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
      1934




For
the quarterly period ended March 31, 2010




OR




o
            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 April 30, 2010 was 12,380,187 (excluding
treasury shares).





INDEX





PART
      I – FINANCIAL INFORMATIONItem
      No. 1
                          
                          Financial
      Statements (Unaudited)
                          
                          1Item
      No. 2
                          
                          Management’s
      Discussion and Analysis of Financial
      Condition and Results of Operations
                          
                          7Item
      No. 4
                          
                          Controls
      and Procedures
                          
                          12PART
      II – OTHER INFORMATIONItem
      No. 2
                          
                          Unregistered
      Sales of Equity Securities and Use of Proceeds
                          
                          12Item No. 6
                          
                          Exhibits
                          
                          12





PART
I — FINANCIAL INFORMATION





Item No. 1 - Financial
Statements





Reliv International, Inc. and Subsidiaries





Consolidated
Balance Sheets





March 31
                
                
                December 312010
                
                
                2009(unaudited)AssetsCurrent
      assets:Cash
      and cash equivalents
                
                $
                7,150,487
                
                
                $
                5,760,913Accounts
      and notes receivable, less allowances of $62,000 in 2010 and $59,700 in
      2009
                
                
                322,815
                
                
                
                326,022Accounts
      due from employees and distributors
                
                
                74,519
                
                
                
                78,500InventoriesFinished
      goods
                
                
                3,157,007
                
                
                
                3,073,570Raw
      materials
                
                
                1,346,921
                
                
                
                1,388,140Sales
      aids and promotional materials
                
                
                695,247
                
                
                
                622,694Total
      inventories
                
                
                5,199,175
                
                
                
                5,084,404Refundable
      income taxes
                
                
                -
                
                
                
                23,789Prepaid
      expenses and other current assets
                
                
                1,195,316
                
                
                
                652,544Deferred
      income taxes
                
                
                303,000
                
                
                
                303,000Total
      current assets
                
                
                14,245,312
                
                
                
                12,229,172Other
      assets
                
                
                1,875,067
                
                
                
                1,569,079Intangible
      assets, net
                
                
                1,940,119
                
                
                
                1,991,497Property,
      plant and equipment:Land
      and land improvements
                
                
                852,147
                
                
                
                852,147Building
                
                
                9,904,014
                
                
                
                9,851,829Machinery
      & equipment
                
                
                3,423,242
                
                
                
                3,426,720Office
      equipment
                
                
                1,502,602
                
                
                
                1,494,915Computer
      equipment & software
                
                
                2,999,241
                
                
                
                3,003,76618,681,246
                
                
                
                18,629,377Less:
      Accumulated depreciation
                
                
                10,468,399
                
                
                
                10,264,692Net
      property, plant and equipment
                
                
                8,212,847
                
                
                
                8,364,685Total
      assets
                
                $
                26,273,345
                
                
                $
                24,154,433





See notes
to financial statements.


1


Reliv
International, Inc. and Subsidiaries





Consolidated
Balance Sheets





March 31
                
                
                December 312010
                
                
                2009(unaudited)Liabilities
      and stockholders' equityCurrent
      liabilities:Accounts
      payable and accrued expenses:Trade
      accounts payable and other accrued expenses
                
                $
                3,565,640
                
                
                $
                2,627,674Distributors
      commissions payable
                
                
                2,815,329
                
                
                
                2,674,247Sales
      taxes payable
                
                
                407,445
                
                
                
                362,612Payroll
      and payroll taxes payable
                
                
                584,610
                
                
                
                577,756Total
      accounts payable and accrued expenses
                
                
                7,373,024
                
                
                
                6,242,289Income
      taxes payable
                
                
                275,177
                
                
                
                -Current
      maturities of long-term debt
                
                
                524,592
                
                
                
                519,192Total
      current liabilities
                
                
                8,172,793
                
                
                
