##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 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.
  Nevada
(State or other jurisdiction of incorporation or organization)
    
    91-2015186
(I.R.S. Employer Identification No.)
 2301 Crown Court, Irving, Texas
    
    75038(Address of principal executive offices)
    
    (Zip Code)
 972-893-4000
 None
 Securities registered pursuant to Section 12(g) of the Act:
    

Common
Stock, $0.001 par value(Title of class)
 YesoNoþ.
 YesoNoþ.
 Yes þ No o
 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 YesoNoþ.
   DOCUMENTS INCORPORATED BY REFERENCE




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FORWARD LOOKING STATEMENTS




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RBC LIFE SCIENCES, INC.
 
  PAGEPART I
    
    
    2Item 1.Business
    
    
    2Item 1A.Risk Factors
    
    
    15Item 1B.Unresolved Staff Comments
    
    
    22Item 2.Properties
    
    
    23Item 3.Legal Proceedings
    
    
    23Item 4.Submission of Matters to a Vote of Security Holders
    
    
    23PART II
    
    
    24Item 5.Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    24Item 6.Selected Financial Data
    
    
    25Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operation
    
    
    25Item 7A.Quantitative and Qualitative Disclosures About Market Risk
    
    
    35Item 8.Financial Statements and Supplementary Data
    
    
    35Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    35Item 9A(T).Controls and Procedures
    
    
    35Item 9B.Other Information
    
    
    36PART III
    
    
    37Item 10.Directors, Executive Officers and Corporate Governance
    
    
    37Item 11.Executive Compensation
    
    
    37Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    37Item 13.Certain Relationships and Related Transactions, and Director Independence
    
    
    37Item 14.Principal Accountant Fees and Services
    
    
    37PART IV
    
    
    38Item 15.Exhibits and Financial Statement Schedules
    
    
    38SIGNATURES
    
    
    40Exhibit 10.5Exhibit 10.6Exhibit 10.15Exhibit 10.16Exhibit 21.1Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   1




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PART I
 
 Item 1. Business
 Overview
     www.rbclifesciences.com www.mpmmedicalinc.com
 Industry Overview
 Nutritional Products.
 Nutrition Business Journal
   2




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
    
    The general publics interest in healthier lifestyles, healthier aging and disease
prevention;
 
    
    The aging population, particularly the baby-boomer generation, which we believe is more
likely to use more nutritional supplementation as it ages;
 
    
    Rising health care costs causing many consumers to take preventative measures, including
alternative medicines and nutritional supplements; and
 
    
    The publication of research findings supporting the positive health effects of certain
nutritional supplements.
  
    
    Mass market retailers, including mass merchandisers, drug stores, supermarkets, and
discount stores;
 
    
    Natural health food retailers;
 
    
    Network marketing;
 
    
    Mail order;
 
    
    Health care professionals and practitioners; and
 
    
    The Internet.
  Medical Products.
 
    
    Wound management products such as adhesive bandages and gauze;
 
    
    Wound closure products such as staples, various clips and sutures;
 
    
    Advanced wound care products, which are represented by a variety of moist wound healing
dressings such as alginate dressings, film dressings, foam dressings, hydrocolloid
dressings and hydrogel dressings;
 
    
    Active wound healing products such as skin replacements, collagen dressings and growth
factors;
 
    
    Debriding products including various cleansers; and
 
    
    Pressure relief devices such as beds, mattress overlays and other support devices.
   Competitive Strengths
 Product Portfolio.
  3




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In-house Manufacturing. ® ®
 Science-based Product Development.
 Operating Flexibility.
 Experienced Management Team.
 Business Strategy
  Leverage and Expand our Relationship with CCI.
 Expand our Existing Network Marketing Associate Base.
 Expand Medical Products in Existing and New Markets.
  4




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Develop Improved and New Products.
 Products
  Nutritional Products
 
    
    Microhydrin and Microhydrin Plus  powerful, broad-spectrum antioxidants;
 
    
    Organic spirulina  sold in powder, tablet and capsule forms, a nutritious algae
that provides a complete range of vital nutrients and a higher percentage of easily
digested protein than meat;
 
    
    OliVivaTM  made from freshly harvested olive leaves, an antioxidant
beverage that supports the immune system, increases energy and supports the
cardiovascular system;
 
    
    ColoVada   an effective fourteen-day colon cleansing program that has been
widely used for more than 20 years;
 
    
    HydraCelTM  a product that improves the quality of drinking water by
reducing surface tension and making water more alkaline;
 
    
    24 Seven Life Essentials®  a daily multivitamin/mineral supplement;
 
    
    Immune 360TM  a product to nourish and support the function of the
immune system;
 
    
    Digestion Formula  a combination of digestive enzymes to supplement the decline
of enzymes that naturally occurs with aging; and
 
    
    Cellution 7TM  a science-based skin care product collection that
incorporates ingredients with unique benefits.
   
    
    Silica mineral hydride, a nutritional antioxidant manufactured by us using our
proprietary formula and process and used as an ingredient in the formulation of
nutritional supplement and personal care products;
 
    
    Organic spirulina sourced from the highest quality producers, sold as a
stand-alone product and combined as an ingredient in many other nutritional
supplement formulations; and
 
    
    Organic aloe vera specially processed to retain the benefits found in a fresh
aloe vera leaf and sold as a beverage and as a topical gel and used as an
ingredient in many of our skin care products.
  5




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Medical Products.
  Manufacturing and Product Sourcing
   Sales by Geographic Area
  Independent Distributor Network
 Overview.
  6




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Associates.
 Sponsoring.
  Compensation.
 
    
    Through retail markups on sales of products purchased at wholesale; and
 
    
    Through a series of commissions on product sales generated by the Associate and
his or her downline Associates.
  Support.
   7




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Compliance.
 Returns.
  Licensees
   Medical Products Distribution
 Sales force.
 Distribution.
  8




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Third-Party Reimbursement.
 Returns.
 Trademarks, Patents or Other Intellectual Property
   Seasonality
  Inventory Requirements, Backlogs
   9




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Industry/Competitors
     Research and Development
   10




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Governmental Regulations
 Products.
       11




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12




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13




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Network Marketing.
  Transfer Pricing.
 Employees
   14




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Additional Available Information
 www.rbclifesciences.com www.sec.gov
 
 Item 1A. Risk Factors.
  If we continue to lose existing Associates more rapidly than we recruit new Associates, net sales
from our Associate network will continue to decrease.
   
