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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2006

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission file number: 000-50417



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RBC Life Sciences, Inc.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Nevada                                                         |  | 91-2015186                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)



|                                         |  |           
|---------------------------------------- |  | ----------
|2301 Crown Court, Irving, Texas          |  | 75038     
|(Address of principal executive offices) |  | (Zip code)

Registrants telephone number, including area code: 972-893-4000



---

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 Act of 1934 during the past 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.    x  YES ̈NO

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

Large accelerated
filer ̈Accelerated filer ̈Non-accelerated filer  x

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

Number of shares of
common stock, par value $0.001, outstanding at August 1, 2006:

20,155,294



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##### Table of Contents

TABLE OF CONTENTS



|                               |  |             |  |          |  |                                                                                       |  |   
|------------------------------ |  | ----------- |  | -------- |  | ------------------------------------------------------------------------------------- |  | --
|                               |  | Page Number
|PART I  FINANCIAL INFORMATION |  |            
|                               |  |             |  |         
|                               |  |             |  | Item 1.  |  | Condensed Consolidated Financial Statements (unaudited)                               |  | 3 
|                               |  |             |  |          |  | Notes to Condensed Consolidated Financial Statements                                  |  | 7 
|                               |  |             |  | Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 16
|                               |  |             |  | Item 3.  |  | Quantitative and Qualitative Disclosure about Market Risk                             |  | 22
|                               |  |             |  | Item 4.  |  | Controls and Procedures                                                               |  | 22
|                               | 
|PART II  OTHER INFORMATION    |  |            
|                               |  |             |  |         
|                               |  |             |  | Item 1.  |  | Legal Proceedings                                                                     |  | 23
|                               |  |             |  | Item 1A. |  | Risk Factors                                                                          |  | 23
|                               |  |             |  | Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 23
|                               |  |             |  | Item 3.  |  | Defaults Upon Senior Securities                                                       |  | 23
|                               |  |             |  | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                   |  | 23
|                               |  |             |  | Item 5.  |  | Other Information                                                                     |  | 23
|                               |  |             |  | Item 6.  |  | Exhibits                                                                              |  | 23
|                               | 
|Signatures                     |  | 24         
|                               | 
|Exhibit Index                  |  | 25         



