UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





x
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934For
      the quarterly period ended June 30, 2009OR ̈
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934For
      the transition period from ________________ to
      ________________





Commission
file number:   00-50417





RBC Life Sciences,
Inc.


(Exact
name of registrant as specified in its charter)





Nevada
              
              91-2015186(State
      or other jurisdiction of
              
              (I.R.S.
      Employerincorporation
      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   ̈





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  ̈     No   ̈





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
                 ̈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  ̈     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 July 15,
  2009Common
      Stock, $0.001 par value per share
                  
                  21,921,934
      shares







TABLE OF
CONTENTS





Page NumberPART
      I – FINANCIAL INFORMATIONItem
      1.
                      Condensed
      Consolidated Financial Statements (unaudited)
                      
                      3Notes
      to Condensed Consolidated Financial Statements
                      
                      7Item
      2.
                      Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                      
                      15Item
      3.
                      Quantitative
      and Qualitative Disclosures About Market Risk
                      
                      20Item
      4.
                      Controls
      and Procedures
                      
                      21PART
      II – OTHER INFORMATIONItem
      1.
                      Legal
      Proceedings
                      
                      22Item
      1A.
                      Risk
      Factors
                      
                      22Item
      2.
                      Unregistered
      Sales of Equity Securities and Use of Proceeds
                      
                      22Item
      3.
                      Defaults
      Upon Senior Securities
                      
                      22Item
      4.
                      Submission
      of Matters to a Vote of Security Holders
                      
                      22Item
      5.
                      Other
      Information
                      
                      22Item
      6.
                      Exhibits
                      
                      22Signatures
                      
                      23Exhibit
      Index
                      
                      24







PART 1 –
FINANCIAL INFORMATION





ITEM
1. FINANCIAL
STATEMENTS





RBC
LIFE SCIENCES, INC. and SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS





June 30,
                  2009
                
                
                December 31,
                  2008(Unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                
                $
                4,096,880
                
                
                $
                4,973,405Accounts
      receivable, net
                
                
                366,458
                
                
                
                465,311Inventories
                
                
                5,608,457
                
                
                
                5,706,613Deferred
      income taxes
                
                
                399,286
                
                
                
                405,286Prepaid
      expenses
                
                
                1,109,406
                
                
                
                1,374,805Total
      current assets
                
                
                11,580,487
                
                
                
                12,925,420Property
      and equipment, net
                
                
                4,893,651
                
                
                
                4,330,451Goodwill,
      net
                
                
                2,220,322
                
                
                
                2,197,082Intangible
      assets, net
                
                
                96,125
                
                
                
                109,347Other
      assets
                
                
                9,960
                
                
                
                203,816$
                18,800,545
                
                
                $
                19,766,116LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable, trade
                
                $
                1,503,439
                
                
                $
                1,961,579Accrued
      liabilities
                
                
                1,041,088
                
                
                
                1,266,167Current
      maturities of long-term obligations
                
                
                150,083
                
                
                
                144,397Deferred
      revenue
                
                
                3,837,452
                
                
                
                4,278,503Total
      current liabilities
                
                
                6,532,062
                
                
                
                7,650,646Long-term
      obligations, less current maturities
                
                
                1,975,580
                
                
                
                2,052,071Deferred
      income taxes
                
                
                716,855
                
                
                
                676,495Shareholders’
      equity:Common
      stock, $0.001 par value; 50,000,000 shares authorized; 21,921,934 and
      21,915,004 shares issued and outstanding at June 30, 2009 and December 31,
      2008, respectively
                
                
                21,922
                
                
                
                21,915Additional
      paid-in capital
                
                
                13,435,836
                
                
                
                13,364,308Accumulated
      deficit
                
                
                (3,998,022
                )
                
                
                (4,104,241
                )Accumulated
      other comprehensive income
                
                
                116,312
                
                
                
                104,9229,576,048
                
                
                
                9,386,904$
                18,800,545
                
                
                $
                19,766,116





See notes
to condensed consolidated financial statements.


- 3
-


RBC
LIFE SCIENCES, INC. and SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)





For the Quarters Ended June
    30,2009
                      
                      
                      2008Net
      sales
                      
                      $
                      6,759,219
                      
                      
                      $
                      6,886,775Cost
      of sales
                      
                      
                      3,238,206
                      
                      
                      
                      3,190,209Gross
      profit
                      
                      
                      3,521,013
                      
                      
                      
                      3,696,566Operating
      expenses:General
      and administrative
                      
                      
                      2,353,383
                      
                      
                      
                      2,551,430Distributor
      commissions
                      
                      
                      567,395
                      
                      
                      
                      560,100Depreciation
      and amortization
                      
                      
                      92,619
                      
                      
                      
                      84,473Total
      operating expenses
                      
                      
                      3,013,397
                      
                      
                      
                      3,196,003Operating
      profit
                      
                      
                      507,616
                      
                      
                      
                      500,563Interest
      expense
                      
                      
                      41,417
                      
                      
                      
                      44,091Earnings
      before income taxes
                      
                      
                      466,199
                      
                      
                      
                      456,472Provision
      for income taxes
                      
                      
                      189,000
                      
                      
                      
                      180,000Net
      earnings
                      
                      $
                      277,199
                      
                      
                      $
                      276,472Earnings
      per share:Basic
                      
                      $
                      0.01
                      
                      
                      $
                      0.01Diluted
                      
                      
                      0.01
                      
                      
                      
                      0.01Weighted
      average common shares outstanding:Basic
                      
                      
                      21,921,934
                      
                      
                      
                      21,242,664Diluted
                      
                      
                      22,477,317
                      
                      
                      
                      22,943,569





See notes
to condensed consolidated financial statements.