    
    on-going motivation of our Associates;
 
    
    general business and economic conditions;
 
    
    significant changes in the amount of commissions paid;
 
    
    public perception and acceptance of the nutritional supplement industry;
 
    
    public perception and acceptance of network marketing;
 
    
    public perception and acceptance of RBC and our products;
 
    
    the limited number of people interested in pursuing network marketing as a business;
 
    
    our ability to provide products that satisfy market demands; and
 
    
    competition in recruiting and retaining active Associates
  15




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The implementation of a new Associate compensation plan may not attract new Associates and may
increase the turnover of existing Associates.
  Two of our customers constitute a significant portion of our sales.
  Two of our products constitute a significant portion of our net sales.
  Net sales of our Nutritional Products are dependent upon an independent sales force and third-party
licensees, and we do not have direct control over the marketing of our products.
   16




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Adverse economic conditions may harm our business.
  We may be affected adversely by increased fuel and utility costs.
  Changes in customer preferences and demand could negatively impact our operating results.
  
    
    accurately anticipate customer needs;
    
    innovate and develop new products or product enhancements that meet these needs;
    
    successfully commercialize new products or product enhancements in a timely manner;
    
    price our products competitively;
    
    manufacture and deliver our products in sufficient volumes and in a timely manner;
    
    differentiate our product offerings from those of our competitors; and
    
    satisfy government regulations related to the manufacture, labeling, sale and distribution of the products
   17




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Our Associate network business is subject to the effects of adverse publicity and negative public
perception.
  We may have to obtain regulatory approvals before we market and sell certain new Medical Products.
  Growth of Medical Products sales depends in part upon the availability of adequate third-party
reimbursement.
  We must rely on independent third parties for the supply of our products.
   18




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As a product manufacturer and distributor we may be subject to product liability claims.
  A violation of marketing or advertising laws by Associates in connection with the sale of our
products or the promotion of our Associate compensation plan could adversely affect our business.
  Laws and regulations may prohibit or severely restrict our sales efforts and could adversely affect
our ability to do business.
     19




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Our business is subject to the risks associated with intense competition from larger, wealthier and
more established competitors.
   Our business is subject to intellectual property risks.
   We are subject to risks associated with our reliance upon information technology systems and
implementation of a new technology system.
   20




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Our future financial results could be adversely impacted by asset impairments.
 Goodwill and
Other Intangible Assets,
 Changes in conditions in foreign territories and exchange rate fluctuations affect our foreign
operations and could reduce our net sales and earnings.
  Taxation and transfer pricing considerations affect our international operations.
  We may be held responsible for certain taxes relating to our distributors.
   21




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Our stock price has been volatile and subject to various market conditions, and there is a limited
public trading market for our common stock.
   The beneficial ownership of a significant percentage of our common stock gives Clinton H. Howard
effective control and limits the influence of other shareholders on important policy and management
issues.
  If our shareholders sell a substantial number of shares of our common stock in the public market,
the market price of our common stock could fall.
  We depend on our key personnel, and the loss of the services provided by any of our executive
officers or other key employees could harm our business and results of operations.
  
 Item 1B. Unresolved Staff Comments.
   22




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Item 2. Properties.
  
 Item 3. Legal Proceedings.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
   23




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PART II
 
 Item 5.

    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
  QUARTER ENDED
    
    3/31/08
    
    
    6/30/08
    
    
    9/30/08
    
    
    12/31/08HIGH
    
    $
    1.00
    
    
    $
    0.72
    
    
    $
    0.70
    
    
    $
    0.70LOW
    
    
    0.59
    
    
    
    0.49
    
    
    
    0.45
    
    
    
    0.26
 QUARTER ENDED
    
    3/31/07
    
    
    6/30/07
    
    
    9/30/07
    
    
    12/31/07HIGH
    
    $
    0.47
    
    
    $
    0.78
    
    
    $
    0.86
    
    
    $
    1.10LOW
    
    
    0.21
    
    
    
    0.36
    
    
    
    0.60
    
    
    
    0.71
     24




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Item 6. Selected Financial Data.
  Years Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(In thousands, except per share data)Statement of Earnings Data:Net sales
    
    $
    30,409
    
    
    $
    27,029
    
    
    $
    21,697
    
    
    $
    19,361
    
    
    $
    18,266Earnings before income taxes
    
    
    2,677
    
    
    
    2,689
    
    
    
    714
    
    
    
    619
    
    
    
    537Net earnings
    
    
    1,616
    
    
    
    1,692
    
    
    
    436
    
    
    
    592
    
    
    
    537Net earnings per common
share  diluted
    
    
    0.07
    
    
    
    0.08
    
    
    
    0.02
    
    
    
    0.03
    
    
    
    0.03Balance Sheet Data:Cash and cash equivalents
    
    
    4,973
    
    
    
    6,369
    
    
    
    3,220
    
    
    
    1,698
    
    
    
    1,052Working capital
    
    
    5,275
    
    
    
    3,539
    
    
    
    1,935
    
    
    
    1,140
    
    
    
    123Total assets
    
    
    19,766
    
    
    
    19,158
    
    
    
    13,639
    
    
    
    12,811
    
    
    
    11,264Long-term obligations
    
    
    2,196
    
    
    
    2,332
    
    
    
    2,924
    
    
    
    3,106
    
    
    
    3,152Shareholders equity
    
    
    9,387
    
    
    
    7,578
    
    
    
    5,607
    
    
    
    5,021
    
    
    
    4,428
 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Overview
  
    
    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. and Canada, we distribute
Nutritional Products directly through a network of independent Associates. In certain
international 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 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, oncology and podiatry markets.
  25




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Net sales.
 Years Ended December 31,2008
    
    
    2007
    
    
    2006(U.S. dollars in 000s)Nutritional Products:Associate network
    
    $
    5,686
    
    
    
    19
    %
    
    $
    6,891
    
    
    
    25
    %
    
    $
    8,538
    
    
    
    40
    %Licensees
    
    
    18,375
    
    
    
    60
    %
    
    
    15,632
    
    
    
    58
    %
    
    
    9,399
    
    
    
    43
    %24,061
    
    
    
    79
    %
    
    
    22,523
    
    
    
    83
    %
    
    
    17,937
    
    
    
    83
    %Medical Products
    
    
    6,348
    
    
    
    21
    %
    
    
    4,506
    
    
    
    17
    %
    
    
    3,760
    
    
    
    17
    %$
    30,409
    
    
    
    100
    %
    
    $
    27,029
    
    
    
    100
    %
    
    $
    21,697
    
    
    
    100
    %
 Associate network.
  Years Ended December 31,2008
    
    
    2007
    
    
    2006U.S.
    
