##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2007
 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
    
    91-2015186(State or other jurisdiction of incorporation or organization)
    
    (IRS Employer Identification No.)2301 Crown Court, Irving, Texas
    
    75038(Address of principal executive offices)
    
    (Zip code)
 972-893-4000
  þ o
  o o þ
  o þ




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##### 



Page NumberPART I  FINANCIAL INFORMATIONItem 1.
    
    Condensed Consolidated Financial Statements (unaudited)
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3.
    
    Quantitative and Qualitative Disclosure about Market Risk
    
    
    17Item 4.
    
    Controls and Procedures
    
    
    17PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    18Item 1A.
    
    Risk Factors
    
    
    18Item 2.
    
    Unregistered Sales of Equity Securities and  Use of Proceeds
    
    
    18Item 3.
    
    Defaults Upon Senior Securities
    
    
    18Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    18Item 5.
    
    Other Information
    
    
    18Item 6.
    
    Exhibits
    
    
    18Signatures
    
    
    19Exhibit Index
    
    
    20Certification of Principal Executive Officer Pursuant to Section 302Certification of Principal Financial Officer Pursuant to Section 302Certification of Principal Executive Officer Pursuant to Section 1350Certification of Principal Financial Officer Pursuant to Section 1350




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##### Table of Contents



PART 1  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 RBC LIFE SCIENCES, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    3,805,917
    
    
    $
    3,219,503Accounts receivable, net
    
    
    650,029
    
    
    
    331,834Inventories
    
    
    3,009,558
    
    
    
    2,651,082Deferred income taxes
    
    
    283,800
    
    
    
    231,680Prepaid expenses
    
    
    847,602
    
    
    
    499,267Total current assets
    
    
    8,596,906
    
    
    
    6,933,366Property and equipment, net
    
    
    3,525,196
    
    
    
    3,584,415Goodwill, net
    
    
    2,095,054
    
    
    
    2,095,054Intangible assets, net
    
    
    183,571
    
    
    
    194,173Other assets
    
    
    708,130
    
    
    
    708,187$
    15,108,857
    
    
    $
    13,515,195LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable, trade
    
    $
    1,324,651
    
    
    $
    850,143Accrued liabilities
    
    
    1,274,025
    
    
    
    1,165,247Current maturities of long-term obligations
    
    
    318,332
    
    
    
    379,635Line of credit
    
    
    
    
    
    
    100,000Deferred revenue
    
    
    3,399,425
    
    
    
    2,503,638Total current liabilities
    
    
    6,316,433
    
    
    
    4,998,663Long-term obligations, less current maturities
    
    
    2,476,034
    
    
    
    2,543,964Deferred income taxes
    
    
    486,412
    
    
    
    489,810Shareholders equity:Common stock, $0.001 par value; 50,000,000
shares authorized; 20,188,294 shares issued and
outstanding at March 31, 2007 and December 31, 2006
    
    
    20,188
    
    
    
    20,188Additional paid-in capital
    
    
    12,935,887
    
    
    
    12,916,035Accumulated deficit
    
    
    (7,087,109
    )
    
    
    (7,412,250
    )Accumulated other comprehensive loss
    
    
    (38,988
    )
    
    
    (41,215
    )5,829,978
    
    
    
    5,482,758$
    15,108,857
    
    
    $
    13,515,195
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##### Table of Contents



RBC LIFE SCIENCES, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 For the Quarters Ended March 31,2007
    
    
    2006Net sales
    
    $
    5,392,052
    
    
    $
    4,808,899Cost of sales
    
    
    2,087,737
    
    
    
    1,552,731Gross profit
    
    
    3,304,315
    
    
    
    3,256,168Operating expensesGeneral and administrative
    
    
    1,966,856
    
    
    
    2,184,298Distributor commissions
    
    
    654,890
    
    
    
    883,815Depreciation and amortization
    
    
    90,218
    
    
    
    162,377Total operating expenses
    
    
    2,711,964
    
    
    
