,000
                  
                  
                  
                  15,847,000Earnings
      per common share - Diluted
                  
                  $
                  0.03
                  
                  
                  $
                  0.04
                  
                  
                  $
                  0.10
                  
                  
                  $
                  0.13Weighted
      average shares
                  
                  
                  12,821,000
                  
                  
                  
                  15,821,000
                  
                  
                  
                  13,556,000
                  
                  
                  
                  15,847,000Cash
      dividends declared per common share
                  
                  $
                  0.05
                  
                  
                  $
                  0.05
                  
                  
                  $
                  0.05
                  
                  
                  $
                  0.05
 
 See notes
to financial statements.
  4
 
 Reliv
International, Inc. and Subsidiaries
 
 Consolidated
Statements of Cash Flows
 (unaudited)
 
 Six
      months ended June 302009
                        
                        
                        2008Operating
      activities:Net
      income
                        
                        $
                        1,421,750
                        
                        
                        $
                        2,095,111Adjustments
      to reconcile net income tonet
      cash provided by operating activities:Depreciation
      and amortization
                        
                        
                        560,867
                        
                        
                        
                        543,958Stock-based
      compensation
                        
                        
                        92,162
                        
                        
                        
                        119,309Deferred
      income taxes
                        
                        
                        (4,000
                        )
                        
                        
                        (29,000
                        )Foreign
      currency transaction (gain)/loss
                        
                        
                        (62,622
                        )
                        
                        
                        (24,200
                        )(Increase)
      decrease in accounts and notes receivable
                        
                        
                        256,542
                        
                        
                        
                        433,486(Increase)
      decrease in inventories
                        
                        
                        (17,532
                        )
                        
                        
                        (665,730
                        )(Increase)
      decrease in refundable income taxes
                        
                        
                        50,313
                        
                        
                        
                        106,931(Increase)
      decrease in prepaid expensesand
      other current assets
                        
                        
                        (118,455
                        )
                        
                        
                        (512,058
                        )(Increase)
      decrease in other assets
                        
                        
                        (276,401
                        )
                        
                        
                        20,830Increase
      (decrease) in accounts payable & accrued expensesand
      other noncurrent liabilities
                        
                        
                        652,816
                        
                        
                        
                        249,481Increase
      (decrease) in income taxes payable
                        
                        
                        -
                        
                        
                        
                        (100,000
                        )Net
      cash provided by operating activities
                        
                        
                        2,555,440
                        
                        
                        
                        2,238,118Investing
      activities:Proceeds
      from the sale of property, plant and equipment
                        
                        
                        -
                        
                        
                        
                        8,716Purchase
      of property, plant and equipment
                        
                        
                        (288,304
                        )
                        
                        
                        (457,074
                        )Purchase
      of investments
                        
                        
                        -
                        
                        
                        
                        (1,521,111
                        )Proceeds
      from final withdrawal from limited partnership investment
                        
                        
                        488,633
                        
                        
                        
                        -Proceeds
      from sales or maturities of investments, at cost
                        
                        
                        -
                        
                        
                        
                        398,592Net
      cash provided by (used in) investing activities
                        
                        
                        200,329
                        
                        
                        
                        (1,570,877
                        )Financing
      activities:Proceeds
      from line of credit borrowings
                        
                        
                        5,000,000
                        
                        
                        
                        -Repayment
      of line of credit borrowings
                        
                        
                        (4,120,000
                        )
                        
                        
                        -Proceeds
      from term loan borrowings
                        
                        
                        4,120,000
                        
                        
                        
                        -Principal
      payments on notes payable
                        
                        
                        (569,375
                        )
                        
                        
                        -Common
      stock dividends paid
                        
                        
                        (611,681
                        )
                        
                        
                        (793,313
                        )Purchase
      of stock for treasury
                        
                        
                        (5,014,115
                        )
                        
                        
                        (1,226,044
                        )Other
                        
                        
                        -
                        
                        
                        
                        2,272Net
      cash used in financing activities
                        
                        
                        (1,195,171
                        )
                        
                        
                        (2,017,085
                        )Effect
      of exchange rate changes on cash and cash equivalents
                        
                        
                        99,145
                        
                        
                        
                        7,464Increase
      (decrease) in cash and cash equivalents
                        
                        
                        1,659,743
                        
                        
                        
                        (1,342,380
                        )Cash
      and cash equivalents at beginning of period
                        
                        
                        4,460,637
                        
                        
                        
                        11,694,699Cash
      and cash equivalents at end of period
                        
                        $
                        6,120,380
                        
                        
                        $
                        10,352,319Supplementary
      disclosure of cash flow information:Noncash
      investing and financing transactions:Issuance
      of promissory note for purchase of stock for treasury
                        
                        $
                        1,106,919
                        
                        
                        $
                        -
 
 See notes
to financial statements.
  5
 
 Reliv
International, Inc. and Subsidiaries
 Notes to
Consolidated Financial Statements
 (Unaudited)
 
 June 30,
2009
 
 Note
1—   Accounting Policies
 
 Basis of
Presentation
 
 The
accompanying unaudited consolidated financial statements and notes thereto have
been prepared in accordance with the instructions to Form 10-Q and reflect all
adjustments which management believes necessary (which primarily include normal
recurring accruals) to present fairly the financial position, results of
operations and cash flows.  These statements, however, do not include
all information and footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with accounting
principles generally accepted in the United States.  Interim results
may not necessarily be indicative of results that may be expected for any other
interim period or for the year as a whole.  These financial statements
should be read in conjunction with the audited consolidated financial statements
and footnotes included in the annual report on Form 10-K for the year ended
December 31, 2008, filed March 13, 2009 with the Securities and Exchange
Commission.
 