    
    80
    %
    
    
    80
    %
    
    
    74
    %Canada
    
    
    20
    
    
    
    20
    
    
    
    19South Korea
    
    
    
    
    
    
    
    
    
    
    7100
    %
    
    
    100
    %
    
    
    100
    %
   Licensees.
  26




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Medical Products.
  Cost of Sales.
 Distributor Commissions.
 Accounting for Consideration Given by a Vendor to a Customer (Including a
Reseller of the Vendors Products)
 General and Administrative.
 Critical Accounting Polices and Estimates
   27




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Revenue Recognition. Revenue Recognition
in Financial Statements Accounting of
Shipping and Handling Fees and Costs
 Intangible Assets.
 Income Taxes. Accounting for Income Taxes
 Accounting for Uncertainty in Income Taxes  an interpretation of
FASB Statement 109
  Share-based Payments. Share-Based Payment,
   28




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Results of Operations
  Years Ended December 31,2008
    
    
    2007
    
    
    2006Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    49.0
    
    
    
    44.9
    
    
    
    39.5Gross profit
    
    
    51.0
    
    
    
    55.1
    
    
    
    60.5Operating expenses:General and administrative
    
    
    32.9
    
    
    
    33.8
    
    
    
    39.5Distributor commissions
    
    
    7.6
    
    
    
    9.3
    
    
    
    13.7Depreciation and amortization
    
    
    1.1
    
    
    
    1.3
    
    
    
    2.8Total operating expenses
    
    
    41.6
    
    
    
    44.4
    
    
    
    56.0Operating profit
    
    
    9.4
    
    
    
    10.7
    
    
    
    4.5Interest expense
    
    
    0.6
    
    
    
    0.7
    
    
    
    1.2Earnings before income taxes
    
    
    8.8
    
    
    
    10.0
    
    
    
    3.3Income tax expense
    
    
    3.5
    
    
    
    3.7
    
    
    
    1.3Net earnings
    
    
    5.3
    %
    
    
    6.3
    %
    
    
    2.0
    %
 2008 Compared with 2007
 Net sales.
   
    
    Marketing message  We modified our marketing message to focus on our core products
and their benefits, and the business opportunity and desirable lifestyle available to a
successful Associate. In addition, we developed, introduced and promoted new
sponsoring systems that are simple and easy to explain to prospective Associates.
 
    
    Product strategy  We first categorized our diverse product line into three major
product groups. We then developed and introduced new products in each product group,
allowing us, in some cases, to
eliminate redundant products from the product line. We continue to develop and
introduce new products to support sales in each product category.
  29




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
    
    Marketing materials  We have developed and introduced and are continuing to develop
and introduce, new marketing tools in a variety of media that make it easy and simple
for Associates to expose our products and business to prospective new Associates.
 
    
    Associate compensation plan  We have introduced changes to our Associate
compensation plan to make it financially rewarding at all levels and to encourage
sponsoring. We plan to introduce a new compensation plan in 2009 that we believe will
be more attractive to potential new Associates than our current plan. Although we
expect that the new plan will increase the rate of new Associate sponsoring, no
assurance can be given in this regard.
 
    
    Corporate support  We have significantly increased the support, including financial
support, we provide to Associates who are actively engaged in sponsoring activities.
We have also undertaken various advertising and direct mail initiatives to attract new
prospects and increase communication with existing Associates.
    Cost of sales.
 General and administrative.
 Distributor commissions.
  30




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Income taxes.
 Net earnings.
 2007 Compared with 2006
 Net sales.
     Cost of sales.
 General and administrative.
  31




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Distributor commissions.
 Income taxes.
 Net earnings.
 Liquidity and Capital Resources
  Cash and working capital.
 Operating activities.
   32




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Investing activities.
 Financing activities.
 General liquidity and cash flows.
  Contractual Cash Obligations
  Payments
Due by Period (000s)Contractual
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2014 andObligations
    
    Total
    
    
    2009
    
    
    2010  2011
    
    
    2012  2013
    
    
    BeyondLong-term debt
    
    $
    2,196
    
    
    $
    144
    
    
    $
    325
    
    
    $
    379
    
    
    $
    1,348Operating leases
    
    
    601
    
    
    
    250
    
    
    
    266
    
    
    
    85
    
    
    
    Purchase obligations (1)
    
    
    3,357
    
    
    
    3,357
    
    
    
    
    
    
    
    
    
    
    
    Employment agreements
    
    
    3,339
    
    
    
    1,650
    
    
    
    1,017
    
    
    
    672
    
    
    
    
 
 (1)
    
    Purchase obligations consist of outstanding purchase orders issued in the ordinary course of
our business. These purchase orders are primarily related to the purchase of inventory.  33




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Off-Balance Sheet Arrangements
  Inflation
  Recent Accounting Pronouncements
 Fair Value Measurements. Fair Value
Measurements,
 Business Combinations. Business
Combinations
 Noncontrolling Interests in Consolidated Financial Statements. Noncontrolling Interests in Consolidated Financial Statements  An Amendment
of ARB No. 51
 Disclosures about Derivative Instruments and Hedging Activities Disclosures about Derivative Instruments and Hedging Activities, an amendment
of FASB Statement No. 133
  34




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Hierarchy of Generally Accepted Accounting Principles. The Hierarchy of Generally Accepted Accounting Principles,
 Determination of the Useful Life of Intangible Assets. Determination of the Useful Life of Intangible Assets
 
 Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
  Foreign exchange.
  
 Item 8. Financial Statements and Supplementary Data.
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A(T). Controls and Procedures.
 Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
   35




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Managements Annual Report on Internal Control over Financial Reporting
  Internal ControlIntegrated Framework Internal ControlIntegrated
Framework
  Changes in Internal Control over Financial Reporting
  
 Item 9B. Other Information.
   36




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PART III
  
 Item 10. Directors, Executive Officers and Corporate Governance.
  
 Item 11. Executive Compensation.
  
 Item 12.
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence.
  
 Item 14. Principal Accountant Fees and Services.
   37




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PART IV
 
 Item 15. Exhibits, Financial Statement Schedules.
 (a)(1) Financial Statements.
       (a)(2) Financial Statement Schedules
 (a)(3) Exhibits.
 Ex. No.
    
