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EXCEL - IDEA: XBRL DOCUMENT - RBC LIFE SCIENCES, INC.Financial_Report.xls
EX-31.2 - SECTION 302 CERTIFICATION - RBC LIFE SCIENCES, INC.ex31-2110930.htm
EX-31.1 - SECTION 302 CERTIFICATION - RBC LIFE SCIENCES, INC.ex31-1110930.htm
EX-32.1 - SECTION 906 CERTIFICATION - RBC LIFE SCIENCES, INC.ex32-1110930.htm
EX-32.2 - SECTION 906 CERTIFICATION - RBC LIFE SCIENCES, INC.ex32-2110930.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2011

OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________

Commission file number:  000-50417

RBC Life Sciences, Inc.
(Exact name of registrant as specified in its charter)

Nevada
 
91-2015186
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
 
 
2301 Crown Court, Irving, Texas
 
75038
(Address of principal executive offices)
 
(Zip 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 x     No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes x     No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
o
  
Accelerated filer
o
Non-accelerated filer
o
(Do not check if a smaller reporting company)
Smaller reporting company
x

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class
 
Outstanding at October 28, 2011
Common Stock, $0.001 par value per share
 
22,228,834 shares




TABLE OF CONTENTS

 
Page Number
PART I – FINANCIAL INFORMATION
 
 
 
 
Item 1.
Financial Statements
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
 
 
 
PART II – OTHER INFORMATION
 
 
 
 
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.
Defaults Upon Senior Securities
Item 4.
Reserved
Item 5.
Other Information
Item 6.
Exhibits
 
 
 
Signatures
 
 
Exhibit Index
 



PART 1 – FINANCIAL INFORMATION

ITEM 1.             FINANCIAL STATEMENTS

RBC LIFE SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

 
September 30,
2011
 
December 31,
2010
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
4,720,463

 
$
4,220,152

Accounts receivable, net
540,779

 
491,576

Inventories
6,782,435

 
5,343,016

Deferred income taxes
456,928

 
396,415

Prepaid expenses
824,464

 
807,344

Total current assets
13,325,069

 
11,258,503

Property and equipment, net
4,363,653

 
4,638,075

Goodwill, net
2,275,590

 
2,295,270

Intangible assets, net
51,383

 
55,851

Other assets
116,113

 
95,813

 
$
20,131,808

 
$
18,343,512

LIABILITIES AND SHAREHOLDERS’ EQUITY
 

 
 

Current liabilities:
 

 
 

Accounts payable, trade
$
2,461,265

 
$
2,110,624

Accrued liabilities
1,247,814

 
976,495

Current maturities of long-term obligations
178,574

 
168,522

Deferred revenue
3,862,328

 
2,489,828

Total current liabilities
7,749,981

 
5,745,469

Long-term obligations, less current maturities
1,592,340

 
1,727,555

Deferred income taxes
1,003,113

 
994,909

Shareholders’ equity:
 
 
 

Common stock, $0.001 par value; 50,000,000 shares authorized; 22,228,834 shares issued and outstanding at September 30, 2011 and December 31, 2010
22,229

 
22,229

Additional paid-in capital
13,638,092

 
13,605,922

Accumulated deficit
(4,010,834
)
 
(3,881,348
)
Accumulated other comprehensive income
136,887

 
128,776

 
9,786,374

 
9,875,579

 
$
20,131,808

 
$
18,343,512


See notes to condensed consolidated financial statements.

- 3 -



RBC LIFE SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 
For the Quarters Ended September 30,
 
2011
 
2010
Net sales
$
7,060,839

 
$
6,126,488

Cost of sales
3,743,127

 
2,836,499

Gross profit
3,317,712

 
3,289,989

Operating expenses:
 

 
 

General and administrative
2,653,793

 
2,240,966

Distributor commissions
1,039,385

 
758,509

Depreciation and amortization
110,901

 
119,422

Total operating expenses
3,804,079

 
3,118,897

Operating profit (loss)
(486,367
)
 
171,092

Interest expense
34,587

 
37,769

Earnings (loss) before income taxes
(520,954
)
 
133,323

Provision (benefit) for income taxes
(231,104
)
 

Net earnings (loss)
$
(289,850
)
 
$
133,323


Earnings (loss) per share:
 
 
 
  Basic
$
(0.01
)
 
$
0.01

  Diluted
$
(0.01
)
 
$
0.01


Weighted average common shares outstanding:
 
 
 
  Basic
22,228,834

 
21,921,934

  Diluted
22,228,834

 
22,468,717


See notes to condensed consolidated financial statements.


- 4 -



RBC LIFE SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 
For the Nine Months Ended September 30,
 
2011
 
2010
Net sales
$
21,092,790

 
$
20,946,381

Cost of sales
10,474,095

 
10,611,715

Gross profit
10,618,695

 
10,334,666

Operating expenses:
 

 
 

General and administrative
7,094,147

 
6,998,293

Distributor commissions
3,362,867

 
2,045,747

Depreciation and amortization
329,169

 
362,339

Total operating expenses
10,786,183

 
9,406,379

Operating profit (loss)
(167,488
)
 
928,287

Interest expense
106,202

 
115,567

Earnings (loss) before income taxes
(273,690
)
 
812,720

Provision (benefit) for income taxes
(144,204
)
 
296,100

Net earnings (loss)
$
(129,486
)
 
$
516,620


Earnings (loss) per share:
 
 
 
  Basic
$
(0.01
)
 
$
0.02

  Diluted
$
(0.01
)
 
$
0.02


Weighted average common shares outstanding:
 
 
 
  Basic
22,228,834

 
21,921,934

  Diluted
22,228,834

 
22,386,287


See notes to condensed consolidated financial statements.