 Adoption of New Accounting
Standards
 
 In April
2009, the Financial Accounting Standards Board (FASB) issued FASB Staff Position
(FSP) FSP SFAS 107-1 and Accounting Principles Board Opinion (APB) APB 28-1,
"Interim Disclosure about Fair Value of Financial Instruments" (FSP 107-1/APB
28-1).  FSP 107-1/APB 28-1 requires interim disclosures regarding the
fair values of financial instruments that are within the scope of FASB No. 107,
"Disclosures about the Fair Value of Financial
Instruments."  Additionally, FSP 107-1/APB 28-1 requires disclosure of
the methods and significant assumptions used to estimate the fair value of
financial instruments on an interim basis as well as changes of the methods and
significant assumptions from prior periods.  FSP 107-1/APB 28-1 does
not change the accounting treatment for these financial instruments and is
effective for interim periods ending after June 15, 2009.  The
Company's adoption of FSP 107-1/APB 28-1 in the second quarter of 2009 did not
have a material impact on the Company's financial statements.
 
 In May
2009, the FASB issued SFAS No. 165, "Subsequent Events" (SFAS No.
165).  SFAS No. 165 establishes general standards of accounting for
disclosing events that occur after the balance sheet date but before financial
statements are issued or are available to be issued.  It requires the
disclosure of the date through which an entity has evaluated subsequent events
and the basis for selecting that date, that is, whether that date represents the
date the financial statements were issued or were available to be
issued.  SFAS No. 165 is effective for interim or annual financial
periods ending after June 15, 2009.  The Company adopted SFAS No. 165
during its second quarter of 2009.  The adoption of SFAS No. 165 did
not have a material impact on the Company's financial statements.  The
Company has evaluated  subsequent events through August 10, 2009, the
date the financial statements were issued.
 
 Note
2—    Comprehensive Income
 
 Comprehensive
income was $525,185 and $1,428,997 for the three and six months ended June 30,
2009, respectively.  For the three and six months ended June 30, 2008,
comprehensive income was $546,263 and $2,106,300, respectively.  The
Company's only component of other comprehensive income is the foreign currency
translation adjustment.
  6
 
 Reliv
International, Inc. and Subsidiaries
 Notes to
Consolidated Financial Statements
 (Unaudited)
 
 June 30,
2009
 
 Note
3—   Basic and Diluted Earnings per Share
 
 Basic
earnings per common share are computed using the weighted average number of
common shares outstanding during the period.  Diluted earnings per
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.
 
 The
following table sets forth the computation of basic and diluted earnings per
share:
 
 Three months ended June 30
                                    
                                    
                                    Six months ended June 302009
                                    
                                    
                                    2008
                                    
                                    
                                    2009
                                    
                                    
                                    2008Numerator:Net
      income
                                    
                                    $
                                    409,831
                                    
                                    
                                    $
                                    569,074
                                    
                                    
                                    $
                                    1,421,750
                                    
                                    
                                    $
                                    2,095,111Denominator:Denominator
      for basic earnings pershare—weighted
      average shares
                                    
                                    
                                    12,821,000
                                    
                                    
                                    
                                    15,821,000
                                    
                                    
                                    
                                    13,556,000
                                    
                                    
                                    
                                    15,847,000Dilutive
      effect of employee stock optionsand
      other warrants
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Denominator
      for diluted earnings pershare—adjusted
      weighted average shares
                                    
                                    
                                    12,821,000
                                    
                                    
                                    
                                    15,821,000
                                    
                                    
                                    
                                    13,556,000
                                    
                                    
                                    
                                    15,847,000Basic
      earnings per share
                                    
                                    $
                                    0.03
                                    
                                    
                                    $
                                    0.04
                                    
                                    
                                    $
                                    0.10
                                    
                                    
                                    $
                                    0.13Diluted
      earnings per share
                                    
                                    $
                                    0.03
                                    
                                    
                                    $
                                    0.04
                                    
                                    
                                    $
                                    0.10
                                    
                                    
                                    $
                                    0.13
 
 Options
and warrants to purchase 835,040 shares of common stock for the three months and
six months ended June 30, 2009, respectively, were not included in the
denominator for diluted earnings per share because their effect would be
antidilutive.  Options and warrants to purchase 805,224 shares of
common stock for the three months and six months ended June 30, 2008,
respectively, were not included in the denominator for diluted earnings per
share because their effect would be antidilutive.
 
 Note
4—   Restructuring of European Operations
 
 In June
2008, the Company began closing the operations of its Reliv Germany
subsidiary.  Under this restructuring plan, the Company now manages
its sales, marketing, and overall general management for its entire European
operations from its existing Reliv United Kingdom office.  While this
plan resulted in the closing of the Reliv Germany office, the Company's Germany
distribution center remains open to support that region's
customers.  In the second quarter of 2008, the Company incurred a
charge of $215,000 ($110,000 net of tax) for employee severance and lease exit
costs.
 
 In the
second quarter of 2009, the Company entered into a sublease rental agreement for
a significant portion of the Reliv Germany office.  The term of this
sublease agreement is from May 2009 through June 2010 and encompasses the
remaining term of the facility's master lease.  Under this sublease
agreement, the Company will receive sublease rental income of approximately
$3,700 per month.  In May 2009, the Company reduced its estimated
lease exit reserve by a minor amount to reflect the new sublease
agreement.  The Company expects that the June 30, 2009 reserve balance
will be substantially settled over the remainder of 2009.
 