    Description3.1
    
    
    Articles of Incorporation(2)3.2
    
    
    Bylaws(2)3.3
    
    
    Amendment No. 1 to Bylaws(6)4.1
    
    
    Specimen copy of Certificate for Common Stock(2)4.2
    
    
    The 2003 Stock Incentive Plan(4)4.3
    
    
    The 2006 Stock Incentive Plan(11)10.1
    
    
    Form of Member Agreement and Policies with Distributors(1)10.2
    
    
    Form of Indemnification Agreement(2)10.3
    
    
    Lease Agreement dated August 23, 1994, by and between Royal BodyCare Canada,
Inc. (f/k/a Pure Life International Products, Inc.) and Mott Electric Motor Repair
Ltd.(10)10.4
    
    
    Purchase and Sale Agreement, dated as of August 21, 2000, between CIIF
Associates II Limited Partnership and Royal BodyCare, Inc.(3)10.5
    
    
    Mortgage Note, dated March 15, 2001, in the principal amount of $3,000,000,
executed by Royal BodyCare, Inc. and Clinton H. Howard in favor of Allstate Life
Insurance Company*10.6
    
    
    Deed of Trust, Assignment of Leases, Rents and Contracts, Security Agreement
and Fixture Filing, dated March 16, 2001, between Royal BodyCare, Inc., as Trustor,
Robin R. Green, as Trustee and Allstate Life Insurance Company, as Beneficiary*10.7
    
    
    Employment Agreement, dated November 20, 2003, between Royal BodyCare, Inc. and
Clinton H. Howard(7)10.8
    
    
    Exclusive Distributorship Agreement, dated as of July 14, 2004, between Royal
BodyCare, Inc. and Coral Club International, Inc.(9)10.9
    
    
    Agreement to Renew Lease dated May 26, 2005, by and between Royal BodyCare
Canada, Inc. and Mott Electric Motor Repair Ltd.(10)10.10
    
    
    Line of Credit Promissory Note, dated November 1, 2007, in the principal
amount of $500,000, executed by RBC Life Sciences, Inc. in favor of Independent Bank of
Texas (13)
  38




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##### Table of Contents



Ex. No.
    
    Description10.11
    
    
    Business Loan Agreement, dated November 1, 2007, between RBC Life Sciences,
Inc. and Independent Bank of Texas, associated with $500,000 Line of Credit Promissory
Note (13)10.12
    
    
    Employment Agreement, executed December 7, 2007, between RBC Life Sciences,
Inc. and John W. Price(12)10.13
    
    
    Employment Agreement, executed December 11, 2007 to be effective January 1,
2008, between RBC Life Sciences, Inc. and Kenneth L. Sabot(12)10.14
    
    
    Employment Agreement, executed December 11, 2007 to be effective January 1,
2008, between RBC Life Sciences, Inc. and Steven E. Brown(12)10.15
    
    
    Line of Credit Promissory Note, dated October 22 2008, in the principal amount
of $500,000, executed by RBC Life Sciences, Inc. in favor of Independent Bank of Texas*10.16
    
    
    Amended and Restated Employment Agreement, executed December 31, 2008, between
RBC Life Sciences, Inc. and John W. Price *14.1
    
    
    Code of Ethics(8)21.1
    
    
    List of company subsidiaries*23.1
    
    
    Consent of Lane Gorman Trubitt, L.L.P., independent registered public
accountants to incorporation of report by reference*23.2
    
    
    Consent of Gardere Wynne Sewell LLP, legal counsel(5)24.1
    
    
    Power of Attorney(5)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*
 
 *
    
    Filed herewith(1)
    
    Incorporated by reference to the Annual Report on Form 10-K/A filed May 7, 1999(2)
    
    Incorporated by reference to the Annual Report on Form 10-K filed April 26, 2000(3)
    
    Incorporated by reference to the Quarterly Report on Form 10-Q filed November 13, 2000(4)
    
    Incorporated by reference to the Current Report on Form 8-K filed September 29, 2003(5)
    
    Incorporated by reference to the registration statement filed on Form S-8 filed October 15, 2003(6)
    
    Incorporated by reference to the Quarterly Report on Form 10-Q filed November 14, 2003(7)
    
    Incorporated by reference to the Current Report on Form 8-K filed December 3, 2003(8)
    
    Incorporated by reference to the Annual Report on Form 10-K filed April 14, 2004(9)
    
    Incorporated by reference to the Current Report on Form 8-K filed July 27, 2004(10)
    
    Incorporated by reference to the Current Report on Form 8-K filed June 1, 2005(11)
    
    Incorporated by reference to the registration statement filed on Form S-8 filed December 22, 2006(12)
    
    Incorporated by reference to the Current Report on Form 8-K filed December 13, 2007(13)
    
    Incorporated by reference to the Annual Report on Form 10-K filed March 18, 2008  39




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##### Table of Contents



RBC LIFE SCIENCES, INC.,a Nevada corporationDate: March 13, 2009
    
    By:
    
    /s/ John W. Price

John W. Price, Chief Executive Officer
  Signature
    
    Title
    
    Date/s/ John W. Price

John W. Price
    
    Director, President and Chief
Executive Officer
(principal executive officer)
    
    March 13, 2009/s/ Steven E. Brown

Steven E. Brown
    
    Director, Vice President-Finance and Chief Financial Officer
(principal financial and accounting
officer)
    
    March 13, 2009/s/ Clinton H. Howard

Clinton H. Howard
    
    Chairman of the Board of Directors
    
    March 13, 2009/s/ Kenneth L. Sabot

Kenneth L. Sabot
    
    Director and Senior Vice President- Operations
    
    March 13, 2009/s/ Paul R. Miller

Paul R. Miller
    
    Director and President- MPM

Medical, Inc.
    
    March 13, 2009/s/ Robert A. Kaiser

Robert A. Kaiser
    
    Director
    
    March 13, 2009/s/ Joseph. P. Philipp

Joseph P. Philipp
    
    Director
    
    March 13, 2009
  40




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##### Table of Contents



INDEX TO FINANCIAL STATEMENTS
 PageReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Financial StatementsConsolidated Balance Sheets
    
    
    F-3Consolidated Statements of Earnings
    
    
    F-4Consolidated Statements of Shareholders Equity
    
    
    F-5Consolidated Statements of Cash Flows
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7
  F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
      
  F-2




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##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
 
   2008
    
    
    2007ASSETSCurrent assetsCash and cash equivalents
    
    $
    4,973,405
    
    
    $
    6,368,885Accounts receivable, net of allowance for doubtful accounts
of $36,573 and $34,169, respectively
    
    
    465,311
    
    
    
    687,505Inventories
    
    
    5,706,613
    
    
    
    4,725,372Deferred income taxes
    
    
    405,286
    
    
    
    340,395Prepaid expenses and other current assets
    
    
    1,374,805
    
    
    
    305,960Total current assets
    
    
    12,925,420
    
    
    
    12,428,117Property and equipment, net of accumulated depreciation
    
    
    4,330,451
    
    
    
    4,078,035Goodwill, net of accumulated amortization
    
    
    2,197,082
    
    
    
    2,302,226Other intangible assets, net of accumulated amortization
    
    
    109,347
    
    
    
    151,758Other assets
    
    
    203,816
    
    
    
    198,306$
    19,766,116
    
    
    $
    19,158,442LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable, trade
    
    $
    1,961,579
    
    
    $
    1,932,158Accrued liabilities
    
    
    1,266,167
    
    
    
    2,498,682Current maturities of long-term obligations
    
    
    144,397
    
    
    
    135,428Deferred revenue
    
    
    4,278,503
    
    
    
    4,323,316Total current liabilities
    
    
    7,650,646
    
    
    