    3,230,490Operating profit
    
    
    592,351
    
    
    
    25,678Interest expense
    
    
    59,210
    
    
    
    64,316Earnings (loss) before income taxes
    
    
    533,141
    
    
    
    (38,638
    )Provision for income taxes
    
    
    208,000
    
    
    
    Net earnings (loss)
    
    $
    325,141
    
    
    $
    (38,638
    )Earnings (loss) per share:Basic
    
    $
    0.02
    
    
    $
    (0.00
    )Diluted
    
    
    0.02
    
    
    
    (0.00
    )Weighted average common shares outstanding:Basic
    
    
    20,188,294
    
    
    
    20,144,294Diluted
    
    
    21,556,552
    
    
    
    20,144,294
  -4-




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RBC LIFE SCIENCES, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 For the Quarters Ended March 31,2007
    
    
    2006Cash flows from operating activities:Net earnings (loss)
    
    $
    325,141
    
    
    $
    (38,638
    )Adjustment for non-cash items:Depreciation and amortization
    
    
    96,084
    
    
    
    166,015Stock-based compensation
    
    
    19,852
    
    
    
    22,628Deferred income taxes
    
    
    (55,518
    )
    
    
    Change in operating assets and liabilitiesAccounts receivable
    
    
    (318,195
    )
    
    
    (63,400
    )Inventories
    
    
    (357,346
    )
    
    
    (298,997
    )Prepaid expenses and other
    
    
    (347,778
    )
    
    
    62,985Other assets
    
    
    145
    
    
    
    (210,948
    )Accounts payable and accrued liabilities
    
    
    582,205
    
    
    
    (121,638
    )Deferred revenue
    
    
    895,787
    
    
    
    526,646Net cash provided by operating activities
    
    
    840,377
    
    
    
    44,653Cash flows from investing activities:Purchase of property and equipment
    
    
    (25,920
    )
    
    
    (354,415
    )Net cash used by investing activities
    
    
    (25,920
    )
    
    
    (354,415
    )Cash flows from financing activities:Net payments of lines of credit
    
    
    (100,000
    )
    
    
    (709
    )Payments of long term obligations
    
    
    (129,235
    )
    
    
    (30,748
    )Proceeds from the exercise of stock options
    
    
    
    
    
    
    14,355Net cash used by financing activities
    
    
    (229,235
    )
    
    
    (17,102
    )Effect of exchange rate changes on cash flows
    
    
    1,192
    
    
    
    (11,576
    )Net increase (decrease) in cash and cash equivalents
    
    
    586,414
    
    
    
    (338,440
    )Cash and cash equivalents, beginning of period
    
    
    3,219,503
    
    
    
    1,697,966Cash and cash equivalents, end of period
    
    $
    3,805,917
    
    
    $
    1,359,526
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RBC LIFE SCIENCES, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Note A  Unaudited Condensed Consolidated Financial Statements:
   Note B  Nature of Operations and Organization:
     -6-




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Note C  Inventories:
  March 31, 2007
    
    
    December 31, 2006Raw materials and bulk products
    
    $
    370,372
    
    
    $
    411,880Packaging materials
    
    
    489,490
    
    
    
    422,063Finished goods
    
    
    2,149,696
    
    
    
    1,817,139$
    3,009,558
    
    
    $
    2,651,082
 Note D  Prepaid Expenses:
  March 31, 2007
    
    
    December 31, 2006Advance payment to suppliers
    
    $
    779,803
    
    
    $
    368,536Prepaid insurance and other
    
    
    67,799
    
    
    
    130,731$
    847,602
    
    
    $
    499,267
 Note E  Property and Equipment:
  March 31, 2007
    
    
    December 31, 2006Building and improvements
    
    $
    2,775,109
    
    
    $
    2,775,109Computer software and office
equipment
    
    
    3,078,717
    
    
    
    3,050,784Warehouse equipment
    
    
    272,054
    
    
    
    271,309Automotive equipment
    
    
    55,392
    
    
    