- 4
-


RBC
LIFE SCIENCES, INC. and SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)





For the Six Months Ended June
      30,2009
                      
                      
                      2008Net
      sales
                      
                      $
                      12,775,097
                      
                      
                      $
                      13,234,466Cost
      of sales
                      
                      
                      6,114,757
                      
                      
                      
                      6,035,111Gross
      profit
                      
                      
                      6,660,340
                      
                      
                      
                      7,199,355Operating
      expenses:General
      and administrative
                      
                      
                      4,930,380
                      
                      
                      
                      4,804,182Distributor
      commissions
                      
                      
                      1,202,426
                      
                      
                      
                      1,117,748Depreciation
      and amortization
                      
                      
                      180,794
                      
                      
                      
                      165,260Total
      operating expenses
                      
                      
                      6,313,600
                      
                      
                      
                      6,087,190Operating
      profit
                      
                      
                      346,740
                      
                      
                      
                      1,112,165Interest
      expense
                      
                      
                      83,521
                      
                      
                      
                      88,834Earnings
      before income taxes
                      
                      
                      263,219
                      
                      
                      
                      1,023,331Provision
      for income taxes
                      
                      
                      157,000
                      
                      
                      
                      392,000Net
      earnings
                      
                      $
                      106,219
                      
                      
                      $
                      631,331Earnings
      per share:Basic
                      
                      $
                      0.00
                      
                      
                      $
                      0.03Diluted
                      
                      
                      0.00
                      
                      
                      
                      0.03Weighted
      average common shares outstanding:Basic
                      
                      
                      21,919,624
                      
                      
                      
                      21,178,551Diluted
                      
                      
                      22,508,523
                      
                      
                      
                      22,920,405





See notes
to condensed consolidated financial statements.


- 5
-


RBC
LIFE SCIENCES, INC. and SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)





For the Six Months Ended June
      30,2009
                
                
                2008Cash
      flows from operating activities:Net
      earnings
                
                $
                106,219
                
                
                $
                631,331Adjustment
      for non-cash items:Depreciation
      and amortization
                
                
                204,980
                
                
                
                181,723Stock-based
      compensation
                
                
                70,080
                
                
                
                61,945Deferred
      income taxes
                
                
                49,400
                
                
                
                (113,000
                )Change
      in operating assets and liabilities:Accounts
      receivable
                
                
                98,846
                
                
                
                41,773Inventories
                
                
                105,125
                
                
                
                (980,283
                )Prepaid
      expenses
                
                
                269,340
                
                
                
                (505,491
                )Other
      assets
                
                
                -
                
                
                
                (924
                )Accounts
      payable and accrued liabilities
                
                
                (688,923
                )
                
                
                (1,445,407
                )Deferred
      revenue
                
                
                (441,051
                )
                
                
                1,412,688Net
      cash used in operating activities
                
                
                (225,984
                )
                
                
                (715,645
                )Cash
      flows from investing activities:Purchase
      of property and equipment
                
                
                (753,574
                )
                
                
                (271,554
                )Proceeds
      from surrender of insurance policy
                
                
                194,277
                
                
                
                -Net
      cash used in investing activities
                
                
                (559,297
                )
                
                
                (271,554
                )Cash
      flows from financing activities:Payments
      of long-term obligations
                
                
                (70,804
                )
                
                
                (67,306
                )Proceeds
      from the exercise of stock options
                
                
                1,455
                
                
                
                56,123Net
      cash used in financing activities
                
                
                (69,349
                )
                
                
                (11,183
                )Effect
      of exchange rate changes on cash flows
                
                
                (21,895
                )
                
                
                2,448Net
      decrease in cash and cash equivalents
                
                
                (876,525
                )
                
                
                (995,934
                )Cash
      and cash equivalents, beginning of period
                
                
                4,973,405
                
                
                
                6,368,885Cash
      and cash equivalents, end of period
                
                $
                4,096,880
                
                
                $
                5,372,951





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 United States of America 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 accounting
principles generally accepted in the United States of America 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, 2008 (the
“2008 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 accounting principles
generally accepted in the United States of America 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.





In
connection with preparation of these condensed consolidated financial statements
and in accordance with Statement of Financial Accounting Standards No. 165,
Subsequent Events
(“SFAS 165”), the Company evaluated subsequent events after the balance sheet
date of June 30, 2009 through August 6, 2009.





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”) under the RBC Life
Sciences 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.  Associates can derive compensation both from the direct
sales of products and from sales generated by sponsored Associates.





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 according to the same or a similar compensation plan as 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.  Medical 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,
oncology and podiatry markets.


- 7
-


Note
C – Inventories:





Inventories
at June 30, 2009 and December 31, 2008 consist of the following:





June 30, 2009
                    
                    
                    December 31, 2008Raw
      materials and bulk products
                    
                    $
                    415,611
                    
                    
                    $
                    384,376Packaging
      materials
                    
                    
                    656,298
                    
                    
                    
                    584,842Finished
      goods
                    
                    
                    4,536,548
                    
                    
                    
                    4,737,395$
                    5,608,457
                    
                    
                    $
                    5,706,613





Note
D – Prepaid Expenses:





Prepaid
expenses at June 30, 2009 and December 31, 2008 consist of the
following:





June 30, 2009
                  
                  
                  December 31, 2008Advance
      payment to suppliers
                  
                  $
                  87,192
                  
                  
                  $
                  415,699Certificates
      of deposit - restricted
                  
                  
                  573,109
                  
                  
                  
                  569,445Prepaid
      insurance and other
                  
                  
                  449,105
                  
                  
                  
                  389,661$
                  1,109,406
                  
                  
                  $
                  1,374,805





Note
E – Property and Equipment:





Property
and equipment at June 30, 2009 and December 31, 2008 consists of the
following:





June 30, 2009
                  
                  
                  December 31, 2008Building
      and improvements
                  
                  $
                  3,523,428
                  
                  
                  $
                  3,523,428Computer
      software and office equipment
                  
                  
                  1,947,740
                  
                  
                  
                  1,625,205Warehouse
      equipment
                  
                  
                  242,941
                  
                  
                  