 The
following is a summary of the costs incurred and payments made by
category.  (These costs have been recorded in Selling, General and
Administrative within the Consolidated Statements of Income).
  7
  Reliv
International, Inc. and Subsidiaries
 Notes to
Consolidated Financial Statements
 (Unaudited)
 
 June 30,
2009
 
 Note
4—   Restructuring of European Operations
(continued)
 
 Employee
                        
                        
                        LeaseSeverance
                        
                        
                        Exit
                        
                        
                        TotalOriginal
      charges and reserve balance
                        
                        $
                        107,000
                        
                        
                        $
                        108,000
                        
                        
                        $
                        215,000Additional
      charges in 2008
                        
                        
                        17,500
                        
                        
                        
                        -
                        
                        
                        
                        17,500Amounts
      settled in 2008
                        
                        
                        (124,500
                        )
                        
                        
                        (42,000
                        )
                        
                        
                        (166,500
                        )Reserve
      balance at December 31, 2008
                        
                        
                        -
                        
                        
                        
                        66,000
                        
                        
                        
                        66,000Amounts
      settled in first quarter 2009
                        
                        
                        -
                        
                        
                        
                        (13,000
                        )
                        
                        
                        (13,000
                        )Reserve
      balance at March 31, 2009
                        
                        
                        -
                        
                        
                        
                        53,000
                        
                        
                        
                        53,000Amounts
      settled and sublease incomeadjustment
      in second quarter 2009
                        
                        
                        -
                        
                        
                        
                        (20,000
                        )
                        
                        
                        (20,000
                        )Reserve
      balance at June 30, 2009
                        
                        
                        -
                        
                        
                        $
                        33,000
                        
                        
                        $
                        33,000
 
 Note
5—   Debt
 
 Short-term
and long-term debt at June 30, 2009 and December 31, 2008 consists of the
following:
 
 June 30
                    
                    
                    December 312009
                    
                    
                    2008Notes
      payable  (1)
                    
                    $
                    -
                    
                    
                    $
                    569,375Note
      payable (2)
                    
                    
                    1,106,919
                    
                    
                    
                    -Revolving
      line of credit (2) (3)
      (4)
                    
                    
                    880,000
                    
                    
                    
                    -Term
      loan (3)
      (4)
                    
                    
                    4,120,000
                    
                    
                    
                    -6,106,919
                    
                    
                    
                    569,375Less:  current
      portion
                    
                    
                    2,398,919
                    
                    
                    
                    569,375Long-term
      debt, less current maturities
                    
                    $
                    3,708,000
                    
                    
                    $
                    -
 
 (1)
Series of five notes issued from October 2008 through December
2008.  The notes range in amounts from $73,375 to $132,250 with the
following key provisions:  interest payable at 6%; all outstanding
principal and unpaid interest due two years from each note's issuance date; and
no prepayment penalty.  At December 31, 2008, the Company classified
these notes as a current liability as the Company repaid these notes in March
2009.
 
 (2) In
April 2009, the Company entered into a Stock Purchase Agreement with a large
shareholder (Seller) to purchase 2,068,973 shares of the Company's common stock
for $6,106,919 (an average price of $2.95 per share).  To finance the
purchase, the Company borrowed $5 million under its existing line of credit and
issued a promissory note to the Seller for $1,106,919.  The promissory
note bore interest at 6% per annum with all principal and unpaid interest due no
later than ninety days from closing.   The Company repaid this
note in July 2009 with an additional borrowing of $1 million from its revolving
line of credit.
 
 (3) In
June 2009, the Company entered into a term loan agreement with its primary
lender for $4.12 million and used the proceeds to reduce its revolving line of
credit balance from $5 million to $880,000.  The term of the loan is
for a period of two years with interest accruing at a floating interest rate
based on the 30-day LIBOR plus 3%, subject to a 3.75% floor.  Monthly
principal and interest are based on a ten-year amortization.  The
aggregate outstanding balance of principal and interest is due and payable on
June 29, 2011.
 
 (4)  Under
the terms of the revolving line of credit and term loan, the Company is required
to maintain the following financial covenants: (a)
maintain at all times a tangible net worth of not less than $10 million and (b)
maintain at all times a ratio of Total Funded Debt to EBITDA of not greater than
2.5 to 1.  The revolving line of credit and term loan are secured by
all tangible and intangible assets of the Company and also by a mortgage on the
Company headquarters building and real estate. At June 30, 2009, the Company was
in compliance with its debt covenants.
  8
  Reliv
International, Inc. and Subsidiaries
 Notes to
Consolidated Financial Statements
 (Unaudited)
 
 June 30,
2009
 
 Note
6—    Fair Value Measurements
 
 Effective
January 1, 2008, the Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 157, “Fair Value Measurements,” which defines
fair value, establishes a framework for fair value and expands disclosures about
fair value measurements required under other accounting
pronouncements.  SFAS No. 157 clarifies that fair value is an exit
price, representing the amount that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market
participants.  SFAS No. 157 also requires that a fair value
measurement reflect the assumptions market participants would use in pricing an
asset or liability based on the best information
available.  Assumptions include the risks inherent in a particular
valuation technique (such as a pricing model) and/or the risks inherent in the
inputs to the model.  In February 2008, the Financial Accounting
Standards Board ("FASB") issued Staff Position No. 157-2 that delays the
effective date of SFAS No. 157 for non-financial assets and non-financial
liabilities, except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually).
 
 As of
June 30, 2009, the Company held assets that are required to be measured at fair
value on a recurring basis:
 
 Using
      QuotedTotal
                                                        
                                                        
                                                        Prices
      inCarrying
                                                        
                                                        
                                                        Active
      MarketsDescription
                                                        
                                                        Value
                                                        
                                                        
                                                        (Level
      1)Marketable
      securities (1)
                                                        
                                                        $
                                                        185,035
                                                        
                                                        
                                                        $
                                                        185,035
 
 (1)
Representing assets of the Company's Supplemental Executive Retirement Plan
(trading securities).  Presented within Other Assets in the
consolidated balance sheets.
 
 The
carrying value of the Company's short-term and long-term debt approximates fair
value due to the short-term duration of the debt and / or  the
frequent resetting of its variable interest rate(s).
 
 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.
  9




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.  These forward-looking
statements are affected by risks, uncertainties and assumptions that we make,
including, among other things, the factors that are described in “Item No. 1A -
Risk Factors” in our 2008 Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 13, 2009, as the same may be updated or amended
in our quarterly reports on Form 10-Q.




