**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 September 30, 2006****OR**o
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**


**For
      the transition period from _________to_________**




**Commission
      File Number**


**1-11768**


**RELIV’
      INTERNATIONAL, INC.**


(Exact
      name of Registrant as specified in its charter)





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





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





(636)
      537-9715





(Registrant’s
      telephone number, including area code)




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




Indicate
      by check mark whether the Registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
      (Check one):





Large
      accelerated filer o Accelerated
      filer þ Non-accelerated
      filer o




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 October 23,
      2006 was 16,703,810 (excluding treasury shares).





**INDEX**








PART
      I -
      FINANCIAL INFORMATION





Item
                No. 1
            Financial
                Statements
            1Item
                No. 2
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            10Item
                No. 3
            Quantitative
                and Qualitative Disclosures Regarding Market Risk
            16Item
                No. 4
            Controls
                and Procedures
            17PART
                II -OTHER
                INFORMATIONItem
                No. 1A
            Risk
                Factors
            17Item
                No. 2
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            18Item
                No. 6
            Exhibits
            19










**PART
                    I - FINANCIAL INFORMATION****Item
                    No. 1 - Financial
                    Statements**
  Reliv’
                    International, Inc. and SubsidiariesConsolidated
                    Balance SheetsSeptember
                    30
                
                December
                    312006
                
                2005(unaudited)AssetsCurrent
                    assets:Cash
                    and cash equivalents
                
                $
                13,160,538
                
                $
                5,653,594Short-term
                    investments
                
                
                5,000,000
                
                
                -Accounts
                    and notes receivable, less allowances of$6,200
                    in 2006 and $39,700 in 2005
                
                
                786,385
                
                
                775,623Accounts
                    due from employees and distributors
                
                
                99,371
                
                
                152,760InventoriesFinished
                    goods
                
                
                2,409,785
                
                
                3,569,449Raw
                    materials
                
                
                1,308,449
                
                
                1,441,107Sales
                    aids and promotional materials
                
                
                765,529
                
                
                573,900Total
                    inventories
                
                
                4,483,763
                
                
                5,584,456Refundable
                    income taxes
                
                
                389,192
                
                
                -Prepaid
                    expenses and other current assets
                
                
                1,047,671
                
                
                1,240,138Deferred
                    income taxes
                
                
                438,430
                
                
                452,430Total
                    current assets
                
                
                25,405,350
                
                
                13,859,001Other
                    assets
                
                
                2,549,590
                
                
                1,626,330Accounts
                    due from employees and distributors
                
                
                381,870
                
                
                355,651Property,
                    plant and equipment:Land
                
                
                829,222
                
                
                829,222Building
                
                
                9,550,022
                
                
                9,553,311Machinery
                    & equipment
                
                
                4,116,497
                
                
                4,736,274Office
                    equipment
                
                
                1,504,370
                
                
                1,400,544Computer
                    equipment & software
                
                
                2,447,411
                
                
                2,536,41518,447,522
                
                
                19,055,766Less:
                    Accumulated depreciation
                
                
                8,840,827
                
                
                8,915,325Net
                    property, plant and equipment
                
                
                9,606,695
                
                
                10,140,441Total
                    assets
                
                $
                37,943,505
                
                $
                25,981,423
  See
                    notes to financial statements.
  1
  Reliv’
                    International, Inc. and SubsidiariesConsolidated
                    Balance Sheets
  September
                    30
                
                
                December
                    312006
                
                
                2005(unaudited)Liabilities
                    and stockholders' equityCurrent
                    liabilities:Accounts
                    payable and accrued expenses:Trade
                    accounts payable and other accrued expenses
                
                $
                3,694,648
                
                $
                3,165,871Distributors
                    commissions payable
                
                
                4,103,739
                
                
                3,578,405Sales
                    taxes payable
                
                
                526,447
                
                
                518,870Interest
                    payable
                
                
                -
                
                
                31,000Payroll
                    and payroll taxes payable
                
                
                936,592
                
                
                864,624Total
                    accounts payable and accrued expenses
                
                
                9,261,426
                
                
                8,158,770Income
                    taxes payable
                
                
                -
                
                
                820,246Current
                    maturities of long-term debt
                
                
                -
                
                
                916,244Total
                    current liabilities
                
                
                9,261,426
                
                
                9,895,260Noncurrent
                    liabilities:Long-term
                    debt, less current maturities
                
                
                -
                
                
                2,211,065Deferred
                    income taxes
                
                
                95,000
                
                
                89,000Other
                    non-current liabilities
                
                
                866,648
                
                
                1,221,270Total
                    noncurrent liabilities
                
                
                961,648
                
                
                3,521,335Stockholders'
                    equity:Preferred
                    stock, par value $.001 per share; 3,000,000shares
                    authorized; -0- shares issued and outstandingin
                    2006 and 2005
                
                
                -
                
                
                -Common
                    stock, par value $.001 per share; 30,000,000authorized;
                    17,009,808 shares issued and 16,742,547shares
                    outstanding as of 9/30/2006; 15,613,644 sharesissued
                    and 15,563,562 shares outstanding as of 12/31/2005
                
                
                17,010
                
                
                15,614Additional
                    paid-in capital
                
                
                35,227,833
                
                
                22,972,463Accumulated
                    deficit
                
                
                (4,648,701
                )
                
                (9,252,413
                )Accumulated
                    other comprehensive loss:Foreign
                    currency translation adjustment
                
                
                (649,168
                )
                
                (669,346
                )Treasury
                    stock
                
                
                (2,226,543
                )
                
                (501,490
                )Total
                    stockholders' equity
                
                
                27,720,431
                
                
                12,564,828Total
                    liabilities and stockholders' equity
                
                $
                37,943,505
                
                $
                25,981,423
  See
                    notes to financial statements.
 2


Reliv’
                  International, Inc. and SubsidiariesConsolidated
                  Statements of Income(unaudited)
  Three
                  months ended September 30
              
              Nine
                  months ended September 302006
              
              2005
              
              2006
              
              2005Product
                  sales
              
              $
              26,779,859
              
              $
              25,657,349
              
              $
              79,812,178
              
              $
              77,416,348Handling
                  & freight income
              
              
              2,999,544
              
              
              2,898,083
              
              
              9,011,644
              
              
              8,664,267Net
                  sales
              
              
              29,779,403
              
              
              28,555,432
              
              
              88,823,822
              
              
              86,080,615Costs
                  and expenses:Cost
                  of products sold
              
              
              4,951,293
              
              
              4,873,785
              
              
              14,756,297
              
              
              14,528,561Distributor
                  royalties and commissions
              
              
              11,923,943
              
              
              11,416,814
              
              
              35,707,259
              
              
              34,507,541Selling,
                  general and administrative
              
              
              10,211,813
              
              
              9,466,159
              
              
              29,163,430
              
              
              27,619,467Total
                  costs and expenses
              
              
              27,087,049
              
              
              25,756,758
              
              
              79,626,986
              
              
              76,655,569Income
                  from operations
              
              
              2,692,354
              
              
              2,798,674
              
              
              9,196,836
              
              
              9,425,046Other
                  income (expense):Interest
                  income
              
              
              197,998
              
              
              40,647
              
              
              480,120
              
              
              190,183Interest
                  expense
              
              
              (1,961
              )
              
              (59,776
              )
              
              (47,428
              )
              
              (262,443
              )Other
                  income (expense)
              
              
              83,720
              
              
              (75,109
              )
              
              182,239
              
              
              (26,187
              )Income
                  before income taxes
              
              
              2,972,111
              
              
              2,704,436
              
              
              9,811,767
              
              
              9,326,599Provision
                  for income taxes
              
              
              1,168,000
              
              
              1,036,000
              
              
              3,937,000
              
              
              3,616,000Net
                  income
              
              $
              1,804,111
              
              $
              1,668,436
              
              $
              5,874,767
              
              $
              5,710,599Earnings
                  per common share - Basic
              
              $
              0.11
              
              $
              0.11
              
              $
              0.36
              
              $
              0.36Weighted
                  average shares
              
              
              16,919,000
              
              
              15,539,000
              
              
              16,390,000
              
              
              15,988,000Earnings
                  per common share - Diluted
              
              $
              0.11
              
              $
              0.10
              
              $
              0.35
              
              $
              0.35Weighted
                  average shares
              
              
              17,050,000
              
              
              15,978,000
              
              
              16,712,000
              
              
              16,551,000Cash
                  dividends declared per common share
              
              $
              -
              
              $
              -
              
              $
              0.050
              
              $
              0.035
  See
                  notes to financial statements.