    55,392Leasehold improvements
    
    
    18,957
    
    
    
    18,7586,200,229
    
    
    
    6,171,352Less  accumulated depreciation
    
    
    3,816,206
    
    
    
    3,728,1102,384,023
    
    
    
    2,443,242Land
    
    
    1,141,173
    
    
    
    1,141,173$
    3,525,196
    
    
    $
    3,584,415
 Note F  Goodwill and Other Intangible Assets:
  March 31, 2007
    
    
    December 31, 2006Gross
    
    
    
    
    
    
    Grosscarrying
    
    
    Accumulated
    
    
    carrying
    
    
    Accumulatedvalue
    
    
    amortization
    
    
    value
    
    
    amortizationGoodwill
    
    $
    3,222,349
    
    
    $
    (1,127,295
    )
    
    $
    3,222,349
    
    
    $
    (1,127,295
    )
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March 31, 2007
    
    
    December 31, 2006Average
    
    
    Gross
    
    
    
    
    
    
    Grosslife
    
    
    carrying
    
    
    Accumulated
    
    
    carrying
    
    
    Accumulated(years)
    
    
    value
    
    
    amortization
    
    
    value
    
    
    amortizationDistribution contracts
    
    
    8
    
    
    $
    277,369
    
    
    $
    (186,862
    )
    
    $
    277,369
    
    
    $
    (178,625
    )Copyrights, trademarks
and other registrations
    
    
    19
    
    
    
    99,100
    
    
    
    (29,730
    )
    
    
    99,100
    
    
    
    (28,409
    )Other
    
    
    11
    
    
    
    47,600
    
    
    
    (23,906
    )
    
    
    47,600
    
    
    
    (22,862
    )$
    424,069
    
    
    $
    (240,498
    )
    
    $
    424,069
    
    
    $
    (229,896
    )
  Remainder of 2007
    
    $
    31,8052008
    
    
    42,4072009
    
    
    24,0492010
    
    
    21,6262011
    
    
    13,791Thereafter
    
    
    49,893Total
    
    $
    183,571
 Note G  Accrued Liabilities:
  March 31, 2007
    
    
    December 31, 2006Distributor commissions
    
    $
    349,015
    
    
    $
    415,474Salaries and wages
    
    
    469,190
    
    
    
    556,058Income, sales and other taxes
    
    
    334,286
    
    
    
    73,060Interest
    
    
    19,127
    
    
    
    20,312Other
    
    
    102,407
    
    
    
    100,343$
    1,274,025
    
    
    $
    1,165,247
 Note H  Share-Based Compensation:
 Share-Based Payment
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Quarters Ended March 31,2007 (1)
    
    2006Expected life (years)
    
    
    
    
    
    
    9.0Risk-free interest rate
    
    
    
    
    
    
    4.67
    %Expected Volatility
    
    
    
    
    
    
    135.0
    %Expected Dividend yield
    
    
    
    
    
    
    0.0
    %
 
 (1)
    
    There were no option grants during this period.  Weighted-AverageWeighted-
    
    
    Remaining
    
    
    AggregateAverage Exercise
    
    
    Contractual Term
    
    
    IntrinsicOptions
    
    
    Price per Share
    
    
    (in years)
    
    
    ValueOutstanding on January 1, 2007
    
    
    3,757,150
    
    
    $
    0.22Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited/Canceled
    
    
    (12,200
    )
    
    
    0.21Outstanding on March 31, 2007
    
    
    3,744,950
    
    
    $
    0.22
    
    
    
    5.0
    
    
    $
    1,056,869Exercisable on March 31, 2007
    
    
    2,764,200
    
    
    $
    0.24
    
    
    
    4.8
    
    
    $
    753,254
  Weighted AverageGrant Date FairShares
    
    Value per ShareNon-vested stock options at January 1, 2007
    
    
    1,109,370
    
    
    $
    0.15Non-vested stock options granted
    
    
    
    
    
    
    Vested stock options
    
    
    (120,000
    )
    