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





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





Overview





We are a developer, manufacturer and
marketer of a proprietary line of nutritional supplements addressing basic
nutrition, specific wellness needs, weight management and sports nutrition. We
also offer a line of skin care products. We sell our products through an
international network marketing system using independent distributors. Sales in
the United States represented approximately 89.0% of worldwide net sales for the
six months ended June 30, 2009 and 86.4% of worldwide net sales for the six
months ended June 30, 2008. Our international operations currently generate
sales through distributor networks in Australia, Canada, Germany, Ireland,
Malaysia, Mexico, New Zealand, the Philippines, Singapore and the
United Kingdom.  We also operate on a limited basis in Austria
and the Netherlands from our German distribution center and in Brunei from our
Malaysia office.





We derive our revenues principally
through product sales made by our global independent distributor base, which, as
of June 30, 2009, consisted of approximately 68,040 distributors. Our sales can
be affected by several factors, including our ability to attract new
distributors and retain our existing distributor base, our ability to properly
train and motivate our distributor base and our ability to develop new products
and successfully maintain our current product line.





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





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 between 20% to 40% of suggested
retail price, depending on the rank of a particular
distributor.  Handling and freight income represents the amounts
billed to distributors for shipping costs.  We record net sales and
the related commission expense when the merchandise is shipped.


10


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





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





Distributor royalties and commissions
are monthly payments made to Master Affiliates and above, based on products sold
in their downline organization. Based on our distributor agreements, these
expenses typically approximate 23% of sales at suggested retail. Also, we
include other sales leadership bonuses, such as Ambassador bonuses, in this line
item. Distributor royalties and commissions are directly related to the level of
our sales and, absent any changes in our distributor compensation plan, should
continue at comparable levels as a percentage of net sales as in recent periods.
However, in 2008, we adjusted the commission structure on our newest product,
GlucAffect, and other higher priced products in our line.  We reduced the
value of the product used to determine distributor allowances and commission
payouts on these products.  This, in turn, allows us to sell these products
at a lower suggested retail price with no net impact to our earnings. 
This adjustment appears as a slight reduction in the percentage of
distributor royalties and commissions as a percentage of net
sales.





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; the cost of
regulatory compliance, such as the costs incurred to comply with the various
provisions of the Sarbanes-Oxley Act of 2002; and other administrative
costs.





Results
of Operations





The
following table sets forth selected results of our operations expressed as a
percentage of net sales for the three- and six-month periods ended June 30, 2009
and 2008. Our results of operations for the periods described below are not
necessarily indicative of results of operations for future periods.





Three
      months ended
                    June
      30,
                  
                  
                  Six
      months ended
                    June
      30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Net
      sales
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %Costs
      and expenses:Cost
      of products sold
                  
                  
                  18.8
                  
                  
                  
                  17.2
                  
                  
                  
                  19.1
                  
                  
                  
                  17.1Distributor
      royalties and commissions
                  
                  
                  38.1
                  
                  
                  
                  39.3
                  
                  
                  
                  37.8
                  
                  
                  
                  39.3Selling,
      general and administrative
                  
                  
                  40.1
                  
                  
                  
                  40.0
                  
                  
                  
                  38.0
                  
                  
                  
                  37.4Income
      from operations
                  
                  
                  3.0
                  
                  
                  
                  3.5
                  
                  
                  
                  5.1
                  
                  
                  
                  6.2Interest
      expense
                  
                  
                  (0.2
                  )
                  
                  
                  (0.0
                  )
                  
                  
                  (0.1
                  )
                  
                  
                  (0.0
                  )Interest
      and other income
                  
                  
                  0.6
                  
                  
                  
                  0.5
                  
                  
                  
                  0.4
                  
                  
                  
                  0.4Income
      before income taxes
                  
                  
                  3.4
                  
                  
                  
                  4.0
                  
                  
                  
                  5.4
                  
                  
                  
                  6.6Provision
      for income taxes
                  
                  
                  1.4
                  
                  
                  
                  1.6
                  
                  
                  
                  2.2
                  
                  
                  
                  2.6Net
      income
                  
                  
                  2.0
                  %
                  
                  
                  2.4
                  %
                  
                  
                  3.2
                  %
                  
                  
                  4.0
                  %




11


Net Sales.Overall
net sales decreased by 16.3% in the three months ended June 30, 2009 compared to
the same period in 2008.  During the second quarter of 2009, sales in
the United States decreased by 13.7%, and our international sales decreased by
31.5% over the prior-year period.





The
following table summarizes net sales by geographic market for the three months
ended June 30, 2009 and 2008. Beginning in 2009, we have condensed the sales and
distributor count data for the various countries where we operate within Europe
and Asia into single line items for each region.





Three months ended June 30,2009
                                                      
                                                      2008
                                                      
                                                      Change from prior yearAmount
                                                      
                                                      % of Net
                                                        Sales
                                                      
                                                      Amount
                                                      
                                                      % of Net
                                                        Sales
                                                      
                                                      Amount
                                                      
                                                      %(dollars
      in thousands)United
      States
                                                      $
                                                      17,638
                                                      
                                                      
                                                      87.9
                                                      %
                                                      
                                                      $
                                                      20,435
                                                      
                                                      
                                                      
                                                      85.3
                                                      %
                                                      
                                                      $
                                                      (2,797
                                                      )
                                                      
                                                      
                                                      (13.7
                                                      )%Australia/New
      Zealand
                                                      
                                                      535
                                                      
                                                      
                                                      2.7
                                                      
                                                      
                                                      
                                                      682
                                                      
                                                      
                                                      
                                                      2.8
                                                      
                                                      
                                                      
                                                      (147
                                                      )
                                                      
                                                      
                                                      (21.6
                                                      )Canada
                                                      
                                                      313
                                                      
                                                      
                                                      1.6
                                                      
                                                      
                                                      
                                                      436
                                                      
                                                      
                                                      
                                                      1.8
                                                      
                                                      
                                                      
                                                      (123
                                                      )
                                                      
                                                      
                                                      (28.2
                                                      )Mexico
                                                      
                                                      345
                                                      
                                                      
                                                      1.7
                                                      
                                                      
                                                      