                6,761,481Noncurrent
      liabilities:Long-term
      debt, less current maturities
                
                
                4,585,874
                
                
                
                4,719,542Other
      noncurrent liabilities
                
                
                406,120
                
                
                
                406,544Total
      noncurrent liabilities
                
                
                4,991,994
                
                
                
                5,126,086Stockholders'
      equity:Preferred
      stock, par value $.001 per share; 3,000,000 shares authorized; -0- shares
      issued and outstanding in 2010 and 2009
                
                
                -
                
                
                
                -Common
      stock, par value $.001 per share; 30,000,000 authorized; 14,425,185 shares
      issued and 12,380,187 shares outstanding as of 3/31/2010; 14,425,185
      shares issued and 12,380,187 shares outstanding as of
      12/31/2009
                
                
                14,425
                
                
                
                14,425Additional
      paid-in capital
                
                
                30,278,746
                
                
                
                30,228,573Accumulated
      deficit
                
                
                (10,533,050
                )
                
                
                (11,279,526
                )Accumulated
      other comprehensive loss:Foreign
      currency translation adjustment
                
                
                (582,661
                )
                
                
                (627,704
                )Treasury
      stock
                
                
                (6,068,902
                )
                
                
                (6,068,902
                )Total
      stockholders' equity
                
                
                13,108,558
                
                
                
                12,266,866Total
      liabilities and stockholders' equity
                
                $
                26,273,345
                
                
                $
                24,154,433





See notes
to financial statements.


2


Reliv
International, Inc. and Subsidiaries





Consolidated
Statements of Income


(unaudited)





Three months ended March 312010
                    
                    
                    2009Product
      sales
                    
                    $
                    20,257,680
                    
                    
                    $
                    21,166,181Handling
      & freight income
                    
                    
                    2,469,571
                    
                    
                    
                    2,624,809Net
      sales
                    
                    
                    22,727,251
                    
                    
                    
                    23,790,990Costs
      and expenses:Cost
      of products sold
                    
                    
                    4,556,382
                    
                    
                    
                    4,575,751Distributor
      royalties and commissions
                    
                    
                    8,480,076
                    
                    
                    
                    8,937,667Selling,
      general and administrative
                    
                    
                    8,543,450
                    
                    
                    
                    8,617,873Total
      costs and expenses
                    
                    
                    21,579,908
                    
                    
                    
                    22,131,291Income
      from operations
                    
                    
                    1,147,343
                    
                    
                    
                    1,659,699Other
      income (expense):Interest
      income
                    
                    
                    9,526
                    
                    
                    
                    20,715Interest
      expense
                    
                    
                    (51,676
                    )
                    
                    
                    (9,550
                    )Other
      income
                    
                    
                    57,283
                    
                    
                    
                    12,055Income
      before income taxes
                    
                    
                    1,162,476
                    
                    
                    
                    1,682,919Provision
      for income taxes
                    
                    
                    416,000
                    
                    
                    
                    671,000Net
      income
                    
                    $
                    746,476
                    
                    
                    $
                    1,011,919Earnings
      per common share - Basic
                    
                    $
                    0.06
                    
                    
                    $
                    0.07Weighted
      average shares
                    
                    
                    12,380,000
                    
                    
                    
                    14,299,000Earnings
      per common share - Diluted
                    
                    $
                    0.06
                    
                    
                    $
                    0.07Weighted
      average shares
                    
                    
                    12,380,000
                    
                    
                    
                    14,299,000Cash
      dividends declared per common share
                    
                    $
                    -
                    
                    
                    $
                    -





See notes
to financial statements.


