RELIV INTERNATIONAL INC (Form: 10-Q, Received: 05/14/2012 10:05:22)

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, 2012
OR
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________to_________

Commission File Number

000-19932

RELIV’ INTERNATIONAL, INC.

(Exact name of Registrant as specified in its charter)

Delaware		371172197
(State or other jurisdiction of		(I.R.S. Employer Identification Number)
incorporation or organization)

136 Chesterfield Industrial Boulevard
Chesterfield, Missouri	63005
(Address of principal executive offices)	(Zip Code)

(636) 537-9715

(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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 þ 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, 2012 was 12,512,505 (excluding treasury shares).

INDEX

Part I – Financial Information

Item No. 1	Financial Statements (Unaudited)	1
Item No. 2	Management’s Discussion and Analysis of
	Financial Condition and Results of Operations	7
Item No. 4	Controls and Procedures	12

Part II – Other Information

Item No. 2	Unregistered Sales of Equity Securities and Use of Proceeds	13
Item No. 6	Exhibits	13

PART I -- FINANCIAL INFORMATION

Item No. 1 - Financial Statements

Reliv International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

	March 31		December 31
	2012		2011
	(unaudited)
Assets

Current assets:
Cash and cash equivalents	$	6,590,435	$	7,174,213
Accounts receivable, less allowances of
$72,700 in 2012 and $70,300 in 2011		338,384		334,828
Accounts due from employees and distributors		32,188		43,191
Inventories
Finished goods		2,883,118		3,252,153
Raw materials		1,657,780		1,048,419
Sales aids and promotional materials		377,150		423,201
Total inventories		4,918,048		4,723,773

Refundable income taxes		-		96,387
Prepaid expenses and other current assets		1,112,541		607,989
Deferred income taxes		419,000		432,000
Total current assets		13,410,596		13,412,381

Other assets		267,347		204,461
Cash surrender value of life insurance		2,041,873		1,782,752
Note receivable		2,000,000		-
Intangible assets, net		1,559,142		1,597,644

Property, plant and equipment:
Land and land improvements		883,563		883,563
Building		9,916,867		9,899,291
Machinery & equipment		3,748,300		3,736,144
Office equipment		1,393,665		1,376,577
Computer equipment & software		2,964,889		2,911,778
		18,907,284		18,807,353
Less: Accumulated depreciation		11,623,135		11,385,406
Net property, plant and equipment		7,284,149		7,421,947

Total assets	$	26,563,107	$	24,419,185

See notes to financial statements.

Reliv International, Inc. and Subsidiaries

Consolidated Balance Sheets

	March 31			December 31
	2012			2011
	(unaudited)
Liabilities and stockholders' equity

Current liabilities:
Accounts payable and accrued expenses:
Trade accounts payable and other accrued expenses	$	3,333,196		$	2,492,973
Distributors' commissions payable		2,489,607			2,238,987
Sales taxes payable		405,817			365,897
Payroll and payroll taxes payable		538,240			427,719
Total accounts payable and accrued expenses		6,766,860			5,525,576

Income taxes payable		287,684			-
Current maturities of long-term debt		585,630			584,873
Total current liabilities		7,640,174			6,110,449

Noncurrent liabilities:
Long-term debt, less current maturities		3,421,300			3,566,175
Other noncurrent liabilities		286,834			256,710
Total noncurrent liabilities		3,708,134			3,822,885

Stockholders' equity:
Preferred stock, par value $.001 per share; 3,000,000
shares authorized; -0- shares issued and outstanding
in 2012 and 2011		-			-
Common stock, par value $.001 per share; 30,000,000
authorized; 14,461,435 shares issued and 12,512,505
shares outstanding as of 3/31/2012; 14,425,185 shares
issued and 12,484,104 shares outstanding as of 12/31/2011		14,788			14,425
Additional paid-in capital		30,389,206			30,292,792
Accumulated deficit		(9,008,211	)		(9,540,595	)
Accumulated other comprehensive loss:
Foreign currency translation adjustment		(507,531	)		(617,303	)
Treasury stock		(5,673,453	)		(5,663,468	)

Total stockholders' equity		15,214,799			14,485,851

Total liabilities and stockholders' equity	$	26,563,107		$	24,419,185

See notes to financial statements.

Reliv International, Inc. and Subsidiaries

Condensed Consolidated Statements of Net

Income and Comprehensive Income


(unaudited)	Three months ended March 31
	2012			2011



Product sales	$	17,614,840		$	19,326,943
Handling & freight income		2,128,804			2,359,911

Net sales		19,743,644			21,686,854

Costs and expenses:
Cost of products sold		3,900,581			4,220,350
Distributor royalties and commissions		7,455,160			8,120,942
Selling, general and administrative		7,474,246			8,268,868

Total costs and expenses		18,829,987			20,610,160

Income from operations		913,657			1,076,694

Other income (expense):
Interest income		9,314			15,579
Interest expense		(30,919	)		(36,623	)
Other expense		(22,668	)		(68,850	)

Income before income taxes		869,384			986,800
Provision for income taxes		337,000			377,000

Net income	$	532,384		$	609,800

Other comprehensive income (loss):
Foreign currency translation adjustment		109,772			(66,485	)

Comprehensive income	$	642,156		$	543,315


Earnings per common share - Basic	$	0.04		$	0.05
Weighted average shares		12,512,000			12,451,000

Earnings per common share - Diluted	$	0.04		$	0.05
Weighted average shares		12,633,000			12,453,000

Cash dividends declared per common share	$	-		$	-

See notes to financial statements.

Reliv International, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited)

	Three months ended March 31
	2012			2011

Operating activities:
Net income	$	532,384		$	609,800
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization		240,454			294,645
Stock-based compensation		53,277			45,942
Deferred income taxes		(36,000	)		(62,000	)
Foreign currency transaction (gain)/loss		(23,052	)		(17,945	)
(Increase) decrease in accounts receivable		19,509			67,452
(Increase) decrease in inventories		(143,739	)		(124,077	)
(Increase) decrease in refundable income taxes		96,387			62,324
(Increase) decrease in prepaid expenses
and other current assets		(499,481	)		(617,008	)
(Increase) decrease in other assets		(25,886	)		(14,619	)
Increase (decrease) in income taxes payable		287,467			293,250
Increase (decrease) in accounts payable & accrued expenses
and other noncurrent liabilities		1,267,820			1,797,517

Net cash provided by operating activities		1,769,140			2,335,281

Investing activities:
Purchase of property, plant and equipment		(61,457	)		(87,748	)
Purchase of note and mortgage secured by underlying property		(2,000,000	)		-
Payment of life insurance premiums		(259,121	)		(252,250	)

Net cash used in investing activities		(2,320,578	)		(339,998	)

Financing activities:
Principal payments on long-term borrowings		(144,118	)		(140,240	)
Purchase of stock for treasury		(9,985	)		-

Net cash used in financing activities		(154,103	)		(140,240	)

Effect of exchange rate changes on cash and cash equivalents		121,763			46,037

Increase (decrease) in cash and cash equivalents		(583,778	)		1,901,080

Cash and cash equivalents at beginning of period		7,174,213			6,331,038

Cash and cash equivalents at end of period	$	6,590,435		$	8,232,118

See notes to financial statements.