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##### Table of Contents

PART 1  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RBC LIFE SCIENCES, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                           |  |               |            |   |                   |   |            |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ---------- | - | ----------------- | - | ---------- | -
|                                                                                                                                                                           |  | June 30, 2006 |            |   | December 31, 2005 |  
|                                                                                                                                                                           |  | (Unaudited)   |            |   |                   |  
|ASSETS                                                                                                                                                                     |  |               |            |   |                   |   |            |  
|Current assets:                                                                                                                                                            |  |               |            |   |                   |   |            |  
|Cash and cash equivalents                                                                                                                                                  |  | $             | 2,128,799  |   |                   | $ | 1,697,966  |  
|Accounts receivable, net                                                                                                                                                   |  |               | 357,846    |   |                   |   | 352,741    |  
|Inventories                                                                                                                                                                |  |               | 2,999,610  |   |                   |   | 3,564,760  |  
|Prepaid expenses and other                                                                                                                                                 |  |               | 815,379    |   |                   |   | 511,975    |  
|                                                                                                                                                                           |  |               |            |   |                   |   |            |  
|Total current assets                                                                                                                                                       |  |               | 6,301,634  |   |                   |   | 6,127,442  |  
|                                                                                                                                                                           |  |              
|Property and equipment, net                                                                                                                                                |  |               | 4,040,645  |   |                   |   | 3,975,948  |  
|                                                                                                                                                                           |  |              
|Goodwill, net                                                                                                                                                              |  |               | 2,095,054  |   |                   |   | 2,095,054  |  
|                                                                                                                                                                           |  |              
|Intangible assets, net                                                                                                                                                     |  |               | 215,376    |   |                   |   | 236,580    |  
|                                                                                                                                                                           |  |              
|Other assets                                                                                                                                                               |  |               | 480,543    |   |                   |   | 251,895    |  
|                                                                                                                                                                           |  |               |            |   |                   |   |            |  
|                                                                                                                                                                           |  | $             | 13,133,252 |   |                   | $ | 12,686,919 |  
|                                                                                                                                                                           |  |               |            |   |                   |   |            |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                       |  |               |            |   |                   |   |            |  
|Current liabilities:                                                                                                                                                       |  |               |            |   |                   |   |            |  
|Accounts payable, trade                                                                                                                                                    |  | $             | 1,022,355  |   |                   | $ | 1,202,990  |  
|Accrued liabilities                                                                                                                                                        |  |               | 1,045,604  |   |                   |   | 1,134,478  |  
|Current maturities of long-term obligations                                                                                                                                |  |               | 372,737    |   |                   |   | 303,655    |  
|Lines of credit                                                                                                                                                            |  |               | 120,875    |   |                   |   | 122,249    |  
|Deferred revenue                                                                                                                                                           |  |               | 2,494,735  |   |                   |   | 2,224,341  |  
|                                                                                                                                                                           |  |               |            |   |                   |   |            |  
|Total current liabilities                                                                                                                                                  |  |               | 5,056,306  |   |                   |   | 4,987,713  |  
|                                                                                                                                                                           |  |              
|Long-term obligations, less current maturities                                                                                                                             |  |               | 2,672,455  |   |                   |   | 2,802,113  |  
|                                                                                                                                                                           |  |              
|Deferred income tax liabilities                                                                                                                                            |  |               | 158,218    |   |                   |   |           |  
|                                                                                                                                                                           |  |              
|Shareholders equity:                                                                                                                                                      |  |               |            |   |                   |   |            |  
|Common stock, $0.001 par value; 50,000,000 shares authorized; 20,155,294 and 20,056,294 shares issued and outstanding at June 30, 2006
and December 31, 2005, respectively |  |               | 20,155     |   |                   |   | 20,056     |  
|Additional paid-in capital                                                                                                                                                 |  |               | 12,854,223 |   |                   |   | 12,789,978 |  
|Accumulated deficit                                                                                                                                                        |  |               | (7,594,237 | ) |                   |   | (7,848,454 | )
|Accumulated other comprehensive loss                                                                                                                                       |  |               | (33,868    | ) |                   |   | (64,487    | )
|                                                                                                                                                                           |  |               |            |   |                   |   |            |  
|                                                                                                                                                                           |  |               | 5,246,273  |   |                   |   | 4,897,093  |  
|                                                                                                                                                                           |  |               |            |   |                   |   |            |  
|                                                                                                                                                                           |  | $             | 13,133,252 |   |                   | $ | 12,686,919 |  
|                                                                                                                                                                           |  |               |            |   |                   |   |            |  

See notes to condensed consolidated financial statements.



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RBC LIFE SCIENCES, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                            |  |                                 |            |      |   |           
|------------------------------------------- |  | ------------------------------- | ---------- | ---- | - | ----------
|                                            |  | For the Quarters Ended June 30,
|                                            |  | 2006                            |            | 2005
|Net sales                                   |  | $                               | 6,202,541  |      | $ | 5,358,114 
|                                            |  |                                
|Cost of sales                               |  |                                 | 2,628,860  |      |   | 2,190,132 
|                                            |  |                                 |            |      |   |           
|Gross profit                                |  |                                 | 3,573,681  |      |   | 3,167,982 
|                                            |  |                                
|Operating expenses                          |  |                                 |            |      |   |           
|General and administrative                  |  |                                 | 2,126,067  |      |   | 1,754,091 
|Distributor commissions                     |  |                                 | 768,720    |      |   | 826,037   
|Depreciation and amortization               |  |                                 | 161,917    |      |   | 144,016   
|                                            |  |                                 |            |      |   |           
|Total operating expenses                    |  |                                 | 3,056,704  |      |   | 2,724,144 
|                                            |  |                                 |            |      |   |           
|Operating profit                            |  |                                 | 516,977    |      |   | 443,838   
|                                            |  |                                
|Interest expense                            |  |                                 | 64,122     |      |   | 63,454    
|                                            |  |                                 |            |      |   |           
|Earnings before income taxes                |  |                                 | 452,855    |      |   | 380,384   
|                                            |  |                                
|Provision for income taxes                  |  |                                 | 160,000    |      |   |          
|                                            |  |                                 |            |      |   |           
|Net earnings                                |  | $                               | 292,855    |      | $ | 380,384   
|                                            |  |                                 |            |      |   |           
|Earnings per share:                         |  |                                 |            |      |   |           
|Basic                                       |  | $                               | 0.01       |      | $ | 0.02      
|Diluted                                     |  |                                 | 0.01       |      |   | 0.02      
|                                            |  |                                
|Weighted average common shares outstanding: |  |                                 |            |      |   |           
|Basic                                       |  |                                 | 20,155,294 |      |   | 20,056,294
|Diluted                                     |  |                                 | 22,404,118 |      |   | 21,183,028