3


Reliv
International, Inc. and Subsidiaries




Consolidated
Statements of Cash Flows


(unaudited)





Three months ended March 312010
                
                
                2009Operating
      activities:Net
      income
                
                $
                746,476
                
                
                $
                1,011,919Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
                
                
                302,444
                
                
                
                277,010Stock-based
      compensation
                
                
                50,173
                
                
                
                51,829Deferred
      income taxes
                
                
                (42,000
                )
                
                
                (29,000
                )Foreign
      currency transaction (gain)/loss
                
                
                (23,203
                )
                
                
                12,819(Increase)
      decrease in accounts and notes receivable
                
                
                15,820
                
                
                
                251,858(Increase)
      decrease in inventories
                
                
                (89,152
                )
                
                
                (485,459
                )(Increase)
      decrease in refundable income taxes
                
                
                23,789
                
                
                
                128,319(Increase)
      decrease in prepaid expenses and other current assets
                
                
                (538,096
                )
                
                
                (316,049
                )(Increase)
      decrease in other assets
                
                
                (273,103
                )
                
                
                (252,355
                )Increase
      (decrease) in accounts payable & accrued expenses and other noncurrent
      liabilities
                
                
                1,103,295
                
                
                
                1,598,651Increase
      (decrease) in income taxes payable
                
                
                274,961
                
                
                
                523,255Net
      cash provided by operating activities
                
                
                1,551,404
                
                
                
                2,772,797Investing
      activities:Proceeds
      from the sale of property, plant and equipment
                
                
                3,083
                
                
                
                -Purchase
      of property, plant and equipment
                
                
                (91,041
                )
                
                
                (146,131
                )Proceeds
      from final withdrawal from limited partnership investment
                
                
                -
                
                
                
                488,633Net
      cash provided by (used in) investing activities
                
                
                (87,958
                )
                
                
                342,502Financing
      activities:Principal
      payments on short and long-term borrowings
                
                
                (128,268
                )
                
                
                (569,375
                )Purchase
      of stock for treasury
                
                
                -
                
                
                
                (14,115
                )Net
      cash used in financing activities
                
                
                (128,268
                )
                
                
                (583,490
                )Effect
      of exchange rate changes on cash and cash equivalents
                
                
                54,396
                
                
                
                (9,111
                )Increase
      (decrease) in cash and cash equivalents
                
                
                1,389,574
                
                
                
                2,522,698Cash
      and cash equivalents at beginning of period
                
                
                5,760,913
                
                
                
                4,460,637Cash
      and cash equivalents at end of period
                
                $
                7,150,487
                
                
                $
                6,983,335





See notes
to financial statements.


4


Reliv
International, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements


(Unaudited)





March 31,
2010





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 primarily include normal recurring accruals) which management
believes are necessary to present fairly the financial position, results of
operations and cash flows.  These statements, however, do not include
all information and footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with accounting
principles generally accepted in the United States.  Interim results
may not necessarily be indicative of results that may be expected for any other
interim period or for the year as a whole.  These financial statements
should be read in conjunction with the audited consolidated financial statements
and footnotes included in the annual report on Form 10-K for the year ended
December 31, 2009, filed March 12, 2010 with the Securities and Exchange
Commission.





Adoption
of New Accounting Standards





Effective
January 1, 2010, the Company adopted the amendments to ASC 820, "Fair Value
Measurements and Disclosures" ("ASC 820").  The amendments require new
disclosures for transfers in and out of fair value hierarchy Levels 1 and 2 and
activity within fair value hierarchy Level 3.  The amendments also
clarify existing disclosures regarding the disaggregation for each class of
assets and liabilities, and the disclosures about inputs and valuation
techniques.  The amendments to ASC 820 did not have a material impact
on the Company's consolidated financial statements.




Note
      2—
            Comprehensive
      Income





Total
comprehensive income was $791,519 and $903,812 for the three months ended March
31, 2010 and March 31, 2009, respectively.  The Company's only
component of other comprehensive income is the foreign currency translation
adjustment.