Reliv International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

March 31, 2012

Note 1--	Accounting Policies

	Basis of Presentation

	The accompanying unaudited condensed consolidated financial statements and notes thereto have been prepared in accordance with the instructions to Form 10-Q and reflect all adjustments (which primarily include normal recurring accruals) which 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, 2011, filed March 23, 2012 with the Securities and Exchange Commission.

	Adoption of New Accounting Standards

	Effective January 1, 2012, the Company adopted Accounting Standards Update (ASU) No. 2011-5 and 2011-12, which amends accounting guidance on the financial statement presentation of comprehensive income. Under this guidance, a company has the option to present the components of net income and other comprehensive income in either a single continuous statement of comprehensive income or in two separate but consecutive statements. The company has elected to present total comprehensive income in a single continuous statement which contains two sections: net income and comprehensive income. The adoption of this new accounting guidance only impacted financial statement presentation and did not have any impact on the company's consolidated financial position, results of operations, or cash flows.

Note 2--	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 31
	2012		2011
Numerator:
Net income	$	532,384	$	609,800

Denominator:
Denominator for basic earnings per
share--weighted average shares		12,512,000		12,451,000
Dilutive effect of employee stock options
and other warrants		121,000		2,000

Denominator for diluted earnings per
share--adjusted weighted average shares		12,633,000		12,453,000

Basic earnings per share	$	0.04	$	0.05
Diluted earnings per share	$	0.04	$	0.05

Options and warrants to purchase 1,243,863 and 780,798 shares of common stock for the three months ended March 31, 2012 and 2011, respectively, were not included in the denominator for diluted earnings per share because their effect would be antidilutive or because the shares were deemed contingently issuable.

Note 3--	Purchase of Note Receivable

	On March 16, 2012, the Company entered into an agreement with a real estate investment management firm to purchase a note and mortgage on certain properties in Utah and Idaho for $2 million. Subsequently, the transaction closed in March 2012. Under a February 27, 2012 Memorandum of Agreement (MOA) between the Company and the obligor on the aforementioned note and mortgage, the Company anticipates entering into a restructured note and mortgage with the original obligor for a similar amount with, initially, interest only monthly payments for the remainder of 2012. The MOA contemplates that the restructured note and mortgage will be secured additionally by the obligor's Reliv distributorship business. Accordingly, pending completion of the restructured note and mortgage agreement, the Company has presented the note receivable as a non-current asset in the condensed consolidated balance sheets.

Note 4--	Stock-based Compensation

	In January 2012, the Company issued stock option grants totaling 775,000 shares. These option grants contain exercise prices ranging from $1.20 to $1.32 per share with a five-year term. One half of the options granted have time vesting provisions ranging from one to 4.8 years while the remainder have vesting provisions that are contingent upon the Company achieving certain financial performance measurements. The aggregate estimated compensation cost related to the time vesting stock option grant is $172,000 recognized on a straight-line basis over the weighted requisite service periods. The aggregate estimated compensation cost related to the performance based options is $185,000; however, recognition is contingent upon performance vesting. The grant-date fair value of the options range from $0.42 to $0.48 per share and was determined using the Black-Scholes option pricing model using an average risk-free rate of 0.82%, an average dividend yield of 1.60%, and an average volatility of 49.31%.

	The Company recognized stock-based compensation expense from all plans of approximately $53,000 and $46,000 in the three months ended March 31, 2012 and 2011, respectively. This expense is presented in Selling, General and Administrative in the accompanying condensed consolidated statements of net income and comprehensive income.

Note 5--	Taxes

	One of the Company's foreign subsidiaries is presently under local country audit for alleged deficiencies (totaling approximately $800,000 plus interest at 20% per annum) in value-added tax (VAT) and withholding tax for the years 2004 through 2006. The Company, in consultation with its legal counsel, believes that there are strong legal grounds that it should not be liable to pay the majority of the alleged tax deficiencies. As of December 31, 2010, management estimated and reserved approximately $185,000 for resolution of this matter and recorded this amount within Selling, General, and Administrative expense in the 2010 Consolidated Statement of Income. In 2011, the Company has made good faith deposits to the local tax authority under the tax agency's administrative judicial resolution process. As of March 31, 2012 and December 31, 2011, management's estimated reserve (net of deposits) for this matter is approximately $50,000. There has been no change in this matter during the first quarter of 2012.

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 Financial Condition and Results of Operations

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

Overview

We are a developer, 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 79.9% of worldwide net sales for the three months ended March 31, 2012 and 85.2% of worldwide net sales for the three months ended March 31, 2011. 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, 2012, consisted of approximately 58,530 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. United States generally accepted 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.

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 distributors, 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; and the cost of regulatory compliance.

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, 2012 and 2011. Our results of operations for the periods described below are not necessarily indicative of results of operations for future periods.

	Three months ended March 31,
		2012		2011

Net sales		100.0	%	100.0	%
Costs and expenses:
Cost of products sold		19.8		19.5
Distributor royalties and commissions		37.7		37.4
Selling, general and administrative		37.9		38.1

Income from operations		4.6		5.0
Interest expense		(0.1	)	(0.2	)
Interest and other income/(expense)		(0.1	)	(0.2	)

Income before income taxes		4.4		4.6
Provision for income taxes		1.7		1.8

Net income		2.7	%	2.8	%

Net Sales. Overall net sales decreased by 9.0% in the three months ended March 31, 2012 compared to the same period in 2011. During the first quarter of 2012, sales in the United States decreased by 14.6%, and international sales increased by 23.4% over the prior-year period.

The following table summarizes net sales by geographic market for the three months ended March 31, 2012 and 2011.