    8,889,584Long-term obligations, less current maturities
    
    
    2,052,071
    
    
    
    2,196,468Deferred income taxes
    
    
    676,495
    
    
    
    494,265Commitments and contingenciesShareholders equityPreferred stock, $0.10 par value; authorized 20,000,000 shares;
none outstanding
    
    
    
    
    
    
    Common stock, $.001 par value; authorized 50,000,000 shares;
21,915,004 and 20,863,724 shares issued and outstanding
in 2008 and 2007, respectively
    
    
    21,915
    
    
    
    20,864Additional paid-in capital
    
    
    13,364,308
    
    
    
    13,086,182Accumulated deficit
    
    
    (4,104,241
    )
    
    
    (5,720,001
    )Accumulated other comprehensive income
    
    
    104,922
    
    
    
    191,0809,386,904
    
    
    
    7,578,125$
    19,766,116
    
    
    $
    19,158,442
   F-3




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##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
 
   2008
    
    
    2007
    
    
    2006Net sales
    
    $
    30,409,293
    
    
    $
    27,028,529
    
    
    $
    21,696,631Cost of sales
    
    
    14,914,840
    
    
    
    12,129,963
    
    
    
    8,578,243Gross profit
    
    
    15,494,453
    
    
    
    14,898,566
    
    
    
    13,118,388Operating expensesGeneral and administrative
    
    
    10,012,438
    
    
    
    9,142,624
    
    
    
    8,564,448Distributor commissions
    
    
    2,293,841
    
    
    
    2,522,978
    
    
    
    2,978,336Depreciation and amortization
    
    
    336,522
    
    
    
    334,445
    
    
    
    609,311Total operating expenses
    
    
    12,642,801
    
    
    
    12,000,047
    
    
    
    12,152,095Operating profit
    
    
    2,851,652
    
    
    
    2,898,519
    
    
    
    966,293Interest expense
    
    
    175,055
    
    
    
    209,770
    
    
    
    252,175Earnings before income taxes
    
    
    2,676,597
    
    
    
    2,688,749
    
    
    
    714,118Income tax expense
    
    
    1,060,837
    
    
    
    996,500
    
    
    
    277,914Net earnings
    
    $
    1,615,760
    
    
    $
    1,692,249
    
    
    $
    436,204Basic earnings per share
    
    $
    0.08
    
    
    $
    0.08
    
    
    $
    0.02Basic weighted average shares outstanding
    
    
    21,464,832
    
    
    
    20,396,420
    
    
    
    20,163,544Diluted earnings per share
    
    $
    0.07
    
    
    $
    0.08
    
    
    $
    0.02Diluted weighted average shares outstanding
    
    
    22,838,858
    
    
    
    22,206,382
    
    
    
    22,047,152
   F-4




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##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
 
  Additional
    
    
    
    
    
    
    Accumulated other
    
    
    TotalCommon stock
    
    
    paid-in
    
    
    Accumulated
    
    
    comprehensive
    
    
    shareholdersShares
    
    
    Amount
    
    
    capital
    
    
    deficit
    
    
    income
    
    
    equityBalance at January 1, 2006
    
    
    20,056,294
    
    
    $
    20,056
    
    
    $
    12,789,978
    
    
    $
    (7,848,454
    )
    
    $
    59,595
    
    
    $
    5,021,175Comprehensive incomeNet earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    436,204
    
    
    
    
    
    
    
    436,204Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,433
    
    
    
    23,433Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    459,637Exercise of common stock options
    
    
    132,000
    
    
    
    132
    
    
    
    19,008
    
    
    
    
    
    
    
    
    
    
    
    19,140Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    107,049
    
    
    
    
    
    
    
    
    
    
    
    107,049Balance at December 31, 2006
    
    
    20,188,294
    
    
    
    20,188
    
    
    
    12,916,035
    
    
    
    (7,412,250
    )
    
    
    83,028
    
    
    
    5,607,001Comprehensive incomeNet earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,692,249
    
    
    
    
    
    
    
    1,692,249Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    108,052
    
    
    
    108,052Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,800,301Exercise of common stock options
    
    
    675,430
    
    
    
    676
    
    
    
    97,874
    
    
    
    
    
    
    
    
    
    
    
    98,550Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    72,273
    
    
    
    
    
    
    
    
    
    
    
    72,273Balance at December 31, 2007
    
    
    20,863,724
    
    
    
    20,864
    
    
    
    13,086,182
    
    
    
    (5,720,001
    )
    
    
    191,080
    
    
    
    7,578,125Comprehensive income (loss)Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,615,760
    
    
    
    
    
    
    
    1,615,760Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (86,158
    )
    
    
    (86,158
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,529,602Exercise of common stock options
    
    
    1,051,280
    
    
    
    1,051
    
    
    
    156,549
    
    
    
    
    
    
    
    
    
    
    
    157,600Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    121,577
    
    
    
    
    
    
    
    
    
    
    
    121,577Balance at December 31, 2008
    
    
    21,915,004
    
    
    $
    21,915
    
    
    $
    13,364,308
    
    
    $
    (4,104,241
    )
    
    $
    104,922
    
    
    $
    9,386,904
   F-5




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##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
 
   2008
    
    
    2007
    
    
    2006Cash flows from operating activitiesNet earnings
    
    $
    1,615,760
    
    
    $
    1,692,249
    
    
    $
    436,204Adjustments to reconcile net earnings to net cash
provided by (used in) operating activitiesDepreciation and amortization
    
    
    373,811
    
    
    
    362,809
    
    
    
    634,703Losses on write off of note receivable and
disposition of assets
    
    
    
    
    
    
    535,249
    
    
    
    169,501Deferred income taxes
    
    
    117,339
    
    
    
    (104,260
    )
    
    
    258,130Stock-based compensation
    
    
    121,577
    
    
    
    72,273
    
    
    
    107,049Change in operating assets and liabilitiesAccounts receivable
    
    
    222,194
    
    
    
    (355,671
    )
    
    
    15,677Inventories
    
    
    (1,011,530
    )
    
    
    (2,055,759
    )
    
    
    730,040Prepaid expenses and other current assets
    
    
    (1,081,026
    )
    
    
    194,775
    
    
    
    (122,895
    )Other assets
    
    
    (7,417
    )
    
    
    (4,591
    )
    
    
    (230,779
    )Accounts payable, trade
    
    
    37,475
    
    
    
    1,076,737
    
    
    
    (251,842
    )Accrued liabilities
    
    
    (1,215,469
    )
    
    
    1,291,382
    
    
    
    57,922Deferred revenue
    
    
    (44,813
    )
    
    
    1,819,678
    
    
    
    279,297Net cash provided by (used in) operating activities
    
    
    (872,099
    )
    
    
    4,524,871
    
    
    
