**FORM        10-Q**

**RELIV’        INTERNATIONAL, INC.**

| **Delaware**                                     | **37-1172197**                                           |
|--------------------------------------------------|----------------------------------------------------------|
| (State                  or other jurisdiction of | (I.R.S.                  Employer Identification Number) |
| incorporation                  or organization)  |                                                     |

----

| **Part                I.** | **FINANCIAL                  INFORMATION** |
|----------------------------|--------------------------------------------|

| **Item                1.** | **Financial                  Statements** |
|----------------------------|-------------------------------------------|

|   | 1. | Interim                  Balance Sheet as of September 30, 2005 and Balance Sheet as of                  December                  31, 2004. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2. | Interim                  Statements of Income for the three- and nine-month periods ended                  September                  30, 2005 and September 30, 2004. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3. | Interim                  Statements of Cash Flows for the nine-month periods ended September                  30,                  2005 and September 30, 2004. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **Item                2.** | **Management’s                  Discussion and Analysis of Financial Condition and Results of                  Operations** |
|----------------------------|-----------------------------------------------------------------------------------------------------------------------------------|

**Overview**

----

**Results        of Operations**

| **Net                    Sales by Region** |   | **Three                    months ended September 30** |   |                          |   |                           |   |
|--------------------------------------------|--------|--------------------------------------------------------|--------|-------------------------------|--------|--------------------------------|--------|
| (in                    thousands)          |   | **2005**                                               |   | **2004**                      |   | Change                    from |   |   |   |
|                                       |   | $                                                      |   | %                    of sales |   | $                              |   | %                    of sales |   | prior                    year |   | Change                    in % |   |
|                                       |   |                                                   |   |                          |   |                           |   |   |   |   |   |   |   |
| United                    States           |   | $                                                      | 25,823 |                          |   | 90.4                           | %      | $ | 20,705 |   |   | 85.7 | % | $ | 5,118 |   |   | 24.7 | % |
| Australia/New                    Zealand   |   |                                                   | 486    |                          |   | 1.7                            | %      |   | 642 |   |   | 2.7 | % |   | (156 | ) |   | -24.3 | % |
| Canada                                     |   |                                                   | 383    |                          |   | 1.3                            | %      |   | 455 |   |   | 1.9 | % |   | (72 | ) |   | -15.8 | % |
| Mexico                                     |   |                                                   | 402    |                          |   | 1.4                            | %      |   | 642 |   |   | 2.7 | % |   | (240 | ) |   | -37.4 | % |
| United                    Kingdom/Ireland  |   |                                                   | 240    |                          |   | 0.8                            | %      |   | 122 |   |   | 0.5 | % |   | 118 |   |   | 96.7 | % |
| Philippines                                |   |                                                   | 526    |                          |   | 1.8                            | %      |   | 767 |   |   | 3.2 | % |   | (241 | ) |   | -31.4 | % |
| Malaysia/Singapore                         |   |                                                   | 577    |                          |   | 2.0                            | %      |   | 839 |   |   | 3.5 | % |   | (262 | ) |   | -31.2 | % |
| Germany                                    |   |                                                   | 118    |                          |   | 0.4                            | %      |   | - |   |   | - |   |   | 118 |   |   | N.M. |   |
|                                       |   |                                                   |   |                          |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                    total      |   | $                                                      | 28,555 |                          |   | 100.0                          | %      | $ | 24,172 |   |   | 100.0 | % | $ | 4,383 |   |   | 18.1 | % |

----

| **Net                    Sales by Region** |   | **Nine                    months ended September 30** |   |                          |   |                           |   |
|--------------------------------------------|--------|-------------------------------------------------------|--------|-------------------------------|--------|--------------------------------|--------|
| (in                    thousands)          |   | **2005**                                              |   | **2004**                      |   | Change                    from |   |   |   |
|                                       |   | $                                                     |   | %                    of sales |   | $                              |   | %                    of sales |   | prior                    year |   | Change                    in % |   |
|                                       |   |                                                  |   |                          |   |                           |   |   |   |   |   |   |   |
| United                    States           |   | $                                                     | 77,881 |                          |   | 90.5                           | %      | $ | 61,722 |   |   | 86.3 | % | $ | 16,159 |   |   | 26.2 | % |
| Australia/New                    Zealand   |   |                                                  | 1,567  |                          |   | 1.8                            | %      |   | 1,800 |   |   | 2.5 | % |   | (233 | ) |   | -12.9 | % |
| Canada                                     |   |                                                  | 1,290  |                          |   | 1.5                            | %      |   | 1,231 |   |   | 1.7 | % |   | 59 |   |   | 4.8 | % |
| Mexico                                     |   |                                                  | 1,237  |                          |   | 1.4                            | %      |   | 1,977 |   |   | 2.8 | % |   | (740 | ) |   | -37.4 | % |
| United                    Kingdom/Ireland  |   |                                                  | 642    |                          |   | 0.7                            | %      |   | 411 |   |   | 0.6 | % |   | 231 |   |   | 56.2 | % |
| Philippines                                |   |                                                  | 1,807  |                          |   | 2.1                            | %      |   | 2,137 |   |   | 3.0 | % |   | (330 | ) |   | -15.4 | % |
| Malaysia/Singapore                         |   |                                                  | 1,539  |                          |   | 1.8                            | %      |   | 2,263 |   |   | 3.2 | % |   | (724 | ) |   | -32.0 | % |
| Germany                                    |   |                                                  | 118    |                          |   | 0.1                            | %      |   | - |   |   | - |   |   | 118 |   |   | N.M. |   |
|                                       |   |                                                  |   |                          |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                    total      |   | $                                                     | 86,081 |                          |   | 100.0                          | %      | $ | 71,541 |   |   | 100.0 | % | $ | 14,540 |   |   | 20.3 | % |