	Three months ended March 31,
	2012					2011					Change from prior year
	Amount		% of Net Sales			Amount		% of Net Sales			Amount			%
	(dollars in thousands)
United States	$	15,770		79.9	%	$	18,466		85.2	%	$	(2,696	)		(14.6	)%
Australia/New Zealand		540		2.7			618		2.8			(78	)		(12.6	)
Canada		550		2.8			597		2.8			(47	)		(7.9	)
Mexico		287		1.4			348		1.6			(61	)		(17.5	)
Europe		1,595		8.1			724		3.3			871			120.3
Asia		1,002		5.1			934		4.3			68			7.3

Consolidated total	$	19,744		100.0	%	$	21,687		100.0	%	$	(1,943	)		(9.0	)%

The following table sets forth, as of March 31, 2012 and 2011, 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, 2012			March 31, 2011			% Change
		Active Distributors	Master Affiliates and Above		Active Distributors	Master Affiliates and Above		Active Distributors		Master Affiliates and Above
United States		42,910	4,550		46,910	5,360		(8.5	)%	(15.1	)%
Australia/New Zealand		1,950	120		2,200	140		(11.4	)	(14.3	)
Canada		1,340	190		1,370	170		(2.2	)	11.8
Mexico		1,640	140		1,630	240		0.6		(41.7	)
Europe		4,900	480		2,570	260		90.7		84.6
Asia		5,790	500		5,190	400		11.6		25.0
Consolidated total		58,530	5,980		59,870	6,570		(2.2	)%	(9.0	)%

In the United States, net sales were down 14.6% in the first quarter of 2012 compared to the same period in 2011. Sales declined in the first quarter of 2012 as distributor activity in United States continues to decline. This decline is shown in the form of a decrease in the number of active distributors and distributors at the level of Master Affiliate and above, along with a decrease in the number of new distributor enrollments. The net number of active distributors in the United States as of March 31, 2012 decreased by 8.5% to 42,910, compared to the number of active distributors as of March 31, 2011. The net number of distributors at the level of Master Affiliate and above as of March 31, 2012 decreased by 15.1% as compared to March 31, 2011. Additionally, in the first quarter of 2012, approximately 400 distributors qualified as new Master Affiliates, compared to approximately 581 in the prior-year quarter, a decline of 31.2%. During the first quarter of 2012, approximately 3,023 new distributors were enrolled, compared to 3,447 new distributor enrollments in the prior-year quarter, a decline of 12.3%. Distributor retention remained steady at 68.7% for the first three months of 2012 compared to a rate of 67.4% for all of 2011.

In the first quarter of 2012, we processed approximately 59,012 orders in the United States for products at an average order of $356 at suggested retail. In the same period of 2011, we processed approximately 67,274 product orders at an average order of $359 at suggested retail. This decline in the number of orders processed is attributable to the decline in distributor activity.

One of our key efforts in the United States to revive distributor activity and ordering focuses on product innovation. Using LunaRich, an enhanced soy powder, we have introduced reformulations of three of our products, Reliv NOW, SoySentials, and Reliv NOW for Kids. LunaRich was created through our research and development partnership with the Missouri Plant Science Center, and it delivers five to ten times more lunasin than standard soy powders. Lunasin is the peptide scientists have identified as the key to many of soy’s documented health benefits, including cholesterol management, cell health and more. We intend to introduce additional LunaRich-based reformulations in the United States and elsewhere in our existing markets in the coming months.

During the three months ended March 31, 2012, net sales in our international operations increased in aggregate by 23.4% to $3.97 million compared to $3.22 million for the three months ended March 31, 2011. When measured on a constant currency basis, sales increased in Europe and Asia, but were offset by declines in Australia/New Zealand, Canada, and Mexico during the first quarter of 2012. When net sales are converted using the 2011 exchange rate for both 2011 and 2012, international net sales increased by 23.7% for the first quarter of 2012 compared to the first quarter of the prior year. Regional sales results on a constant currency basis for the first quarter of 2012 compared to the first quarter of 2011 were as follows: Australia/New Zealand net sales down 17.1%, Canada net sales down 6.6%, Mexico net sales down 11.6%, Europe net sales up 124.5%, and Asian sales up 5.2%. In Australia/New Zealand, Canada, and Mexico, new distributor enrollments and new Master Affiliate qualifications were down in the first quarter of 2012 commensurate to the decline of sales in the respective markets.

In Europe, strong distributor activity and growth continued in the first quarter of 2012 and resulted in a 124.5% increase in net sales. New distributor enrollments were 1,424 in the first quarter of 2012, compared to 549 in the same period in 2011, an increase of 159%; and new Master Affiliate qualifications were 148 in the first quarter of 2012, compared to 45 in the same period in 2011, an increase of 229%.

In Asia, the increase in regional sales was driven by a 64.3% increase in sales in the Philippines. Sales of Reliv NOW, lemon-flavored Innergize, and Fibrestore in single-serving packs continue to gain momentum in that market.

Cost of Products Sold. Cost of products sold as a percentage of net sales was 19.8% for the three-month period ended March 31, 2012, compared to 19.5% for the same period in 2011. Gross margins decreased in the first quarter of 2012 as the result of increases in the cost of shipping for distributor orders in the United States.

Distributor Royalties and Commissions. Distributor royalties and commissions as a percentage of net sales was 37.7% for the three-month period ended March 31, 2012, compared to 37.4% in the same period in 2011. 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. The slight increase in the percentage in the first quarter of 2012 is due to a higher average level of distributor discounts at the time of purchase in 2012, compared to the prior-year quarter. Distributor royalties are based on product prices at suggested retail price.

Selling, General and Administrative Expenses. For the three months ended March 31, 2012, selling, general and administrative, or SGA, expenses decreased by $795,000, compared to the same period in 2011. SGA expenses as a percentage of net sales were 37.9% for the three-month period ended March 31, 2012, compared to 38.1% for the same period of 2011.

Sales and marketing expenses decreased by approximately $453,000 in the first quarter of 2012, compared to the prior-year quarter. Distributor bonuses and other expenses directly related to the level of sales decreased by approximately $170,000. Other changes included a decrease in conference and meeting expenses of $138,000 and a decrease in promotional expenses of $114,000.

Salaries, benefits, and incentive compensation decreased by $192,000 in the first quarter of 2012, compared to the prior-year quarter, due in part to the headcount reductions in the fourth quarter of 2011. Distribution and warehouse expenses increased by $10,000 and other general and administrative expenses decreased by approximately $159,000 in the first quarter of 2012, compared to the prior-year quarter. The decrease in other general and administrative expenses is the result of reductions in a number of expenses, including office rental expenses in Australia and Malaysia, consulting fees, directors’ fees, and fees paid to our medical advisory board which was disbanded in 2011.

Interest Expense. Interest expense decreased to $31,000 during the first quarter of 2012 compared to $37,000 in the first quarter of 2011. The lower interest expense is the result of a decrease in the amount of debt compared to the prior year.

Other Income/Expense . Other income/expense in the first quarter of 2012 was a net expense of $23,000, compared to a net expense of $69,000 in the first quarter of 2011. The first quarter 2012 net expense is the result of foreign currency exchange losses in certain of our subsidiaries. The net expense in 2011 is primarily the result of a loss of approximately $97,000 incurred in our Indonesian subsidiary in the 2011 first quarter. A nominee director/former employee of the subsidiary misappropriated this amount from the subsidiary's bank account. During the second quarter of 2011, we recovered $60,000 of this amount.

Income Taxes. We recorded income tax expense of $337,000 for the first three months of 2012, resulting in an effective rate of 38.8%. In the same period in 2011, we recorded income tax expense of $377,000, which represented an effective rate of 38.2%. Our effective rate is higher in 2012 due to a higher effective rate for state income taxes in 2012.

Net Income. Our net income for the three months ended March 31, 2012 was approximately $532,000 ($0.04 per share basic and diluted), compared to approximately $610,000 ($0.05 per share basic and diluted) for the same period in 2011. Profitability decreased in the first quarter of 2012 as net sales decreased in the United States as discussed above.