- 5 -



RBC LIFE SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 
For the Nine Months Ended September 30,
 
2011
 
2010
Cash flows from operating activities:
 
 
 
Net earnings (loss)
$
(129,486
)
 
$
516,620

Adjustment for non-cash items:
 
 
 
Depreciation and amortization
379,909

 
408,957

Stock-based compensation
32,170

 
34,791

Deferred income taxes
(54,414
)
 
32,842

     (Gain) loss on disposition of equipment
(4,969
)
 
22,874

Change in operating assets and liabilities:
 
 
 
Accounts receivable
(49,268
)
 
62,321

Inventories
(1,452,945
)
 
110,689

Prepaid expenses
(20,467
)
 
147,020

Other assets
(21,335
)
 
(2,595
)
Accounts payable and accrued liabilities
616,095

 
(192,712
)
Deferred revenue
1,372,568

 
(22,144
)
Net cash provided by operating activities
667,858

 
1,118,663

Cash flows from investing activities:
 

 
 

Purchase of property and equipment
(102,781
)
 
(155,768
)
Proceeds from sale of equipment
4,969

 
7,034

Net cash used in investing activities
(97,812
)
 
(148,734
)
Cash flows from financing activities:
 

 
 

Payments of long-term obligations
(125,163
)
 
(115,858
)
Net cash used in financing activities
(125,163
)
 
(115,858
)
Effect of exchange rate changes on cash flows
55,428

 
(12,341
)
Net increase in cash and cash equivalents
500,311

 
841,730

Cash and cash equivalents, beginning of period
4,220,152

 
3,972,111

Cash and cash equivalents, end of period
$
4,720,463

 
$
4,813,841


See notes to condensed consolidated financial statements.

- 6 -



RBC LIFE SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note A – Unaudited Condensed Consolidated Financial Statements:

The accompanying unaudited condensed consolidated financial statements of RBC Life Sciences, Inc. (sometimes hereinafter referred to collectively as “we”, “our”, “RBC” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the U.S. (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Certain information and disclosures that are normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to these rules and regulations.  These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010 (the “2010 Form 10-K”), previously filed with the Securities and Exchange Commission.

In the opinion of management, all adjustments (consisting solely of normal recurring accruals) considered necessary for a fair presentation of the Company's results for the interim periods have been included.  The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the period.  Actual results could differ from those estimates.  The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.  Subsequent events were evaluated through the issuance date of the condensed consolidated financial statements.

Note B – Nature of Operations and Organization:

The Company is principally engaged in the marketing of nutritional supplements and personal care products (collectively “Nutritional Products”) through subsidiaries in the U.S. and Canada.  This product line is marketed under the “RBC Life” brand name.  In certain markets, primarily the U.S. and Canada, the Company markets its products through a network of distributors that are referred to as “Associates.”  The Associates are independent contractors who purchase products for personal use, purchase products for resale to retail customers and sponsor other individuals as Associates.  Accordingly, Associates may be product consumers only or they may also seek to derive compensation both from the direct sales of products and from sales generated by sponsored Associates. In certain markets in Southeast Asia the Company sells its products through an NFR program. Individuals who participate in the NFR program function similarly to Associates in the U.S. and Canada in that they can sponsor others and derive compensation from sales generated by individuals they sponsor. However, they may only order products for personal use and may not resell products to retail customers.

On October 1, 2011, the Company opened a branch in Taiwan, which permits individuals in Taiwan to join the Company as Associates rather than NFR program participants. Through the Taiwan branch, the Company will provide Taiwan Associates local marketing and sales support, customer service and product order fulfillment.

RBC also markets its Nutritional Products in certain international markets through license arrangements.  The licensees are third parties who are granted exclusive rights to distribute RBC products in their respective territories and, for the most part, distribute these products through an independent Associate network in the licensed territory.  Under these arrangements, the independent Associate network in a licensed territory is compensated by the licensee in accordance with a compensation plan similar to the one used by RBC for its Associates in North America.

In addition to its Nutritional Products, RBC also markets a line of wound care products (“Medical Products”) under the MPM Medical brand name through a U.S. subsidiary.  Medical Products are distributed primarily in the U.S. to hospitals, nursing homes, clinics and pharmacies through traditional medical/surgical supply dealers and pharmaceutical distributors.  Medical Products are used to prevent and treat wounds, and manage pain associated with wounds, in the acute care, long-term care and oncology markets.


- 7 -



Note C – Inventories:

Inventories consist of the following:
 
September 30, 2011
 
December 31, 2010
Raw materials and bulk products
$
359,972

 
$
287,644

Packaging materials
398,017

 
318,397

Finished goods
6,024,446

 
4,736,975

 
$
6,782,435

 
$
5,343,016


Note D – Prepaid Expenses:

Prepaid expenses consist of the following:
 
September 30, 2011
 
December 31, 2010
Advance payment to suppliers
$
393,015

 
$
333,763

Prepaid income taxes
76,223

 
225,698

Certificates of deposit - restricted
81,821

 
84,923

Prepaid insurance and other
273,405

 
162,960

 
$
824,464

 
$
807,344


At September 30, 2011 and December 31, 2010, the Company held certificates of deposit in the amounts of approximately $82,000 and $85,000, respectively, which were pledged to secure surety bonds.

Note E – Property and Equipment:

Property and equipment consists of the following:
 
September 30, 2011
 
December 31, 2010
Building and improvements
$
3,523,428

 
$
3,523,428

Computer software and office equipment
2,141,804

 
2,063,488

Warehouse equipment
226,922

 
219,030

Automotive equipment
14,717

 
15,228

 
5,906,871

 
5,821,174

Less – accumulated depreciation
(2,684,391
)
 
(2,324,272
)
 
3,222,480

 
3,496,902

Land
1,141,173

 
1,141,173

 
$
4,363,653

 
$
4,638,075


Note F – Goodwill and Other Intangible Assets:

The Company measures its goodwill for impairment at the end of each year or in the event of an impairment indicator.  No impairment losses have been recognized as a result of this testing.  Goodwill balances are summarized as follows:
 
Gross Carrying Value
 
Accumulated Amortization
Balance, December 31, 2010
$
3,429,940

 
$
(1,134,670
)
Currency translation adjustment
(38,404
)
 