| **Active                    Distributors and Master Affiliates by Region** |
|----------------------------------------------------------------------------|
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   | **as                    of 9/30/2005** |   | **as                    of 9/30/2004** |   | **Change                    in %** |   |
|                                                                       |   |   |   | Master |   |   |   | Master |   |   |   | Master |   |
|                                                                       |   | Distributors |   | Affiliates |   | Distributors |   | Affiliates |   | Distributors |   | Affiliates |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| United                    States                                           |   |   | 51,470 |   |   | 14,560 |   |   | 46,030 |   |   | 11,120 |   |   | 11.8 | % |   | 30.9 | % |
| Australia/New                    Zealand                                   |   |   | 2,570 |   |   | 240 |   |   | 2,990 |   |   | 260 |   |   | -14.0 | % |   | -7.7 | % |
| Canada                                                                     |   |   | 1,270 |   |   | 200 |   |   | 1,440 |   |   | 190 |   |   | -11.8 | % |   | 5.3 | % |
| Mexico                                                                     |   |   | 4,020 |   |   | 380 |   |   | 8,000 |   |   | 720 |   |   | -49.8 | % |   | -47.2 | % |
| United                    Kingdom/Ireland                                  |   |   | 640 |   |   | 90 |   |   | 410 |   |   | 50 |   |   | 56.1 | % |   | 80.0 | % |
| Philippines                                                                |   |   | 4,930 |   |   | 520 |   |   | 6,710 |   |   | 610 |   |   | -26.5 | % |   | -14.8 | % |
| Malaysia/Singapore                                                         |   |   | 3,430 |   |   | 620 |   |   | 5,220 |   |   | 710 |   |   | -34.3 | % |   | -12.7 | % |
| Germany                                                                    |   |   | 70 |   |   | 30 |   |   | - |   |   | - |   |   | N.M. |   |   | N.M. |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                    total                                      |   |   | 68,400 |   |   | 16,640 |   |   | 70,800 |   |   | 13,660 |   |   | -3.4 | % |   | 21.8 | % |

----

----

| **Selected                      data from the Consolidated** |   | Three                      Months Ended |   | Nine                      Months Ended |   |
|--------------------------------------------------------------|--------|-----------------------------------------|--------|----------------------------------------|--------|
| **Statements                      of Operations**            |   | September                      30       |   | September                      30      |   |
|                                                         |   | 2005                                    |   | 2004                                   |   | 2005 |   | 2004 |   |
|                                                         |   |                                    |   |                                   |   |   |   |   |   |
| Cost                      of products sold                   |   |                                    | 17.1   | %                                      |   | 17.1 | % |   | 16.9 | % |   | 16.8 | % |
|                                                         |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| Distributor                      royalties and commissions   |   |                                    | 40.0   | %                                      |   | 39.4 | % |   | 40.1 | % |   | 39.7 | % |
|                                                         |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| Selling,                      general, and administrative    |   |                                    | 33.2   | %                                      |   | 34.9 | % |   | 32.1 | % |   | 33.9 | % |
|                                                         |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| Provision                      for income taxes              |   |                                    | 3.6    | %                                      |   | 3.3 | % |   | 4.2 | % |   | 3.8 | % |
|                                                         |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| Net                      income                              |   |                                    | 5.8    | %                                      |   | 5.2 | % |   | 6.6 | % |   | 5.7 | % |

----

**Financial        Condition, Liquidity and Capital Resources**

----

**Critical        Accounting Policies**

**Safe        Harbor Provision of the Private Securities Litigation Act of 1995 and Forward        Looking Statements**

----

| **Item                    3.** | **Quantitative                      and Qualitative Disclosures of Market                      Risk** |
|--------------------------------|-------------------------------------------------------------------------------------------------------|