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 March 312010
                        
                        
                        2009Numerator:Net
      income
                        
                        $
                        746,476
                        
                        
                        $
                        1,011,919Denominator:Denominator
      for basic earnings per share—weighted average shares
                        
                        
                        12,380,000
                        
                        
                        
                        14,299,000Dilutive
      effect of employee stock optionsand other
      warrants
                        
                        
                        -
                        
                        
                        
                        -Denominator
      for diluted earnings per share—adjusted weighted average
      shares
                        
                        
                        12,380,000
                        
                        
                        
                        14,299,000Basic
      earnings per share
                        
                        $
                        0.06
                        
                        
                        $
                        0.07Diluted
      earnings per share
                        
                        $
                        0.06
                        
                        
                        $
                        0.07





Options
and warrants to purchase 806,689 and 842,040 shares of common stock for the
three months ended March 31, 2010 and 2009, respectively, were not included in
the denominator for diluted earnings per share because their effect would be
antidilutive.


5


Reliv
International, Inc. and Subsidiaries


Notes to
Consolidated Financial Statements


(Unaudited)





March 31,
2010





Note
      4—
            Fair
      Value Measurements





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




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





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





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





The
carrying amount and fair value of financial instruments at March 31, 2010 and
December 31, 2009 were as follows:





Fair ValueUsing Quoted
                                                    
                                                    
                                                    Using SignificantTotal
                                                    
                                                    
                                                    Prices in
                                                    
                                                    
                                                    Other ObservableCarrying
                                                    
                                                    
                                                    Fair
                                                    
                                                    
                                                    Active Markets
                                                    
                                                    
                                                    InputsDescription
                                                    
                                                    Amount
                                                    
                                                    
                                                    Value
                                                    
                                                    
                                                    (Level 1)
                                                    
                                                    
                                                    (Level 2)March 31, 2010Long-term
      debt (1)
                                                    
                                                    $
                                                    5,110,466
                                                    
                                                    
                                                    $
                                                    5,060,000
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    5,060,000Marketable
      securities (2)
                                                    
                                                    
                                                    215,000
                                                    
                                                    
                                                    
                                                    215,000
                                                    
                                                    
                                                    
                                                    215,000
                                                    
                                                    
                                                    
                                                    -December 31, 2009Long-term
      debt (1)
                                                    
                                                    $
                                                    5,238,734
                                                    
                                                    
                                                    $
                                                    5,184,000
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    5,184,000Marketable
      securities (2)
                                                    
                                                    
                                                    200,000
                                                    
                                                    
                                                    
                                                    200,000
                                                    
                                                    
                                                    
                                                    200,000
                                                    
                                                    
                                                    
                                                    -





(1)
            The
      fair value of the Company's variable interest rate debt approximates
      carrying value due to the short-term duration of the debt and the frequent
      re-setting of its variable interest rate.  The fair value of the
      of the Company's fixed interest rate long-term obligation was estimated by
      management based upon the rate available at the balance sheet date for the
      additional unused credit available to the
  Company.




(2)
            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 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.


6


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 annual report to conform such statements to actual results or
to changes in our opinions or expectations.





Item No.
2 - Management’s Discussion and Analysis of 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 and food products under our Relivables brand. We
sell our products through an international network marketing system utilizing
independent distributors. Sales in the United States represented approximately
85.6% of worldwide net sales for the three months ended March 31, 2010 and 89.9%
of worldwide net sales for the three months ended March 31, 2009. Our
international operations currently generate sales through distributor networks
with facilities in Australia, Canada, Indonesia, Malaysia, Mexico, the
Philippines, and the United Kingdom.  We also operate on a
limited basis in Ireland, Germany, Austria and the Netherlands from our U.K.
distribution center, in New Zealand from our Australia office, and in Singapore
and Brunei from our Malaysia office.





We derive our revenues principally
through product sales made by our global independent distributor base, which, as
of March 31, 2010, consisted of approximately 66,030 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 from 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.





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


7


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.