Financial Condition, Liquidity and Capital Resources

During the first three months of 2012, we generated $1.77 million of net cash from operating activities, $2.32 million was used in investing activities, and we used $154,000 in financing activities. This compares to $2.34 million of net cash provided by operating activities, $340,000 used in investing activities, and $140,000 used in financing activities in the same period of 2011. Cash and cash equivalents decreased by $584,000 to $6.59 million as of March 31, 2012 compared to December 31, 2011.

Significant changes in working capital items consisted of an increase in inventory of $144,000, an increase in prepaid expenses/other current assets of $499,000, an increase in accounts payable and accrued expenses of $1.27 million, and an increase in income taxes payable of $287,000 in the first three months of 2012. The increase in inventory is to support the sales growth in Europe, and 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 and the increase in inventory. The increase in income taxes payable is a function of the timing of estimated tax payments.

Investing activities during the first three months of 2012 consisted of the purchase of a note and mortgage for $2 million, a net investment of $61,000 for capital expenditures, and $259,000 for key-man life insurance. Financing activities during the first three months of 2012 consisted of principal payments of $144,000 on long-term borrowings and $10,000 in treasury stock purchased. The purchase of the note and mortgage are discussed further in Note 3 of the Consolidated Financial Statements.

Stockholders’ equity increased to $15.21 million at March 31, 2012 compared to $14.49 million at December 31, 2011. The increase is due to our net income during the first three months of 2012 of $532,000 and an improvement in the cumulative foreign currency translation adjustment of $110,000 due to the general weakening of the United States dollar. Our working capital balance was $5.77 million at March 31, 2012 compared to $7.30 million at December 31, 2011. The current ratio at March 31, 2012 was 1.76 compared to 2.19 at December 31, 2011.

On November 30, 2010, we entered into a term loan with our primary lender (“the Bank”) in the principal amount of $3.66 million. The loan was renegotiated from a loan that originated with the Bank on June 29, 2009. The term of the loan is for a period of three years with interest accruing on the outstanding principal balance at a floating interest rate based on the 30-day LIBOR plus 2.0%. Monthly principal and interest payments are based on approximately a nine-year amortization. The aggregate outstanding balance of principal and interest is due and payable on November 30, 2013.

We also renewed a revolving credit facility for $5 million with the Bank in October 2011. The credit facility accrues interest on the outstanding principal balance at a floating interest rate based on 30-day LIBOR plus 1.85% and has a maturity date of September 30, 2012. As of March 31, 2012, there were no outstanding borrowings on the revolving credit facility.

The amended terms of the term loan and revolving credit facility are reflected in separate promissory notes dated November 30, 2010 between us and the Bank. A separate letter agreement stating the financial covenants related to the term loan and revolving credit facility was updated and amended on April 4, 2012 and continues in effect.

Under the terms of the amended letter agreement, we have agreed to financial covenants under which we are required to (i) maintain at all times a tangible net worth of not less than $11 million and (ii) maintain at all times a ratio of Total Funded Debt to EBITDA of not greater than 2.5 to 1. 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. As of March 31, 2012, we were in compliance with all financial covenants.

Management believes that our internally generated funds coupled with cash on hand and the bank loan facilities will be sufficient to meet working capital requirements for the remainder of 2012.

Critical Accounting Policies

A summary of our critical accounting policies and estimates is presented on pages 24-26 of our 2011 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 23, 2012.

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, 2012. 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, 2012, 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 2012 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

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⁾

January 1-31, 2012		7,849	$	1.27		7,849	$	870,000

February 1-29, 2012		-		-		-	$	870,000

March 1-31, 2012		-		-		-	$	870,000

Total		7,849				7,849

(1) In April 2011, the Company’s Board of Directors approved a share repurchase plan of up to $1 million through April 2013.

Item No. 6 – Exhibits

Exhibit

Number

Document

10.1

Loan Sale Agreement between 2010-1 RADC/CADC Venture, LLC and Registrant dated March 16, 2012 (filed herewith).

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).

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).

101

Interactive Data Files, including the following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, formatted in XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Net Income and Comprehensive Income, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) the Notes to Consolidated Financial Statements.

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. Montgomery

Robert L. Montgomery, Chairman of the Board of Directors, President and Chief Executive Officer

Date: May 14, 2012

By: /s/ Steven D. Albright

Steven D. Albright, Chief Financial Officer (and accounting officer)

Date: May 14, 2012

Exhibit 10.1

LOAN SALE AGREEMENT

This Loan Sale Agreement (this “ Agreement ”) is made effective as of March 16, 2012 (the “ Effective Date ”), between 2010-1 RADC/CADC Venture, LLC (“ Seller ”) , and Reliv’ International, Inc. (“ Buyer ”).

Recitals

A. Seller is the current owner and holder of a loan (the “ Loan ”) evidenced by (among other things) the following documents (collectively, the “ Loan Documents ”): (i) that certain promissory note executed by ______________________________ , husband and wife (“ Borrowers ”), in the original principal amount of $2,600,000.00 dated June 12, 2008, together with that certain Allonge to Promissory Note from the Federal Deposit Insurance Corporation in its capacity as receiver for First Bank of Idaho, FSB dated effective as of August 26, 2010 (collectively, the “ Note ”); (ii) that certain mortgage dated June 12, 2008, and recorded July 1, 2008 as Document No. 0733226, Book No. 703, Page 337-342 in the office of the Clerk of Teton County, Wyoming, and pertaining to certain real property and improvements commonly known as 720 West Lois Lane, Lot 1 of Kiln Creek Subdivision, Teton County, Wyoming 83414 (“ Property I ”), together with that certain Assignment of Real Estate Mortgage dated effective as of August 26, 2010 and recorded on April 8, 2011 as Document Number 0791760 in Book 780, page 392 with the Clerk of Teton County, Wyoming (collectively, the “ Wyoming Mortgage ”); and (iii) that certain mortgage dated June 12, 2008, and recorded June 30, 2008 as Instrument No. 198526, in the office of the Recorder of Teton County, Idaho, and pertaining to certain real property and improvements commonly known as E1/2NE1/4 Section 7, and Part of NW Section 8 all in Township 5 North, Range 44 East, Boise Meridian, Teton County, Idaho 83452 (“ Property II ” and together with Property I , the “ Property ”), together with that certain Assignment of Real Estate Mortgage dated effective as of August 26, 2010 and recorded on December 6, 2010 as Instrument No. 214613 with the Recorder of Teton County, Idaho (collectively, the “ Idaho Mortgage ”).

B. Seller desires to sell, assign and transfer to Buyer, and Buyer desires to purchase from Seller, all of Seller’s rights, title and interest in, to and under the Loan. Seller and Buyer enter into this Agreement for the purpose of providing the terms and conditions upon which Buyer will purchase the Loan and the Loan Documents.