**Foreign        Currency Risk**

----

| **Item                4.** | **Controls                  and Procedures** |
|----------------------------|----------------------------------------------|

| **Part                II.** | **OTHER                  INFORMATION** |
|-----------------------------|----------------------------------------|

| **Item                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) |   |
|---------------------------------------|--------|--------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                  |   |                                                                           |   |                                                                             |   |                                                                                                            |   |                                                                                                                                           |   |
| July                  1-31, 2005      |   |                                                                           | 51,911 |                                                                             | $      | 10.37                                                                                                           |   |                                                                                                                                           | 51,911 |   | $ | 11,920,000 |   |
|                                  |   |                                                                           |   |                                                                             |   |                                                                                                            |   |                                                                                                                                           |   |   |   |   |   |
| August                  1-31, 2005    |   |                                                                           | 10,200 |                                                                             | $      | 8.78                                                                                                            |   |                                                                                                                                           | 10,200 |   | $ | 11,830,000 |   |
|                                  |   |                                                                           |   |                                                                             |   |                                                                                                            |   |                                                                                                                                           |   |   |   |   |   |
| September                  1-30, 2005 |   |                                                                           | 35,616 |                                                                             | $      | 8.76                                                                                                            |   |                                                                                                                                           | 35,616 |   | $ | 11,518,000 |   |
|                                  |   |                                                                           |   |                                                                             |   |                                                                                                            |   |                                                                                                                                           |   |   |   |   |   |
| Total                                 |   |                                                                           | 97,727 |                                                                             |   |                                                                                                            |   |                                                                                                                                           | 97,727 |   |   |   |   |

----

| **Item                6.** | **Exhibits** |
|----------------------------|--------------|

| Exhibit                  No. | Description                                                                                                                                                                                                                                                 |
|------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                         |                                                                                                                                                                                                                                                        |
| 3.1                          | Certificate                  of Incorporation (incorporated by reference to Appendix B of Form                  14A of                  the Registrant filed on April 22, 1999).                                                                            |
| 3.2                          | By-Laws                  (incorporated by reference to Appendix C of Form 14A of the Registrant                  filed on April 22, 1999).                                                                                                                  |
| 3.3                          | Amendment                  to By-Laws dated March 22, 2001 (incorporated by reference to Exhibit                  3.3                  of Form 10-K of the Registrant for the year ended December 31,                  2001).                               |
| 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.                                                                       |
| 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.                                                                       |
| 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. |

----

|                                     |                                              |                                       |
|------------------------------------------|---------------------------------------------------|--------------------------------------------|
| Dated:                  November 4, 2005 | RELIV’ INTERNATIONAL, INC.                  |
|                                |                                         |                                  |
|                                     | By:                                     | /s/                  Robert L. Montgomery  |
|                                     | Robert                  L. Montgomery, President, |
|                                     | Chief                  Executive Officer          |
|                                     |                                                   |                                       |
|                                     |                                              |                                       |
|                                     | By:                                     | /s/ Steven D. Albright                     |
|                                     |                                              | Steven                  D. Albright, Chief |
|                                     |                                              | Financial                  Officer         |

----

|                                                                 |   | September                    30 |       | December                    31 |   |
|----------------------------------------------------------------------|--------|---------------------------------|------------|--------------------------------|--------|
|                                                                 |   | 2005                            |       | 2004                           |   |
|                                                                 |   | (unaudited)                     |       |                           |   |
| Assets                                                               |   |                            |       |                           |   |   |   |
|                                                                 |   |                            |       |                           |   |   |   |
| Current                    assets:                                   |   |                            |       |                           |   |   |   |
| Cash                    and cash equivalents                         |   | $                               | 4,938,717  |                           | $      | 10,151,503 |   |
| Accounts                    and notes receivable, less allowances of |   |                            |       |                           |   |   |   |
| $26,500                    in 2005 and $11,500 in 2004               |   |                            | 553,333    |                           |   | 872,592 |   |
| Accounts                    due from employees and distributors      |   |                            | 122,534    |                           |   | 70,620 |   |
| Inventories                                                          |   |                            |       |                           |   |   |   |
| Finished                    goods                                    |   |                            | 4,450,245  |                           |   | 3,528,135 |   |
| Raw                    materials                                     |   |                            | 1,645,248  |                           |   | 1,877,210 |   |
| Sales                    aids and promotional materials              |   |                            | 544,209    |                           |   | 491,437 |   |
| Total                    inventories                                 |   |                            | 6,639,702  |                           |   | 5,896,782 |   |
|                                                                 |   |                            |       |                           |   |   |   |
| Refundable                    income taxes                           |   |                            | -          |                           |   | 1,288,260 |   |
| Prepaid                    expenses and other current assets         |   |                            | 1,165,203  |                           |   | 1,052,428 |   |
| Deferred                    income taxes                             |   |                            | 391,430    |                           |   | 286,430 |   |
| Total                    current assets                              |   |                            | 13,810,919 |                           |   | 19,618,615 |   |
|                                                                 |   |                            |       |                           |   |   |   |
| Other                    assets                                      |   |                            | 1,480,639  |                           |   | 1,196,780 |   |
| Accounts                    due from employees and distributors      |   |                            | 414,882    |                           |   | 213,123 |   |
|                                                                 |   |                            |       |                           |   |   |   |
| Property,                    plant and equipment:                    |   |                            |       |                           |   |   |   |
| Land                                                                 |   |                            | 829,222    |                           |   | 829,222 |   |
| Building                                                             |   |                            | 9,516,758  |                           |   | 9,027,577 |   |
| Machinery                    & equipment                         |   |                            | 5,095,108  |                           |   | 4,926,048 |   |
| Office                    equipment                                  |   |                            | 1,445,610  |                           |   | 1,092,285 |   |
| Computer                    equipment & software                 |   |                            | 2,529,804  |                           |   | 2,719,065 |   |
|                                                                 |   |                            | 19,416,502 |                           |   | 18,594,197 |   |
| Less:                      Accumulated depreciation        |   |                            | 8,942,186  |                           |   | 8,626,048 |   |
| Net                    property, plant and equipment                 |   |                            | 10,474,316 |                           |   | 9,968,149 |   |
|                                                                 |   |                            |       |                           |   |   |   |
| Total                    assets                                      |   | $                               | 26,180,756 |                           | $      | 30,996,667 |   |
|                                                                      |   |                            |       |                           |   |   |   |