                                                      481
                                                      
                                                      
                                                      
                                                      2.0
                                                      
                                                      
                                                      
                                                      (136
                                                      )
                                                      
                                                      
                                                      (28.3
                                                      )Europe
                                                      
                                                      305
                                                      
                                                      
                                                      1.5
                                                      
                                                      
                                                      
                                                      381
                                                      
                                                      
                                                      
                                                      1.6
                                                      
                                                      
                                                      
                                                      (76
                                                      )
                                                      
                                                      
                                                      (19.9
                                                      )Asia
                                                      
                                                      917
                                                      
                                                      
                                                      4.6
                                                      
                                                      
                                                      
                                                      1,545
                                                      
                                                      
                                                      
                                                      6.5
                                                      
                                                      
                                                      
                                                      (628
                                                      )
                                                      
                                                      
                                                      (40.6
                                                      )Consolidated
      total
                                                      $
                                                      20,053
                                                      
                                                      
                                                      100.0
                                                      %
                                                      
                                                      $
                                                      23,960
                                                      
                                                      
                                                      
                                                      100.0
                                                      %
                                                      
                                                      $
                                                      (3,907
                                                      )
                                                      
                                                      
                                                      (16.3
                                                      )%





The following table summarizes net
sales by geographic market for the six months ended June 30, 2009 and
2008.




Six months ended June 30,2009
                                            
                                            2008
                                            
                                            Change from prior yearAmount
                                            
                                            % of Net
                                              Sales
                                            
                                            Amount
                                            
                                            % of Net
                                              Sales
                                            
                                            Amount
                                            
                                            %(dollars
      in thousands)United
      States
                                            $
                                            39,019
                                            
                                            
                                            89.0
                                            %
                                            
                                            $
                                            45,120
                                            
                                            
                                            
                                            86.4
                                            %
                                            
                                            $
                                            (6,101
                                            )
                                            
                                            
                                            (13.5
                                            )%Australia/New
      Zealand
                                            
                                            1,051
                                            
                                            
                                            2.4
                                            
                                            
                                            
                                            1,428
                                            
                                            
                                            
                                            2.7
                                            
                                            
                                            
                                            (377
                                            )
                                            
                                            
                                            (26.4
                                            )Canada
                                            
                                            648
                                            
                                            
                                            1.5
                                            
                                            
                                            
                                            897
                                            
                                            
                                            
                                            1.7
                                            
                                            
                                            
                                            (249
                                            )
                                            
                                            
                                            (27.8
                                            )Mexico
                                            
                                            627
                                            
                                            
                                            1.4
                                            
                                            
                                            
                                            880
                                            
                                            
                                            
                                            1.7
                                            
                                            
                                            
                                            (253
                                            )
                                            
                                            
                                            (28.8
                                            )Europe
                                            
                                            613
                                            
                                            
                                            1.4
                                            
                                            
                                            
                                            905
                                            
                                            
                                            
                                            1.8
                                            
                                            
                                            
                                            (292
                                            )
                                            
                                            
                                            (32.3
                                            )Asia
                                            
                                            1,886
                                            
                                            
                                            4.3
                                            
                                            
                                            
                                            3,001
                                            
                                            
                                            
                                            5.7
                                            
                                            
                                            
                                            (1,115
                                            )
                                            
                                            
                                            (37.2
                                            )Consolidated
      total
                                            $
                                            43,844
                                            
                                            
                                            100.0
                                            %
                                            
                                            $
                                            52,231
                                            
                                            
                                            
                                            100.0
                                            %
                                            
                                            $
                                            (8,387
                                            )
                                            
                                            
                                            (16.1
                                            )%





The following table sets forth, as of
June 30, 2009 and 2008, the number of our active distributors and Master
Affiliates and above.  The total number of active distributors
includes Master Affiliates and above. We define an active distributor as one
that enrolls as a distributor or renews his or her distributorship during the
prior twelve months.  Master Affiliates and above are distributors
that have attained the highest level of discount and are eligible for royalties
generated by Master Affiliates and above in their downline
organization.  Growth in the number of active distributors and Master
Affiliates and above is a key factor in the growth of our
business.


12





June 30, 2009
                      
                      June 30, 2008
                      
                      % ChangeActive
                        Distributors
                      
                      Master
                        Affiliates and
                        Above
                      
                      Active
                        Distributors
                      
                      Master
                        Affiliates and
                        Above
                      
                      Active
                        Distributors
                      
                      Master
                        Affiliates and
                        AboveUnited
      States
                      54,160
                      
                      
                      7,880
                      
                      
                      
                      55,070
                      
                      
                      
                      10,080
                      
                      
                      
                      (1.7
                      )%
                      
                      
                      (21.8
                      )%Australia/New
      Zealand
                      2,440
                      
                      
                      180
                      
                      
                      
                      2,420
                      
                      
                      
                      220
                      
                      
                      
                      0.8
                      
                      
                      
                      (18.2
                      )Canada
                      1,230
                      
                      
                      120
                      
                      
                      
                      1,230
                      
                      
                      
                      150
                      
                      
                      
                      0.0
                      
                      
                      
                      (20.0
                      )Mexico
                      1,820
                      
                      
                      210
                      
                      
                      
                      1,540
                      
                      
                      
                      220
                      
                      
                      
                      18.2
                      
                      
                      
                      (4.5
                      )Europe
                      1,090
                      
                      
                      160
                      
                      
                      
                      1,250
                      
                      
                      
                      170
                      
                      
                      
                      (12.8
                      )
                      
                      
                      (5.9
                      )Asia
                      7,300
                      
                      
                      840
                      
                      
                      
                      7,940
                      
                      
                      
                      920
                      
                      
                      
                      (8.1
                      )
                      
                      
                      (8.7
                      )Consolidated
      total
                      68,040
                      
                      
                      9,390
                      
                      
                      
                      69,450
                      
                      
                      