18,724

Balance, September 30, 2011
$
3,391,536

 
$
(1,115,946
)
  

- 8 -



Other intangible assets consist of the following:
 
 
 
September 30, 2011
 
December 31, 2010
 
Average
Life
(years)
 
Gross
Carrying
Value
 
Accumulated
Amortization
 
Gross
Carrying
Value
 
Accumulated
Amortization
Copyrights, trademarks and other registrations
19
 
$
99,100

 
$
(53,513
)
 
$
99,100

 
$
(49,549
)
Other
19
 
12,600

 
(6,804
)
 
12,600

 
(6,300
)
 
 
 
$
111,700

 
$
(60,317
)
 
$
111,700

 
$
(55,849
)

Amortization expense related to other intangible assets totaled approximately $1,500 for the quarters ended September 30, 2011 and 2010, and $4,500 for the nine months ended September 30, 2011 and 2010.  The aggregate estimated amortization expense for intangible assets remaining as of September 30, 2011 is as follows:
Remainder of 2011
$
1,489

2012
5,957

2013
5,957

2014
5,957

2015
5,957

Thereafter
26,066

 
$
51,383


Note G – Accrued Liabilities:

Accrued liabilities consist of the following:
 
September 30, 2011
 
December 31, 2010
Distributor commissions
$
566,159

 
$
470,778

Salaries and wages
506,602

 
399,357

Sales and property taxes
68,935

 
31,422

Interest
11,437

 
12,246

Other
94,681

 
62,692

 
$
1,247,814

 
$
976,495


Note H – Long-Term Obligations:

Long-term obligations consist of the following:
 
September 30, 2011
 
December 31, 2010
Mortgage note payable bearing interest at 7.75%, payable in monthly installments of $25,797 through April 2019, collateralized by land and building, and personally guaranteed by the Company’s Chairman of the Board and Chief Executive Officer
$
1,770,914

 
$
1,896,077

Less – current maturities
(178,574
)
 
(168,522
)
 
$
1,592,340

 
$
1,727,555


The fair value of long-term debt is estimated based on interest rates for the same or similar instruments offered having the same or similar maturities and collateral requirements.  At September 30, 2011, the fair value of fixed-rate long-term debt was approximately $1,986,000, which was $215,000 above the carrying value of approximately $1,771,000.  At December 31, 2010, the fair value of fixed-rate long-term debt was approximately $2,041,000, which was $145,000 above the carrying value of approximately $1,896,000.

Note I – Share-Based Compensation:

The Company records compensation expense for all share-based payments based on the estimated grant date fair value.  Share-

- 9 -



based compensation expense was approximately $10,600 and $9,300 for the quarters ended September 30, 2011 and 2010, respectively, and $32,200 and $34,800 for the nine months ended September 30, 2011 and 2010, respectively.  Share-based compensation is classified as a general and administrative expense.  There were no material tax benefits related to this expense because virtually all share-based compensation resulted from grants of incentive stock options.
 
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:
 
Quarters Ended September 30,
 
Nine Months Ended September 30,
 
2011
 
2010
 
2011
 
2010
 
(1)
 
 
 
 
 
 
Weighted average expected life (years)

 
9.0

 
8.4

 
9.0

Risk-free interest rate
%
 
3.09
%
 
3.32
%
 
3.09
%
Expected volatility
%
 
105.02
%
 
96.23
%
 
105.02
%
Expected dividend yield
%
 
%
 
%
 
%
__________________
(1) There were no option grants during this period.

A summary of stock option activity for the nine months ended September 30, 2011 is as follows:
 
Options
 
Weighted-Average Exercise Price per Share
 
Weighted-Average Remaining Contractual Term (in years)
 
Aggregate Intrinsic Value
Outstanding on December 31, 2010
1,198,390

 
$
0.34

 
                                      
 
 
Granted
33,600

 
0.28

 
 
 
 
Exercised

 

 
 
 
 
Forfeited/canceled
(64,820
)
 
0.50

 
 
 
 
Outstanding on September 30, 2011
1,167,170

 
$
0.33

 
3.6

 
$
80,893

Exercisable on September 30, 2011
913,070

 
$
0.28

 
2.9

 
$
79,862

 
A summary of the status of the Company's non-vested stock options as of September 30, 2011 and changes during the nine months then ended are presented below:
 
Shares
 
Weighted-Average Grant Date Fair Value per Share
Non-vested stock options at December 31, 2010
303,930

 
$
0.46

Non-vested stock options granted

 

Vested stock options
(7,500
)
 
0.29

Forfeited stock options
(42,330
)
 
0.44

Non-vested stock options at September 30, 2011
254,100

 
0.47


As of September 30, 2011, there was approximately $86,500 of total unrecognized compensation cost related to stock option grants.
 

- 10 -



Note J – Segments and Geographic Area:

The Company's segments are based on the organizational structure that is used by management for making operating and investment decisions and for assessing performance.  Based on this management approach, the Company has two operating segments: Nutritional Products and Medical Products.

The Nutritional Products segment manufactures and distributes a line of over 75 nutritional supplements and personal care products, including herbs, vitamins and minerals, as well as natural skin, hair and body care products.  Nutritional Products are marketed under the RBC Life brand name through subsidiaries in the U.S. and Canada and, effective October 1, 2011, a branch in Taiwan.  These products are distributed by a network comprised of independent Associates and NFR program participants in certain markets, primarily the U.S., Canada and Southeast Asia, and by licensees in certain other international markets.  For the most part, licensees also market the Nutritional Products in their respective territories through a network of independent Associates.

The Medical Products segment markets a line of approximately 28 wound care products under the MPM Medical brand name through a U.S. subsidiary operating primarily in the U.S.  These wound care products are distributed to hospitals, nursing homes, home health care agencies, clinics and pharmacies through a network of medical/surgical supply dealers and pharmaceutical distributors.  Medical Products are used to prevent and treat wounds, and manage pain associated with wounds, in the acute care, long-term care and oncology markets.