                  367,285Automotive
      equipment
                  
                  
                  15,228
                  
                  
                  
                  55,392Leasehold
      improvements
                  
                  
                  18,800
                  
                  
                  
                  17,8585,748,137
                  
                  
                  
                  5,589,168Less
      – accumulated depreciation
                  
                  
                  (1,995,659
                  )
                  
                  
                  (2,399,890
                  )3,752,478
                  
                  
                  
                  3,189,278Land
                  
                  
                  1,141,173
                  
                  
                  
                  1,141,173$
                  4,893,651
                  
                  
                  $
                  4,330,451





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 AmortizationBalance,
      December 31, 2008
                  
                  $
                  3,238,342
                  
                  
                  $
                  (1,041,260
                  )Currency
      translation adjustment
                  
                  
                  45,348
                  
                  
                  
                  (22,108
                  )Balance,
      June 30, 2009
                  
                  $
                  3,283,690
                  
                  
                  $
                  (1,063,368
                  )




- 8
-


Other
intangible assets consist of the following:





June 30, 2009
                  
                  
                  December 31, 2008Average
                    Life
                    (years)
                  
                  
                  Gross
                    Carrying
                    Value
                  
                  
                  Accumulated
                    Amortization
                  
                  
                  Gross
                    Carrying
                    Value
                  
                  
                  Accumulated
                    AmortizationDistribution
      contracts
                  
                  
                  8
                  
                  
                  $
                  277,369
                  
                  
                  $
                  (253,031
                  )
                  
                  $
                  277,369
                  
                  
                  $
                  (244,536
                  )Copyrights,
      trademarks and other registrations
                  
                  
                  19
                  
                  
                  
                  99,100
                  
                  
                  
                  (41,621
                  )
                  
                  
                  99,100
                  
                  
                  
                  (38,979
                  )Other
                  
                  
                  11
                  
                  
                  
                  47,600
                  
                  
                  
                  (33,292
                  )
                  
                  
                  47,600
                  
                  
                  
                  (31,207
                  )$
                  424,069
                  
                  
                  $
                  (327,944
                  )
                  
                  $
                  424,069
                  
                  
                  $
                  (314,722
                  )





Amortization
expense related to other intangible assets totaled approximately $5,400 and
$10,600 for the quarters ended June 30, 2009 and 2008, respectively, and $13,200
and $21,200 for the six months ended June 30, 2009 and 2008,
respectively.  The aggregate estimated amortization expense for
intangible assets remaining as of June 30, 2009 is as follows:





Remainder
      of 2009
                  
                  $
                  10,8132010
                  
                  
                  21,6262011
                  
                  
                  13,7922012
                  
                  
                  5,9572013
                  
                  
                  5,957Thereafter
                  
                  
                  37,980Total
                  
                  $
                  96,125





Note
G – Accrued Liabilities:





Accrued
liabilities at June 30, 2009 and December 31, 2008 consist of the
following:





June 30, 2009
                  
                  
                  December 31, 2008Salaries
      and wages
                  
                  $
                  562,462
                  
                  
                  $
                  798,913Distributor
      commissions
                  
                  
                  305,364
                  
                  
                  
                  297,570Sales
      and property taxes
                  
                  
                  54,921
                  
                  
                  
                  32,759Interest
                  
                  
                  13,728
                  
                  
                  
                  14,186Other
                  
                  
                  104,613
                  
                  
                  
                  122,739$
                  1,041,088
                  
                  
                  $
                  1,266,167





Note
H – Share-Based Compensation:





On
January 1, 2006, the Company adopted Statement of Financial Accounting Standards
No. 123 (Revised 2004), Share-Based Payment(“SFAS
123R”) using the modified-prospective transition method.  As a result,
the Company records compensation expense for all share-based payments based on
the grant date fair value estimated in accordance with the provisions of
SFAS 123R.  Share-based compensation expense for the quarters
ended June 30, 2009 and 2008 was approximately $35,400 and $32,000,
respectively, and for the six months ended June 30, 2009 and 2008 was
approximately $70,100 and $62,000.  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.


- 9
-


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 June 30,
                  
                  
                  Six Months Ended June 30,2009
                  
                  
                  2008(1)
                  
                  
                  2009
                  
                  
                  2008Weighted
      average expected life (years)
                  
                  
                  5.0
                  
                  
                  
                  —
                  
                  
                  
                  7.3
                  
                  
                  
                  9.0Risk-free
      interest rate
                  
                  
                  2.31
                  %
                  
                  
                  —
                  
                  
                  
                  2.67
                  %
                  
                  
                  3.77
                  %Expected
      volatility
                  
                  
                  97.75
                  %
                  
                  
                  —
                  
                  
                  
                  114.92
                  %
                  
                  
                  138.57
                  %Expected
      dividend yield
                  
                  
                  0.0
                  %
                  
                  
                  —
                  
                  
                  
                  0.0
                  %
                  
                  
                  0.0
                  %


(1)           There
were no option grants during this period.





On May
13, 2009, the Company granted to certain key Associates, non-qualified stock
options to purchase an aggregate of 150,000 shares of the Company’s common stock
at an exercise price of $0.39 per share.  The options expire five
years from the date of grant and are subject to vesting provisions based on
attaining certain performance goals.  However, if the first
performance goal is not attained on or before May 13, 2011, the options will
expire on that date.  The fair value of these options was estimated to
be $43,400 using the Black-Scholes pricing model.  As of June 30,
2009, no compensation cost has been recognized with respect to these options as,
based on available information, the Company does not believe that the
performance goals are probable of being achieved.