    2,083,007Cash flows from investing activitiesPurchase of property and equipment
    
    
    (590,907
    )
    
    
    (827,884
    )
    
    
    (488,345
    )Proceeds from sale of assets
    
    
    
    
    
    
    820
    
    
    
    107,457Net cash used in investing activities
    
    
    (590,907
    )
    
    
    (827,064
    )
    
    
    (380,888
    )Cash flows from financing activitiesExercise of common stock options
    
    
    157,600
    
    
    
    98,550
    
    
    
    19,140Net payments against lines of credit
    
    
    
    
    
    
    (100,000
    )
    
    
    (22,249
    )Payments of long-term debt
    
    
    (135,428
    )
    
    
    (566,703
    )
    
    
    (182,169
    )Net cash provided by (used in) financing activities
    
    
    22,172
    
    
    
    (568,153
    )
    
    
    (185,278
    )Effect of exchange rate changes on cash flows
    
    
    45,354
    
    
    
    19,728
    
    
    
    4,696Net increase (decrease) in cash
    
    
    (1,395,480
    )
    
    
    3,149,382
    
    
    
    1,521,537Cash and cash equivalents at beginning of year
    
    
    6,368,885
    
    
    
    3,219,503
    
    
    
    1,697,966Cash and cash equivalents at end of year
    
    $
    4,973,405
    
    
    $
    6,368,885
    
    
    $
    3,219,503Supplemental cash flow disclosuresInterest paid
    
    $
    175,934
    
    
    $
    212,662
    
    
    $
    253,553Income taxes paid
    
    
    2,181,912
    
    
    
    45,947
    
    
    
    25,056Receivable recorded in connection with the sale
of South Korea operations
    
    
    
    
    
    
    
    
    
    
    520,000
   F-6




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##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
  
       Principles of Consolidation
 Cash and Cash Equivalents
 Accounts Receivable
   F-7




---



##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
    Inventories
 Property and Equipment
 Intangible Assets and Amortization Goodwill and Other Intangible Assets ,
  Impairment of Long-Lived Assets
 Revenue Recognition and Deferred Revenue
   F-8




---



##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
    Distributor Commissions - Accounting for
Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendors Products)
 Income Taxes -
 Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement 109
 Earnings Per Share
 Accounting Estimates
 Financial Instruments
  F-9




---



##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
    Segment Information
 Product Return Policy
 Advertising
 Translation of Foreign Currencies
 Other Comprehensive Income (Loss)
 Share-Based Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees
  F-10




---



##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
    Share-Based Payment,
 Recent Accounting Pronouncements -
 Fair Value Measurements
 Fair Value Measurements,
 Business Combinations
 Business Combinations
  F-11




---



##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
    Noncontrolling Interests in Consolidated Financial Statements
 Noncontrolling Interests in Consolidated Financial
Statements  An Amendment of ARB No. 51
 Disclosures about Derivative Instruments and Hedging Activities
 Disclosures about Derivative Instruments and Hedging
Activities, an amendment of FASB Statement No. 133
 Hierarchy of Generally Accepted Accounting Principles
 The Hierarchy of Generally Accepted Accounting
Principles,
 Determination of the Useful Life of Intangible Assets
 Determination of the Useful Life of
Intangible Assets
  F-12




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##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
     2008
    
    
    2007Accounts receivableTrade
    
    $
    495,164
    
    
    $
    692,969Other
    
    
    6,720
    
    
    
    28,705Total
    
    
    501,884
    
    
    
    721,674Less allowance for doubtful accounts
    
    
    36,573
    
    
    
    34,169Net accounts receivable
    
    $
    465,311
    
    
    $
    687,505
  2008
    
    
    2007Beginning balance
    
    $
    34,169
    
    
    $
    34,739Bad debt provision
    
    
    5,706
    
    
    
    4,041Accounts written off
    
    
    (3,302
    )
    
    
    (4,611
    )Ending balance
    
    $
    36,573
    
    
    $
    34,169
   2008
    
    
    2007Raw materials and bulk products
    
    $
    384,376
    
    
    $
    573,625Packaging materials
    
    
    584,842
    
    
    
    509,541Finished goods
    
    
    4,737,395
    
    
    
    3,642,206$
    5,706,613
    
    
    $
    4,725,372
   2008
    
    
    2007Advance payments to suppliers
    
    $
    415,699
    
    
    $
    179,844Certificates of deposit  restricted
    
    
    569,445
    
    
    
    Prepaid insurance and other
    
    
    389,661
    
    
    
    126,116Total
    
    $
    1,374,805
    
    
    $
    305,960
   F-13




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##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
     2008
    
    
    2007Building and improvements
    
    $
    3,523,428
    
    
    $
    3,314,482Computer software and office equipment
    
    
    1,625,205
    
    
    
    1,567,381Warehouse equipment
    
    
    367,285
    
    
    
    345,030Automotive equipment
    
    
    55,392
    
    
    
    55,392Leasehold improvements
    
    
    17,858
    
    
    
    22,1205,589,168
    
    
    
    5,304,405Less accumulated depreciation and amortization
    
    
    2,399,890
    
    
    
    2,367,5433,189,278
    
    
    
    2,936,862Land
    
    
    1,141,173
    
    
    
    1,141,173$
    4,330,451
    
    
    $
    4,078,035
  Goodwill and Other Intangible Assets
  GrossCarrying
    
    
    AccumulatedValue
    
    
    AmortizationBalance, December 31, 2006
    
    $
    3,281,690
    
    
    $
    (1,062,393
    )Currency translation adjustment
    
    
    161,822
    
    
    
    (78,893
    )Balance, December 31, 2007
    
    
    3,443,512
    
    
    
    (1,141,286
    )Currency translation adjustment
    
    
    (205,170
    )
    
    
    100,026Balance, December 31, 2008
    
    $
    3,238,342
    
    
    $
    (1,041,260
    )
  December 31, 2008
    
    
    December 31, 2007Average
    
    
    Gross
    
    
    
    
    
    
    GrossLife
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Accumulated(years)
    
    
    Value
    
    
    Amortization
    
    
    Value
    
    
    AmortizationDistribution contracts
    
    
    8
    
    
    $
    277,369
    
    
    $
    (244,536
    )
    
    $
    277,369
    
    
    $
    (211,583
    )Copyrights, trademarks and
other registrations
    
    
    19
    
    
    
    99,100
    
    
    
    (38,979
    )
    
    
    99,100
    
    
    
    (33,694
    )Other
    
    
    11
    
    
    
    47,600
    
    
    
    (31,207
    )
    
    
    47,600
    
    
    
    (27,034
    )$
    424,069
    
    
    $
    (314,722
    )
    
    $
    424,069
    
    
    $
    (272,311
    )
  F-14




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##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
     2009
    