    
    0.14Forfeited stock options
    
    
    (8,620
    )
    
    
    0.20Non-vested stock options at March 31, 2007
    
    
    980,750
    
    
    
    0.15
  Note I  Long Term Obligations and Credit Lines:
  March 31, 2007
    
    
    December 31, 2006Mortgage 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 Chief Executive Officer
    
    $
    2,423,814
    
    
    $
    2,453,855
 -9-




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March 31, 2007
    
    
    December 31, 2006Note payable to bank bearing interest at 7.96%,
payable in monthly installments of $12,550
through June 2009, collateralized by accounts
receivable, inventories and equipment, and
personally guaranteed by the Companys Chief
Executive Officer
    
    
    308,750
    
    
    
    339,848Convertible notes (original amount $730,000)
bearing interest at 10% payable quarterly,
originally due two years from the date of
issuance (1997), notes are convertible into
common stock any time prior to maturity at
the option of the holder based on a per share
conversion price of $1.32
    
    
    55,000
    
    
    
    121,500Capital lease obligation
    
    
    6,802
    
    
    
    8,3962,794,366
    
    
    
    2,923,599Less  current maturities
    
    
    318,332
    
    
    
    379,635$
    2,476,034
    
    
    $
    2,543,964
   Note J  Segments and Geographic Area:
   -10-




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Nutritional Products
    
    Medical Products
    
    ConsolidatedQuarter ended March 31, 2007Net sales
    
    $
    4,360
    
    
    $
    1,032
    
    
    $
    5,392Depreciation and amortization
    
    
    72
    
    
    
    24
    
    
    
    96Operating profit
    
    
    466
    
    
    
    126
    
    
    
    592Capital expenditures
    
    
    26
    
    
    
    
    
    
    
    26Total assets
    
    
    13,446
    
    
    
    1,663
    
    
    
    15,109Quarter ended March 31, 2006Net sales
    
    $
    4,065
    
    
    $
    744
    
    
    $
    4,809Depreciation and amortization
    
    
    153
    
    
    
    13
    
    
    
    166Operating profit
    
    
    (27
    )
    
    
    53
    
    
    
    26Capital expenditures
    
    
    354
    
    
    
    
    
    
    
    354Total assets
    
    
    11,648
    
    
    
    1,414
    
    
    
    13,062
  Quarter ended March 31, 2007
    
    
    Quarter ended March 31, 2006Net sales
    
    
    Long-Lived assets
    
    
    Net sales
    
    
    Long-Lived assetsDomestic
    
    $
    2,551
    
    
    $
    6,132
    
    
    $
    2,544
    
    
    $
    6,004Former Soviet Union
    
    
    2,334
    
    
    
    
    
    
    
    1,267
    
    
    
    Canada
    
    
    353
    
    
    
    380
    
    
    
    468
    
    
    
    388South Korea
    
    
    
    
    
    
    
    
    
    
    229
    
    
    
    570All others
    
    
    154
    
    
    
    
    
    
    
    301
    
    
    
    Totals
    
    $
    5,392
    
    
    $
    6,512
    
    
    $
    4,809
    
    
    $
    6,962
 Significant Customers
  Note K  Earnings (loss) Per Share:
  Net Earnings
    
    
    Shares
    
    
    Per ShareQuarter ended March 31, 2007Basic earnings per common share
    
    $
    325,141
    
    
    
    20,188,294
    
    
    $
    0.02Effect of dilutive stock options
    
    
    
    
    
    
    1,368,258Diluted earnings per common share
    
    $
    325,141
    
    
    
    21,556,552
    
    
    $
    0.02Quarter ended March 31, 2006Basic loss per common share
    
    $
    (38,638
    )
    
    
    20,144,294
    
    
    $
    (0.00
    )Effect of dilutive stock options
    
    
    
    
    
    
    Diluted loss per common share
    
    $
    (38,638
    )
    
    
    20,144,294
    
    
    $
    (0.00
    )
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Note L  Comprehensive Income (Loss):
  Quarters EndedMarch 31,2007
    