Selling, general and administrative
expenses include the compensation and benefits paid to our employees except for
those in manufacturing, all other selling expenses, marketing, promotional
expenses, travel and other corporate administrative expenses. These other
corporate administrative expenses include professional fees, non-manufacturing
depreciation and amortization, occupancy costs, communication costs and other
similar operating expenses. Selling, general and administrative expenses can be
affected by a number of factors, including staffing levels and the cost of
providing competitive salaries and benefits; the amount we decide to invest in
distributor training and motivational initiatives; 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-month periods ended March 31, 2010 and
2009. Our results of operations for the periods described below are not
necessarily indicative of results of operations for future
periods.




Three months endedMarch 31,2010
                    
                    
                    2009Net
      sales
                    
                    
                    100.0
                    %
                    
                    
                    100.0
                    %Costs
      and expenses:Cost
      of products sold
                    
                    
                    20.0
                    
                    
                    
                    19.2Distributor
      royalties and commissions
                    
                    
                    37.4
                    
                    
                    
                    37.6Selling,
      general and administrative
                    
                    
                    37.6
                    
                    
                    
                    36.2Income
      from operations
                    
                    
                    5.0
                    
                    
                    
                    7.0Interest
      expense
                    
                    
                    (0.2
                    )
                    
                    
                    (0.0
                    )Interest
      and other income
                    
                    
                    0.3
                    
                    
                    
                    0.1Income
      before income taxes
                    
                    
                    5.1
                    
                    
                    
                    7.1Provision
      for income taxes
                    
                    
                    1.8
                    
                    
                    
                    2.8Net
      income
                    
                    
                    3.3
                    %
                    
                    
                    4.3
                    %





Net Sales.Overall
net sales decreased by 4.5% in the three months ended March 31, 2010 compared to
the same period in 2009.  During the first quarter of 2010, sales in
the United States decreased by 9.0%, and international sales increased by 36.1%
over the prior-year period.


8


The
following table summarizes net sales by geographic market for the three months
ended March 31, 2010 and 2009.


Three months ended March 31,2010
                                                  
                                                  
                                                  2009
                                                  
                                                  
                                                  Change from prior yearAmount
                                                  
                                                  
                                                  % of Net
                                                    Sales
                                                  
                                                  
                                                  Amount
                                                  
                                                  
                                                  % of Net
                                                    Sales
                                                  
                                                  
                                                  Amount
                                                  
                                                  
                                                  %(dollars in thousands)United
      States
                                                  
                                                  $
                                                  19,448
                                                  
                                                  
                                                  
                                                  85.6
                                                  %
                                                  
                                                  $
                                                  21,381
                                                  
                                                  
                                                  
                                                  89.9
                                                  %
                                                  
                                                  $
                                                  (1,933
                                                  )
                                                  
                                                  
                                                  (9.0
                                                  )%Australia/New
      Zealand
                                                  
                                                  
                                                  727
                                                  
                                                  
                                                  
                                                  3.2
                                                  
                                                  
                                                  
                                                  516
                                                  
                                                  
                                                  
                                                  2.1
                                                  
                                                  
                                                  
                                                  211
                                                  
                                                  
                                                  
                                                  40.9Canada
                                                  
                                                  
                                                  587
                                                  
                                                  
                                                  
                                                  2.6
                                                  
                                                  
                                                  
                                                  336
                                                  
                                                  
                                                  
                                                  1.4
                                                  
                                                  
                                                  
                                                  251
                                                  
                                                  
                                                  
                                                  74.7Mexico
                                                  
                                                  
                                                  394
                                                  
                                                  
                                                  
                                                  1.7
                                                  
                                                  
                                                  
                                                  281
                                                  
                                                  
                                                  
                                                  1.2
                                                  
                                                  
                                                  
                                                  113
                                                  
                                                  
                                                  
                                                  40.2Europe
                                                  
                                                  
                                                  420
                                                  
                                                  
                                                  
                                                  1.8
                                                  
                                                  
                                                  
                                                  308
                                                  
                                                  
                                                  