Agreement

In consideration of the foregoing facts and the mutual promises contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller hereby agrees to sell, assign and transfer to Buyer and Buyer hereby agrees to purchase from Seller all of Seller’s rights, title and interest in, to and under the Loan and the Loan Documents subject to the following terms, covenants and conditions:

1. Incorporation of Recitals . The recitals set forth above are accurate and are incorporated in this Agreement by this reference.

2. Purchase Price . On the Closing Date (as defined below), Buyer shall deliver to Seller the purchase price of TWO MILLION AND 00/100 DOLLARS ($2,000,000.00) (the “ Purchase Price ”) less the Earnest Money (as defined below) in immediately available funds in exchange for all of Seller’s rights, title and interest in, to and under the Loan and Loan Documents.

3. Closing; Earnest Money . The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place on a date mutually agreeable to the parties within five (5) days following the Effective Date (the “ Closing Date ”) at Seller’s office located at 4601 College Boulevard, Suite 300, Leawood, Kansas 66211. On the Effective Date, Buyer shall deliver to Seller (by wire transfer of immediately available funds) an earnest money deposit in the amount of ONE HUNDRED THOUSAND AND 00/100 DOLLARS ($100,000.00) (the “ Earnest Money ”). The Earnest Money will be applied to the Purchase Price on the Closing Date. In the event of any breach or default by Seller of its covenants in Section 8 below, Seller will promptly refund the Earnest Money to Buyer, otherwise the Earnest Money shall be nonrefundable to Buyer.

4. Due Diligence .

(a) The Loan Documents and the other documents identified on Schedule I , if any, are the “ Loan File Documents .” Although Seller has offered to make the Loan File Documents available for inspection by Buyer (subject to the execution of a confidentiality agreement), Buyer has declined to receive copies of the Loan File Documents.

(b) The Loan File Documents may have been prepared by Seller, prior holders of the Loan, third party contractors or other persons. BUYER UNDERSTANDS AND ACKNOWLEDGES THAT ANY LOAN FILE DOCUMENT PROVIDED BY SELLER OR ANY OTHER SELLER PARTY (defined below) IS BEING PROVIDED WITHOUT REPRESENTATION OR WARRANTY AS TO THE COMPLETENESS OR ACCURACY OF THE FACTS, PRESUMPTIONS AND CONCLUSIONS CONTAINED THEREIN, AND BUYER MAY NOT RELY ON ANY LOAN FILE DOCUMENT IN ANY REGARD. SELLER SPECIFICALLY ADVISES BUYER TO CONDUCT AN INDEPENDENT INVESTIGATION WITH RESPECT TO (AMONG OTHER THINGS) THE VALIDITY AND ENFORCEABILITY OF THE LOAN DOCUMENTS AND OTHER LOAN FILE DOCUMENTS, THE IDENTIFICATION, EXISTENCE, VALUE AND CONDITION OF ALL COLLATERAL FOR THE LOAN, AND LIEN PRIORITY AND PERFECTION.

(c) The Loan File Documents do not include, and Seller does not represent that it has made available to Buyer, all documents or information within the possession or control of Seller or the other Seller Parties relating the Loan, the Property, the Borrowers, the Guarantors or otherwise. Certain of such documents and information have been excluded from disclosure by Seller (or may later come into a Seller Party’s possession and remain undisclosed) in its sole and absolute discretion and, for purposes of this Agreement, are referred to collectively as the “ Excluded Information .” The Excluded Information includes information or documents with respect to the Loan, the Property, Borrowers, any Guarantor, or any of their affiliates or representatives that is not known to Buyer and that may be material, and if known to Buyer, could have an impact upon perceived, apparent or actual value of, the merits and risks with respect to, or the decision to acquire, the Loan. The Excluded Information might include, without limitation, attorney-client or otherwise legally privileged documents, appraisals, broker’s opinions of value or other valuation documents, internal loan risk assessments, asset or credit grading reports and internally prepared memoranda. Buyer understands and acknowledges that Seller makes no representations or warranties regarding the Excluded Information and that the Excluded Information could contain documents or information which, if known to Buyer, could have a material impact on its determination of value of the Loan as well as its decision to purchase the Loan.

(d) Buyer hereby acknowledges and agrees that Buyer has made its own independent investigation of the financial condition and business affairs of Borrowers and all other persons or entities that have executed any of the Loan File Documents, and that Buyer has conducted its own independent review of the Loan File Documents, and that Buyer has made its own determination as to the following, notwithstanding its lack of knowledge of or access to the Excluded Information: (i) the enforceability of the Loan; (ii) the existence, condition, location or value of any property, real or personal, encumbered pursuant to or affected by or described in any of the Loan File Documents; and (iii) the fact that the Note remains unpaid and is in default.

(e) Buyer acknowledges that there may be certain environmental issues and/or risks with respect to the Property (including the real property, all buildings, structures and improvements situated thereon, and water rights or mineral interests securing payment of the Note). BUYER FURTHER ACKNOWLEDGES AND AGREES THAT SELLER HAS NOT UNDERTAKEN TO MAKE THE PROPERTY AVAILABLE FOR INSPECTION BY BUYER, AND THAT BUYER IS RELYING, AND WILL RELY SOLELY ON WHATEVER INVESTIGATION OF THE PROPERTY IT HAS CONDUCTED, IF ANY, AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY SELLER OR ANY OF ITS AGENTS OR REPRESENTATIVES, AND HEREBY WAIVES ALL OBJECTIONS OR CLAIMS AGAINST SELLER AND ALL SELLER PARTIES (INCLUDING ANY RIGHT OR CLAIM OF CONTRIBUTION) ARISING FROM OR RELATED TO THE PROPERTY OR TO ANY HAZARDOUS MATERIALS (AS DEFINED BELOW) ON OR RELATING TO THE PROPERTY. Nothing in this Section 4 or otherwise in this Agreement is intended to, or may be construed to, amend, modify or waive any provisions contained in any nondisclosure or confidentiality agreement between the parties. For purposes of this Agreement, the term “Hazardous Materials” means any substance which is or contains: (i) any “hazardous substance” as now or hereafter defined in § 101(14) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. § 9601 et seq.) (“CERCLA”) or any regulations promulgated under CERCLA; (ii) any “hazardous waste” as now or hereafter defined in the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.) (“RCRA”) or any regulations promulgated under RCRA; (iii) any substance regulated by the Toxic Substances Control Act (15 U.S.C. - § 2601 et seq.); (iv) gasoline, diesel fuel, or other petroleum hydrocarbons; (v) asbestos and asbestos containing materials, in any form, whether friable or non-friable; (vi) polychlorinated biphenyls; (vii) radon gas; (viii) any additional substances or materials which are now or hereafter classified or considered to be hazardous or toxic under Environmental Requirements (as defined below) or the common law, or any other applicable laws relating to the Property; and (ix) any substance, the presence of which on the Property: (A) requires reporting, investigation or remediation under Environmental Requirements; (B) causes or threatens to cause a nuisance on the Property or adjacent property or poses or threatens to pose a hazard to the health or safety of persons on the Property or adjacent property; or (C) which, if it emanated or migrated from the Property could constitute a trespass.