    $
    24,0492010
    
    
    21,6262011
    
    
    13,7922012
    
    
    5,9572013
    
    
    5,957Thereafter
    
    
    37,966$
    109,347
   2008
    
    
    2007Distributor commissions
    
    $
    297,570
    
    
    $
    362,900Income taxes
    
    
    
    
    
    
    1,052,813Salaries and wages
    
    
    798,913
    
    
    
    850,855Sales and property taxes
    
    
    32,759
    
    
    
    57,908Interest
    
    
    14,186
    
    
    
    15,064Other
    
    
    122,739
    
    
    
    159,142Total
    
    $
    1,266,167
    
    
    $
    2,498,682
     F-15




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##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
     2008
    
    
    2007Mortgage 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 of Directors
    
    $
    2,196,468
    
    
    $
    2,330,130Capital lease obligation
    
    
    
    
    
    
    1,7662,196,468
    
    
    
    2,331,896Less  current maturities
    
    
    144,397
    
    
    
    135,428$
    2,052,071
    
    
    $
    2,196,468
   December 31,2009
    
    $
    144,3972010
    
    
    155,9942011
    
    
    168,5222012
    
    
    182,0562013
    
    
    196,678Thereafter
    
    
    1,348,821$
    2,196,468
  Stock incentive plans
   F-16




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##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
      Other stock options
  Stock option accounting
  Accounting for Income Taxes
 Fair value
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Weighted average expected life (years)
    
    
    8.6
    
    
    
    8.7
    
    
    
    9.0Risk-free interest rate
    
    
    2.95
    %
    
    
    4.29
    %
    
    
    4.72
    %Expected volatility
    
    
    128.07
    %
    
    
    136.79
    %
    
    
    138.31
    %Expected dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
  F-17




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##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
     Stock option activity
  Weighted-AverageWeighted-
    
    
    Remaining
    
    
    AggregateAverage Exercise
    
    
    Contractual Term
    
    
    IntrinsicOptions
    
    
    Price per Share
    
    
    (in years)
    
    
    ValueOutstanding on January 1, 2006
    
    
    3,565,000
    
    
    $
    0.21Granted
    
    
    524,150
    
    
    
    0.41Exercised
    
    
    (132,000
    )
    
    
    0.15Forfeited/Canceled
    
    
    (200,000
    )
    
    
    0.74Outstanding on December 31, 2006
    
    
    3,757,150
    
    
    
    0.22Granted
    
    
    512,950
    
    
    
    0.80Exercised
    
    
    (675,430
    )
    
    
    0.15Forfeited/Canceled
    
    
    (99,720
    )
    
    
    0.17Outstanding on December 31, 2007
    
    
    3,494,950
    
    
    
    0.32Granted
    
    
    420,650
    
    
    
    0.58Exercised
    
    
    (1,051,280
    )
    
    
    0.15Forfeited/Canceled
    
    
    (571,435
    )
    
    
    0.23Outstanding on December 31, 2008
    
    
    2,292,885
    
    
    $
    0.46
    
    
    
    5.0
    
    
    $
    381,360Exercisable on December 31, 2008
    
    
    1,473,810
    
    
    $
    0.37
    
    
    
    3.3
    
    
    $
    352,638
  Weighted AverageGrant Date FairShares
    
    
    Value per ShareNon-vested stock options January 1, 2008
    
    
    866,540
    
    
    $
    0.50Non-vested stock options granted
    
    
    405,650
    
    
    
    0.54Vested stock options
    
    
    (366,697
    )
    
    
    0.31Forfeited stock options
    
    
    (86,418
    )
    
    
    0.60Non-vested stock options at December 31, 2008
    
    
    819,075
    
    
    
    0.60
  F-18




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##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
     Year Ended December 31,2008
    
    
    2007
    
    
    2006Grant date fair value of stock options granted
    
    $
    226,230
    
    
    $
    394,779
    
    
    $
    208,064Grant date fair value of stock options vested
    
    
    120,350
    
    
    
    112,507
    
    
    
    107,049Intrinsic value of stock options exercised
    
    
    611,190
    
    
    
    481,030
    
    
    
    67,980
    Year Ended December 31,2008
    
    
    2007
    
    
    2006Federal income tax expense at statutory rate
    
    $
    910,043
    
    
    $
    914,175
    
    
    $
    242,800State income taxes, net of federal benefit
    
    
    5,559
    
    
    
    (3,309
    )
    
    
    26,636Stock-based compensation
    
    
    38,296
    
    
    
    21,554
    
    
    
    36,221Effect of foreign operations, net of foreign tax credits
    
    
    (17,130
    )
    
    
    (6,775
    )
    
    
    (10,578
    )Change in valuation allowance
    
    
    65,504
    
    
    
    69,284
    
    
    
    Other, net
    
    
    58,565
    
    
    
    1,571
    
    
    
    (17,165
    )Income tax expense
    
    $
    1,060,837
    
    
    $
    996,500
    
    
    $
    277,914
  F-19




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##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
     December 31,2008
    
    
    2007Deferred tax assets related to:Inventories
    
    $
    361,791
    
    
    $
    327,765Accounts receivable and other assets
    
    
    11,051
    
    
    
    11,959Accrued liabilities
    
    
    44,964
    
    
    
    32,646Tax loss and tax credit carryforwards
    
    
    206,477
    
    
    
    105,046Other
    
    
    5,478
    
    
    
    3,357629,761
    
    
    
    480,773Valuation allowance
    
    
    (182,988
    )
    
    
    (117,484
    )Net deferred tax assets
    
    
    446,773
    
    
    
    363,289Deferred tax liabilities related to:Property and equipment
    
    
    (298,517
    )
    
    
    (148,792
    )Intangible assets
    
    
    (419,465
    )
    
    
    (368,367
    )Deferred tax liabilities
    
    
    (717,982
    )
    
    
    (517,159
    )Net deferred tax liabilities
    
    $
    (271,209
    )
    
    $
    (153,870
    )Net current deferred tax assets
    
    $
    405,286
    
    
    $
    340,395Net long-term deferred tax liabilities
    
    
    (676,495
    )
    
    
    (494,265
    )$
    (271,209
    )
    
    $
    (153,870
    )
     F-20




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##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
     Year Ended December 31,2008
    
    
    2007
    
    
    2006CurrentFederal
    
    $
    943,498
    
    
    $
    1,100,760
    
    
    $
    19,784Foreign
    
    
    
    
    
    
    
    
    
    
    DeferredFederal
    
    
    117,339
    
    
    
    (104,260
    )
    
    
    284,528Foreign
    
    
    
    
    
    
    
    
    
    
    (26,398
    )Income tax expense
    
    $
    1,060,837
    
    
    $
    996,500
    
    
    $
    277,914
  Leases
  December 31,2009
    
    $
    250,0402010
    
    
    166,1832011
    
    
    100,2592012
    
    
    84,986$
    601,468
 Employee Arrangements
   F-21




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##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
       Litigation
      F-22