A summary
of stock option activity for the six months ended June 30, 2009 is as
follows:





Options
                      
                      
                      Weighted-
                        Average Exercise
                        Price per Share
                      
                      
                      Weighted-Average
                        Remaining
                        Contractual Term
                        (in years)
                      
                      Aggregate
                        Intrinsic
                        ValueOutstanding
      on January 1, 2009
                      
                      
                      2,292,885
                      
                      
                      $
                      0.46Granted
                      
                      
                      351,485
                      
                      
                      
                      0.47Exercised
                      
                      
                      (6,930
                      )
                      
                      
                      0.21Forfeited/canceled
                      
                      
                      (446,385
                      )
                      
                      
                      0.72Outstanding
      on June 30, 2009
                      
                      
                      2,191,055
                      
                      
                      $
                      0.41
                      
                      
                      
                      5.7
                      
                      
                      $
                      266,404Exercisable
      on June 30, 2009
                      
                      
                      1,074,445
                      
                      
                      $
                      0.23
                      
                      
                      
                      4.2
                      
                      
                      $
                      248,450




A summary
of the status of the Company’s non-vested stock options as of June 30, 2009 and
changes during the six months then ended are presented
below:




Weighted-AverageGrant Date FairShares
                          
                          
                          Value per ShareNon-vested
      stock options at January 1, 2009
                          
                          
                          819,075
                          
                          
                          $
                          0.60Non-vested
      stock options granted
                          
                          
                          350,000
                          
                          
                          
                          0.41Vested
      stock options
                          
                          
                          (40,000
                          )
                          
                          
                          0.42Forfeited
      stock options
                          
                          
                          (12,465
                          )
                          
                          
                          0.51Non-vested
      stock options at June 30, 2009
                          
                          
                          1,116,610
                          
                          
                          
                          0.54





As of
June 30, 2009, there was approximately $533,000 of total unrecognized
compensation cost related to stock option grants.


- 10
-


Note
I – Long-Term Obligations and Credit Lines:





At June
30, 2009 and December 31, 2008 long-term obligations consist of the
following:





June 30, 2009
                        
                        
                        December 31, 2008Mortgage
      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
                        
                        $
                        2,125,663
                        
                        
                        $
                        2,196,468Less
      – current maturities
                        
                        
                        (150,083
                        )
                        
                        
                        (144,397
                        )$
                        1,975,580
                        
                        
                        $
                        2,052,071





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 June 30, 2009, fair value of fixed-rate long-term
debt was $2,209,000, which was $83,000 above the carrying value of
$2,126,000.  At December 31, 2008, fair value of fixed-rate long-term
debt was $2,386,000, which was $190,000 above the carrying value of
$2,196,000.





The
Company maintains a $500,000 bank line of credit that matures October 22,
2009.  Borrowings under this line of credit bear interest at 5.05% and
are secured by a $500,000 certificate of deposit maintained at the
bank.  There were no borrowings outstanding under this line at June
30, 2009.





Note
J – Segments and Geographic Area:





The
Company's segments are based on the organization 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
Sciences brand name.  These products are distributed by a network of
independent Associates in certain markets, primarily the U.S. and Canada, 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
primarily in the U.S. under the MPM Medical brand name.  The 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.  MPM’s 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.





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.


- 11
-


Segment
information is as follows (in thousands):





Nutritional Products
                
                
                Medical Products
                
                
                ConsolidatedQuarter
      Ended June 30, 2009Net
      sales
                
                $
                5,301
                
                
                $
                1,458
                
                
                $
                6,759Depreciation
      and amortization
                
                
                87
                
                
                
                18
                
                
                
                105Operating
      profit
                
                
                432
                
                
                
                76
                
                
                
                508Capital
      expenditures
                
                
                248
                
                
                
                7
                
                
                
                255Total
      assets
                
                
                16,845
                
                
                
                1,956
                
                
                
                18,801Quarter
      Ended June 30, 2008Net
      sales
                
                $
                5,361
                
                
                $
                1,526
                
                
                $
                6,887Depreciation
      and amortization
                
                
                69
                
                
                
                24
                
                
                
                93Operating
      profit
                
                
                384
                
                
                
                117
                
                
                
                501Capital
      expenditures
                
                
                184
                
                
                
                8
                
                
                
                192Total
      assets
                
                
                18,054
                
                
                
                1,681
                
                
                
                19,735Six
      Months Ended June 30, 2009Net
      sales
                
                $
                9,821
                
                
                $
                2,954
                
                
                $
                12,775Depreciation
      and amortization
                
                
                166
                
                
                
                39
                
                
                
                205Operating
      profit
                
                
                227
                
                
                
                120
                
                
                
                347Capital
      expenditures
                
                
                747
                
                
                
                7
                
                
                
                754Total
      assets
                
                
                16,845
                
                
                
                1,956
                
                
                
                18,801Six
      Months Ended June 30, 2008Net
      sales
                
                $
                10,346
                
                
                $
                2,888
                
                
                $
                13,234Depreciation
      and amortization
                
                
                134
                
                
                
                48
                
                
                
                182Operating
      profit
                
                
                952
                
                
                
                160
                
                
                
                1,112Capital
      expenditures
                
                
                249
                
                
                
                23
                
                
                
                272Total
      assets
                
                
                18,054
                
                
                
                1,681
                
                
                
                19,735





Financial
information summarized geographically for the quarters and six months ended June
30, 2009 and 2008 is listed below (in thousands):





Quarter Ended June 30, 2009
                  
                  
                  Quarter Ended June 30, 2008Net sales
                  
                  
                  Long-Lived assets
                  
                  
                  Net sales
                  
                  
                  Long-Lived assetsDomestic
                  
                  $
                  2,649
                  
                  
                  $
                  6,721
                  
                  
                  $
                  2,600
                  
                  
                  $
                  6,228Former
      Soviet Union
                  
                  
                  3,609
                  
                  
                  
                  -
                  
                  
                  
                  3,672
                  
                  
                  
                  -Canada
                  
                  
                  287
                  
                  
                  
                  499
                  
                  
                  
                  306
                  
                  
                  
                  575All
      others
                  
                  
                  214
                  
                  
                  
                  -
                  
                  
                  
                  309
                  
                  
                  