3


Reliv’
                  International, Inc. and SubsidiariesConsolidated
                  Statements of Cash Flows(unaudited)
  Nine
                  months ended September 302006
              
              2005Operating
                  activities:Net
                  income
              
              $
              5,874,767
              
              $
              5,710,599Adjustments
                  to reconcile net income tonet
                  cash provided by operating activities:Depreciation
                  and amortization
              
              
              934,233
              
              
              1,012,697Stock-based
                  compensation
              
              
              139,659
              
              
              50,024Tax
                  benefit from exercise of options
              
              
              -
              
              
              1,344,000Deferred
                  income taxes
              
              
              20,000
              
              
              (266,000
              )Foreign
                  currency transaction (gain)/loss
              
              
              (104,421
              )
              
              184,275(Increase)
                  decrease in accounts and notes receivable
              
              
              24,176
              
              
              77,845(Increase)
                  decrease in inventories
              
              
              1,153,277
              
              
              (745,134
              )(Increase)
                  decrease in refundable income taxes
              
              
              (389,192
              )
              
              1,267,255(Increase)
                  decrease in prepaid expensesand
                  other current assets
              
              
              202,149
              
              
              (101,436
              )(Increase)
                  decrease in other assets
              
              
              49,373
              
              
              (283,847
              )Increase
                  (decrease) in accounts payable and accrued expenses
              
              
              715,428
              
              
              1,566,467Increase
                  (decrease) in income taxes payable
              
              
              (812,205
              )
              
              538,094Net
                  cash provided by operating activities
              
              
              7,807,244
              
              
              10,354,839Investing
                  activities:Proceeds
                  from the sale of property, plant and equipment
              
              
              42,009
              
              
              57,823Purchase
                  of property, plant and equipment
              
              
              (401,130
              )
              
              (1,587,264
              )Purchase
                  of investments
              
              
              (54,000,000
              )
              
              -Proceeds
                  from sales of investments
              
              
              48,000,000
              
              
              -Net
                  cash used in investing activities
              
              
              (6,359,121
              )
              
              (1,529,441
              )Financing
                  activities:Principal
                  payments on long-term borrowings
              
              
              (3,127,336
              )
              
              (3,648,541
              )Net
                  proceeds from issuance of common stock
              
              
              11,918,792
              
              
              -Proceeds
                  from sale of treasury stock
              
              
              -
              
              
              22,547Common
                  stock dividends paid
              
              
              (840,887
              )
              
              (565,158
              )Proceeds
                  from options and warrants exercised
              
              
              135,120
              
              
              179,919Excess
                  tax benefits from stock based compensation
              
              
              102,914
              
              
              -Purchase
                  of stock for treasury
              
              
              (2,203,755
              )
              
              (9,891,505
              )Net
                  cash used in financing activities
              
              
              5,984,848
              
              
              (13,902,738
              )Effect
                  of exchange rate changes on cash and cash equivalents
              
              
              73,973
              
              
              (135,446
              )Increase
                  in cash and cash equivalents
              
              
              7,506,944
              
              
              (5,212,786
              )Cash
                  and cash equivalents at beginning of period
              
              
              5,653,594
              
              
              10,151,503Cash
                  and cash equivalents at end of period
              
              $
              13,160,538
              
              $
              4,938,717
  See
                  notes to financial statements




4




Reliv’
                  International, Inc. and SubsidiariesNotes
                  to Consolidated Financial Statements(Unaudited)September
                  30, 2006**Note
                  1-****Accounting
                  Policies**
  *Basis
          of Presentation*
  The
          accompanying unaudited consolidated financial statements and notes thereto
          have
          been prepared in accordance with the instructions to Form 10-Q and reflect
          all
          adjustments which management believes necessary (which primarily include
          normal
          recurring accruals) to present fairly the financial position, results of
          operations and cash flows. These statements, however, do not include all
          information and footnotes necessary for a complete presentation of financial
          position, results of operations and cash flows in conformity with accounting
          principles generally accepted in the United States. Interim results may
          not
          necessarily be indicative of results that may be expected for any other
          interim
          period or for the year as a whole. These financial statements should be
          read in
          conjunction with the audited consolidated financial statements and footnotes
          included in the annual report on Form 10-K for the year ended December
          31, 2005,
          filed March 16, 2006 with the Securities and Exchange Commission. The accounting
          policies used in preparing these financial statements are the same as those
          applied in the prior year, except that the Company adopted two new financial
          accounting standards at the beginning of its 2006 fiscal year, one concerning
          inventory valuation, which is discussed within this Note, and one concerning
          stock-based compensation which is discussed in Note 7. Both of these standards
          were adopted prospectively and comparative periods were not
          restated.
 
 In
          addition, as further discussed in Note 3, the Company has reclassified
          its
          presentation of "net sales" by presenting "product sales" and "handling
&
freight income."
  *Cash
            Equivalents*
  The
            Company's policy is to consider the following as cash and cash equivalents:
            demand deposits, short-term investments with a maturity of three months
            or less
            when purchased, and highly liquid debt securities with insignificant
            interest
            rate risk and with original maturities from the date of purchase of generally
            three months or less.
 
 *Short-Term
            Investments*
  Short-term
            investments are comprised of investment-grade variable rate debt obligations,
            issued by various state governments and categorized as available-for-sale.
            Accordingly, investments in these securities are recorded at cost, which
            approximates fair value due to their variable interest rates, which typically
            reset every 35 days or less. Despite the long-term nature of their stated
            contractual maturities, the Company has the ability to quickly liquidate
            these
            securities and therefore classifies them as current assets. As a result
            of the
            resetting variable rates, no cumulative gross unrealized or realized
            holding
            gains or losses are recognized from these investments. All income generated
            from
            these investments is recorded as interest income.
 
 *Inventory
            Costs*
  In
            2006,
            the Company has adopted Statement of Financial Accounting Standards No.
            151,
            "Inventory Costs" ("SFAS No. 151"). SFAS No. 151 clarifies that abnormal
            amounts
            of idle facility expense, freight handling costs and spoilage should
            be
            recognized as period charges, rather than as an inventory value. This
            standard
            also requires that allocation of fixed production overheads to the costs
            of
            conversion be based on the normal capacity of the production facilities.
            Management believes the Company's pre-existing accounting policy for
            inventory
            valuation was generally consistent with this guidance and, therefore,
            does not
            expect the adoption of SFAS 151 to have a significant impact on 2006
            financial
            results.
  **Note
              2 - **Recent
              Accounting Standards Pending Adoption****
 In
            July
            2006, the Financial Accounting Standards Board ("FASB") issued FASB
            Interpretation No. 48, "Accounting for Uncertainty in Income Taxes"
            ("Interpretation No. 48" or "FIN No. 48"). FIN No. 48 prescribes a more
            likely
            than not threshold for financial statement recognition and measurement
            of a tax
            position taken or expected to be taken in a tax return. FIN No. 48 also
            provides
            guidance on derecognition of income tax assets and liabilities, classification
            of current and deferred income tax assets and liabilities, accounting
            for
            interest and penalties associated with tax positions, accounting for
            income
            taxes in interim periods, and income tax disclosures. For the Company,
            FIN No.
            48 is effective as of January 1, 2007. The Company is currently evaluating
            the
            impact of FIN No. 48 on its financial statements.
  5
 Reliv’
                            International, Inc. and SubsidiariesNotes
                            to Consolidated Financial Statements(Unaudited)
                          