----

|                                                                       |   | September                  30 |       | December                  31 |   |
|----------------------------------------------------------------------------|--------|-------------------------------|------------|------------------------------|--------|
|                                                                       |   | 2005                          |       | 2004                         |   |
|                                                                       |   | (unaudited)                   |       |                         |   |
| Liabilities                  and stockholders' equity                      |   |                          |       |                         |   |   |   |
|                                                                       |   |                          |       |                         |   |   |   |
| Current                  liabilities:                                      |   |                          |       |                         |   |   |   |
| Accounts                  payable and accrued expenses:                    |   |                          |       |                         |   |   |   |
| Trade                  accounts payable and other accrued expenses         |   | $                             | 3,884,764  |                         | $      | 3,155,071 |   |
| Distributors                  commissions payable                          |   |                          | 4,047,860  |                         |   | 3,561,110 |   |
| Sales                  taxes payable                                       |   |                          | 501,248    |                         |   | 493,571 |   |
| Interest                  expense payable                                  |   |                          | 12,000     |                         |   | 18,000 |   |
| Payroll                  and payroll taxes payable                         |   |                          | 877,540    |                         |   | 598,321 |   |
| Total                  accounts payable and accrued expenses               |   |                          | 9,323,412  |                         |   | 7,826,073 |   |
|                                                                       |   |                          |       |                         |   |   |   |
| Income                  taxes payable                                      |   |                          | 517,460    |                         |   | - |   |
| Current                  maturities of long-term debt                      |   |                          | 919,225    |                         |   | 325,895 |   |
| Total                  current liabilities                                 |   |                          | 10,760,097 |                         |   | 8,151,968 |   |
|                                                                       |   |                          |       |                         |   |   |   |
| Noncurrent                  liabilities:                                   |   |                          |       |                         |   |   |   |
| Long-term                  debt, less current maturities                   |   |                          | 15,098     |                         |   | 3,357,691 |   |
| Promissory                  note (see Note 7)                              |   |                          | 2,200,000  |                         |   | - |   |
| Deferred                  income taxes                                     |   |                          | 128,000    |                         |   | 289,000 |   |
| Other                  non-current liabilities                             |   |                          | 1,068,598  |                         |   | 1,007,255 |   |
| Total                  noncurrent liabilities                              |   |                          | 3,411,696  |                         |   | 4,653,946 |   |
|                                                                       |   |                          |       |                         |   |   |   |
| Stockholders'                  equity:                                     |   |                          |       |                         |   |   |   |
| Preferred                  stock, par value $.001 per share; 3,000,000     |   |                          |       |                         |   |   |   |
| shares                  authorized; -0- shares issued and outstanding      |   |                          |       |                         |   |   |   |
| as                  of 9/30/2005 and as of 12/31/2004                      |   |                          | -          |                         |   | - |   |
| Common                  stock, par value $.001 per share; 30,000,000       |   |                          |       |                         |   |   |   |
| authorized;                  15,665,848 shares issued and 15,616,607       |   |                          |       |                         |   |   |   |
| shares                  outstanding as of 9/30/2005; 16,323,668 shares     |   |                          |       |                         |   |   |   |
| issued                  and 16,320,931 shares outstanding as of 12/31/2004 |   |                          | 15,666     |                         |   | 16,324 |   |
| Additional                  paid-in capital                                |   |                          | 22,955,687 |                         |   | 22,661,179 |   |
| Accumulated                  deficit                                       |   |                          | (9,838,046 | )                            |   | (3,719,711 | ) |
| Accumulated                  other comprehensive loss:                     |   |                          |       |                         |   |   |   |
| Foreign                  currency translation adjustment                   |   |                          | (700,143   | )                            |   | (758,331 | ) |
| Treasury                  stock                                            |   |                          | (424,201   | )                            |   | (8,708 | ) |
|                                                                       |   |                          |       |                         |   |   |   |
| Total                  stockholders' equity                                |   |                          | 12,008,963 |                         |   | 18,190,753 |   |
|                                                                       |   |                          |       |                         |   |   |   |
| Total                  liabilities and stockholders' equity                |   | $                             | 26,180,756 |                         | $      | 30,996,667 |   |