                  -Totals
                  
                  $
                  6,759
                  
                  
                  $
                  7,220
                  
                  
                  $
                  6,887
                  
                  
                  $
                  6,803





Six Months Ended June 30, 2009
                  
                  
                  Six Months Ended June 30, 2008Net sales
                  
                  
                  Long-Lived assets
                  
                  
                  Net sales
                  
                  
                  Long-Lived assetsDomestic
                  
                  $
                  5,377
                  
                  
                  $
                  6,721
                  
                  
                  $
                  5,138
                  
                  
                  $
                  6,228Former
      Soviet Union
                  
                  
                  6,607
                  
                  
                  
                  -
                  
                  
                  
                  7,047
                  
                  
                  
                  -Canada
                  
                  
                  542
                  
                  
                  
                  499
                  
                  
                  
                  595
                  
                  
                  
                  575All
      others
                  
                  
                  249
                  
                  
                  
                  -
                  
                  
                  
                  454
                  
                  
                  
                  -Totals
                  
                  $
                  12,775
                  
                  
                  $
                  7,220
                  
                  
                  $
                  13,234
                  
                  
                  $
                  6,803




- 12
-


Significant
Customers





The
Company recorded sales of Nutritional Products to Coral Club International,
Inc., a licensee of the Company, in the amounts of $3,609,000 and $3,672,000
during the quarters ended June 30, 2009 and 2008, respectively, and $6,607,000
and $7,047,000 during the six months ended June 30, 2009 and 2008,
respectively.  The Company also recorded sales of Medical Products to
a medical/surgical dealer in the amounts of $870,000 and $914,000 during the
quarters ended June 30, 2009 and 2008, respectively, and $1,888,000 and
$1,738,000 during the six months ended June 30, 2009 and 2008,
respectively.  These sales accounted for more than 10% of net sales in
these periods.  In no other case did a customer of the Company account
for more than 10% of net sales during the quarters or six months ended June 30,
2009 and 2008.





Note
K – Earnings Per Share:





Summarized
basic and diluted earnings per common share were calculated as
follows:





Net Earnings
                  
                  
                  Weighted
                    Average
                    Shares
                  
                  
                  Per ShareQuarter
      Ended June 30, 2009Basic
      earnings per common share
                  
                  $
                  277,199
                  
                  
                  
                  21,921,934
                  
                  
                  $
                  0.01Effect
      of dilutive stock options
                  
                  
                  -
                  
                  
                  
                  555,383Diluted
      earnings per common share
                  
                  $
                  277,199
                  
                  
                  
                  22,477,317
                  
                  
                  $
                  0.01Quarter
      Ended June 30, 2008Basic
      earnings per common share
                  
                  $
                  276,472
                  
                  
                  
                  21,242,664
                  
                  
                  $
                  0.01Effect
      of dilutive stock options
                  
                  
                  -
                  
                  
                  
                  1,700,905Diluted
      earnings per common share
                  
                  $
                  276,472
                  
                  
                  
                  22,943,569
                  
                  
                  $
                  0.01Six
      Months Ended June 30, 2009Basic
      earnings per common share
                  
                  $
                  106,219
                  
                  
                  
                  21,919,624
                  
                  
                  $
                  0.00Effect
      of dilutive stock options
                  
                  
                  -
                  
                  
                  
                  588,899Diluted
      earnings per common share
                  
                  $
                  106,219
                  
                  
                  
                  22,508,523
                  
                  
                  $
                  0.00Six
      Months Ended June 30, 2008Basic
      earnings per common share
                  
                  $
                  631,331
                  
                  
                  
                  21,178,551
                  
                  
                  $
                  0.03Effect
      of dilutive stock options
                  
                  
                  -
                  
                  
                  
                  1,741,854Diluted
      earnings per common share
                  
                  $
                  631,331
                  
                  
                  
                  22,920,405
                  
                  
                  $
                  0.03





The
number of stock options that were outstanding, but not included in the
computation of diluted earnings per common share because their exercise price
was greater than the average market price of the common stock, or were otherwise
anti-dilutive, was 1,121,000 and 909,000 for the quarters ended June 30, 2009
and 2008, respectively, and 1,159,000 and 870,000 for the six months ended June
30, 2009 and 2008, respectively.





Note
L – Comprehensive Income (Loss):





Comprehensive
income (loss) is net earnings 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):


- 13
-




Quarters Ended June 30,
                
                
                Six Months Ended June 30,2009
                
                
                2008
                
                
                2009
                
                
                2008Net
      earnings
                
                $
                277,199
                
                
                $
                276,472
                
                
                $
                106,219
                
                
                $
                631,331Other
      comprehensive income (loss):Foreign
      currency translation adjustment
                
                
                18,936
                
                
                
                5,875
                
                
                
                11,390
                
                
                
                (17,436
                )Comprehensive
      income
                
                $
                296,135
                
                
                $
                282,347
                
                
                $
                117,609
                
                
                $
                613,895





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.


- 14
-


ITEM
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results ofOperations.





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 2008 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.  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 2008 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 onforward-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. 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
      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.  MPM’s 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.