See notes to condensed consolidated financial statements.



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RBC LIFE SCIENCES, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                            |  |                                   |            |      |   |           
|------------------------------------------- |  | --------------------------------- | ---------- | ---- | - | ----------
|                                            |  | For the Six Months Ended June 30,
|                                            |  | 2006                              |            | 2005
|Net sales                                   |  | $                                 | 11,011,440 |      | $ | 9,498,099 
|                                            |  |                                  
|Cost of sales                               |  |                                   | 4,181,591  |      |   | 3,574,430 
|                                            |  |                                   |            |      |   |           
|Gross profit                                |  |                                   | 6,829,849  |      |   | 5,923,669 
|                                            |  |                                  
|Operating expenses                          |  |                                   |            |      |   |           
|General and administrative                  |  |                                   | 4,310,364  |      |   | 3,484,999 
|Distributor commissions                     |  |                                   | 1,652,535  |      |   | 1,652,541 
|Depreciation and amortization               |  |                                   | 324,295    |      |   | 287,857   
|                                            |  |                                   |            |      |   |           
|Total operating expenses                    |  |                                   | 6,287,194  |      |   | 5,425,397 
|                                            |  |                                   |            |      |   |           
|Operating profit                            |  |                                   | 542,655    |      |   | 498,272   
|                                            |  |                                  
|Interest expense                            |  |                                   | 128,438    |      |   | 126,725   
|                                            |  |                                   |            |      |   |           
|Earnings before income taxes                |  |                                   | 414,217    |      |   | 371,547   
|                                            |  |                                  
|Provision for income taxes                  |  |                                   | 160,000    |      |   |          
|                                            |  |                                   |            |      |   |           
|Net earnings                                |  | $                                 | 254,217    |      | $ | 371,547   
|                                            |  |                                   |            |      |   |           
|Earnings per share:                         |  |                                   |            |      |   |           
|Basic                                       |  | $                                 | 0.01       |      | $ | 0.02      
|Diluted                                     |  |                                   | 0.01       |      |   | 0.02      
|                                            |  |                                  
|Weighted average common shares outstanding: |  |                                   |            |      |   |           
|Basic                                       |  |                                   | 20,149,794 |      |   | 20,056,294
|Diluted                                     |  |                                   | 22,491,663 |      |   | 20,619,661

See notes to condensed consolidated financial statements.