For purposes of this Agreement, the term “Environmental Requirements” means all laws, ordinances, statutes, codes, rules, regulations, agreements, judgments, orders, and decrees, now on hereafter enacted, promulgated, or amended, of the United States, the states, the counties, the cities, or any other political subdivisions in which the Property is located, and any other political subdivision, agency or instrumentality exercising jurisdiction over the owner of the Property, the Property or the use of the Property relating to pollution, the protection or regulation of human health, natural resources or the environment, or the emission, discharge, release or threatened release of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or waste or Hazardous Materials into the environment (including ambient air, surface water, ground water, land or soil).

5. Limited Warranties and Representations of Seller . Seller hereby represents and warrants to Buyer with respect to the Loan:

(a) Seller is the owner and holder of the Loan and the Loan Documents, and has the right to sell the Loan and the Loan Documents to Buyer free and clear of any and all liens, claims or encumbrances.

(b) Seller has received no payments on the Loan during the period Seller has owned the Loan.

(c) Seller has entered into no written agreement or other document to release the Borrowers, the Guarantors or the Mortgage prior to the Closing, other than (i) pursuant to Loan Documents or other Loan File Documents delivered to Buyer or (ii) as may result from the operation of law.

(d) Seller has all requisite power and authority to execute and deliver, and to perform all of its obligations under, this Agreement and all instruments and other documents executed and delivered by Seller in connection herewith.

(e) The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of Seller and do not require any consent or approval of any party or governmental entity that has not been obtained.

The foregoing representations and warranties of Seller shall survive the Closing Date for a period of one (1) year (subject to any claims pending as of the expiration of such period); provided, however, that fraud or intentional misrepresentation shall survive for the applicable statute of limitations period.

6. Representations and Warranties of Buyer . Buyer hereby represents and warrants to Seller that:

(a) Buyer has all requisite power and authority to execute and deliver, and to perform all of its obligations under, this Agreement and all instruments and other documents executed and delivered by Buyer in connection herewith.

(b) The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of Buyer and do not require any consent or approval of any party or governmental entity that has not been obtained.

(c) Buyer has knowledge and experience in financial and business matters and is capable of evaluating the merits and risks relating to the Loan and Loan File Documents (including any environmental laws pertaining to the Property or other collateral for the Loan) and making an informed purchase and investment decision in connection therewith.

(d) Buyer acknowledges that the Loan may have limited or no liquidity and Buyer has the financial wherewithal to hold the Loan for an indefinite period of time and to bear the economic risk attendant to ownership of the Loan.

(e) Buyer has made, prior to the Closing, such examination, review and investigation of the facts and circumstances necessary to evaluate the Loan and the Loan File Documents as Buyer has deemed necessary or appropriate (including as described in Section 4 ). Buyer is assuming all risk with respect to the completeness, accuracy, enforceability or sufficiency of the Loan File Documents and the existence, condition, location and value of the Property and any property (real or personal) encumbered pursuant to or affected by or described in any of the Loan File Documents. Buyer further acknowledges that in acquiring the Loan and Loan Documents, Buyer is assuming all credit, collateral and collectability risks, including full or partial losses which are inherent with the Loan and Loan Documents.

(f) Buyer has not relied upon any representations, warranties or statements of any kind made by or on behalf of the Seller or any officer, director, employee, agent or representative of Seller with respect to the Borrowers, the Property, the Loan, or any Loan File Document except as expressly set forth in this Agreement. Buyer acknowledges that, except for the representations and warranties by Seller set forth in Section 5 , Seller negates and disclaims all representations, warranties and statements of every kind or type (express or implied). Without limiting the foregoing, Buyer acknowledges and agrees that the amount ultimately received by Buyer with respect to the Loan, the Loan Documents or the Property may be less than the Purchase Price and that Buyer shall have no recourse to Seller for any such deficiency.

(g) If Buyer has engaged any broker or finder or incurred or becomes obligated to pay any broker’s commission or finder’s fee in connection with the transaction contemplated by this Agreement, in no event will Seller or any of its affiliates be obligated to pay any fee, expense or other remuneration to or in connection with such broker or finder, directly or indirectly, and any such fee, expense or other remuneration shall be Buyer’s sole responsibility.

The foregoing representations and warranties of Buyer shall survive the Closing Date for a period of one (1) year (subject to any claims pending as of the expiration of such period); provided, however, that fraud or intentional misrepresentation shall survive for the applicable statute of limitations period.

7. Covenants of Buyer . Regarding its purchase of Seller’s rights, title and interest in and to the Loan and Loan Documents, Buyer covenants and agrees that:

(a) Buyer’s purchase of the Loan and Loan Documents is and shall be on an “AS IS” AND “WHERE IS” BASIS, “WITH ALL FAULTS” AND WITHOUT REPRESENTATION, EXPRESS OR IMPLIED, OF ANY KIND, TYPE, CHARACTER OR NATURE, AND WITHOUT RECOURSE OR WARRANTY, EXPRESS OR IMPLIED, EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES BY SELLER SET FORTH IN SECTION 5 OF THIS AGREEMENT.

(b) Buyer assumes all risks as to the security for the Loan (including the Property) including the adequacy or accuracy of any description of any such security, the validity and execution of any of the Loan Documents, the perfection and priority of any lien or security interest purportedly securing the Loan, the rights of third parties regarding any such security, the financial creditworthiness of the Borrowers, or the value or marketability of any such security.

(d) Notwithstanding any term or provision of this Agreement to the contrary, Seller retains the right, if it so chooses in its sole and absolute discretion, to participate in any lawsuits for the sole purpose of defending any of the Seller Parties (as hereinafter defined) against any claims or counterclaims brought against any of them, whether now existing or at any time hereafter arising, and those rights are not assigned or transferred to the Buyer under this Agreement or in connection with the consummation of the transaction contemplated under this Agreement. Buyer and Buyer’s counsel shall cooperate with Seller and Seller’s counsel, all at Buyer’s sole cost and expense in the defense of any claims or counterclaims made against Seller or any of Seller’s subsidiaries, affiliates (including the FDIC), employees, officers, directors, shareholders, members, managers, partners, agents, representatives, attorneys, accountants or consultants (collectively, the “ Seller Parties ”), in any litigation, arbitration proceeding or other forum involving or relating to the Loan.

(e) Buyer shall be responsible for complying with all state and federal laws with respect to the ownership, servicing and collection of the Loan and Loan Documents, including the obligation to notify Borrowers, each Guarantor or any other obligor or pledgor of collateral (each, a “ Loan Party ”) of the transfer of the Loan and Loan Documents. Further, Seller shall have the right, but not the obligation, to notify any Loan Party of the transfer of the Loan and Loan Documents to Buyer. Buyer agrees not to misrepresent, mislead, deceive, or otherwise fail adequately to disclose to any Loan Party the identity of Buyer as the owner of the Loan and Loan Documents. Buyer’s collection of the Loan and enforcement of the Loan Documents shall be done in compliance with all applicable federal and state laws and solely in its name and not in Seller’s name.