The Company evaluates the performance of its segments primarily based on operating profit.  All intercompany transactions have been eliminated, and intersegment revenues are not significant.  In calculating operating profit for these two segments, administrative expenses incurred that are common to the two segments are allocated on a usage basis.
 
Segment information is as follows (in thousands):
 
Nutritional Products
 
Medical Products
 
Consolidated
Quarter Ended September 30, 2011
 

 
 

 
 

  Net sales
$
5,376

 
$
1,685

 
$
7,061

  Depreciation and amortization
110

 
17

 
127

  Operating loss
(464
)
 
(22
)
 
(486
)
  Capital expenditures
38

 

 
38

  Total assets
17,576

 
2,556

 
20,132

Quarter Ended September 30, 2010
 

 
 

 
 

  Net sales
$
4,533

 
$
1,593

 
$
6,126

  Depreciation and amortization
114

 
21

 
135

  Operating profit
85

 
86

 
171

  Capital expenditures
23

 

 
23

  Total assets
15,657

 
3,180

 
18,837

Nine Months Ended September 30, 2011
 

 
 

 
 

Net sales
$
15,893

 
$
5,200

 
$
21,093

Depreciation and amortization
327

 
53

 
380

Operating profit (loss)
(292
)
 
125

 
(167
)
Capital expenditures
103

 

 
103

Total assets
17,576

 
2,556

 
20,132

Nine Months Ended September 30, 2010
 

 
 

 
 

Net sales
$
16,134

 
$
4,812

 
$
20,946

Depreciation and amortization
346

 
63

 
409

Operating profit
668

 
260

 
928

Capital expenditures
156

 

 
156

Total assets
15,657

 
3,180

 
18,837



- 11 -



Financial information summarized geographically is as follows (in thousands):

 
Quarter Ended September 30, 2011
 
Quarter Ended September 30, 2010
 
Net sales
 
Long-Lived assets
 
Net sales
 
Long-Lived assets
Domestic
$
3,332

 
$
6,226

 
$
2,518

 
$
6,575

Russia/Eastern Europe
3,087

 

 
2,965

 

Canada
425

 
521

 
249

 
536

All others
217

 
60

 
394

 

Totals
$
7,061

 
$
6,807

 
$
6,126

 
$
7,111


 
Nine Months Ended September 30, 2011
 
Nine Months Ended September 30, 2010
 
Net sales
 
Long-Lived assets
 
Net sales
 
Long-Lived assets
Domestic
$
9,864

 
$
6,226

 
$
7,928

 
$
6,575

Russia/Eastern Europe
9,124

 

 
11,552

 

Canada
1,229

 
521

 
808

 
536

All others
876

 
60

 
658

 

Totals
$
21,093

 
$
6,807

 
$
20,946

 
$
7,111

  
Significant Customers

The Company recorded sales of Nutritional Products to Coral Club International, Inc. ("CCI"), a licensee of the Company, in the amounts of $3,087,000 and $2,965,000 during the quarters ended September 30, 2011 and 2010, respectively, and $9,124,000 and $11,552,000 during the nine months ended September 30, 2011 and 2010, respectively.  The Company also recorded sales of Medical Products to a medical/surgical dealer in the amounts of $961,000 and $848,000 during the quarters ended September 30, 2011 and 2010, respectively, and $3,109,000 and $2,880,000 during the nine months ended September 30, 2011 and 2010, respectively.  In no other case did a customer of the Company account for more than 10% of net sales during the quarters or the nine months ended September 30, 2011 and 2010.



- 12 -



Note K – Earnings (Loss) Per Share:

Summarized basic and diluted earnings (loss) per common share were calculated as follows:
 
Net Earnings (Loss)
 
Weighted
Average
Shares
 
Per Share
Quarter Ended September 30, 2011
 

 
 

 
 

  Basic loss per common share
$
(289,850
)
 
22,228,834

 
$
(0.01
)
  Effect of dilutive stock options

 

 
 

  Diluted loss per common share
$
(289,850
)
 
22,228,834

 
$
(0.01
)
Quarter Ended September 30, 2010
 

 
 

 
 

  Basic earnings per common share
$
133,323

 
21,921,934

 
$
0.01

  Effect of dilutive stock options

 
546,783

 
 

  Diluted earnings per common share
$
133,323

 
22,468,717

 
$
0.01

Nine Months Ended September 30, 2011
 

 
 

 
 

Basic loss per common share
$
(129,486
)
 
22,228,834

 
$
(0.01
)
Effect of dilutive stock options

 

 
 

Diluted loss per common share
$
(129,486
)
 
22,228,834

 
$
(0.01
)
Nine Months Ended September 30, 2010
 

 
 

 
 

Basic earnings per common share
$
516,620

 
21,921,934

 
$
0.02

Effect of dilutive stock options

 
464,353

 
 

Diluted earnings per common share
$
516,620

 
22,386,287

 
$
0.02


The number of stock options that were outstanding, but not included in the computation of diluted earnings (loss) per common share because their exercise price was greater than the average market price of the common stock, or were otherwise anti-dilutive, was approximately 1,167,000 and 675,000 for the quarters ended September 30, 2011 and 2010, respectively, and 1,167,000 and 929,000 for the nine months ended September 30, 2011 and 2010, respectively.

Note L – Comprehensive Income (Loss):

Comprehensive income (loss) is net earnings (loss) adjusted for other comprehensive income (loss), which, for the periods presented, consists of the change in the foreign currency translation adjustment.  The following table provides information regarding comprehensive income (loss):
 
Quarters Ended September 30,
 
Nine Months Ended September 30,
 
2011
 
2010
 
2011
 
2010
Net earnings (loss)
$
(289,850
)
 
$
133,323

 
$
(129,486
)
 
$
516,620

Other comprehensive income:
 
 
 
 
 
 
 
Foreign currency translation adjustment
10,980

 
(2,405
)
 
8,111

 
(600
)
Comprehensive income (loss)
$
(278,870
)
 
$
130,918

 
$
(121,375
)
 
$
516,020


Note M – Legal Proceedings:

The Company is from time to time engaged in routine litigation.  The Company regularly reviews all pending litigation matters in which it is involved and establishes reserves deemed appropriate by management for these litigation matters.