                                                  1.3
                                                  
                                                  
                                                  
                                                  112
                                                  
                                                  
                                                  
                                                  36.4Asia
                                                  
                                                  
                                                  1,151
                                                  
                                                  
                                                  
                                                  5.1
                                                  
                                                  
                                                  
                                                  969
                                                  
                                                  
                                                  
                                                  4.1
                                                  
                                                  
                                                  
                                                  182
                                                  
                                                  
                                                  
                                                  18.8Consolidated
      total
                                                  
                                                  $
                                                  22,727
                                                  
                                                  
                                                  
                                                  100.0
                                                  %
                                                  
                                                  $
                                                  23,791
                                                  
                                                  
                                                  
                                                  100.0
                                                  %
                                                  
                                                  $
                                                  (1,064
                                                  )
                                                  
                                                  
                                                  (4.5
                                                  )%





The following table sets forth, as of
March 31, 2010 and 2009, 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 Affiliate groups 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.




March 31, 2010
                      
                      March 31, 2009
                      
                      % ChangeActive
                        Distributors
                      
                      Master
                        Affiliates and
                        Above
                      
                      Active
                        Distributors
                      
                      Master
                        Affiliates and
                        Above
                      
                      Active
                        Distributors
                      
                      Master
                        Affiliates and
                        AboveUnited
      States
                      
                      52,010
                      
                      
                      6,070
                      
                      
                      
                      54,440
                      
                      
                      
                      7,490
                      
                      
                      
                      (4.5
                      )%
                      
                      
                      (19.0
                      )%Australia/New
      Zealand
                      
                      2,530
                      
                      
                      190
                      
                      
                      
                      2,440
                      
                      
                      
                      180
                      
                      
                      
                      3.7
                      
                      
                      
                      5.6Canada
                      
                      1,310
                      
                      
                      140
                      
                      
                      
                      1,250
                      
                      
                      
                      110
                      
                      
                      
                      4.8
                      
                      
                      
                      27.3Mexico
                      
                      2,290
                      
                      
                      220
                      
                      
                      
                      1,700
                      
                      
                      
                      200
                      
                      
                      
                      34.7
                      
                      
                      
                      10.0Europe
                      
                      1,350
                      
                      
                      180
                      
                      
                      
                      1,080
                      
                      
                      
                      140
                      
                      
                      
                      25.0
                      
                      
                      
                      28.6Asia
                      
                      6,540
                      
                      
                      590
                      
                      
                      
                      7,770
                      
                      
                      
                      880
                      
                      
                      
                      (15.8
                      )
                      
                      
                      (33.0
                      )Consolidated
      total
                      
                      66,030
                      
                      
                      7,390
                      
                      
                      
                      68,680
                      
                      
                      
                      9,000
                      
                      
                      
                      (3.9
                      )%
                      
                      
                      (17.9
                      )%





In the United States, net sales were
down 9.0% in the first quarter of 2010 compared to the same period in
2009.   Sales in the United States continue to be adversely
impacted by distributor uncertainty in the economic recovery and the reduced
availability of consumer credit.  In addition to the direct impact on
sales, these factors lead to the lower number of distributors qualifying for the
level of Master Affiliate.  In the first quarter of 2010,
approximately 632 distributors qualified as new Master Affiliates, compared to
approximately 753 in the prior-year quarter, a decline of 16.1%.  In
addition, the net number of Master Affiliates and above as of March 31, 2010
decreased by 19.0% as compared to the net number of Master Affiliates and above
as of March 31, 2009.  This is consistent with 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 March 31, 2010 decreased by 4.5% to 52,010, compared to the number
of active Distributors as of March 31, 2009.   This decline in
new enrollments was expected as we ran an initiative from January through August
2009 to increase new distributor enrollments by offering an enrollment fee of
$20, half of the normal $39.95 fee.  Distributor retention was 60.4%
for the first three months of 2010 compared to a rate of 63.1% for all of
2009.