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##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
         Nutritional Products
    
    
    Medical Products
    
    
    ConsolidatedYear ended December 31, 2008Net sales
    
    $
    24,061
    
    
    $
    6,348
    
    
    $
    30,409Depreciation and amortization
    
    
    277
    
    
    
    97
    
    
    
    374Operating profit
    
    
    2,523
    
    
    
    329
    
    
    
    2,852Capital expenditures
    
    
    560
    
    
    
    31
    
    
    
    591Total assets
    
    
    17,247
    
    
    
    2,519
    
    
    
    19,766Year ended December 31, 2007Net sales
    
    $
    22,523
    
    
    $
    4,506
    
    
    $
    27,029Depreciation and amortization
    
    
    272
    
    
    
    91
    
    
    
    363Operating profit
    
    
    2,645
    
    
    
    254
    
    
    
    2,899Capital expenditures
    
    
    806
    
    
    
    22
    
    
    
    828Total assets
    
    
    17,309
    
    
    
    1,849
    
    
    
    19,158Year ended December 31, 2006Net sales
    
    $
    17,937
    
    
    $
    3,760
    
    
    $
    21,697Depreciation and amortization
    
    
    581
    
    
    
    54
    
    
    
    635Operating profit
    
    
    422
    
    
    
    544
    
    
    
    966Capital expenditures
    
    
    486
    
    
    
    2
    
    
    
    488Total assets
    
    
    12,543
    
    
    
    1,096
    
    
    
    13,639
  F-23




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##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
     Net Sales
    
    
    Long-lived AssetsYear ended December 31, 2008Domestic
    
    $
    10,818
    
    
    $
    6,365Former Soviet Union
    
    
    17,799
    
    
    
    Canada
    
    
    1,115
    
    
    
    476All others
    
    
    677
    
    
    
    Totals
    
    $
    30,409
    
    
    $
    6,841Year ended December 31, 2007Domestic
    
    $
    10,011
    
    
    $
    6,133Former Soviet Union
    
    
    14,950
    
    
    
    Canada
    
    
    1,382
    
    
    
    597South Korea
    
    
    14
    
    
    
    All others
    
    
    672
    
    
    
    Totals
    
    $
    27,029
    
    
    $
    6,730Year ended December 31, 2006Domestic
    
    $
    10,101
    
    
    $
    6,201Former Soviet Union
    
    
    8,644
    
    
    
    Canada
    
    
    1,608
    
    
    
    505South Korea
    
    
    587
    
    
    
    All others
    
    
    757
    
    
    
    Totals
    
    $
    21,697
    
    
    $
    6,706
 Significant Customers
   F-24




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##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
     Net Earnings
    
    
    Shares
    
    
    Per ShareYear ended December 31, 2008Basic earnings per common share
    
    $
    1,615,760
    
    
    
    21,464,832
    
    
    $
    0.08Effect of dilutive stock options
    
    
    
    
    
    
    1,374,026Diluted earnings per common share
    
    $
    1,615,760
    
    
    
    22,838,858
    
    
    $
    0.07Year ended December 31, 2007Basic earnings per common share
    
    $
    1,692,249
    
    
    
    20,396,420
    
    
    $
    0.08Effect of dilutive stock options
    
    
    
    
    
    
    1,809,962Diluted earnings per common share
    
    $
    1,692,249
    
    
    
    22,206,382
    
    
    $
    0.08Year ended December 31, 2006Basic earnings per common share
    
    $
    436,204
    
    
    
    20,163,544
    
    
    $
    0.02Effect of dilutive stock options
    
    
    
    
    
    
    1,883,608Diluted earnings per common share
    
    $
    436,204
    
    
    
    22,047,152
    
    
    $
    0.02
   Debt Guarantees
 Customer Arrangement
  F-25




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##### Table of Contents



RBC Life Sciences, Inc. and Subsidiaries
     Quarter EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 31(Unaudited - In thousands, except per share data)2008:Net sales
    
    $
    6,348
    
    
    $
    6,887
    
    
    $
    9,925
    
    
    $
    7,249Gross profit
    
    
    3,503
    
    
    
    3,696
    
    
    
    4,710
    
    
    
    3,585Net earnings
    
    
    355
    
    
    
    276
    
    
    
    846
    
    
    
    139Basic earnings per share
    
    
    0.02
    
    
    
    0.01
    
    
    
    0.04
    
    
    
    0.01Diluted earnings per share
    
    
    0.02
    
    
    
    0.01
    
    
    
    0.04
    
    
    
    0.012007:Net sales
    
    $
    5,392
    
    
    $
    7,148
    
    
    $
    7,857
    
    
    $
    6,632Gross profit
    
    
    3,304
    
    
    
    3,793
    
    
    
    4,156
    
    
    
    3,646Net earnings(1)
    
    
    325
    
    
    
    510
    
    
    
    672
    
    
    
    185Basic earnings per share
    
    
    0.02
    
    
    
    0.03
    
    
    
    0.03
    
    
    
    0.01Diluted earnings per share
    
    
    0.02
    
    
    
    0.02
    
    
    
    0.03
    
    
    
    0.01
 (1)
    
    As described in Note N, the Company recorded an aggregate charge of $516,000, or
$335,000 net of tax, during 2007 to write off the note receivable received in connection
with the sale of South Korean operations in 2006. Of this charge, $87,000 net of tax and
$248,000 net of tax, was recorded in the third quarter and fourth quarter of 2007,
respectively.  F-26




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##### Table of Contents



Exhibit Index
 Exhibit Number
    
    Description10.5
    
    
    Mortgage Note, dated March 15, 2001, in the principal
amount of $3,000,000, executed by Royal BodyCare, Inc. and
Clinton H. Howard in favor of Allstate Life Insurance
Company10.6
    
    
    Deed of Trust, Assignment of Leases, Rents and Contracts,
Security Agreement and Fixture Filing, dated March 16,
2001, between Royal BodyCare, Inc., as Trustor, Robin R.
Green, as Trustee and Allstate Life Insurance Company, as
Beneficiary10.15
    
    
    Line of Credit Promissory Note, dated October 22 2008, in
the principal amount of $500,000, executed by RBC Life
Sciences, Inc. in favor of Independent Bank of Texas10.16
    
    
    Amended and Restated Employment Agreement, executed
December 31, 2008, between RBC Life Sciences, Inc. and John
W. Price21.1
    
    
    List of company subsidiaries23.1
    
    
    Consent of Lane Gorman Trubitt, L.L.P., independent
registered public accountants to incorporation of report by
reference31.1
    
    
    Certification of Principal Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    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 200232.2
    
    
    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