                          September
                            30, 2006
  **Note
              3 - **Reclassifications****
 
 In
            previous years, in addition to the required disclosure of "net sales,"
            the
            Company reported "sales at suggested retail," representing the gross
            sales
            amount reflected on the Company's invoices to distributors before "distributor
            allowances." In the current year, the Company has reclassified the presentation
            of "net sales" by presenting "product sales" and "handling & freight
            income." Handling and freight income income represents the amounts billed
            to
            distributors for shipping costs. Product sales represent the actual product
            purchase price typically paid by the Company's distributors, after giving
            effect
            to distributor allowances, which range from 20% to 40% of suggested retail
            prices. Subsequent to this classification, net sales represent product
            sales and
            handling & freight income.
  **Note
            4 - **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 September 30
                    Nine
                        months ended September 302006
                    
                    2005
                    
                    2006
                    
                    2005Numerator:Net
                        income
                    
                    $
                    1,804,111
                    
                    $
                    1,668,436
                    
                    $
                    5,874,767
                    
                    $
                    5,710,599Denominator:Denominator
                        for basic earnings pershare--weighted
                        average shares
                    
                    
                    16,919,000
                    
                    
                    15,539,000
                    
                    
                    16,390,000
                    
                    
                    15,988,000Dilutive
                        effect of employee stock optionsand
                        other warrants
                    
                    
                    131,000
                    
                    
                    439,000
                    
                    
                    322,000
                    
                    
                    563,000Denominator
                        for diluted earnings pershare--adjusted
                        weighted average shares
                    
                    
                    17,050,000
                    
                    
                    15,978,000
                    
                    
                    16,712,000
                    
                    
                    16,551,000Basic
                        earnings per share
                    
                    $
                    0.11
                    
                    $
                    0.11
                    
                    $
                    0.36
                    
                    $
                    0.36Diluted
                        earnings per share
                    
                    $
                    0.11
                    
                    $
                    0.10
                    
                    $
                    0.35
                    
                    $
                    0.35
  Warrants
          to purchase 47,147 and 25,303 shares of common stock for the three and
          nine
          months ended September 30, 2006, respectively, were not included in the
          denominator for diluted earnings per share because their effect would be
          antidilutive.
  6
 Reliv’
                        International, Inc. and SubsidiariesNotes
                        to Consolidated Financial Statements(Unaudited)
                      
                      September
                        30, 2006
 **Note
        5 - Comprehensive Income**
 Total
          comprehensive income was $1,896,475 and $5,894,945 for the three and nine
          months
          ended September 30, 2006, respectively. For the three and nine months ended
          September 30, 2005, comprehensive income was $1,745,016 and $5,768,787,
          respectively. The Company's only component of other comprehensive income
          is the
          foreign currency translation adjustment.
  **Note
        6 - **Employee
        Stock Ownership Plan****


On
          September 1, 2006, the Company established an employee stock ownership
          plan
          ("ESOP") which covers substantially all U.S. employees. Contributions to
          the
          ESOP will be funded by the Company on a discretionary basis. For the three
          and
          nine months ended September 30, 2006, accrued ESOP expense was
          $100,000.
  **Note
          7 - Stock-Based Compensation**
 
 *Stock
          Options*
  On
          January 1, 2006, the Company adopted Statement of Financial Accounting
          Standards
          No. 123(R), "Share-Based Payment" ("SFAS 123(R)"). Prior to the adoption
          of SFAS
          123(R), the Company had adopted the disclosure-only provisions of SFAS
          123 and
          accounted for employee stock-based compensation under the intrinsic value
          method, and no expense related to stock options was recognized. The Company
          adopted the provisions of SFAS 123(R) using the modified prospective transition
          method. Under this method, the Company's consolidated financial statements
          as of
          and for the nine months ended September 30, 2006 reflect the impact of
          SFAS
          123(R), while the consolidated financial statements for prior periods have
          not
          been restated to reflect, and do not include, the impact of SFAS 123(R).
          SFAS
          123(R) amends SFAS No. 95, "Statement of Cash Flows," to require that excess
          tax
          benefits be reported as a financing cash flow rather than as an operating
          cash
          flow.
 
 The
          Company sponsors a stock option plan (the "2003 Plan") allowing for incentive
          stock options and non-qualified stock options to be granted to employees
          and
          eligible directors. The 2003 Plan provides that 1,000,000 shares may be
          issued
          under the 2003 Plan at an option price not less than the fair market value
          of
          the stock at the time the option is granted. The 2003 Plan expires on March
          20,
          2013. In 2005, the Company issued grants of 543,000 shares under the 2003
          Plan.
          The 2005 option grants were issued with an exercise price equal to the
          fair
          value of the shares at the time of grant and were fully vested in the year
          of
          grant. Accordingly, no stock-based compensation expense has been recognized
          relating to the 2005 option grants. As of September 30, 2006, as adjusted
          for
          forfeitures, 480,000 shares remain available for grant under the 2003 Plan.
 
 The
          fair
          value of the options granted in 2005 was estimated at the date of grant
          using a
          Black-Scholes option pricing model with the following weighted average
          assumptions: risk-free interest rates ranging from 4.02% to 4.31%; dividend
          yield ranging from 0.55% to 0.80%; volatility factor of the expected price
          of
          the Company's stock ranging from 0.448 to 0.516; and a weighted average
          expected
          life of 7.0 years. The weighted average fair value of options granted during
          2005 was $4.19 per share.
 
 There
          were no options granted during the nine months ended September 30, 2006
          and for
          the years ended December 31, 2004, 2003, and 2002. As of June 30, 2006,
          there
          existed 195,980 unexercised stock options from grants made in 2001 under
          a prior
          stock option plan. The fair value of options granted in 2001 were estimated
          at
          the date of grant using a Black-Scholes option pricing model with the following
          weighted average assumptions: risk-free interest rates ranging from 3.07%
          to
          4.78%; dividend yield of zero; volatility factor of the expected price
          of the
          Company's stock of 0.729; and a weighted average expected life of 4.51
          years.
          The weighted average fair value of options granted during 2001 was $0.42
          per
          share. As of September 30, 2006, all stock options granted in 2001 have
          either
          been exercised or have expired.
 
 Compensation
          cost for the stock option plans was approximately $63,000 for the nine
          months
          ended September 30, 2006 and has been recorded in selling, general, and
          administrative expense. As of September 30, 2006 there was zero unrecognized
          compensation cost related to stock options. For the three and nine months
          ended
          September 30, 2006, the number of unvested stock options has been reduced
          from
          128,720 to zero.
  7
 Reliv’
                          International, Inc. and SubsidiariesNotes
                          to Consolidated Financial Statements(Unaudited)
                        
                        September
                          30, 2006
 The
          following tables set forth a summary of the Company's stock option activity
          and
          related information for the nine months ended September 30,
          2006:
 Options
                  
                  Weighted
                      Avg. Exercise Price
                  
                  Aggregate
                      Intrinsic Value
                  
                  Weighted
                      Avg. Remaining LifeOutstanding
                      beginning of the year
                  
                  
                  813,074
                  
                  $
                  5.57Granted
                  
                  
                  --
                  
                  
                  --Exercised
                  
                  
                  (247,457
                  )
                  
                  0.74Forfeited
                  
                  
                  (45,617
                  )
                  