                      11,760
                      
                      
                      
                      (2.0
                      )%
                      
                      
                      (20.2
                      )%





In the United States, net sales were
down 13.7% in the second quarter of 2009 compared to the same period in
2008.   For the six-month period ended June 30, 2009, net sales
in the United States were down 13.5% versus the prior-year
period.  Sales in the United States continue to be adversely impacted
by the downturn in the economy.  First, the broad reduction in
consumer spending in the United States has negatively impacted our
sales.  Second, we believe the credit problems in the U.S. financial
markets, and the reduced availability of consumer credit, continue to play a
role in our sales decline, resulting in the lower number of distributors
qualifying for the level of Master Affiliate.  In the second quarter
of 2009, approximately 617 distributors qualified as new Master Affiliates,
compared to approximately 1,090 in the prior-year quarter, a decline of
43.4%.  For the first six months of 2009, the number of distributors
qualifying for the level of Master Affiliate is down 40.6%, compared to the
prior-year period.  In addition, the net number of Master Affiliates
and above as of June 30, 2009 decreased by 21.8%, as compared to the net number
of Master Affiliates and above as of June 30, 2008.  This is
consistent with a reduced number of distributors qualifying for the level of
Master Affiliate discussed above.   The net number of active
Distributors in the United States as of June 30, 2009 decreased by 1.7% to
54,160, compared to the number of active Distributors as of June 30,
2008.  To help offset this decline, we launched an initiative in
January 2009 to increase new distributor enrollments by offering an enrollment
fee of $20, half of the normal $39.95 fee.  As a result, new
distributor enrollments increased in the second quarter of 2009 to 4,970
compared to 4,680 in the prior year quarter, an increase of 6.2%.  For
the first six months of 2009, new distributor enrollments are up 15.7%, compared
to the prior-year period.  Distributor retention was 59.3% for the
first six months of 2009 compared to a rate of 64.7% for all of
2008.   We continue to structure our distributor training to help
distributors reach the Master Affiliate level as quickly as possible, as we
believe that is a key in their potential for long-term success.





Another
impact of the downturn in the economy to our business is the number of orders
placed and the average order size.  In the second quarter of 2009, we
processed approximately 67,880 orders in the U.S. for products at an average
order of $333 at suggested retail, a decline of 3.4% in the number of orders
placed compared to the prior-year quarter.  In the same period of
2008, we processed approximately 70,280 product orders at an average order of
$372 at suggested retail.  The average order size for all of 2008 was
$388 at suggested retail.   This decline in the average order
size is another indicator of the impact of the current economic conditions and a
contributing factor in the lower numbers of distributors reaching the Master
Affiliate level.





During the three months ended June 30,
2009, net sales in our international operations decreased in aggregate by 31.5%
to $2.41 million compared to $3.52 million for the three months ended June
30, 2008.  For the six-month period ended June 30, 2009, international
net sales decreased by 32.1% to $4.82 million compared to $7.11 million in the
same period in 2008.   For the first six months of 2009,
approximately 45% of the decline was the result of foreign currency fluctuation
in the form of a stronger U.S. dollar.  Excluding currency impact,
international net sales decreased by 18.9% and 17.5% for the second quarter and
first six months of 2009, respectively, compared to the same periods of the
prior year.  Sales in all of our foreign markets are being impacted by
the global recession as in the United States.  Our half-price
distributor enrollment initiative has been implemented in nearly all of our
foreign markets.  Sales in the Australia/New Zealand market were
impacted less by the global recession, as net sales on a constant currency basis
were down only 3.8%.  We rolled out our current meal
replacement/appetite suppressant product line in February 2009, marketed under
the name, Slimsimply, in this region.  Other regional sales results on
a constant currency basis for the first half of 2009 compared to the same period
of 2008 were as follows:  Canada’s net sales are down 13.4%, Mexico’s
net sales are down 7.3%, European net sales are down 12.6%, and Asian net sales
are down 29.8%.


13


Cost of Products Sold.Cost
of products sold as a percentage of net sales was 18.8% and 19.1% for the three-
and six-month periods ended June 30, 2009, respectively, compared to 17.2% and
17.1% for the same periods in 2008.  Gross margins were impacted in
the second quarter and first half of 2009 compared to the same periods of 2008
by raw material price increases and higher freight costs.  Lower plant
utilization also continues to have a negative impact on cost of products
sold.





Distributor Royalties and
Commissions.Distributor royalties and commissions as a
percentage of net sales were 38.1% and 37.8% for the three- and six-month
periods ended June 30, 2009, respectively, compared to 39.3% and 39.3% for the
same periods in 2008.  The decrease as a percentage of net sales is
the result of changes made to our commission payout structure on our newest
product, GlucAffect, and certain other higher priced products in our
line.





Selling, General and Administrative
Expenses.For the three and six months ended June 30, 2009, selling,
general and administrative, or SGA, expenses decreased by $1.54 million and
$2.85 million, respectively, compared to the same periods in
2008.  SGA expenses as a percentage of net sales were 40.1% and 38.0%
for the three- and six-month periods ended June 30, 2009, respectively, compared
to 40.0% and 37.4% for the same periods of 2008.





Sales and marketing expenses decreased
by approximately $1.75 million in the first six months of 2009, compared to the
prior-year period.  The decrease is comprised of lower distributor
bonuses and expenses directly related to the level of sales and a reduction in
the amount spent on company-sponsored business opportunity meetings and other
special events, as we restructured our schedule of major distributor events to
include a nationwide distributor conference held in the United States in
February 2009 in Ft. Worth, Texas.  During the second quarter of 2009,
we held a series of distributor events referred to as the “Financial Freedom
Tour”.  However, these events are of a smaller scale and replaced the
distributor conferences historically held on a regional basis; and therefore, we
consider them to be more cost effective.