    
    2006Net earnings (loss)
    
    $
    325,141
    
    
    $
    (38,638
    )Other comprehensive income:Foreign currency translation adjustment
    
    
    2,227
    
    
    
    2,452Comprehensive income (loss)
    
    $
    327,368
    
    
    $
    (36,186
    )
 Note M  Legal Proceedings:
  -12-




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ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  FORWARD-LOOKING STATEMENTS
  OVERVIEW
  
    
    Through the Nutritional Products segment, we distribute products in four broad
categories: (i) wellness products, (ii) weight loss products, (iii) fitness products
and (iv) 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 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 and oncology products.
These products are distributed in the United States to hospitals, nursing homes,
clinics and pharmacies through traditional medical/surgical supply dealers and
pharmaceutical distributors.
  Quarters Ended March 31,2007
    
    
    2006(U.S. dollars in
000s)Nutritional Products:Associate network
    
    $
    1,873
    
    
    
    35
    %
    
    $
    2,498
    
    
    
    52
    %Licensees
    
    
    2,487
    
    
    
    46
    %
    
    
    1,567
    
    
    
    33
    %4,360
    
    
    
    81
    %
    
    
    4,065
    
    
    
    85
    %Medical Products
    
    
    1,032
    
    
    
    19
    %
    
    
    744
    
    
    
    15
    %$
    5,392
    
    
    
    100
    %
    
    $
    4,809
    
    
    
    100
    %
 -13-




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Associate Network
 Quarters Ended March 31,2007
    
    2006United States
    
    
    81
    %
    
    
    72
    %Canada
    
    
    19
    
    
    
    19South Korea
    
    
    
    
    
    
    9100
    %
    
    
    100
    %
  Licensees.
  Medical Products.
  CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   RESULTS OF OPERATIONS
  -14-




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Quarters Ended March 31,2007
    
    2006Net sales
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    38.7
    
    
    
    32.3Gross profit
    
    
    61.3
    
    
    
    67.7Operating expenses:General and administrative
    
    
    36.5
    
    
    
    45.4Distributor commissions
    
    
    12.1
    
    
    
    18.4Depreciation and amortization
    
    
    1.7
    
    
    
    3.4Total operating expenses
    
    
    50.3
    
    
    
    67.2Operating profit
    
    
    11.0
    
    
    
    0.5Interest expense
    
    
    1.1
    
    
    
    1.3Earnings (loss) before income taxes
    
    
    9.9
    
    
    
    (0.8
    )Provision for income taxes
    
    
    3.9
    
    
    
    Net earnings (loss)
    
    
    6.0
    %
    
    
    (0.8
    )%
 Quarter ended March 31, 2007 compared with quarter ended March 31, 2006
 Net sales.
 Associate Network
  Licensees
 Medical products.
 -15-




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Cost of sales.
 General and administrative.
 Distributor commissions.
 Income taxes.
 Net earnings (loss).
 LIQUIDITY AND CAPITAL RESOURCES
 Cash and working capital.
 Operating activities
 Investing activities.
 Financing activities
 General liquidity and cash flows
 -16-




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ITEM 3. Quantitative and Qualitative Disclosure About Market Risk.
  Foreign exchange
  Interest rates
  
 ITEM 4. Controls and Procedures.
    -17-




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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. Submission of Matters to a Vote of Security Holders.
  
 ITEM 5. Other Information.
  
 ITEM 6. Exhibits.
  -18-




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##### Table of Contents



SIGNATURES
  RBC Life Sciences, Inc.
RegistrantBy:
    
    /s/ Clinton H. HowardIts:
    
    Chief Executive OfficerBy:
    
    /s/ Steven E. BrownIts:
    
    Vice President-Finance and
Chief Financial Officer
(Principal Financial and Accounting Officer)
 DATE:
    
    May 2, 2007Irving, Texas
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RBC LIFE SCIENCES, INC.
 
 Exhibit Index
 Exhibit Number
    
    Description31.1
    
    
    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
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