                  4.39Outstanding
                      and exercisable at September 30, 2006
                  
                  
                  520,000
                  
                  $
                  7.96
                  
                  $
                  534,000
                  
                  
                  8.30
  As
                      of September 30, 2006Options
                      Outstanding
                  
                  Options
                      ExercisableRange
                      of Exercise Prices
                  
                  Number
                      Outstanding
                  
                  Weighted
                      Avg. Remaining Life
                  
                  Weighted
                      Avg. Exercise Price
                  
                  Number
                      Exercisable
                  
                  Weighted
                      Avg. Exercise Price$7.92
                      - $8.68
                  
                  
                  520,000
                  
                  
                  8.30
                  
                  $
                  7.96
                  
                  
                  520,000
                  
                  $
                  7.96
   For
            the
            nine months ended September 30, 2006, the total intrinsic value, cash
            received,
            and actual tax benefit realized for stock options exercised (247,457
            shares) was
            $2,262,000, $121,000, and $108,000, respectively. In addition, for the
            nine
            months ended September 30, 2006, 6,537 mature shares were tendered by
            employees
            in satisfaction of the exercise price of stock options.
  In
          accordance with the modified prospective transition method, the Company's
          consolidated financial statements for prior periods have not been restated
          and
          do not include the impact of SFAS 123(R). Accordingly, no compensation
          expense
          related to such stock option awards was recognized in the three-month and
          nine-month periods ended September 30, 2005 because all stock options granted
          had an exercise price equal to the fair market value of the underlying
          common
          stock on the date of grant. The following table shows the effect on net
          income
          and earnings per share as if the fair-value-based method of accounting
          had been
          applied to all outstanding and unvested stock option awards prior to adoption
          of
          SFAS 123(R). For purposes of this pro forma disclosure, the estimated fair
          value
          of the stock option award is assumed to be expensed over the award's vesting
          periods using the Black-Scholes model.
 Three
                    Months
                
                Nine
                    MonthsEnded
                
                EndedSeptember
                    30,
                
                September
                    30,2005
                
                2005Net
                    income, as reported
                
                $
                1,668,436
                
                $
                5,710,599Deduct:
                    Total stock-based employee compensationexpense
                    determined under fair value based methodfor
                    all awards, net of related tax effects
                
                
                47,316
                
                
                1,537,911Pro
                    forma net income available tocommon
                    shareholders
                
                $
                1,621,120
                
                $
                4,172,688Earnings
                    per share:Basic--as
                    reported
                
                $
                0.11
                
                $
                0.36Basic--pro
                    forma
                
                $
                0.10
                
                $
                0.26Diluted--as
                    reported
                
                $
                0.10
                
                $
                0.35Diluted--pro
                    forma
                
                $
                0.10
                
                $
                0.25
   8
 Reliv’
                          International, Inc. and SubsidiariesNotes
                          to Consolidated Financial Statements(Unaudited)
                        
                        September
                          30, 2006
 **Note
          8 - **Public
          Offering of Common Stock****
 On
          February 21, 2006, the Company filed a registration statement on Form S-3
          with
          the Securities and Exchange Commission relating to an underwritten public
          offering of 2,000,000 shares of its common stock. On April 5, 2006, the
          Company
          commenced the public offering at a price of $11.25 per share. The public
          offering was completed on April 11, 2006 and consisted of 1,200,000 shares
          of
          common stock offered and sold by the Company and 800,000 shares of common
          stock
          offered and sold by selling stockholders. The selling stockholders were
          four
          directors and/or officers of the Company. The underwriters had a 30-day
          option
          to purchase up to 300,000 additional shares from certain of the selling
          stockholders to cover over-allotments, if any. This option was exercised
          for the
          full 300,000 shares and closed on May 9, 2006. The Company did not receive
          any
          proceeds from the sale of common stock by the selling stockholders.
 
 The
          Company intends to use the net proceeds from the offering for the repayment
          of
          debt and for general corporate purposes, including working capital, continued
          domestic and international growth, and for possible product acquisitions.
          Net
          proceeds to the Company from the offering, after reduction for the underwriters'
          fees and other offering expenses, are $11.9 million.
  **Note
          9 - Short-Term Borrowings**
 
 On
          June
          28, 2006, the Company entered into a new revolving loan agreement with
          its
          primary lender. The new agreement has an effective date of April 30, 2006
          and
          replaces the prior revolving loan agreement with the same lender. Under
          the new
          agreement, the lender agreed to provide a line of credit for the Company
          in the
          amount of $5 million, reduced from $15 million under the prior agreement.
 
 This
          new
          revolving line of credit facility expires on April 30, 2008, and any advances
          accrue interest at a variable interest rate based on LIBOR. Similar to
          the
          previous facility, the new facility includes covenants to maintain total
          stockholders' equity of not less than $10.5 million, and that borrowings
          under
          the facility shall not exceed EBITDA by a ratio of 3.5:1. A commitment
          fee in an
          amount equal to 0.25% per year is payable quarterly on the average daily-unused
          portion of the revolver. At September 30, 2006, the Company had not utilized
          any
          of the new revolving line of credit facility and was in compliance with
          the
          minimum stockholders' equity covenant.
 **Note
          10 - Long-Term Debt**
 Long-term
            debt at September 30, 2006 and December 31, 2005 consists of the
            following:
 September
                      30,
                  
                  December
                      31,2006
                  
                  2005Promissory
                      note payable to a former officer/director payable in annual
                      installments
                      thru 2008, interest payable quarterly at 4% per annum
                  
                  $
                  -
                  
                  $
                  3,100,000Notes
                      payable - primarily vehicle loans
                  
                  
                  -
                  
                  
                  27,309-
                  
                  
                  3,127,309Less
                      current maturities
                  
                  
                  -
                  
                  
                  916,244$
                  -
                  
                  $
                  2,211,065
  The
                Company made a scheduled principal payment of $900,000 in March 2006
                and made a
                principal prepayment (without penalty) of $2.2 million in May 2006
                to a former
                officer/director. The prepayment was made with proceeds received
                from the
                Company's public offering (as described in Note
                7).


9
 
 **FORWARD-LOOKING
          STATEMENTS**
 
 This
          quarterly report includes both historical and “forward-looking statements”
within the meaning of Section 21E of the Securities Exchange Act of 1934,
          as
          amended. We have based these forward-looking statements on our current
          expectations and projections about future results. Words such as “may,”
“should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,”
“estimate,” “predict,” “potential,” “continue,” or similar words are intended to
          identify forward-looking statements, although not all forward-looking statements
          contain these words. Although we believe that our opinions and expectations
          reflected in the forward-looking statements are reasonable, we cannot guarantee
          future results, levels of activity, performance or achievements, and our
          actual
          results may differ substantially from the views and expectations set forth
          in
          this quarterly report on Form 10-Q. We disclaim any intent or obligation
          to
          update any forward-looking statements after the date of this quarterly
          report to
          conform such statements to actual results or to changes in our opinions
          or
          expectations. These forward-looking statements are affected by risks,
          uncertainties and assumptions that we make, including, among other things,
          the
          factors that are described in “Item No. 1A - Risk Factors” in our 2005 Annual
          Report on Form 10-K filed with the Securities and Exchange Commission on
          March
          16, 2006, as the same may be updated or amended in our quarterly reports
          on Form
          10-Q.




**Item
      No. 2 - Management’s Discussion and Analysis of
      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 products.
      We
      sell our products through an international network marketing system using
      independent distributors. Sales in the United States represented approximately
      90.5% of worldwide net sales for the nine months ended September 30, 2006 and
      September 30, 2005. Our international operations currently generate sales
      through distributor networks in Australia, Canada, Germany, Ireland, Malaysia,
      Mexico, New Zealand, the Philippines, Singapore and the
      United Kingdom.