- 13 -



ITEM 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 the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this report and the audited consolidated financial statements and notes thereto included in the 2010 Form 10-K.

FORWARD-LOOKING STATEMENTS
 
The statements, other than statements of historical or present facts, included in this report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act").  All statements, other than statements of historical or present facts, that address activities, events, outcomes and other matters that we plan, expect, intend, assume, believe, budget, predict, forecast, project, estimate or anticipate (and other similar expressions) will, should or may occur in the future are forward-looking statements.  Forward-looking statements can be identified by the use of the words “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “objective,” “projection,” forecast,” “goal,” “believe,” and similar expressions.  These forward-looking statements are based on management's current belief, based on currently available information, as to the outcome and time of future events.  We believe that the expectations and assumptions reflected in these forward-looking statements are reasonable.  However, we cannot assure you that such expectations will occur.  Our actual future performance could differ materially from such statements.  When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this Form 10-Q and those previously disclosed in Item 1A to Part I of the 2010 Form 10-K.  Many of these factors are beyond the Company's ability to control or predict. We caution you not to put undue reliance on forward-looking statements or to project any future results based on such statements or on present or prior earnings levels. We do not undertake any obligation to publicly release any revisions to any forward-looking statement to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.  Please consider our forward-looking statements in light of those risks as you read this report.

OVERVIEW
 
We operate in two industry segments, Nutritional Products and Medical Products.
 
Through the Nutritional Products segment, we distribute products in three broad categories: (i) wellness products, (ii) fitness products and (iii) skin care products.   Products include herbal formulas, vitamins, minerals, antioxidants and personal care products.  In certain markets, principally in the U.S., Canada and Southeast Asia, we distribute Nutritional Products directly through a network comprised of independent Associates and individuals who participate in our NFR program. In certain other markets, we distribute Nutritional Products through exclusive license arrangements with third parties who, for the most part, distribute our products through an independent Associate network in the licensed territory.
 
Through the Medical Products segment, we distribute wound care products.  These products are distributed mainly in the U.S. to hospitals, nursing homes, clinics and pharmacies through traditional medical/surgical supply dealers and pharmaceutical distributors.  Medical Products are used to prevent and treat wounds, and manage pain associated with wounds, in the acute care, long-term care and oncology markets.
  
Consolidated net sales in dollars and as a percentage of consolidated net sales are as follows:
 
Quarters Ended September 30,
 
2011
 
2010
 
(U.S. dollars in 000’s)
Nutritional Products:
 
 
 
 
 
 
 
Licensees
$
3,105

 
44
%
 
$
3,005

 
49
%
Associate network
2,271

 
32
%
 
1,528

 
25
%
 
5,376

 
76
%
 
4,533

 
74
%
Medical Products
1,685

 
24
%
 
1,593

 
26
%
 
$
7,061

 
100
%
 
$
6,126

 
100
%


- 14 -



 
Nine Months Ended September 30,
 
2011
 
2010
 
(U.S. dollars in 000’s)
Nutritional Products:
 
 
 
 
 
 
 
Licensees
$
9,215

 
44
%
 
$
11,801

 
56
%
Associate network
6,678

 
32
%
 
4,333

 
21
%
 
15,893

 
76
%
 
16,134

 
77
%
Medical Products
5,200

 
24
%
 
4,812

 
23
%
 
$
21,093

 
100
%
 
$
20,946

 
100
%

Licensees. Our highest revenue distribution channel is the licensee channel.  In this channel we sell Nutritional Products to third parties who purchase products from us in accordance with a license arrangement that gives the licensee exclusive rights to distribute our products in the licensed territory. For the most part, licensees are required to distribute our products in the licensed territory through network marketing. Net sales in this distribution channel are mainly dependent upon the licensee's success in building a distribution network in the licensed territory.
 
Our principal licensee is CCI, which accounted for 99% and 98% of licensee net sales in the nine months ended September 30, 2011 and 2010, respectively. CCI distributes products in a territory comprised mainly of Russia and Eastern Europe. The President of CCI is a former member of our Board of Directors and beneficially owns approximately 18% of our outstanding common stock. Under our arrangement with CCI, CCI orders products from the Company and pays for products when they are segregated in the Company's warehouse for CCI’s account. Once segregated, products are stored until CCI provides shipping instructions; segregated products are not subject to return except in the case of a manufacturing defect.  Because we do not recognize revenue until products are shipped to CCI, the Company's sales to CCI fluctuate from quarter to quarter depending on a number of logistical considerations, only one of which is the sales demand of CCI’s Associate network. 
 
Net sales in this channel decreased $2,586,000, or 22%, during the nine months ended September 30, 2011 compared with net sales for the same period in 2010 primarily as a result of a decrease in net sales to CCI.  Net sales to CCI decreased $2,428,000, or 21%, for the nine months ended September 30, 2011.  We attribute this decline primarily to the logistical considerations affecting the timing of shipments to CCI as well as decreased in-territory demand. Reduced in-territory demand generally results in a disproportionate reduction of sales to CCI as CCI adjusts its inventory to a level commensurate with expected future sales. Backlog related to CCI’s account was $6,545,000 at September 30, 2011 compared to $6,275,000 at September 30, 2010. Net sales in this channel represented 44% of consolidated net sales in the first nine months of 2011, compared to 56%, 51% and 60% for the years ended December 31, 2010, 2009 and 2008, respectively.