Distribution
and warehouse expenses decreased by $168,000 and general and administrative
expenses decreased by approximately $937,000 in the first six months of 2009,
compared to the prior-year period.  The decrease in general and
administrative expenses consists primarily of reductions in professional fees,
corporate travel expenses, salaries, and incentive compensation.  The
general and administrative expenses in 2008 included a pre-tax charge of
$215,000 for the restructuring of the German office, which included costs for
severance payments and accrued lease termination costs.





Interest Income/Expense.Interest income decreased to $35,000 for the six months ended June 30,
2009, compared to $236,000 for the same period in 2008.  The decrease
is the result of a lower level of invested funds.  We incurred $51,000
in interest expense during the first half of 2009, on promissory notes and bank
debt related to the purchases of our common stock from a significant shareholder
during the fourth quarter of 2008 and second quarter of 2009.





Income Taxes.We recorded
income tax expense of $942,000 for the first six months of 2009, an
effective rate of 39.8%. In the same period in 2008, we recorded income tax
expense of $1.33 million, which represented an effective rate of
38.9%.  Our effective rate is higher in 2009 due to non-deductible
losses for U.S. income tax purposes in some of our foreign markets, compared to
the prior-year period.





Net Income.Our net income
for the three and six months ended June 30, 2009 was $410,000 ($0.03 per
share basic and diluted) and $1.42 million ($0.10 per share basic and diluted),
respectively, compared to $569,000 ($0.04 per share basic and diluted) and
$2.10 million ($0.13 per share basic and diluted) for the same periods in 2008.
Profitability decreased in the second quarter and first half of 2009 as net
sales decreased in the United States and across our international markets as
discussed above.





Financial
Condition, Liquidity and Capital Resources





During the first six months of 2009, we
generated $2.56 million of net cash from operating activities, $200,000 was
provided by investing activities, and we used $1.20 million in financing
activities. This compares to $2.24 million of net cash provided by
operating activities, $1.57 million used in investing activities, and $2.02
million used in financing activities in the same period of 2008. Cash and cash
equivalents increased by $1.66 million to $6.12 million as of June 30, 2009
compared to December 31, 2008.


14


Significant
changes in working capital items consisted of a decrease in accounts and notes
receivable of $257,000, an increase in prepaid expenses/other current assets of
$118,000, an increase in accounts payable and accrued expenses of $653,000, and
an increase in other assets of $276,000 in the first six months of
2009.  Accounts and notes receivable decreased due to collections on
VAT refunds due to us in Mexico and credits applied to distributor accounts on
sales taxes.   The increase in prepaid expenses/other current
assets represents the annual premium payments made in the first quarter on most
of the corporate insurance policies.  The increase in accounts payable
and accrued expenses is related to a financing arrangement for our annual
corporate insurance policy renewals, coupled with various annual
accruals.  The change in other assets is due to payments made on
various officer life insurance policies.





Investing
activities during the first six months of 2009 consisted of $288,000 for capital
expenditures, along with proceeds of $489,000 from the final withdrawal in a
limited partnership investment.





Stockholders’ equity decreased to
$10.90 million at June 30, 2009 compared with $16.11 million at
December 31, 2008. The decrease is due to the purchase of treasury stock
from a significant shareholder for $6.12 million and our cash dividend of
$612,000 in the second quarter, offset by our net income of $1.42 million during
the first six months of 2009.  Our working capital balance was
$4.73 million at June 30, 2009 compared to $6.25 million at
December 31, 2008. The current ratio at June 30, 2009 was 1.48 compared to
1.85 at December 31, 2008.





In late
June 2009, we entered into a term loan with our primary lender in the principal
amount of $4.12 million.  The term of the loan is for a period of two
years with interest accruing on the outstanding principal balance at a floating
interest rate based on the 30-day LIBOR plus 3.0%, subject to a 3.75%
floor.  As of June 30, 2009, we are subject to the 3.75%
floor.  Monthly principal and interest payments are based on a
ten-year amortization.  The aggregate outstanding balance of principal
and interest is due and payable on June 29, 2011.  The loan includes
revised financial covenants under which we are required to (1) maintain at all
times a tangible net worth of not less than $10 million and (2) maintain at all
times a ratio of total funded debt to EBITDA of not greater than 2.5 to
1.  The proceeds of the term loan were used to reduce the outstanding
balance on the revolving credit facility we have with the lender.





We also
have a $5 million secured revolving credit facility with the same lender
with whom we renewed in September 2008. This facility expires in September 2009,
and any advances accrue interest at a variable interest rate based on LIBOR. The
term loan and revolving credit facility are secured by all our tangible and
intangible assets and also by a mortgage on our building and real estate located
in Chesterfield, Missouri. This facility bears the same financial covenants as
listed with the term loan. At June 30, 2009, we had outstanding borrowings of
$880,000 on the revolving line of credit facility and were in compliance with
all financial covenants.  In July 2009, we drew an additional $1
million on this facility to settle the promissory note that was a part of the
stock purchase described in Note 5 to the unaudited Consolidated Financial
Statements.





We
believe that our internally generated funds coupled with the restructured bank
loan facilities will be sufficient to meet working capital requirements for the
remainder of 2009.





Critical Accounting
Policies





A summary of our critical accounting
policies and estimates is presented on pages 39-42 of our 2008 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 13,
2009.





Item No. 4 - Controls and
Procedures





Our
management, under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer, has reviewed and evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures as of June 30, 2009.  Based on such review and evaluation,
our Chief Executive Officer and Chief Financial Officer have concluded that the
disclosure controls and procedures were effective as of June 30, 2009, to ensure
that the information required to be disclosed by us in the reports that we file
or submit under the Securities Exchange Act of 1934, as amended, (a) is
recorded, processed, summarized and reported within the time period specified in
the SEC’s rules and forms and (b) is accumulated and communicated to our
management, including the officers, as appropriate to allow timely decisions
regarding required disclosure.  There were no material changes in our
internal control over financial reporting during the second quarter of 2009 that
have materially affected or are reasonably likely to materially affect our
internal controls over financial reporting.