We
      derive
      our revenues principally through product sales made by our global independent
      distributor base, which, as of September 30, 2006, consisted of approximately
      64,820 distributors. Our sales can be affected by several factors, including
      our
      ability to attract new distributors and retain our existing distributor base,
      our ability to properly train and motivate our distributor base and our ability
      to develop new products and successfully maintain our current product line.





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





**Components
      of Net Sales and Expense**





Net
      sales
      are comprised of two components. Product sales represent the actual product
      purchase price typically paid by our distributors, after giving effect to
      distributor allowances, which range from 20% to 40% of suggested retail prices.
      Handling and freight income represents the amounts billed to distributors for
      shipping costs. We record net sales and the related commission expense when
      the
      merchandise is shipped.





10


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





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





Distributor
      royalties and commissions are monthly payments made to Master Affiliates and
      above, based on products sold by Master Affiliates and above sponsored by such
      Master Affiliates or higher-level distributors. “Master Affiliates and above”
are active distributors that have attained the highest level of discount on
      purchases of our products and are eligible for royalties from sales volume
      generated by Master Affiliates and above that they sponsor. 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. We generally expect total distributor
      royalties and commissions to approximate 40% of our net sales. 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, all other selling expenses, marketing, promotional expenses,
      travel and other corporate administrative expenses. These other corporate
      administrative expenses include professional fees, depreciation and
      amortization, occupancy costs, communication costs and other similar operating
      expenses. Selling, general and administrative expenses can be affected by a
      number of factors, including staffing levels and the cost of providing
      competitive salaries and benefits; the amount we decide to invest in distributor
      training and motivational initiatives; the cost of regulatory compliance, such
      as the costs incurred to comply with the various provisions of the
      Sarbanes-Oxley Act of 2002; and other administrative costs.





In
      previous years, in addition to the required disclosure of “net sales,” we
      reported “sales at suggested retail,” representing the gross sales amount
      reflected on our invoices to distributors before “distributor allowances.” In
      the current year, we have reclassified the presentation of “net sales” by
      presenting “product sales” and “handling & freight income.” Handling and
      freight income represents the amounts billed to distributors for shipping costs.
      Product sales represent the actual product purchase price typically paid by
      our
      distributors, after giving effect to distributor allowances, which range from
      20% to 40% of suggested retail prices. Subsequent to this classification, net
      sales represent product sales and handling & freight
      income.


11


**Results
      of Operations**





The
      following table sets forth selected results of our operations expressed as
      a
      percentage of net sales for the three and nine months ended September 30, 2006
      and 2005. Our results of operations for the periods described below are not
      necessarily indicative of results of operations for future
      periods.




**Three
                months ended**
              **September
                30,**
            
            **Nine
                months ended**
              **September
                30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Net
                sales
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %Costs
                and expenses:Cost
                of products sold
            
            
            16.6
            
            
            17.1
            
            
            16.6
            
            
            16.9Distributor
                royalties and commissions
            
            
            40.1
            
            
            40.0
            
            
            40.2
            
            
            40.1Selling,
                general and administrative
            
            
            34.3
            
            
            33.1
            
            
            32.8
            
            
            32.1Income
                from operations
            
            
            9.0
            
            
            9.8
            
            
            10.4
            
            
            10.9Interest
                expense
            
            
            (0.0
            )
            
            (0.2
            )
            
            (0.1
            )
            
            (0.3
            )Interest
                and other income
            
            
            1.0
            
            
            (0.2
            )
            
            0.7
            
            
            0.2Income
                before income taxes
            
            
            10.0
            
            
            9.4
            
            
            11.0
            
            
            10.8Provision
                for income taxes
            
            
            3.9
            
            
            3.6
            
            
            4.4
            
            
            4.2Net
                income
            
            
            6.1
            %
            
            5.8
            %
            
            6.6
            %
            
            6.6
            %








*Net
      Sales.* Overall
      net sales increased by 4.3% in the three months ended September 30, 2006
      compared to the same period in 2005. During the third quarter of 2006, sales
      in
      the United States increased by 3.7%, whereas our international sales increased
      by 9.6% over the prior year period. For the nine months ended September 30,
      2006, overall net sales increased by 3.2% compared to the first nine months
      of
      2005. Net sales in the United States increased by 3.2% and international sales
      increased by 3.0% in the first nine months of 2006 compared to the prior year
      period.





The
      following table summarizes net sales by geographic market ranked by the date
      we
      began operations in each market for the three months ended September 30, 2006
      and 2005.




**Three
                months ended September 30,****2006**
            
            
            **2005**
            
            
            **Change
                from prior year****Amount**
            
            
            **%
                of Net**
              **Sales**
            
            
            **Amount**
            
            
            **%
                of Net**
              **Sales**
            
            
            **Amount**
            
            
            **%****(dollars
                in thousands)**United
                States
            
            $
            26,784
            
            
            89.9
            %
            $
            25,823
            
            
            90.4
            %
            $
            961
            
            
            3.7
            %Australia/New
                Zealand
            
            
            701
            
            
            2.4
            
            
            486
            
            
            1.7
            
            
            215
            
            
            44.2Canada
            
            
            414
            
            
            1.4
            
            
            383
            
            
            1.3
            
            
            31
            
            
            8.1Mexico
            
            
            367
            
            
            1.2
            
            
            402
            
            
            1.4
            
            
            (35
            )
            
            (8.7
            )United
                Kingdom/Ireland
            
            
            323
            
            
            1.1
            
            
            240
            
            
            0.8
            
            
            83
            
            
            34.6Philippines
            
            
            594
            
            
            2.0
            
            
            526
            
            
            1.8
            
            
            68
            
            
            12.9Malaysia/Singapore
            
            
            382
            
            
            1.3
            
            
            577
            
            
            2.0
            
            
            (195
            )
            
            (33.8
            )Germany
            
            
            214
            
            
            0.7
            
            
            118
            
            
            0.4
            
            
            96
            
            
            81.4Consolidated
                total
            
            $
            29,779
            
            
            100.0
            %
            $
            28,555
            
            
            100.0
            %
            $
            1,224
            
            
            4.3
            %







12


The
      following table summarizes net sales by geographic market ranked by the date
      we
      began operations in each market for the nine months ended September 30, 2006
      and
      2005.




**Nine
                months ended September 30,****2006**
            
            
            **2005**
            
            
            **Change
                from prior year****Amount**
            
            
            **%
                of Net**
              **Sales**
            
            
            **Amount**
            
            
            **%
                of Net**
              **Sales**
            
            
            **Amount**
            
            
            **%****(dollars
                in thousands)**United
                States
            
            $
            80,376
            
            
            90.5
            %
            $
            77,881
            
            
            90.5
            %
            $
            2,495
            
            
            3.2
            %Australia/New
                Zealand
            
            
            1,855
            
            
            2.1
            
            
            1,567
            
            
            1.8
            
            
            288
            
            
            18.4Canada
            
            
            1,234
            
            
            1.4
            
            
            1,290
            
            
            1.5
            
            
            (56
            )
            
            (4.3
            )Mexico
            
            
            1,011
            
            
            1.1
            
            
            1,237
            
            
            1.4
            
            
            (226
            )
            
            (18.3
            )United
                Kingdom/Ireland
            
            
            915
            
            
            1.0
            
            
            642
            
            
            0.7
            
            
            273
            
            
            42.5Philippines
            
            
            1,602
            
            
            1.8
            
            
            1,807
            
            
            2.1
            
            
            (205
            )
            
            (11.3
            )Malaysia/Singapore
            
            
            1,297
            
            
            1.5
            
            
            1,539
            
            
            1.8
            
            
            (242
            )
            
            (15.7
            )Germany
            
            
            534
            
            
            0.6
            
            
            118
            
            
            0.1
            
            
            416
            
            
            352.5Consolidated
                total
            
            $
            88,824
            
            
            100.0
            %
            $
            86,081
            
            
            100.0
            %
            $
            2,743
            
            
            3.2
            %




The
      following table sets forth, as of September 30, 2006 and 2005, the number of
      our
      active distributors and Master Affiliates and above. The total number of active
      distributors includes Master Affiliates and above. We define an active
      distributor as one that enrolls as a distributor or renews his or her
      distributorship during the prior twelve months. Master Affiliates and above
      are
      distributors that have attained the highest level of discount and are eligible
      for royalties generated by Master Affiliates and above in their downline
      organization. Growth in the number of active distributors and Master Affiliates
      and above is a key factor in continuing the growth of our business.