- 15
-


Consolidated
net sales in dollars and as a percentage of consolidated net sales are as
follows:





Quarters Ended June 30,2009
                    
                    
                    2008(U.S. dollars in 000’s)Nutritional
      Products:Associate
      network
                    
                    $
                    1,478
                    
                    
                    
                    22
                    %
                    
                    $
                    1,481
                    
                    
                    
                    22
                    %Licensees
                    
                    
                    3,823
                    
                    
                    
                    56
                    %
                    
                    
                    3,880
                    
                    
                    
                    56
                    %5,301
                    
                    
                    
                    78
                    %
                    
                    
                    5,361
                    
                    
                    
                    78
                    %Medical
      Products
                    
                    
                    1,458
                    
                    
                    
                    22
                    %
                    
                    
                    1,526
                    
                    
                    
                    22
                    %$
                    6,759
                    
                    
                    
                    100
                    %
                    
                    $
                    6,887
                    
                    
                    
                    100
                    %





Six Months Ended June 30,2009
                                    
                                    
                                    2008(U.S. dollars in 000’s)Nutritional
      Products:Associate
      network
                                    
                                    $
                                    2,965
                                    
                                    
                                    
                                    23
                                    %
                                    
                                    $
                                    2,946
                                    
                                    
                                    
                                    22
                                    %Licensees
                                    
                                    
                                    6,856
                                    
                                    
                                    
                                    54
                                    %
                                    
                                    
                                    7,400
                                    
                                    
                                    
                                    56
                                    %9,821
                                    
                                    
                                    
                                    77
                                    %
                                    
                                    
                                    10,346
                                    
                                    
                                    
                                    78
                                    %Medical
      Products
                                    
                                    
                                    2,954
                                    
                                    
                                    
                                    23
                                    %
                                    
                                    
                                    2,888
                                    
                                    
                                    
                                    22
                                    %$
                                    12,775
                                    
                                    
                                    
                                    100
                                    %
                                    
                                    $
                                    13,234
                                    
                                    
                                    
                                    100
                                    %





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 June 30,
                            
                            
                            Six Months Ended June 30,2009
                            
                            
                            2008
                            
                            
                            2009
                            
                            
                            2008United
      States
                            
                            
                            81
                            %
                            
                            
                            79
                            %
                            
                            
                            82
                            %
                            
                            
                            80
                            %Canada
                            
                            
                            19
                            
                            
                            
                            21
                            
                            
                            
                            18
                            
                            
                            
                            20100
                            %
                            
                            
                            100
                            %
                            
                            
                            100
                            %
                            
                            
                            100
                            %





Net sales
through the Associate network channel increased approximately 1% during the
first six months of 2009 compared to the same period in 2008.  This
increase is primarily attributable to an increase in the rate of sponsorship of
new Associates by the current Associate network in the U.S. market. 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.




Licensees. 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 Coral Club International (“CCI”). CCI, which accounted for
96% and 95% of licensee net sales in the six months ended June 30, 2009 and
2008, respectively, distributes products in a territory comprised mainly of the
former Soviet Union 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.




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.


- 16
-





This
segment’s largest customer, a medical/surgical dealer, accounted for 64% and 60%
of Medical Products net sales during the six months ended June 30, 2009 and
2008, respectively.




CRITICAL
ACCOUNTING POLICIES AND ESTIMATES




The
preparation of our financial statements and related disclosures in conformity
with accounting principles generally accepted in the U.S. 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 six months ended
June 30, 2009 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 2008 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 June 30,
                                
                                
                                Six Months Ended June 30,2009
                                
                                
                                2008
                                
                                
                                2009
                                
                                
                                2008Net
      sales
                                
                                
                                100.0
                                %
                                
                                
                                100.0
                                %
                                
                                
                                100.0
                                %
                                
                                
                                100.0
                                %Cost
      of sales
                                
                                
                                47.9
                                
                                
                                
                                46.3
                                
                                
                                
                                47.9
                                
                                
                                
                                45.6Gross
      profit
                                
                                
                                52.1
                                
                                
                                
                                53.7
                                
                                
                                
                                52.1
                                
                                
                                
                                54.4Operating
      expenses:General
      and administrative
                                
                                
                                34.8
                                
                                
                                
                                37.1
                                
                                
                                
                                38.6
                                
                                
                                
                                36.3Distributor
      commissions
                                
                                
                                8.4
                                
                                
                                
                                8.1
                                
                                
                                
                                9.4
                                
                                
                                
                                8.4Depreciation
      and amortization
                                
                                
                                1.4
                                
                                
                                
                                1.2
                                
                                
                                
                                1.4
                                
                                
                                
                                1.3Total
      operating expenses
                                
                                
                                44.6
                                
                                
                                
                                46.4
                                
                                
                                
                                49.4
                                
                                
                                
                                46.0Operating
      profit
                                
                                
                                7.5
                                
                                
                                
                                7.3
                                
                                
                                
                                2.7
                                
                                
                                
                                8.4Interest
      expense
                                
                                
                                0.6
                                
                                
                                
                                0.7
                                
                                
                                
                                0.7
                                
                                
                                
                                0.7Earnings
      before income taxes
                                
                                
                                6.9
                                
                                
                                
                                6.6
                                
                                
                                
                                2.0
                                
                                
                                
                                7.7Provision
      for income taxes
                                
                                
                                2.8
                                
                                
                                
                                2.6
                                
                                
                                
                                1.2
                                
                                
                                
                                2.9Net
      earnings
                                
                                
                                4.1
                                %
                                
                                
                                4.0
                                %
                                
                                
                                0.8
                                %
                                
                                
                                4.8
                                %





Quarter
ended June 30, 2009 compared with quarter ended June 30, 2008




Net sales.Net sales for the
quarter ended June 30, 2009 were $6,759,000 compared with net sales for the same
period in 2008 of $6,887,000, a decrease of $128,000 or 2%. This decrease
resulted from a $60,000 decrease in net sales of Nutritional Products and a
$68,000 decrease in net sales of Medical Products. Net sales of Nutritional
Products to our licensees decreased $57,000 while net sales of Nutritional
Products to our Associate network decreased $3,000.




Associate
Network.  Net sales in the North American market were
essentially flat, decreasing approximately $3,000 during the quarter ended June
30, 2009.  Continuing the trend from the first quarter of 2009, the
sponsorship of new Associates by the current Associate network increased more
than 100% during the second quarter of 2009.  While we believe the
marketing initiatives and other actions we have undertaken led to this increase
in the sponsorship of new Associates, we can give no assurance that the number
of active Associates will continue to increase.