Associate Network.  The following table sets forth the Associate network net sales by geographic region as a percentage of total net sales for the periods indicated:
 
Quarters Ended September 30,
 
Nine Months Ended September 30,
 
2011
 
2010
 
2011
 
2010
U.S.
73
%
 
63
%
 
71
%
 
72
%
Canada
19

 
16

 
18

 
19

Southeast Asia
8

 
21

 
11

 
9

 
100
%
 
100
%
 
100
%
 
100
%
 
Sales in this channel are dependent upon the number and productivity of our Associates.  Accordingly, growth in sales is dependent upon the sponsorship of new Associates and retention of existing Associates.  Net sales through the Associate network channel and sponsorship of new Associates increased approximately 54% and 121%, respectively, during the first nine months of 2011 compared to the same period in 2010.  This increase was primarily attributable to the following:

In late March 2010, we initiated a program whereby we began selling selected nutritional supplement products in Taiwan under an NFR program.  In June 2010, October 2010 and April 2011, this program was expanded to include the Southeast Asian markets of Brunei, Singapore and Hong Kong, respectively. The NFR program allows consumers in NFR markets to sign up as customers, purchase products, refer others to our network marketing program and receive commissions. The NFR program also allows independent Associates in North America to expand their distributorships into these NFR markets.   Product orders from NFR customers are currently fulfilled from our U.S. warehouse located in Irving,

- 15 -



Texas.  Because of the favorable response to this program, the Company opened an office and distribution facility in Taiwan on October 1, 2011. We believe that providing local marketing and sales support, customer service and product order fulfillment will generate additional sales growth in the Taiwan market.
In May 2011, we launched a new product, Stem-KineTM. Stem-Kine is a dietary supplement that has been shown in published human clinical studies to nutritionally enable bone marrow and other stem cell-producing tissues to increase their production of stem cells, which form the natural repair and renewal system of the body. In connection with this launch, we promoted sales of Stem-Kine through special purchase offers, sales contests and a series of Company-sponsored events.
 
Medical Products. We sell Medical Products primarily in the U.S. to wholesalers such as medical/surgical dealers and pharmaceutical distributors. These wholesalers supply various health care providers such as hospitals, nursing homes, clinics and pharmacies. In some cases, wholesalers maintain their own sales forces to market products that they supply, which include our products.
 
This segment's largest customer, a medical/surgical dealer, accounted for 60% of Medical Products net sales during the nine months ended September 30, 2011 and 2010.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
 
The preparation of our financial statements and related disclosures in conformity with US GAAP requires us to make estimates and judgments that affect the amounts reported in our financial statements and accompanying footnotes. On an on-going basis, we evaluate these estimates and assumptions based on historical experience and various other factors and circumstances. Our management believes that the estimates and assumptions are reasonable in the circumstances; however, actual results may vary from these estimates and assumptions under different future circumstances.
 
Management believes that there have been no significant changes during the nine months ended September 30, 2011 to the items that we disclosed as our critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in the 2010 Form 10-K.

RESULTS OF OPERATIONS
 
The following table sets forth our operating results as a percentage of net sales for the periods indicated:
 
Quarters Ended September 30,
 
Nine Months Ended September 30,
 
2011
 
2010
 
2011
 
2010
Net sales
100.0
 %
 
100.0
%
 
100.0
 %
 
100.0
%
Cost of sales
53.0

 
46.3

 
49.7

 
50.7

Gross profit
47.0

 
53.7

 
50.3

 
49.3

Operating expenses:
 

 
 

 
 

 
 

General and administrative
37.6

 
36.6

 
33.6

 
33.4

Distributor commissions
14.7

 
12.4

 
15.9

 
9.8

Depreciation and amortization
1.6

 
1.9

 
1.6

 
1.7

Total operating expenses
53.9

 
50.9

 
51.1

 
44.9

Operating profit (loss)
(6.9
)
 
2.8

 
(0.8
)
 
4.4

Interest expense
0.5

 
0.6

 
0.5

 
0.5

Earnings (loss) before income taxes
(7.4
)
 
2.2

 
(1.3
)
 
3.9

Provision (benefit) for income taxes
(3.3
)
 

 
(0.7
)
 
1.4

Net earnings (loss)
(4.1
)%
 
2.2
%
 
(0.6
)%
 
2.5
%

Quarter ended September 30, 2011 compared with quarter ended September 30, 2010 (000’s except per share amounts)
 
Net sales. Net sales for the quarter ended September 30, 2011 were $7,061 compared with net sales for the same period in 2010 of $6,126, an increase of $935, or 15%. This increase resulted from a $843 increase in net sales of Nutritional Products and a $92 increase in net sales of Medical Products. Net sales of Nutritional Products to our licensees increased $100 while net sales of Nutritional Products to our Associate network increased $743.
 

- 16 -



Licensees.  Net sales to our licensees increased as a result of increased shipments to CCI; sales of our products to CCI increased $122, or 4%, during the third quarter of 2011. We attribute this increase primarily to the logistical considerations affecting the timing of shipments to CCI as CCI's in-territory sales declined during the third quarter of 2011 compared with the comparable quarter in 2010. Sales to CCI can vary from quarter to quarter due to various logistical factors, sometimes significantly, irrespective of the sales demand of CCI’s Associate network.
  
Associate Network.  Net sales to our Associate network increased approximately $743, or 49%, during the third quarter of 2011 primarily as a result of increased levels of sponsorship of new Associates and the introduction of Stem-Kine, as described above under the section "Overview - Associate Network." During the third quarter of 2011, the number of new Associates sponsored more than doubled from the number sponsored during the third quarter of 2010.

Medical products.  The growth in net sales of Medical Products resulted from increased sales to the largest customer in this segment.   Sales to the largest customer in this segment, which distributes wound care products and provides services to the nursing home market, increased $113 during the third quarter of 2011 compared to the third quarter of 2010.  Sales to this distributor in the third quarter of 2011 were approximately $961, or 57% of Medical Products net sales.