**September
                30, 2006**
            
            **September
                30, 2005**
            
            **%
                Change****Active
                Distributors**
            
            **Master
                Affiliates and Above**
            
            **Active
                Distributors**
            
            **Master
                Affiliates and Above**
            
            **Active
                Distributors**
            
            **Master
                Affiliates and Above**United
                States
            
            
            52,760
            
            
            15,660
            
            
            51,470
            
            
            14,560
            
            
            2.5
            %
            
            7.6
            %Australia/New
                Zealand
            
            
            2,420
            
            
            270
            
            
            2,570
            
            
            240
            
            
            (5.8
            )
            
            12.5Canada
            
            
            1,170
            
            
            180
            
            
            1,270
            
            
            200
            
            
            (7.9
            )
            
            (10.0
            )Mexico
            
            
            1,130
            
            
            220
            
            
            4,020
            
            
            380
            
            
            (71.9
            )
            
            (42.1
            )United
                Kingdom/Ireland
            
            
            910
            
            
            150
            
            
            640
            
            
            90
            
            
            42.2
            
            
            66.7Philippines
            
            
            3,360
            
            
            350
            
            
            4,930
            
            
            520
            
            
            (31.8
            )
            
            (32.7
            )Malaysia/Singapore
            
            
            2,750
            
            
            380
            
            
            3,430
            
            
            620
            
            
            (19.8
            )
            
            (38.7
            )Germany
            
            
            320
            
            
            110
            
            
            70
            
            
            30
            
            
            357.1
            
            
            266.7Consolidated
                total
            
            
            64,820
            
            
            17,320
            
            
            68,400
            
            
            16,640
            
            
            (5.2
            )%
            
            4.1
            %





In
      the
      United States, net sales were up 3.7% in the third quarter of 2006 compared
      to
      the same period in 2005. However, the rate of sales growth in U.S. continues
      to
      be impacted by declining new distributor enrollments over the course of 2006.
      In
      the third quarter of 2006, new distributor enrollments were approximately 5,350
      compared to 5,660 in the prior year quarter, a reduction of 5.5%. For the first
      nine months of 2006, new distributor enrollments were approximately 15,570
      compared to approximately 18,460 in the prior year period, a reduction of 15.7%.
      However, new distributor enrollments were approximately 300 higher in the third
      quarter of 2006, compared to the second quarter of 2006. Distributor retention
      was 61.5% for the first nine months of 2006 compared to a rate of 62.9% for
      all
      of 2005. The net number of Master Affiliates and above as of September 30,
      2006
      increased by 7.6% to 15,660, compared to the number of Master Affiliates and
      above as of September 30, 2005, and the number of existing distributors reaching
      Master Affiliate in the third quarter, approximately 2,000, was 1.4% greater
      than the number reaching Master Affiliate during the same period in 2005.





We
      continue to focus on initiatives to improve our new distributor enrollment
      rates, which we believe will lead to improved sales, and continue to emphasize
      the importance of new distributor enrollments in our distributor training.
      We
      believe that these initiatives are beginning to have a positive impact, as
      shown
      by the slight improvement in U.S. sales, new distributor enrollments and number
      of distributors reaching Master Affiliate in third quarter 2006 compared to
      the
      second quarter 2006. We were featured in the June 2006 issue of *Success
      from Home* magazine, a publication targeted towards people who are considering starting
      their own business in the network marketing industry. We have encouraged our
      distributors to use this magazine as a tool to help them build their sales
      organizations. Also, at our international distributor conference in St. Louis
      in
      late July 2006, with nearly 6,000 distributors in attendance, we announced
      a
      special bonus program, called “Mega Bonus.” Via the new “Mega Bonus” program, we
      will award more than $700,000 in bonuses at our international conference in
      August 2007. The bonuses will be awarded to the top 50 distributors in group
      sales volume between August 1, 2006 and July 31, 2007, with the first-place
      winner receiving $100,000.





13


During
      the three months ended September 30, 2006, net sales in our international
      operations improved in aggregate by 9.6% to $3.00 million compared to
      $2.73 million for the three months ended September 30, 2005. For the
      nine-month period ended September 30, 2006, international net sales increased
      by
      3.0% to $8.45 million compared to $8.20 million in the same period in 2005.
      Foreign currency fluctuation did not have a significant impact on the foreign
      sales results. When net sales are converted using the 2005 exchange rate for
      both 2005 and 2006, international net sales improved 1.3% for the first nine
      months of 2006 compared to the first nine months of the prior year, as the
      U.S. dollar showed mixed results against the other currencies of those
      countries in which we conducted operations during the first nine months of
      2006,
      compared to the rates during 2005. Sales results were particularly strong in
      our
      Australia/New Zealand and United Kingdom markets, with sales increases in the
      third quarter of 2006 of 44.2% and 34.6%, respectively, compared to the same
      period in 2005.





Net
      sales
      increased in the United Kingdom by 34.6% in the third quarter of 2006 compared
      to the same period in 2005 due to the continuing efforts of our Managing
      Director hired in the UK during the first quarter of 2005. His efforts, coupled
      with added U.S. distributor leader support, have continued the positive growth
      trend in that market. Net sales in Australia/New Zealand increased by 44.2%
      in
      the third quarter of 2006 compared to the same period in 2005 as we continue
      to
      invest more in sales development in that region by supporting leading U.S.
      distributors as part of a sustained plan to develop more activity in this
      market. In total, we have invested just over $422,000 in these additional sales
      development expenses across our foreign markets during the first nine months
      of
      2006.





In
      August
      2006, we named a new national sales manager for our Reliv Mexico operations.
      Javier Ramirez Madrid previously held the role as sales director for the
      US/Hispanic market. He will continue in that role, along with overseeing sales
      in our Mexico market. Net sales in Mexico declined by 8.7% in the third quarter
      2006 compared to third quarter 2005. For the nine months ended September 30,
      2006, net sales were down 18.3% compared to the prior year period.





*Cost
      of Products Sold.* Cost
      of
      products sold as a percentage of net sales was 16.6% for both the three and
      nine
      months ended September 30, 2006, compared to 17.1% and 16.9% for the same
      periods in 2005. Operating efficiencies were improved during the third quarter
      of 2006, resulting in a decrease of cost of goods sold as a percentage of net
      sales.





*Distributor
      Royalties and Commissions.* Distributor
      royalties and commissions as a percentage of net sales were 40.1% and 40.2%
      for
      the three and nine months ended September 30, 2006, respectively, compared
      to
      40.0% and 40.1% for the same periods in 2005. Due to the structure of our
      distributor compensation plan, we do not expect to experience significant
      fluctuations in distributor royalties and commissions as a percentage of net
      sales.





*Selling,
      General and Administrative Expenses.* For
      the
      three and nine months ended September 30, 2006, selling, general and
      administrative, or SGA, expenses increased by $746,000 and $1.5 million,
      respectively, compared to the same periods in 2005. SGA expenses as a percentage
      of net sales were 34.3% and 32.8% for the three and nine months ended September
      30, 2006, respectively, compared to 33.1% and 32.1% for the same periods of
      2005.