In the
first quarter of 2010, we processed approximately 69,127 orders in the United
States for products at an average order of $367 at suggested
retail.  In the same period of 2009, we processed approximately 69,770
product orders at an average order of $396 at suggested retail.  The
average order size for all of 2009 was $353 at suggested
retail.   This decline in the average order size is another
indicator of the reduced credit availability and the lower numbers of
distributors reaching the Master Affiliate level.


9


During the three months ended March 31,
2010, net sales in our international operations increased in aggregate by 36.1%
to $3.28 million compared to $2.41 million for the three months ended
March 31, 2009.  Sales increased in all of our foreign regions during
the first quarter of 2010.  Approximately half of the increase was the
result of foreign currency fluctuation due to a weaker U.S.
dollar.  When net sales are converted using the 2009 exchange rate for
both 2009 and 2010, international net sales increased by 19.2% for the first
quarter of 2010 compared to the first quarter of the prior
year.  Regional sales results on a constant currency basis for the
first quarter of 2010 compared to the first quarter of 2009 were as
follows:  Australia/New Zealand net sales up 4.8%, Canada net sales up
46.6%, Mexico net sales up 24.8%, European sales up 27.4%, and Asian sales up
13.1%.    Sales results in Mexico and Australia/New Zealand
were helped by strong March sales in advance of price increases on most products
that went into effect on April 1, 2010; however, Mexico is showing increased
distributor activity as new distributor enrollments and Master Affiliate
qualifications are both improved.  Canada is showing strong growth in
new distributor enrollments, up 37%, and in new Master Affiliate qualifications,
28 in the first quarter of 2010 compared to 7 in the first quarter of
2009.





Cost of Products Sold.Cost
of products sold as a percentage of net sales was 20.0% for the three-month
period ended March 31, 2010, compared to 19.2% for the same period in
2009.  Gross margins were impacted in the first quarter of 2010
compared to the same period in 2009 by changes in the revenue mix with the
introduction of the new Relivables product line in the third quarter of
2009.





Distributor Royalties and
Commissions.Distributor royalties and commissions as a
percentage of net sales were 37.4% for the three-month period ended March 31,
2010, compared to 37.6% for the same period in 2009.  The minor
reduction is due to the commission structure on the Relivables product
line.





Selling, General and Administrative
Expenses.For the three months ended March 31, 2010, selling, general and
administrative, or SGA, expenses decreased by $74,000, compared to the same
period in 2009. SGA expenses as a percentage of net sales were 37.6% for the
three-month period ended March 31, 2010, compared to 36.2% for the same period
of 2009.





Sales and marketing expenses increased
by approximately $166,000 in the first quarter of 2010, compared to the prior
year quarter.  The increase is the result of an additional distributor
incentive trip in February 2010 that did not occur in the prior
year.





Distribution
and warehouse expenses decreased by $40,000 and general and administrative
expenses decreased by approximately $201,000 in the first quarter of 2010,
compared to the prior year quarter.  The decrease in general and
administrative expenses consists primarily of reductions in professional fees,
business insurance expense, and lower utility costs.





Interest Income/Expense.Interest income decreased to $10,000 for the three months ended March 31,
2010, compared to $21,000 for the same period in 2009.  The decrease
is the result of lower interest rates in 2010.  Interest expense
increased to $52,000 during the first quarter of 2010 compared to $10,000 in the
first quarter of 2009, as we entered into two long-term debt agreements during
the latter half of 2009.





Income Taxes.We recorded
income tax expense of $416,000 for the first three months of 2010, an
effective rate of 35.8%. In the same period in 2009, we recorded income tax
expense of $671,000, which represented an effective rate of
39.9%.  Our effective rate is lower in 2010 due to an increase in
non-taxable earnings for U.S. income tax purposes in some of our foreign markets
compared to the prior-year period, a slight reduction in effective state income
taxes, and an increased benefit in the Domestic Manufacturing Deduction due to a
2010 statutory rate increase from 6% to 9%.