(f) Buyer shall, within ten (10) days after Closing, record in the applicable county recorder’s office (and pay all costs and fees associated therewith) the Assignments (defined below) delivered by Seller. Buyer shall pay any transfer, property, income or other tax accruing or arising in connection with the transactions contemplated in this Agreement (other than income tax payable by Seller).

8. Covenants of Seller at Closing .

(a) Seller shall, upon confirmation of its receipt of the Purchase Price in immediately available funds, personally deliver to Buyer’s representative attending the Closing:

(i) the following original Loan Documents:

(A) Promissory Note dated June 12, 2008;

(B) Allonge dated as of August 26, 2010;

(D) Assignment of Wyoming Mortgage dated as of August 26, 2010;

(E) Idaho Mortgage dated June 12, 2008; and

(F) Assignment of Idaho Mortgage dated as of August 26, 2010;
and copies (to the extent the originals are not in Seller’s possession) of all other Loan File Documents;

(ii) executed (in recordable form, as applicable) and acknowledged assignments of the Loan Documents and of the Note and Mortgages (and assignment of rents, as applicable) substantially in the forms attached hereto as Exhibit A-1 , Exhibit A-2 , and Exhibit A-3 respectively (collectively, the “ Assignments ”);

(iii) executed allonge to the Note substantially in the form attached hereto as Exhibit B ; and

(iv) a loan payment history for the Loan for the last twelve (12) months (or, if shorter, for the period of Seller’s ownership of the Loan) as may be in Seller’s possession showing the application of payments to and disbursements from Seller or its predecessor (it being understood and agreed that Seller makes no representation or warranty with respect to the accuracy or completeness of such history).

(b) Seller shall deliver all payments received by Seller from Borrower pursuant to the Loan or Loan Documents after the Closing.

9. Buyer’s Indemnities . Buyer agrees to indemnify and hold harmless Seller and each other Seller Party from and against any and all loss, liability, claim, damage and expense (including reasonable attorneys’ fees) directly or indirectly arising out of, based upon, resulting from or otherwise relating to (a) any act of Buyer or any of Buyer’s assignees, subsidiaries, affiliates, employees, officers, directors, shareholders, members, managers, partners, agents, representatives, attorneys, accountants or consultants (collectively, “ Buyer Parties ”) before or after the Closing in connection with the Loan, the Property or otherwise (including any act or omission by Buyer after the Closing in connection with any Loan File Document), (b) the material inaccuracy of any of Buyer’s representations or warranties herein, (c) a breach of any of Buyer’s covenants or obligations in this Agreement (all of which shall survive Closing), (d) any commissions, finder’s fees or similar fees due or claimed by any broker, agent or salesperson claimed against any Seller Party as a result of an agreement entered into by Buyer, or (e) actions taken by Seller which are specifically requested by Buyer.

10. Waiver and Release Regarding Unknown Claims . Buyer hereby waives and releases all rights under any applicable laws and regulations restricting the waiver of claims that Buyer does not know or suspect to exist at the time of this Agreement, and which, if known, would have materially affected Buyer’s decision to enter into this Agreement, including claims that would have been revealed by the Excluded Information. Buyer hereby agrees, represents and warrants to Seller that Buyer realizes and acknowledges that factual matters now unknown to, or not anticipated or suspected by, Buyer (including factual matters that would have been revealed by the Excluded Information), may have given or may hereafter give rise to causes of action, claims, demands, debts, controversies, damages, costs, losses and expenses that are presently unknown, unanticipated and unsuspected by Buyer, and Buyer further agrees, represents and warrants that the waivers and releases provided hereunder have been negotiated and agreed upon in light of such realization.

11. Limitation of Liability and Remedies .

(a) If Seller defaults or breaches any of its obligations under this Agreement on or prior to Closing (and, at that time, there are no material defaults or breaches by Buyer under this Agreement), then Buyer shall have the right to either (i) waive such default or breach by Seller and proceed to close the transaction contemplated herein pursuant to the terms of this Agreement; or (ii) cancel this Agreement by written notice to Seller (in which case Seller shall refund the Earnest Money to Buyer without any further instruction or consent of any party). To avoid doubt, Buyer’s choice of clause (i) or clause (ii) in the preceding sentence shall constitute the sole and exclusive remedy of Buyer under such circumstances. WITHOUT LIMITING THE FOREGOING SENTENCE, BUYER WAIVES ANY AND ALL RIGHTS THAT BUYER OTHERWISE MAY HAVE UNDER APPLICABLE LAW OR OTHERWISE TO SPECIFICALLY ENFORCE THIS AGREEMENT.

Seller Initials: _______ Buyer Initials: ________

If Seller ever becomes liable to Buyer for any reason other than as described in the first sentence of this Section 11(a) , under any circumstances arising under or resulting from or related to this Agreement, for any claim, loss, cost, damage, judgment, injunctive relief, specific performance, expense or other liability of any kind, including reasonable attorneys’ fees (collectively, the “ Liability ”), then Buyer’s recourse against Seller for such Liability (if not negated entirely pursuant to the following sentence) shall be limited to the least of the following amounts: (i) the Purchase Price less principal payments or the value of other consideration received by Buyer in respect to the Loan or the Property; (ii) the then-remaining unpaid principal amount of the indebtedness evidenced by the Note; or (iii) the actual loss or damage; provided, however, that upon the satisfaction of any loss described in clause (i) or clause (ii), Buyer shall, at Seller’s request, reassign to Seller all of Buyer’s rights, title and interest in and to the Loan and Loan File Documents. In addition, Seller shall have no liability to Buyer with respect to the Loan or Loan File Documents and Buyer shall have no recourse against Seller with respect to the Loan or Loan File Documents, upon the occurrence of any one or more of the following events: (I) the passage of sixty (60) days from the Closing; (II) Buyer orally or in writing directly or indirectly releases in whole or in part the Borrower, any Guarantor, the Property or any other security for the Loan or any Guaranty; (III) Buyer orally or in writing amends, modifies, terminates or otherwise changes any term or provision of the Note or any Loan File Documents; (IV) Buyer agrees orally or in writing to forbear the enforcement of any of its rights or remedies relating to the Loan, the Loan File Documents, the Property or the other security for the Loan; or (V) Buyer takes any action or omits to take any action, the consequence of which is to materially alter or amend, or to compromise, impair or otherwise adversely affect any of the obligations evidenced by the Note, the Loan File Documents, the Property or any of the other security for the Loan or any rights or remedies relating thereto.