Licensees.  Net
sales to our licensees decreased primarily as a result of decreased shipments to
CCI. Sales to CCI decreased $63,000 during the quarter ended June 30,
2009.  While 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, in-territory sales of our products to CCI’s
Associate network did decline during the second quarter of 2009.  We
attribute this decline in sales to the general decline in economic conditions in
countries served by CCI, and we expect this trend to continue until economic
conditions improve.


- 17
-





Under our
arrangement with CCI, CCI orders products from us and pays for them when we
segregate them in our warehouse for CCI’s account. Once segregated, products are
not subject to return except in the case of a manufacturing
defect.  We store the products until CCI provides shipping
instructions.  Because we do not recognize revenue until we ship
products to CCI, our 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.  Reflecting the slow-down in CCI’s sales,
backlog related to CCI’s account was $4,933,000 at June 30, 2009 compared to
$11,162,000 at June 30, 2008.





Medical products.  The
decline in net sales of Medical Products resulted mainly from decreased sales to
the largest customer in this segment.   Sales to this customer, which
distributes wound care products and provides services to the nursing home
market, decreased $44,000 during the second quarter of 2009 compared to the
second quarter of 2008.  We attribute the decline in sales to efforts
by this distributor to align inventory with projected demand.  Sales
to this distributor in the second quarter were approximately
$870,000.





Cost of sales.  Cost
of sales for the quarter ended June 30, 2009 was $3,238,000 compared with cost
of sales in the second quarter of 2008 of $3,190,000, an increase of $48,000 or
2%. As a percentage of net sales, cost of sales was 48% in the second quarter of
2009 and 46% in the second quarter of 2008. As a percentage of net sales, gross
profit decreased 2% mainly because of a change in the sales mix of Nutritional
Products.  During the second quarter of 2009, the sales mix associated
with sales to our licensees and our Associate network contributed a lower gross
margin than the corresponding sales mix in the second quarter of
2008.




General and administrative.
General and administrative expenses for the quarter ended June 30, 2009, were
$2,353,000 compared with expenses in the second quarter of 2008 of $2,551,000, a
decrease of $198,000 or 8%.  This decrease was mainly related to the
timing of expenses associated with the annual marketing and sales event that we
sponsor for our North American Associates.  The 2008 Associate event
took place during the second quarter of 2008 while the 2009 Associate event is
not scheduled to be held until the third quarter of this year.  Also
contributing to the decrease in general and administrative expenses in the
second quarter of 2009 was a decrease of Medical Products marketing and sales
expenses, primarily related to reduced travel expenses.  As a
percentage of net sales, general and administrative expenses were 35% and 37% in
the quarters ended June 30, 2009 and 2008, respectively.




Distributor commissions.
Distributor commissions were $567,000 for the quarter ended June 30, 2009
compared with distributor commissions of $560,000 in the second quarter of 2008,
an increase of $7,000 or 1%.  With regard to our Associate network,
distributor commissions as a percentage of commissionable sales increased
slightly to approximately 34% in the second quarter of 2009 compared to 33% in
the same period in 2008.  This percentage increase was mainly due to
the payment of extra commissions during the second quarter of 2009 in connection
with certain marketing and sales initiatives undertaken during the
quarter.  On a consolidated basis, distributor commissions as a
percentage of net sales were 8% in the second quarter of 2009 and
2008.




Income taxes.We
recorded a provision for income taxes of $189,000 during the quarter ended June
30, 2009 based on our estimate of the effective annual income tax
rate.





Net earnings.  As a
result of the factors described above, net earnings for the quarter ended June
30, 2009 were $277,000, or $0.01 per share, compared with net earnings in the
second quarter of 2008 of $276,000, or $0.01 per share.





Six
months ended June 30, 2009 compared with six months  ended June 30,
2008




Net sales.Net sales for the
six months ended June 30, 2009 were $12,775,000 compared with net sales for the
same period in 2008 of $13,234,000, a decrease of $459,000 or 3%. This decrease
resulted from a $525,000 decrease in net sales of Nutritional Products that was
partially offset by a $66,000 increase in net sales of Medical Products. Net
sales of Nutritional Products to our licensees decreased $544,000 while net
sales of Nutritional Products to our Associate network increased
$19,000.




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-





Associate
Network.  Net sales in the North American market increased
approximately $19,000 during the first six months of 2009, a significant change
in the declining sales trend we have reported in this distribution channel for
several years.  We attribute this increase mainly to an increase in
the number of active Associates, which resulted from higher levels of
sponsorship of new Associates by the current Associate network in the U.S.
market.  While we believe the marketing initiatives and other actions
we have undertaken led to this increase in the sponsorship of new Associates, we
can give no assurance that the number of active Associates will continue to
increase.




Licensees.  Net
sales to our licensees decreased primarily as a result of decreased shipments to
CCI. Sales to CCI decreased $440,000 in the first six months of
2009.  While 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, in-territory sales of our products to CCI’s
Associate network did decline during the first six months of 2009.  We
attribute this slowdown to the general decline in economic conditions in
countries served by CCI, and we expect this trend to continue until economic
conditions improve.





Medical products.  The
growth in net sales of Medical Products resulted from increased sales to the
largest customer in this segment.   Sales to this customer, which
distributes wound care products and provides services to the nursing home
market, increased $150,000 during the first six months of 2009 compared to the
first six months of 2008.  Sales to this distributor in the first six
months of 2009 were approximately $1,888,000.





Cost of sales.  Cost
of sales for the six months ended June 30, 2009 was $6,115,000 compared with
cost of sales in the first six months of 2008 of $6,035,000, an increase of
$80,000 or 1%. As a percentage of net sales, cost of sales was 48% in the first
six months of 2009 and 46% in the first six months of 2008. As a percentage of
net sales, gross profit decreased 2% mainly because of a change in the sales mix
of Nutritional Products.  During the first six months of 2009, the
sales mix associated with sales to our licensees and our Associate network
contributed a lower gross margin than the corresponding sales mix in the first
six months of 2008.