Cost of sales.  Cost of sales for the quarter ended September 30, 2011 was $3,743 compared with cost of sales in the first quarter of 2010 of $2,836, an increase of $907 or 32%. As a percentage of net sales, cost of sales was 53% in the third quarter of 2011 and 46% in the third quarter of 2010. As a percentage of net sales, gross profit decreased 7% primarily because of a change in sales mix associated with sales to our international licensees. During the third quarter of 2011, the sales mix associated with sales to our licensees contributed a lower gross margin than the corresponding sales mix in the third quarter of 2010. In addition, during the third quarter of 2011, the Company recorded a charge of approximately $100,000 to write off certain inventory it determined was unsalable.
 
General and administrative. General and administrative expenses for the quarter ended September 30, 2011 were $2,654 compared with expenses in the third quarter of 2010 of $2,241, an increase of $413 or 18%. This increase was primarily attributable to increased expenses associated with (i) the startup of our Taiwan branch, which opened October 1, 2011, (ii) Associate network sales and marketing expenses, primarily related to a leadership event conducted in September 2011, and (iii) Medical products sales and marketing expenses, primarily related to sales representatives added during 2011. As a percentage of net sales, general and administrative expenses were 38% and 37% in the quarters ended September 30, 2011 and 2010, respectively.
 
Distributor commissions. Distributor commissions were $1,039 for the quarter ended September 30, 2011 compared with distributor commissions of $759 in the third quarter of 2010, an increase of $280, or 37%.  This increase was attributable to the increase in Associate network sales in the third quarter of 2011 compared with the comparable period in 2010. With respect to our Associate network, distributor commissions as a percentage of commissionable sales exclusive of rebates, which are recorded as a reduction of sales, decreased to approximately 49% in the third quarter of 2011 compared to 50% in the same period in 2010.  On a consolidated basis, distributor commissions as a percentage of net sales were 15% and 12% in the quarter ended September 30, 2011 and 2010, respectively.
 
Income taxes.  We recorded a benefit for income taxes of $231 during the quarter ended September 30, 2011 based on our estimate of the effective annual income tax rate for the applicable period, giving effect to certain credits and deductions, primarily research and development credits and domestic production activities deductions, that were available to recover taxes paid in prior periods. We did not record a provision or benefit for income taxes for the quarter ended September 30, 2010 based on our estimate of the effective annual income tax rate for 2010. During the third quarter of 2010, we identified certain tax credits and other adjustments that offset the provision for income taxes related to third quarter earnings.

Net earnings (loss).  As a result of the factors described above, the net loss for the quarter ended September 30, 2011 was $290, or $0.01 per share, compared with net earnings in the third quarter of 2010 of $133, or $0.01 per share.

Nine months ended September 30, 2011 compared with nine months ended September 30, 2010 (000’s except per share amounts)
 
Net sales. Net sales for the nine months ended September 30, 2011 were $21,093 compared with net sales for the same period in 2010 of $20,946, an increase of $147 or 1%. This increase resulted from a $388 increase in net sales of Medical Products, which was partially offset by a $241 decrease in net sales of Nutritional Products. Net sales of Nutritional Products to our licensees decreased $2,586 while net sales of Nutritional Products to our Associate network increased $2,345.
 
Licensees.  Net sales to our licensees decreased primarily as a result of decreased shipments to CCI; sales of our products to CCI decreased $2,428, or 21%, during the first nine months of 2011. We attribute this decline primarily to the logistical considerations affecting the timing of shipments to CCI as well as decreased in-territory demand. Sales to CCI vary from period to period due

- 17 -



to various logistical factors, sometimes significantly, irrespective of the sales demand of CCI’s Associate network.
  
Associate Network.  Net sales to our Associate network increased approximately $2,345, or 54%, during the first nine months of 2011 primarily as a result of increased levels of sponsorship of new Associates and the introduction of Stem-Kine, as described above under the section "Overview - Associate Network." During the first nine months of 2011, the number of new Associates sponsored more than doubled from the number sponsored during the first nine months of 2010.

Medical products.  The growth in net sales of Medical Products resulted from increased sales both to new customers and to existing customers in this segment.   Sales to the largest customer in this segment, which distributes wound care products and provides services to the nursing home market, increased $229 during the first nine months of 2011 compared to the first nine months of 2010.  Sales to this distributor in the first nine months of 2011 were approximately $3,109, or 60% of Medical Products net sales.

Cost of sales.  Cost of sales for the nine months ended September 30, 2011 was $10,474 compared with cost of sales in the first nine months of 2010 of $10,612, a decrease of $138, or 1%. As a percentage of net sales, cost of sales was 50% in the first nine months of 2011 and 51% in the first nine months of 2010. As a percentage of net sales, gross profit increased 1% primarily because of a change in sales mix in the Nutritional Products segment.
 
General and administrative. General and administrative expenses for the nine months ended September 30, 2011 were $7,094 compared with expenses in the first nine months of 2010 of $6,998, an increase of $96, or 1%.  As a percentage of net sales, general and administrative expenses were 34% and 33% in the nine months ended September 30, 2011 and 2010, respectively.
 
Distributor commissions. Distributor commissions were $3,363 for the nine months ended September 30, 2011 compared with distributor commissions of $2,046 in the first nine months of 2010, an increase of $1,317, or 64%.  With respect to our Associate network, distributor commissions as a percentage of commissionable sales exclusive of rebates, which are recorded as a reduction of sales, increased to approximately 51% in the first nine months of 2011 compared to 46% in the same period in 2010.  This percentage increase was mainly due to (i) special price promotions offered in connection with the launch of Stem-Kine, (ii) an increase in sales of product "entry packs" that are available for purchase by newly enrolling Associates, which provide a higher percentage of commissions than non-entry pack sales, and (iii) the qualification of certain Associates at higher commission levels of the Associate compensation plan, which was attributable to the overall increase in Associate network sales. On a consolidated basis, distributor commissions as a percentage of net sales were 16% and 10% in the nine months ended September 30, 2011 and 2010, respectively.
 