----

|                                                               |   | Three                  months ended September 30 |       | Nine                  months ended September 30 |   |
|--------------------------------------------------------------------|--------|--------------------------------------------------|------------|-------------------------------------------------|--------|
|                                                               |   | 2005                                             |       | 2004                                            |   | 2005 |   | 2004 |   |
|                                                               |   |                                             |       |                                            |   |   |   |   |   |
| Sales                  at suggested retail                         |   | $                                                | 41,113,139 |                                            | $      | 34,654,446 |   | $ | 124,124,228 |   | $ | 102,794,387 |   |
| Less:                  distributor allowances on product purchases |   |                                             | 12,557,707 |                                            |   | 10,482,388 |   |   | 38,043,613 |   |   | 31,253,292 |   |
|                                                               |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Net                  sales                                         |   |                                             | 28,555,432 |                                            |   | 24,172,058 |   |   | 86,080,615 |   |   | 71,541,095 |   |
|                                                               |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Costs                  and expenses:                               |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Cost                  of products sold                             |   |                                             | 4,873,785  |                                            |   | 4,139,646 |   |   | 14,528,561 |   |   | 11,994,551 |   |
| Distributor                  royalties and commissions             |   |                                             | 11,416,814 |                                            |   | 9,534,381 |   |   | 34,507,541 |   |   | 28,417,457 |   |
| Selling,                  general and administrative               |   |                                             | 9,466,159  |                                            |   | 8,433,789 |   |   | 27,619,467 |   |   | 24,269,000 |   |
|                                                               |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Total                  costs and expenses                          |   |                                             | 25,756,758 |                                            |   | 22,107,816 |   |   | 76,655,569 |   |   | 64,681,008 |   |
|                                                               |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Income                  from operations                            |   |                                             | 2,798,674  |                                            |   | 2,064,242 |   |   | 9,425,046 |   |   | 6,860,087 |   |
|                                                               |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Other                  income (expense):                           |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Interest                  income                                   |   |                                             | 40,647     |                                            |   | 28,849 |   |   | 190,183 |   |   | 77,202 |   |
| Interest                  expense                                  |   |                                             | (59,776    | )                                               |   | (65,621 | ) |   | (262,443 | ) |   | (177,523 | ) |
| Other                  income                                      |   |                                             | (75,109    | )                                               |   | 43,662 |   |   | (26,187 | ) |   | 65,880 |   |
|                                                               |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Income                  before income taxes                        |   |                                             | 2,704,436  |                                            |   | 2,071,132 |   |   | 9,326,599 |   |   | 6,825,646 |   |
| Provision                  for income taxes                        |   |                                             | 1,036,000  |                                            |   | 807,000 |   |   | 3,616,000 |   |   | 2,719,000 |   |
|                                                               |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Net                  income                                        |   |                                             | 1,668,436  |                                            |   | 1,264,132 |   |   | 5,710,599 |   |   | 4,106,646 |   |
|                                                               |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Preferred                  dividends accrued and paid              |   |                                             | -          |                                            |   | - |   |   | - |   |   | 12,292 |   |
|                                                               |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Net                  income available to common shareholders       |   | $                                                | 1,668,436  |                                            | $      | 1,264,132 |   | $ | 5,710,599 |   | $ | 4,094,354 |   |
|                                                               |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Earnings                  per common share - Basic                 |   | $                                                | 0.11       |                                            | $      | 0.08 |   | $ | 0.36 |   | $ | 0.26 |   |
| Weighted                  average shares                           |   |                                             | 15,539,000 |                                            |   | 15,846,000 |   |   | 15,988,000 |   |   | 15,473,000 |   |
|                                                               |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Earnings                  per common share - Diluted               |   | $                                                | 0.10       |                                            | $      | 0.07 |   | $ | 0.35 |   | $ | 0.24 |   |
| Weighted                  average shares                           |   |                                             | 15,978,000 |                                            |   | 16,974,000 |   |   | 16,551,000 |   |   | 17,069,000 |   |
|                                                               |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Cash                  dividends declared per common share          |   | $                                                | -          |                                            | $      | - |   | $ | 0.035 |   | $ | 0.030 |   |