General and administrative.
General and administrative expenses for the six months ended June 30, 2009, were
$4,930,000 compared with expenses in the first six months of 2008 of $4,804,000,
an increase of $126,000 or 3%. This increase was mainly attributable to
increased expenses associated with the upgrade of our network marketing computer
software, regulatory compliance and support activities and facilities
maintenance.  As a percentage of net sales, general and administrative
expenses were 39% and 36% in the six months ended June 30, 2009 and 2008,
respectively.




Distributor commissions.
Distributor commissions were $1,202,000 for the six months ended June 30, 2009
compared with distributor commissions of $1,118,000 in the first six months of
2008, an increase of $84,000 or 8%.  With regard to our Associate
network, distributor commissions as a percentage of commissionable sales
increased to approximately 36% in the first six months of 2009 compared to 33%
in the same period in 2008.  This percentage increase was mainly due
to the payment of extra commissions during the first six months of 2009 in
connection with certain marketing and sales initiatives undertaken during this
period, most of which were paid in the first quarter of 2009.  On a
consolidated basis, distributor commissions as a percentage of net sales
increased to 9% in the first six months of 2009 compared with 8% in the first
six months of 2008.




Income taxes.We
recorded a provision for income taxes of $157,000 during the six months ended
June 30, 2009 based on our estimate of the effective annual income tax
rate.





Net earnings.  As a
result of the factors described above, net earnings for the six months ended
June 30, 2009 were $106,000, or $0.00 per share, compared with net earnings in
the first six months of 2008 of $631,000, or $0.03 per share.





LIQUIDITY
AND CAPITAL RESOURCES




Cash and working capital. At
June 30, 2009, all of our cash and cash equivalents were maintained in accounts
that were fully insured by federal government agencies.  During the
six months ended June 30, 2009, we had a net decrease in cash of $877,000
compared with a net decrease in cash of $996,000 in the first six months of
2008.  At June 30, 2009, we had working capital of $5,048,000, a
$227,000 decrease from working capital at December 31, 2008 of
$5,275,000.   The reasons for these changes in cash and working
capital are described below.


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-





Operating activities. In the
first six months of 2009, our operating activities used cash flows of
$226,000.  In the first six months of 2008, our operating activities
used cash flows of $716,000.  The primary use of cash by operating
activities during the first six months of 2009 related to a $689,000 reduction
in accounts payable and accrued liabilities and a $441,000 decrease in deferred
revenue.  The decreases in accounts payable and accrued liabilities
and deferred revenue were mainly associated with the decrease in CCI
sales.  In the first six months of 2009, net earnings adjusted for
non-cash activities, which include depreciation and amortization, stock-based
compensation and deferred income taxes, provided cash flows of $431,000 compared
with providing cash flows of $762,000 in the first six months of
2008.




Investing activities.During
the first six months of 2009, we used cash of $754,000 to purchase property and
equipment.  Of this amount, approximately $640,000 was associated with
the upgrade of our network marketing computer software.  We expect
additional capital expenditures of approximately $300,000 during 2009 to
complete this project.  During the first six months of 2009, we also
received $194,000 from the surrender of a life insurance policy covering our
former Chief Executive Officer who retired in December 2008.




Financing activities. The
principle financing activity during the first six months of 2009 was the
repayment of long-term debt in the amount of $71,000.  We maintain a
$500,000 line of credit arrangement with a bank, none of which was used as of
June 30, 2009.





General liquidity and cash
flows. We believe that the working capital requirements of our existing
operations 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.  Other than those described above, 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 4% of net sales during the
first six months of 2009 and during fiscal 2008.  We advance funds to
and from our foreign subsidiary denominated in U.S. dollars, exposing the
foreign subsidiary to the effect of changes in spot exchange rates of the
Canadian dollar 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 $521,000 to our Canadian operations at June 30, 2009, a 10%
adverse change in the currency rate would reduce earnings before income taxes by
approximately $52,100.





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.




- 20
-




ITEM
      4.
            Controls
      and Procedures.




As
required by Rules 13a-15(b) and 15d-15(b) under the Securities Exchange Act
of 1934 (the "Exchange Act"), our management, including our Chief Executive
Officer and Chief Financial Officer, evaluated as of June 30, 2009, 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 June 30, 2009, 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 controlover financial reporting that occurred
during the quarter ended June 30, 2009 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.


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-


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 2008 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 2008 Form 10-K.




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




None




ITEM
      3.
            Defaults
      Upon Senior Securities.




None




ITEM
      4.
            Submission
      of Matters to a Vote of Security
Holders.





We held
our Annual Meeting of Shareholders on June 3, 2009.  At this meeting
the following persons were elected to serve as directors until the 2010 Annual
Meeting of Shareholders:





For
                    
                    WithheldSteven
      E. Brown
                    15,578,564
                    
                    453,451Clinton
      H. Howard
                    15,580,564
                    
                    451,451Robert
      A. Kaiser
                    15,618,583
                    
                    413,432Paul
      R. Miller
                    15,595,383
                    
                    436,632Joseph
      P. Philipp
                    15,618,583
                    
                    413,432John
      W. Price
                    15,580,564
                    
                    451,451Kenneth
      L. Sabot
                    15,580,564
                    
                    451,451





ITEM
      5.
            Other
      Information.




None




ITEM
      6.
            Exhibits.





The
Exhibit Index filed herewith is incorporated herein by
reference.


- 22
-


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.RegistrantAugust
      7,
      2009
                                                          By:
                                                          
                                                          /s/
                                                          John
      W.
      PriceDate
                                                          
                                                          
                                                          Its:
                                                          President
      and Chief Executive OfficerAugust
      7,
      2009
                                                          By:
                                                          
                                                          /s/
                                                          Steven
      E.
      BrownDate
                                                          
                                                          
                                                          Its:
                                                          Vice
      President-Finance and
                                                            Chief
      Financial Officer
                                                              (Principal
      Financial and Accounting
Officer)




- 23
-




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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-