Income taxes.  We recorded a benefit for income taxes of $144 during the nine months ended September 30, 2011 based on our estimate of the effective annual income tax rate for the applicable period, giving effect to certain credits and deductions, primarily research and development credits and domestic production activities deductions, that were available to recover taxes paid in prior periods. We recorded a provision for income taxes of $296 during the nine months ended September 30, 2010 based on our estimate of the effective annual income tax rate for the applicable period

Net earnings (loss).  As a result of the factors described above, the net loss for the nine months ended September 30, 2011 was $129, or $0.01 per share, compared with net earnings in the first nine months of 2010 of $517, or $0.02 per share.

LIQUIDITY AND CAPITAL RESOURCES (000’s)
 
Cash and working capital. During the first nine months of 2011, we had a net increase in cash of $500 compared with a net increase in cash of $842 in the first nine months of 2010.  At September 30, 2011, we had working capital of $5,575, a $62 increase from working capital at December 31, 2010 of $5,513.   The reasons for these changes in cash and working capital are described below.
 
Operating activities. In the first nine months of 2011, our operating activities provided cash flows of $668.  In the first nine months of 2010, our operating activities provided cash flows of $1,119.  The primary sources of cash provided by operating activities during the first nine months of 2011 were a $1,373 increase in deferred revenue, which primarily resulted from an increase in payments received for inventory held for shipment to CCI, and a $616 increase in accounts payable and accrued liabilities, which primarily relates to the timing of payments due to suppliers. Offsetting these sources of cash were a $1,453 increase in inventories, which primarily resulted from inventory purchased for the Taiwan branch and inventory held for CCI, and the net loss of $129. In the first nine months of 2011, net earnings (loss) adjusted for non-cash activities, which primarily include depreciation and amortization, stock-based compensation and deferred income taxes, provided cash flows of $223 compared with providing cash flows of $1,016 in the first nine months of 2010.
 
Investing activities. During the first nine months of 2011, we used cash of $103 to purchase property and equipment, most of

- 18 -



which were used to equip the Taiwan office and to upgrade computer systems and warehouse operations in the U.S.
 
Financing activities. The only financing activity during the first nine months of 2011 was the repayment of long-term debt in the amount of $125.

General liquidity and cash flows. We believe that the working capital requirements of our existing operations, including the start-up of branch operations in Taiwan, can be met through available cash and cash generated from operating activities for the foreseeable future; however, an overall decrease in demand for our products could adversely affect our liquidity. In the event of a significant decrease in cash provided by our operating activities, we may seek outside sources of capital including bank borrowings or other types of debt or equity financings. We can give no assurance, however, that we would be able to obtain any additional outside financing or obtain financing on terms we would find acceptable.  We have no plans or requirements for any significant capital expenditures during the next 12 months.
 
Other than those factors already described, we are not aware of any trends or uncertainties that would significantly affect our liquidity or capital resources in the future.

ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk.

The following discussion about our market risk includes “forward-looking statements” that involve risks and uncertainties.  Actual results could differ materially from those projected in the forward-looking statements. We do not use derivative financial instruments for speculative or trading purposes.  We are exposed to market risk from changes in foreign currency exchange rates that could affect our future results of operations and financial condition.  We manage our exposure to these risks through our regular operating and financing activities.
 
Foreign exchange
 
We have foreign-based operations in Canada that accounted for 6% of net sales during the first nine months of 2011 and 4% of net sales in 2010.  We also opened a branch in Taiwan on October 1, 2011. We advance funds to and from our foreign operations denominated in U.S. dollars, exposing the foreign operation to the effect of changes in spot exchange rates of the local currency relative to the U.S. dollar.  We do not regularly use forward-exchange contracts to hedge these exposures.  Based on our foreign currency exchange rate exposure for intercompany advances of approximately $1,065,000 and $548,000 to our Canadian operations and Taiwan operations, respectively, at September 30, 2011, a 10% adverse change in the currency rate would reduce earnings before income taxes by approximately $161,300.

All transactions with our licensees are denominated in U.S. dollars so the licensee bears the currency exchange risk.  Accordingly, exchange rate fluctuations in international markets served by our licensees do not directly affect our results of operations.  However, exchange rate fluctuations in these markets may affect the ability of our licensees to conduct their business operations profitably.

ITEM 4.
Controls and Procedures.

As required by Rules 13a-15(b) and 15d-15(b) under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated as of September 30, 2011, the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of September 30, 2011, were effective for the purpose of ensuring that information required to be disclosed by us in this report is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosures.

There has been no change in internal control over financial reporting that occurred during the quarter ended September 30, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 

- 19 -



PART II – OTHER INFORMATION
 
ITEM 1.
Legal Proceedings.

None

ITEM 1A.
Risk Factors.
 
Our business is subject to certain risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our common stock. For a discussion of these risks, please refer to the “Risk Factors” section of the 2010 Form 10-K. In connection with our preparation of this quarterly report, management has reviewed and considered these risk factors and has determined that there have been no material changes to our risk factors since the date of filing of the 2010 Form 10-K.

ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds.

None

ITEM 3.
Defaults Upon Senior Securities.
 
None

ITEM 4.
Reserved.
 
ITEM 5.
Other Information.
 
None

ITEM 6.
Exhibits.

The Exhibit Index filed herewith is incorporated herein by reference.


- 20 -



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.

 
 
RBC Life Sciences, Inc.
 
 
Registrant
 
 
 
 
November 10, 2011
 
By:
/s/             Clinton H. Howard
Date
 
Its:
President and Chief Executive Officer
 
 
 
(principal executive officer)
 
 
 
 
November 10, 2011
 
By:
/s/              Steven E. Brown
Date
 
Its:
Executive Vice President and Chief Financial Officer
 
 
 
(principal financial and accounting officer)


- 21 -



RBC LIFE SCIENCES, INC.

Exhibit Index

Exhibit Number
Description
31.1
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
31.2
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
32.1
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
32.2
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
101.INS
XBRL Instance Document **
 
 
101.SCH
XBRL Taxonomy Extension Schema Document **
 
 
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document **
 
 
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document **
 
 
101.LAB
XBRL Taxonomy Extension Label Linkbase Document **
 
 
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document **

** Filed electronically herewith

- 22 -