----

|                                                                        |   | Nine                months ended September 30 |        |
|-----------------------------------------------------------------------------|--------|-----------------------------------------------|-------------|
|                                                                        |   | 2005                                          |        | 2004 |   |
|                                                                        |   |                                          |        |   |   |
| Operating                activities:                                        |   |                                          |        |   |   |   |   |
| Net                income                                                   |   | $                                             | 5,710,599   |   | $ | 4,106,646 |   |
| Adjustments                to reconcile net income to                       |   |                                          |        |   |   |   |   |
| net                cash provided by operating activities:                   |   |                                          |        |   |   |   |   |
| Depreciation                                                                |   |                                          | 1,012,697   |   |   | 818,814 |   |
| Stock-based                third party compensation                         |   |                                          | 50,024      |   |   | 58,417 |   |
| Tax                benefit from exercise of options                         |   |                                          | 1,344,000   |   |   | 1,026,204 |   |
| Deferred                income taxes                                        |   |                                          | (266,000    | ) |   | - |   |
| Foreign                currency transaction (gain)/loss                     |   |                                          | 184,275     |   |   | (29,313 | ) |
| (Increase)                decrease in accounts and notes receivable         |   |                                          | 77,845      |   |   | (135,997 | ) |
| (Increase)                decrease in inventories                           |   |                                          | (745,134    | ) |   | (1,511,459 | ) |
| (Increase)                decrease in refundable income taxes               |   |                                          | 1,267,255   |   |   | (351,452 | ) |
| (Increase)                decrease in prepaid expenses                      |   |                                          |        |   |   |   |   |
| and                other current assets                                     |   |                                          | (101,436    | ) |   | (438,510 | ) |
| (Increase)                decrease in other assets                          |   |                                          | (283,847    | ) |   | (227,306 | ) |
| Increase                (decrease) in accounts payable and accrued expenses |   |                                          | 1,566,467   |   |   | 2,380,099 |   |
| Increase                (decrease) in income taxes payable                  |   |                                          | 538,094     |   |   | (147,204 | ) |
|                                                                        |   |                                          |        |   |   |   |   |
| Net                cash provided by operating activities                    |   |                                          | 10,354,839  |   |   | 5,548,939 |   |
|                                                                        |   |                                          |        |   |   |   |   |
| Investing                activities:                                        |   |                                          |        |   |   |   |   |
| Proceeds                from the sale of property, plant and equipment      |   |                                          | 57,823      |   |   | 119,615 |   |
| Purchase                of property, plant and equipment                    |   |                                          | (1,587,264  | ) |   | (1,603,633 | ) |
|                                                                        |   |                                          |        |   |   |   |   |
| Net                cash used in investing activities                        |   |                                          | (1,529,441  | ) |   | (1,484,018 | ) |
|                                                                        |   |                                          |        |   |   |   |   |
| Financing                activities:                                        |   |                                          |        |   |   |   |   |
| Principal                payments on long-term borrowings and               |   |                                          |        |   |   |   |   |
| capital                lease obligations                                    |   |                                          | (3,648,541  | ) |   | (355,690 | ) |
| Proceeds                from sale of common stock                           |   |                                          | -           |   |   | 48,601 |   |
| Proceeds                from sale of treasury stock                         |   |                                          | 22,547      |   |   | - |   |
| Redemption                of preferred stock                                |   |                                          | -           |   |   | (975,000 | ) |
| Preferred                stock dividends paid                               |   |                                          | -           |   |   | (12,292 | ) |
| Common                stock dividends paid                                  |   |                                          | (565,158    | ) |   | (460,319 | ) |
| Proceeds                from options and warrants exercised                 |   |                                          | 179,919     |   |   | 256,602 |   |
| Purchase                of stock for treasury                               |   |                                          | (9,891,505  | ) |   | (1,293,980 | ) |
|                                                                        |   |                                          |        |   |   |   |   |
| Net                cash used in financing activities                        |   |                                          | (13,902,738 | ) |   | (2,792,078 | ) |
|                                                                        |   |                                          |        |   |   |   |   |
| Effect                of exchange rate changes on cash and cash equivalents |   |                                          | (135,446    | ) |   | (31,637 | ) |
|                                                                        |   |                                          |        |   |   |   |   |
| Decrease                in cash and cash equivalents                        |   |                                          | (5,212,786  | ) |   | 1,241,206 |   |
|                                                                        |   |                                          |        |   |   |   |   |
| Cash                and cash equivalents at beginning of period             |   |                                          | 10,151,503  |   |   | 7,902,508 |   |
|                                                                        |   |                                          |        |   |   |   |   |
| Cash                and cash equivalents at end of period                   |   | $                                             | 4,938,717   |   | $ | 9,143,714 |   |