Net Income.Our net income
for the three months ended March 31, 2010 was $746,000 ($0.06 per share
basic and diluted), compared to $1.0 million ($0.07 per share basic
and diluted) for the same period in 2009. Profitability decreased in the first
quarter of 2010 as net sales decreased in the United States as discussed
above.


10


Financial
Condition, Liquidity and Capital Resources





During the first three months of 2010,
we generated $1.6 million of net cash from operating activities, $88,000
was used in investing activities, and we used $128,000 in financing activities.
This compares to $2.8 million of net cash provided by operating activities,
$343,000 provided by investing activities, and $583,000 used in financing
activities in the same period of 2009. Cash and cash equivalents increased by
$1.4 million to $7.2 million as of March 31, 2010 compared to
December 31, 2009.





Significant
changes in working capital items consisted of an increase in prepaid
expenses/other current assets of $538,000, an increase in accounts payable and
accrued expenses of $1.1 million, an increase in other assets of $273,000, and
an increase in income taxes payable of $275,000 in the first three months of
2010.  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 partially 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 a payment made on an
officer life insurance policy.  The increase in income taxes payable
is a function of the timing of estimated tax payments.





Investing
activities during the first three months of 2010 consisted of a net investment
of $88,000 for capital expenditures.  Financing activities during the
first three months of 2010 consisted of principal payments of $128,000 on
long-term borrowings.





Stockholders’ equity increased to
$13.1 million at March 31, 2010 compared to $12.3 million at
December 31, 2009. The increase is due to our net income during the first
three months of 2010 of $746,000.  Our working capital balance was
$6.1 million at March 31, 2010 compared to $5.5 million at
December 31, 2009. The current ratio at March 31, 2010 was 1.74 compared to
1.81 at December 31, 2009.





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 March 31, 2010, 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.





The
revolving credit facility is a $5 million secured revolving credit facility
with the same lender that provided our term loan. This facility was renewed in
September 2009 for a one-year term, and any advances accrue interest at a
variable interest rate based on the 30-day LIBOR plus 3.0%, subject to a 4.0%
floor. The term loan and revolving credit facility are secured by all of 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 the term loan. At March 31, 2010, we had no outstanding borrowings
on the revolving line of credit facility and were in compliance with all
financial covenants.





On August
31, 2009, we acquired an independent Reliv distributorship from its owner for an
aggregate purchase price of $2,060,000.  We paid $500,000 of the
purchase price to the owner at closing, credited the owner’s $216,119
outstanding loan balance due to us, and will pay the balance of the purchase
price, $1,343,881, over a period of seven years at an annual rate of 5% with
monthly payments of principal and interest totaling $18,994.





Management believes that our internally
generated funds coupled with the bank loan facilities will be sufficient to meet
working capital requirements for the remainder of 2010.


11


Critical Accounting
Policies





A summary of our critical accounting
policies and estimates is presented on pages 24-26 of our 2009 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 12,
2010.





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 March 31, 2010.  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 March 31, 2010, 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 first quarter of 2010 that
have materially affected or are reasonably likely to materially affect our
internal controls over financial reporting.





PART
II – OTHER INFORMATION





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





During
the first four months of 2010, we did not repurchase any shares of our common
stock under our share repurchase plan authorized by our Board of Directors in
May 2007 that provides for share repurchases of up to $15 million through April
2010.  As of April 30, 2010, the repurchase plan expired and a new
plan has not been authorized as of the date of this filing.





Item No. 6 –
Exhibits





ExhibitNumber
                
                Document31.1
                
                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).


12


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:  May
      10, 2010By:
                          /s/ Steven D. AlbrightSteven
      D. Albright, Chief Financial Officer (and accounting
    officer)Date:  May
      10, 2010


13


Exhibit
Index





ExhibitNumber
                
                Document31.1
                
                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).


14