15


PART
II – OTHER INFORMATION





Item No. 1A – Risk
Factors





Risk factors associated with our
business activities have not changed materially from the disclosure in our 2008
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
March 13, 2009.





Item No. 2
– Unregistered Sales of Equity Securities and Use of
Proceeds





ISSUER
PURCHASES OF EQUITY SHARES





Period
                
                Total Number
                  of Shares
                  Purchased
                
                
                Average Price
                  Paid per Share
                
                
                Total Number of Shares
                  Purchased as Part of
                  Publicly Announced
                  Programs
                
                
                Approximate Dollar
                  Value of Shares that
                  May Yet Be Purchased
                  Under the Plans or
                  Programs(1)April
      1-30, 2009
                
                
                2,068,973
                
                
                $
                2.95
                
                
                
                —
                
                
                $
                11,991,000May
      1-31, 2009
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                $
                11,991,000June
      1-30, 2009
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                $
                11,991,000Total
                
                
                2,068,973
                
                
                
                
                
                
                
                —





(1)
            In
      May 2007, the Company’s Board of Directors approved a share repurchase
      plan of up to $15 million through April
2010.





Item No. 4 – Submission of
Matters to a Vote of Security Holders





At the
Annual Meeting of Shareholders on May 28, 2009, the following actions were
submitted and approved by a vote of the shareholders:





1.
            Election
      of eight directors; and





2.
            Approve
      adoption of 2009 Incentive Stock
Plan.





3.
            Ratification
      of the Board’s selection of Ernst & Young LLP as our independent
      certified public accountants.





A total
of 12,142,717 shares (approximately 85% of our issued and outstanding shares)
were represented by proxy or in person at the meeting.  These shares
were voted on the matters presented at the meeting as follows:


16


1.           For
the election of directors:




Total VotesName
                                    
                                    Total Votes For
                                    
                                    
                                    Against or WithheldRobert
      L. Montgomery
                                    
                                    
                                    11,785,931
                                    
                                    
                                    
                                    356,787Carl
      W. Hastings
                                    
                                    
                                    11,792,963
                                    
                                    
                                    
                                    349,755Donald
      L. McCain
                                    
                                    
                                    11,773,175
                                    
                                    
                                    
                                    369,543Stephen
      M. Merrick
                                    
                                    
                                    11,773,946
                                    
                                    
                                    
                                    368,772John
      B. Akin
                                    
                                    
                                    11,515,509
                                    
                                    
                                    
                                    627,209Denis
      St. John
                                    
                                    
                                    11,575,660
                                    
                                    
                                    
                                    567,058Robert
      M. Henry
                                    
                                    
                                    11,698,996
                                    
                                    
                                    
                                    443,722Michael
      D. Smith
                                    
                                    
                                    11,492,409
                                    
                                    
                                    
                                    650,309





2.  Approve
adoption of 2009 Incentive Stock Plan.





Total Broker Non-VotesTotal Votes For
                  
                  
                  Total Votes Against
                  
                  
                  and Total Votes Abstain7,840,803
                  
                  
                  
                  1,206,521
                  
                  
                  
                  3,095,393





3.  Ratification
of the Board of Directors selection of Ernst & Young LLP as our certified
public accountants.





Total Broker Non-VotesTotal Votes For
                  
                  
                  Total Votes Against
                  
                  
                  and Total Votes Abstain11,898,271
                  
                  
                  
                  243,037
                  
                  
                  
                  1,409


17


Item No. 6 –
Exhibits





ExhibitNumber
                
                Document10.1
                
                Stock
      Purchase Agreement among the Paul and Jane Meyer Family Foundation and
      Reliv International, Inc. dated April 23, 2009 (incorporated by reference
      to Exhibit 10.1 to the Form 8-K of the Registrant filed April 28,
      2009).10.2
                
                Letter
      Agreement dated June 29, 2009 by and between the Registrant and Southwest
      Bank, an M&I Bank (incorporated by reference to Exhibit 10.1 to the
      Form 8-K of the Registrant filed July 6, 2009).10.3
                
                Promissory
      Note dated June 29, 2009 by the Registrant in favor of Southwest Bank, an
      M&I Bank (incorporated by reference to Exhibit 10.2 to the Form 8-K of
      the Registrant filed July 6, 2009).31.1
                
                Certification
      of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
      of the Securities Exchange Act, as amended (filed
    herewith).31.2
                
                Certification
      of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
      of the Securities Exchange Act, as amended (filed
    herewith).32
                
                Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002 (filed
herewith).


18


SIGNATURES





Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.





RELIV’ INTERNATIONAL,
  INC.By:
                /s/ Robert L. MontgomeryRobert
      L. Montgomery, Chairman of the Board of Directors, President and Chief
      Executive OfficerDate:  August
      10, 2009By:
                /s/ Steven D. AlbrightSteven
      D. Albright, Chief Financial Officer (and accounting
    officer)Date:  August
      10, 2009


19


Exhibit
Index





ExhibitNumber
                
                Document10.1
                
                Stock
      Purchase Agreement among the Paul and Jane Meyer Family Foundation and
      Reliv International, Inc. dated April 23, 2009 (incorporated by reference
      to Exhibit 10.1 to the Form 8-K of the Registrant filed April 28,
      2009).10.2
                
                Letter
      Agreement dated June 29, 2009 by and between the Registrant and Southwest
      Bank, an M&I Bank (incorporated by reference to Exhibit 10.1 to the
      Form 8-K of the Registrant filed July 6, 2009).10.3
                
                Promissory
      Note dated June 29, 2009 by the Registrant in favor of Southwest Bank, an
      M&I Bank (incorporated by reference to Exhibit 10.2 to the Form 8-K of
      the Registrant filed July 6, 2009).31.1
                
                Certification
      of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
      of the Securities Exchange Act, as amended (filed
    herewith).31.2
                
                Certification
      of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
      of the Securities Exchange Act, as amended (filed
    herewith).32
                
                Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002 (filed
herewith).


20