----

| **Note                1--** | **Basis                  of Presentation** |
|-----------------------------|--------------------------------------------|

|   |   |
|--------|--------|

|   | The accompanying unaudited consolidated                financial statements and notes thereto have been prepared in accordance                with the instructions to Form 10-Q and reflect all adjustments which                management believes necessary (which primarily include normal recurring                accruals) to present fairly the financial position, results of operations                and cash flows. These statements, however, do not include all information                and footnotes necessary for a complete presentation of financial                position,                results of operations and cash flows in conformity with accounting                principles generally accepted in the United States. Interim results                may                not necessarily be indicative of results that may be expected for                any                other interim period or for the year as a whole. These financial                statements should be read in conjunction with the audited consolidated                financial statements and footnotes included in the annual report                on Form                10-K for the year ended December 31, 2004, filed March 16, 2005 with                the                Securities and Exchange Commission. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| **Note                  2--** | **Reclassifications** |
|-------------------------------|-----------------------|

|   |   |
|--------|--------|

|   | Certain                  prior year amounts have been reclassified to conform to the current                  year                  presentation. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| **Note                  3--** | **Earnings                  per Share** |
|-------------------------------|-----------------------------------------|

|   |   |
|--------|--------|

|   | The                  following table sets forth the computation of basic and diluted                  earnings                  per share: |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------|

|                                                         |   | Three                  months ended September 30 |       | Nine                  months ended September 30 |   |
|--------------------------------------------------------------|--------|--------------------------------------------------|------------|-------------------------------------------------|--------|
|                                                         |   | 2005                                             |       | 2004                                            |   | 2005 |   | 2004 |   |
| Numerator:                                                   |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Numerator                  for basic earnings per share--net |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| income                  available to common shareholders     |   | $                                                | 1,668,436  |                                            | $      | 1,264,132 |   | $ | 5,710,599 |   | $ | 4,094,354 |   |
| Effect                  of convertible preferred stock:      |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Dividends                  on preferred stock                |   |                                             | -          |                                            |   | - |   |   | - |   |   | 12,292 |   |
|                                                         |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Numerator                  for diluted earnings per share    |   | $                                                | 1,668,436  |                                            | $      | 1,264,132 |   | $ | 5,710,599 |   | $ | 4,106,646 |   |
|                                                         |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Denominator:                                                 |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Denominator                  for basic earnings per          |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| share--weighted                  average shares              |   |                                             | 15,539,000 |                                            |   | 15,846,000 |   |   | 15,988,000 |   |   | 15,473,000 |   |
| Effect                  of convertible preferred stock and   |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| dilutive                  securities:                        |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Convertible                  preferred stock                 |   |                                             | -          |                                            |   | - |   |   | - |   |   | 70,000 |   |
| Employee                  stock options and other warrants   |   |                                             | 439,000    |                                            |   | 1,128,000 |   |   | 563,000 |   |   | 1,526,000 |   |
|                                                         |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Denominator                  for diluted earnings per        |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| share--adjusted                  weighted average shares     |   |                                             | 15,978,000 |                                            |   | 16,974,000 |   |   | 16,551,000 |   |   | 17,069,000 |   |
|                                                         |   |                                             |       |                                            |   |   |   |   |   |   |   |   |   |
| Basic                  earnings per share                    |   | $                                                | 0.11       |                                            | $      | 0.08 |   | $ | 0.36 |   | $ | 0.26 |   |
| Diluted                  earnings per share                  |   | $                                                | 0.10       |                                            | $      | 0.07 |   | $ | 0.35 |   | $ | 0.24 |   |

----

| Note                    4-- | **New                    Pronouncements** |
|-----------------------------|-------------------------------------------|

|   |   |
|--------|--------|

|   | The                    Securities and Exchange Commission has deferred the adoption                    date of                    Statement of Financial Accounting Standard (“SFAS”) No. 123R, “Share-Based                    Payment,” to the beginning of the fiscal year that begins after June 15,                    2005, (January 1, 2006 for calendar year companies) from a July                    1, 2005                    adoption date previously set by the FASB. SFAS No. 123R requires                    the                    recognition of share-based payments, including employee stock                    options, in                    the income statement based on their fair values. The Company                    expects to                    adopt this standard on January 1, 2006. Based on stock option                    grants made                    in prior years, the Company estimates it will (assuming the modified                    prospective method is used) recognize expense for stock options                    for the                    year ending December 31, 2006 of $63,000, net of                    taxes. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| **Note                    5--** | **Comprehensive                    Income** |
|---------------------------------|---------------------------------------------|