Sales
      and
      marketing expenses represented approximately $1.2 million of the year-to-date
      2006 increase, including the increased international sales development expenses,
      and increased promotional bonuses, such as the “Mega Bonus”, and promotional
      trip expenses related to sales volume. Distribution and warehouse expenses
      increased by $132,000 due to higher wages and fringe benefit expenses. General
      and administrative expenses increased by approximately $213,000, primarily
      in
      salaries and bonuses, fringe benefit expenses, and business insurance expense.




14


*Interest
      Income/Expense.* Interest
      income increased to $480,000 for the nine months ended September 30, 2006,
      compared to $190,000 for the same period in 2005. Interest expense decreased
      to
      $47,000 for the nine months ended September 30, 2006 compared to $262,000 for
      the same period in 2005. The decrease is the result of a lower outstanding
      debt
      level during the nine-month period ended September 30, 2006, compared to
      September 30, 2005. In April 2006, we completed a public offering of our common
      stock, which yielded $11.9 million in net proceeds to us. A portion of the
      proceeds was used to pay off the remaining balance of $2.2 million on a note
      we
      entered into in March 2005 to purchase the shares of our common stock owned
      by a
      former officer and director and his wife. The increase in interest income is
      the
      result of the earnings on the remaining proceeds and higher interest rates
      compared to the prior year.





*Income
      Taxes.* We
      recorded income tax expense of $3.9 million for the first nine months of
      2006, an effective rate of 40.1%. In the same period in 2005, we recorded income
      tax expense of $3.6 million, which represented an effective rate of 38.8%.
      The increased effective rate is the result of graduated Federal income tax
      rates, along with increased state income taxes.





*Net
      Income.* Our
      net
      income for the three and nine months ended September 30, 2006 was
      $1.8 million ($0.11 per share basic and diluted) and $5.9 million
      ($0.36 per share basic and $0.35 per share diluted), respectively, compared
      to
      $1.7 million ($0.11 per share basic and $0.10 per share diluted) and
      $5.7 million ($0.36 per share basic and $0.35 per share diluted) for the same
      periods in 2005. Profitability improved slightly in the third quarter of 2006
      as
      net sales increased in the United States and the international markets, in
      aggregate. The improved sales were partially offset by the additional sales
      and
      marketing expenses, particularly the international sales development expenses,
      as discussed above.





**Financial
      Condition, Liquidity and Capital Resources**





During
      the first nine months of 2006 we generated $7.8 million of net cash from
      operating activities, $6.4 million was used in investing activities, and we
      generated $6.0 million in financing activities. This compares to
      $10.4 million of net cash provided by operating activities, $1.5
      million used in investing activities, and $13.9 million used in
      financing activities in the same period of 2005. Cash and cash equivalents
      increased by $7.5 million to $13.2 million as of September 30, 2006
      compared to December 31, 2005.





Significant
      changes in working capital items consisted of a decrease in inventories of
      $1.2
      million, an increase in refundable income taxes of $389,000, an increase in
      accounts payable and accrued expenses of $715,000, and a decrease in income
      taxes payable of $812,000 in the first nine months of 2006. The decrease in
      inventory is a result of an effort to improve inventory turnover. The increase
      in accounts payable and accrued expenses is primarily due to the increase in
      distributor commissions payable at September 30, 2006, compared to December
      31,
      2005. The increase in distributor commissions payable is the result of higher
      worldwide sales in September 2006, compared to December 2005. The increase
      in
      refundable income taxes and the decrease in income taxes payable is the result
      of our income tax deposits being based on a higher projected net income for
      2006
      versus actual results.





Investing
      activities during the first nine months of 2006 consist of $401,000 for capital
      expenditures, along with a net purchase of $6 million in short and long-term
      investments.





Financing
      activities in the first nine months of 2006 included $11.9 million in net
      proceeds from the common stock offering that closed in April 2006, $841,000
      in
      common stock dividends, $2.2 million in treasury stock purchases, $238,000
      in
      proceeds from options exercised and excess tax benefits from stock-based
      compensation, and $3.1 million of principal payments made on long-term
      borrowings. These payments paid off the balance of a promissory note for the
      purchase of common stock from a former officer and director and his wife that
      occurred in March 2005.





Stockholders’
      equity increased to $27.7 million at September 30, 2006 compared with
      $12.6 million at December 31, 2005. The increase is due to the net
      proceeds of the stock offering of $11.9 million, our net income during the
      first
      nine months of 2006 of $5.9 million, less the treasury stock purchases and
      common stock dividends paid. Our working capital balance was $16.1 million
      at September 30, 2006 compared to $4.0 million at December 31, 2005.
      The current ratio at September 30, 2006 improved to 2.7 compared to 1.4 at
      December 31, 2005.





15


On
      February 21, 2006, we filed a registration statement on Form S-3 with the
      Securities and Exchange Commission relating to an underwritten public offering
      of 2,000,000 shares of our common stock. On April 5, 2006, we commenced the
      public offering at a price of $11.25 per share. The public offering was
      completed on April 11, 2006 and consisted of 1,200,000 shares of common stock
      offered and sold by us and 800,000 shares of common stock offered and sold
      by
      selling stockholders. The selling stockholders were four of our directors and/or
      officers. The underwriters had a 30-day option to purchase up to 300,000
      additional shares from certain of the selling stockholders to cover
      over-allotments, if any. This option was exercised for the full 300,000 shares
      and closed on May 9, 2006. We did not receive any proceeds from the sale of
      common stock by the selling stockholders.





We
      have
      used a portion of the proceeds from the offering for the repayment of debt.
      We
      intend to use the balance of net proceeds for general corporate purposes,
      including working capital, continued domestic and international growth, and
      for
      possible product acquisitions. Net proceeds to us from the offering, after
      reduction for the underwriters’ fee and other offering expenses, were $11.9
      million.





We
      also
      have a $5 million secured revolving credit facility with our primary lender
      that we entered into in June 2006. This facility replaces the previous agreement
      with a $15 million limit, and expires in April 2008, and any advances accrue
      interest at a variable interest rate based on LIBOR. The credit facility is
      secured by all of our assets. The facility includes covenants to maintain total
      stockholders’ equity of not less than $10.5 million, and that the ratio of
      borrowings under the facility to EBITDA shall not exceed 3.5 to 1.0. At
      September 30, 2006, we had not utilized any of the revolving line of credit
      facility and were in compliance with the minimum stockholders’ equity covenant.





Management
      believes that our internally generated funds, the proceeds of the offering
      completed in April 2006, and the borrowing capacity under the revolving line
      of
      credit facility will be sufficient to meet working capital requirements for
      the
      remainder of 2006.





**Critical
      Accounting Policies**





A
      summary
      of our critical accounting policies and estimates is presented on pages 37
      and
      38 of our 2005 Annual Report on Form 10-K filed with the Securities and Exchange
      Commission on March 16, 2006.





**Item
      No. 3 - Quantitative and Qualitative Disclosures Regarding Market
      Risk**





We
      are
      exposed to various market risks, primarily foreign currency risks and interest
      rate risks.




**Foreign
      Currency Risk**





Our
      earnings and cash flows are subject to fluctuations due to changes in foreign
      currency rates as we have several foreign subsidiaries and continue to explore
      expansion into other foreign countries. As a result, exchange rate fluctuations
      may have an effect on sales and gross margins. Accounting practices require
      that
      our results from operations be converted to U.S. dollars for reporting purposes.
      Consequently, our reported earnings in future periods 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 with a financial
      institution to sell Canadian dollars in order to protect against currency
      exchange risk associated with expected future cash flows. We have accounted
      for
      these contracts as free standing derivatives, such that gains or losses on
      the
      fair market value of these forward exchange contracts are recorded as other
      income and expense in the consolidated statements of operations. The net change
      in the fair value of these forward contracts as of September 30, 2006 was a
      cumulative expense of $21,000. As of September 30, 2006, we had no hedging
      instruments in place to offset exposure to the Australian or New Zealand
      dollars, Mexican or Philippine pesos, the Malaysian ringgit, the Singapore
      dollar, the EU Euro, or the British pound.