(b) If Buyer ever becomes liable to Seller for any reason, under any circumstances arising under or resulting from or related to this Agreement for any claim, loss, cost, damage, judgment, expenses or other liability of any kind, Seller’s recourse against Buyer shall be limited to the actual loss or damages. Notwithstanding the foregoing, in the event of a breach by Buyer under this Agreement resulting only in the Buyer’s failure to effect the purchase of the Loan at Closing, then (i) Seller shall have the right to terminate this Agreement by written notice to Buyer and (ii) Buyer and Seller agree that (x) Seller will suffer damages in an amount that will be impractical or extremely difficult to ascertain, (y) the amount of the Earnest Money represents a reasonable estimate of the damages that Seller will sustain in such case and (z) Seller shall retain the Earnest Money as liquidated damages without any further instruction or consent of any party as Seller’s sole remedy for such breach.

Seller Initials: Buyer Initials:

12. [Reserved.]

13. [Reserved.]

14. Costs . Each party shall bear their own costs and expenses incurred in negotiating, closing and carrying out the transactions contemplated by this Agreement. Buyer shall pay all costs incurred by Buyer associated with the purchase of the Loan (including any broker’s fees of any broker claiming by, through or under Buyer, due diligence costs incurred, title company fees, and applicable recording fees).

15. Governing Law . This Agreement is being entered into in the State of Kansas and shall be governed by and construed in accordance with the laws of the State of Kansas.

16. Counterparts; Signatures . This Agreement may be executed in counterparts and such counterparts will be compiled into one fully-executed Agreement. A signature delivered by e-mail, facsimile or other electronic transmission will be deemed to constitute an original and fully-effective signature.

17. Time of Essence . Time and strict and punctual performance are of the essence with respect to each provision of this Agreement.

18. Survival . The representations, warranties, obligations and covenants of the parties contained in this Agreement shall survive the consummation of the transactions contemplated in this Agreement, subject to any time period limitations specified herein.

19. Further Assurances . Seller and Buyer shall each execute and deliver to the other all further documents or instruments reasonably requested by either of them in order to effect the intent of this Agreement and to obtain the full benefit of this Agreement. Any request by either party under this Section 19 shall be accompanied by the document proposed for signature by the party requesting it, and the form and substance of such document shall be subject to the review and satisfaction of the party of whom the request is made and its attorneys. The party making the request shall bear and discharge any fees or expenses incident to the preparation, filing or recording of documents requested pursuant to this Section 19 .

20. Entire Agreement; Successors and Assigns . THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS OR UNDERSTANDINGS BETWEEN THE PARTIES. The parties make no representations or warranties to each other except as expressly set forth in this Agreement. All prior agreements and understandings between the parties with respect to the transactions contemplated by this Agreement, whether verbal or in writing, are superseded by, and are deemed to have been merged into, this Agreement. This Agreement shall be binding on, and inure to the benefit of, the parties hereto and their respective heirs, executors, personal and legal representatives, successors and assigns, but no other party shall have or claim any third party beneficiary rights under this Agreement. Notwithstanding the foregoing or any other provision of this Agreement, Buyer may not assign this Agreement or any portion of its rights and obligations under this Agreement without Seller’s prior written consent, which may be granted or withheld in Seller’s sole and absolute discretion.

21. Modifications . This Agreement, including the provisions of this Section 21 , may be changed, waived, discharged or terminated only with an instrument in writing signed by each party, and the parties hereby: (a) agree that it shall not be reasonable for either of them to rely on any alleged, non-written amendment to this Agreement; (b) irrevocably waive any and all right to enforce any alleged, non-written amendment to this Agreement; and (c) agree that it shall be beyond the scope of authority (apparent or otherwise) for any of their respective agents to agree to any non-written modification of this Agreement.

22. Severability . If any provision of this Agreement shall be determined to be invalid, illegal or unenforceable, the balance of this Agreement shall remain in full force and effect and if any provision is inapplicable to any person of circumstance, it shall nevertheless remain applicable to all other persons and circumstances.

23. Jury Trial Waiver; Prevailing Party Fees & Expenses . AS PERMITTED BY APPLICABLE LAW, EACH PARTY WAIVES ITS RESPECTIVE RIGHTS TO A TRIAL BEFORE A JURY IN CONNECTION WITH ANY CLAIM, DISPUTE OR CONTROVERSY ARISING WITH RESPECT TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. The prevailing party in any suit, action or proceeding arising out of or relating to this Agreement shall be entitled to recover from the non-prevailing party all reasonable attorneys’ fees and other out-of-pocket expenses the prevailing party incurs in such suit, action or proceeding and in any subsequent suit to enforce a judgment.

24. Miscellaneous . Whenever the context of this Agreement requires, references to the singular number shall include the plural, and the plural shall include the singular, where appropriate; words denoting gender include the masculine, feminine and neuter where appropriate; and specific enumeration shall not exclude the general, but shall be considered as cumulative. The term “person” is intended to be broadly interpreted to include any natural person, corporation, bank, partnership, company, governmental entity or other legal entity. The terms “include,” “including” and similar terms shall be construed as if followed by the phrase “without being limited to.” The term “or” has the inclusive meaning represented by the phrase “and/or” (except where otherwise indicated). The words “hereof,” “herein,” “hereby,” “hereunder” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision or section of this Agreement. No inference in favor of, or against, any party shall be drawn from the fact that such party has drafted any portion of this Agreement. Each party has either (i) reviewed this Agreement with legal and other counsel of its choice or (ii) had sufficient opportunity to review this Agreement with legal and other counsel of its choice and declined to do so.

[ Remainder of Page Intentionally Blank; Signature Page Follows ]

IN WITNESS WHEREOF, the parties to this Agreement have executed and delivered this Agreement as of the Effective Date.

SELLER:	2010-1 RADC/CADC Venture, LLC
	By: MREC Funding, LLC, its manager
	By: Mariner Real Estate Management, LLC, its manager


	By: /s/T. Anderson
	Name: __________________________
	Title: Authorized Signer_____________



BUYER:	RELIV’ INTERNATIONAL, INC.


	By: /s/ Stephen M. Merrick _______________
	Name: _______________________________
	Title: Senior Vice President _______________

Exhibit 31.1

CERTIFICATION

I, Robert L. Montgomery, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Reliv International, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 14, 2012

/s/ Robert L. Montgomery

Robert L. Montgomery

Chief Executive Officer

Exhibit 31.2

CERTIFICATION

I, Steven D. Albright, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Reliv International, Inc.;

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 14, 2012

/s/ Steven D. Albright

Steven D. Albright

Chief Financial Officer

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Reliv’ International, Inc. (the “Company”) for the quarterly period ended March 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Robert L. Montgomery, as Chief Executive Officer of the Company, and Steven D. Albright, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Robert L. Montgomery

Robert L. Montgomery

Chief Executive Officer

Date: May 14, 2012

/s/ Steven D. Albright

Steven D. Albright

Chief Financial Officer

Date: May 14, 2012

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and is not being “filed” as part of the Form 10-Q or as a separate disclosure document for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liability under that section. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act except to the extent that this Exhibit 32 is expressly and specifically incorporated by reference in any such filing.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.