|   |   |
|--------|--------|

|   | Total                    comprehensive income was $1,745,016 and $5,768,787 for the three                    and nine                    months ended September 30, 2005, respectively. For the three                    and nine                    months ended September 30, 2004, comprehensive income was $1,273,328                    and                    $4,023,771, respectively. The Company's only component of other                    comprehensive income is the foreign currency translation                    adjustment. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| **Note                    6--** | **Stock-Based                    Compensation** |
|---------------------------------|-------------------------------------------------|

|   |   |
|--------|--------|

|   | The                    Company accounts for its stock-based compensation plans under                    the                    recognition and measurement principles of APB Opinion No. 25,                    *Accounting for Stock Issued to Employees*, and related                    Interpretations. No stock-based employee compensation cost is                    reflected in                    net income, as all options granted under those plans had an exercise                    price                    equal to the market value of the underlying common stock on the                    date of                    grant. The following table illustrates the effect on net income                    and                    earnings per share if the Company had applied the fair value                    recognition                    provisions of FASB Statement No. 123, *Accounting for Stock-Based                    Compensation*, to stock-based employee                    compensation. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                              |   | Three                  months ended September 30 |      | Nine                  months ended September 30 |   |
|-------------------------------------------------------------------|--------|--------------------------------------------------|-----------|-------------------------------------------------|--------|
|                                                              |   | 2005                                             |      | 2004                                            |   | 2005 |   | 2004 |   |
|                                                              |   |                                             |      |                                            |   |   |   |   |   |
| Net                  income available to common                   |   |                                             |      |                                            |   |   |   |   |   |   |   |   |   |
| shareholders,                  as reported                        |   | $                                                | 1,668,436 |                                            | $      | 1,264,132 |   | $ | 5,710,599 |   | $ | 4,094,354 |   |
| Deduct:                  Total stock-based employee compensation  |   |                                             |      |                                            |   |   |   |   |   |   |   |   |   |
| expense                  determined under fair value based method |   |                                             |      |                                            |   |   |   |   |   |   |   |   |   |
| for                  all awards, net of related tax effects       |   |                                             | 47,316    |                                            |   | 5,062 |   |   | 1,537,911 |   |   | 51,390 |   |
| Pro                  forma net income available to                |   |                                             |      |                                            |   |   |   |   |   |   |   |   |   |
| common                  shareholders                              |   | $                                                | 1,621,120 |                                            | $      | 1,259,070 |   | $ | 4,172,688 |   | $ | 4,042,964 |   |
|                                                              |   |                                             |      |                                            |   |   |   |   |   |   |   |   |   |
| Earnings                  per share:                              |   |                                             |      |                                            |   |   |   |   |   |   |   |   |   |
| Basic--as                  reported                               |   | $                                                | 0.11      |                                            | $      | 0.08 |   | $ | 0.36 |   | $ | 0.26 |   |
| Basic--pro                  forma                                 |   | $                                                | 0.10      |                                            | $      | 0.08 |   | $ | 0.26 |   | $ | 0.26 |   |
|                                                              |   |                                             |      |                                            |   |   |   |   |   |   |   |   |   |
| Diluted--as                  reported                             |   | $                                                | 0.10      |                                            | $      | 0.07 |   | $ | 0.35 |   | $ | 0.24 |   |
| Diluted--pro                  forma                               |   | $                                                | 0.10      |                                            | $      | 0.07 |   | $ | 0.25 |   | $ | 0.24 |   |

----

| **Note                    7--** | **Related                      Party Tranactions** |
|---------------------------------|----------------------------------------------------|

|   |   |
|--------|--------|

|   | On                      March 14, 2005, the Company entered into an employment agreement                      and a                      stock redemption agreement with an officer/director. The employment                      agreement has a term of three years and includes a non-compete                      clause                      which extends for six years. Under the stock redemption agreement,                      the                      Company will purchase 450,000 shares of the common stock of                      the Company at                      a price of $9.00 per share. Payment of the purchase price for                      the shares                      will be made in installments over a period not to exceed four                      years at an                      interest rate of 4%. The first principal payment of $900,000                      was made on                      March 31, 2005, and future principal payments of $900,000 are                      due on March                      31, 2006, and 2007, and principal payments of $675,000 are                      due on March                      31, 2008 and 2009.On                      March 22, 2005, the Company purchased 39,193 shares of the                      Company's                      common stock from a former officer of the Company at a price                      of $9.00 per                      share.In                      May 2005, the Company purchased an aggregate of 535,008 shares                      of the                      Company's common stock from three officer/directors at a price                      of $9.50                      per share.The                      retirement of the shares purchased in these various transactions                      reduced                      stockholders' equity by $9,485,000 as of September 30,                      2005. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----