There
      have been no other material changes in market risk exposures during the first
      nine months of 2006 that affect the disclosures presented in Item 7A -
“Quantitative and Qualitative Disclosures Regarding Market Risk” on pages 38 and
      39 of our 2005 Annual Report on Form 10-K filed with the Securities and Exchange
      Commission on March 16, 2006.





16


**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 September 30, 2006. 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 September 30, 2006,
      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 third quarter of 2006 that have
      materially affected or are reasonably likely to materially affect our internal
      controls over financial reporting.





**PART
      II - OTHER INFORMATION**





**Item
      No. 1A - Risk Factors**





The
      below
      risk factor associated with our business activities has changed materially
      from
      the disclosure in our 2005 Annual Report on Form 10-K filed with the Securities
      and Exchange Commission on March 16, 2006.





***We
      are affected by extensive laws, governmental regulations, administrative
      determinations, court decisions and similar constraints, both domestically
      and
      abroad, and our or our distributors’ failure to comply with these restraints
      could lead to the imposition of significant penalties or claims, which could
      harm our financial condition and operating results.***





In
      both
      domestic and foreign markets, the formulation, manufacturing, packaging,
      labeling, distribution, importation, exportation, licensing, sale and storage
      of
      our products are affected by extensive laws, governmental regulations,
      administrative determinations, court decisions and similar constraints. There
      can be no assurance that we or our distributors are in compliance with all
      of
      these regulations. Our or our distributors’ failure to comply with these
      regulations or new regulations could lead to the imposition of significant
      penalties or claims and could negatively impact our business. In addition,
      the
      adoption of new regulations or changes in the interpretations of existing
      regulations may result in significant compliance costs or discontinuation of
      product sales and may negatively impact the marketing of our products, resulting
      in significant loss of sales.





On
      April 12, 2006, the Federal Trade Commission issued its Notice of Proposed
      Rulemaking in respect of The Business Opportunity Rule, R511993. The proposed
      rule, if enacted in its current form, would likely cause us, as well as most
      other direct sellers, to be regulated as a seller of business opportunities
      in
      the United States. Under the current Business Opportunity Rule, we do not
      qualify as a seller of a business opportunity because we offer U.S. distributors
      the opportunity to join our business for $40, well below the $500 threshold
      required for a company to be subject to the current rule. The proposed rule
      would eliminate that threshold. In addition, the proposed rule would require
      all
      sellers of business opportunities to deliver
      written disclosure of certain information to a prospective purchaser seven
      days
      prior to the time the prospective purchaser could sign any agreement or make
      any
      payment in
      connection with the business opportunity. The information that a seller of
      a
      business opportunity would have to provide all prospective purchasers would
      include: (1) the seller’s and distributor’s identification information, (2)
      whether an earnings claim is made and, if so, provide a detailed earnings claim
      statement with substantiating information and certain representations relating
      to the earnings of other business opportunity purchasers, (3) legal actions
      involving deceptive practices or other matters filed against the seller, its
      affiliates and other related parties and/or the presenting distributor in the
      last 10 years, (4) whether a cancellation or refund policy is available and,
      if
      so, a statement describing the policy, (5) the number of business opportunity
      purchasers that have canceled within the past two years, and (6) a reference
      list of the 10 nearest current or past business opportunity purchasers to the
      prospect, with personal information available to allow the prospect to contact
      a
      listed purchaser. We, along with the Direct Selling Association, other direct
      selling companies, and other interested parties have filed comments with the
      FTC
      opposing adoption of the proposed rule in its current form and suggesting
      alternative means to regulate fraudulent business activities without imposing
      undue burdens on legitimate companies in the direct selling industry. According
      to information we have received from the Direct Selling Association, we expect
      that the adoption of a final rule will not likely occur until after public
      hearings and discussions are held between members of the direct selling industry
      and the staff of the Federal Trade Commission, which may delay adoption of
      the
      final rule a number of years and result in a final rule that is substantially
      different from the proposed rule. Notwithstanding the foregoing, if the business
      opportunity rule is adopted as proposed, it could negatively impact our business
      and result in a decrease in our ability to attract new distributors in the
      United States.


17





On
      March 7, 2003, the FDA proposed a new regulation to require current good
      manufacturing practices, or cGMPs, affecting the manufacture, packing and
      holding of dietary supplements. The proposed regulation would establish
      standards to ensure that dietary supplements and dietary ingredients are not
      adulterated with contaminants or impurities and are labeled to accurately
      reflect the active ingredients and other ingredients in the products. It also
      includes proposed requirements for designing and constructing physical plants,
      establishing quality control procedures, and testing manufactured dietary
      ingredients and dietary supplements, as well as proposed requirements for
      maintaining records and for handling consumer complaints related to current
      good
      manufacturing practices. The final rule resulting from this rulemaking process
      is currently undergoing review by the Office of Management and Budget. Because
      of the long delay in issuing the final rule, there is considerable uncertainty
      as to the provisions of the final rule, and as to how large an impact the rule
      will have on the dietary supplement industry.





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




**ISSUER
      PURCHASES OF EQUITY SHARES**




Period
            
            Total
                Number of SharesPurchased
            
            Average
                PricePaid
                per Share
            
            Total
                Number of Shares Purchased as Part of Publicly AnnouncedPrograms
            
            Approximate
                Dollar Value of Shares that May Yet Be Purchased Under the Plans
                orPrograms(1)July
                1-31, 2006
            
            
            --
            
            
            --
            
            
            --
            
            $
            10,719,000August
                1-31, 2006
            
            
            75,727
            
            $
            8.36
            
            
            75,727
            
            $
            10,086,000September
                1-30, 2006
            
            
            188,129
            
            $
            8.35
            
            
            188,129
            
            $
            8,515,000Total
            
            
            263,856
            
            
            
            
            
            263,856




(1)
                In March 2005, the Company’s Board of Directors approved a share
                repurchase plan of up to $15 million over the next 36
                months.






18





**Item
      No. 6 - Exhibits**





ExhibitNumber
            
            Document10.1
            
            Reliv
                International, Inc. Employee Stock Ownership Plan and Trust dated
                August
                24, 2006 (incorporated by reference to Exhibit 10.1 to the Form 8-K
                of the
                Registrant filed August 30, 2006).31.1
            
            Certification
                of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
                of the Securities Exchange Act, as amended (filed
                herewith).31.2
            
            Certification
                of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
                of the Securities Exchange Act, as amended (filed
                herewith).32
            
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                18
                U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
                Act
                of 2002 (filed herewith).


19


**SIGNATURES**





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




**RELIV’
              INTERNATIONAL, INC.**By:
              /s/ Robert L. MontgomeryRobert
                L. Montgomery, Chairman of the Board of Directors, President
                and Chief Executive OfficerDate: November 8, 2006By:/s/
              Steven D. AlbrightSteven
                D. Albright, Chief Financial Officer (and accounting
                officer)Date: November 8, 2006





20


**Exhibit
      Index**








ExhibitNumber
              
              Document10.1
              
              Reliv
                  International, Inc. Employee Stock Ownership Plan and Trust dated
                  August
                  24, 2006 (incorporated by reference to Exhibit 10.1 to the Form
                  8-K of the
                  Registrant filed August 30, 2006).31.1
              
              Certification
                  of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule
                  15d-14(a)
                  of the Securities Exchange Act, as amended (filed
                  herewith).31.2
              
              Certification
                  of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule
                  15d-14(a)
                  of the Securities Exchange Act, as amended (filed
                  herewith).32
              
              Certification
                  of Chief Executive Officer and Chief Financial Officer pursuant
                  to 18
                  U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
                  Act
                  of 2002 (filed herewith).




21