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RBC LIFE SCIENCES, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                               |  |                                   |           |   |      |   |           |  
|---------------------------------------------- |  | --------------------------------- | --------- | - | ---- | - | --------- | -
|                                               |  | For the Six Months Ended June 30, |          
|                                               |  | 2006                              |           |   | 2005 |  
|Cash flows from operating activities:          |  |                                   |           |   |      |   |           |  
|Net earnings                                   |  | $                                 | 254,217   |   |      | $ | 371,547   |  
|Adjustment for non-cash items:                 |  |                                   |           |   |      |   |           |  
|Depreciation and amortization                  |  |                                   | 331,627   |   |      |   | 295,018   |  
|Stock-based compensation                       |  |                                   | 49,989    |   |      |   |          |  
|Deferred income taxes                          |  |                                   | 160,000   |   |      |   |          |  
|Change in operating assets and liabilities     |  |                                   |           |   |      |   |           |  
|Accounts receivable                            |  |                                   | (5,011    | ) |      |   | 121,712   |  
|Inventories                                    |  |                                   | 559,568   |   |      |   | (810,388  | )
|Prepaid expenses and other                     |  |                                   | (288,143  | ) |      |   | (158,945  | )
|Other assets                                   |  |                                   | (221,433  | ) |      |   | (11,469   | )
|Accounts payable and accrued liabilities       |  |                                   | (277,185  | ) |      |   | 421,187   |  
|Deferred revenue                               |  |                                   | 270,394   |   |      |   | 1,053,673 |  
|                                               |  |                                   |           |   |      |   |           |  
|Net cash provided by operating activities      |  |                                   | 834,023   |   |      |   | 1,282,335 |  
|                                               |  |                                   |           |   |      |   |           |  
|Cash flows from investing activities:          |  |                                   |           |   |      |   |           |  
|Purchase of property and equipment             |  |                                   | (370,367  | ) |      |   | (59,289   | )
|                                               |  |                                   |           |   |      |   |           |  
|Net cash used by investing activities          |  |                                   | (370,367  | ) |      |   | (59,289   | )
|                                               |  |                                   |           |   |      |   |           |  
|Cash flows from financing activities:          |  |                                   |           |   |      |   |           |  
|Net payments of lines of credit                |  |                                   | (1,374    | ) |      |   | (1,828    | )
|Payments of long term obligations              |  |                                   | (60,576   | ) |      |   | (130,533  | )
|Proceeds from the exercise of stock options    |  |                                   | 14,355    |   |      |   |          |  
|                                               |  |                                   |           |   |      |   |           |  
|Net cash used by financing activities          |  |                                   | (47,595   | ) |      |   | (132,361  | )
|                                               |  |                                   |           |   |      |   |           |  
|Effect of exchange rate changes on cash flows  |  |                                   | 14,772    |   |      |   | 1,411     |  
|                                               |  |                                   |           |   |      |   |           |  
|Net increase in cash and cash equivalents      |  |                                   | 430,833   |   |      |   | 1,092,096 |  
|                                               |  |                                  
|Cash and cash equivalents, beginning of period |  |                                   | 1,697,966 |   |      |   | 1,051,511 |  
|                                               |  |                                   |           |   |      |   |           |  
|Cash and cash equivalents, end of period       |  | $                                 | 2,128,799 |   |      | $ | 2,143,607 |  
|                                               |  |                                   |           |   |      |   |           |  

See notes to condensed consolidated financial statements.



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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., f/k/a Royal BodyCare, 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, 2005 (the 2005 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.

Note B  Nature of Operations and Organization:

In June 2006, the Company changed its name from Royal BodyCare, Inc. to RBC Life Sciences, Inc. The Company made this change to more clearly identify its name with the products it sells, to reflect the advanced level
of biotechnology that is incorporated into its product lines and to improve the direct marketing opportunity for its Associates.

The Company is
principally engaged in the marketing of nutritional supplements and personal care products (collectively Nutritional Products). In North America, South Korea and Japan, the Companys products are marketed 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. The Company began marketing its Nutritional Products in South Korea in February 2006.

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, South Korea and Japan.

In addition to its Nutritional Products, RBC also markets a line of wound care and oncology products throughout the United States under the MPM Medical trade name. These products are distributed to hospitals, nursing
homes, clinics and pharmacies through traditional medical/surgical supply dealers and pharmaceutical distributors.



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Note C  Inventories:

Inventories at June 30, 2006 and December 31, 2005 consist of the following:



|                                |  |               |           |                   |   |          
|------------------------------- |  | ------------- | --------- | ----------------- | - | ---------
|                                |  | June 30, 2006 |           | December 31, 2005
|Raw materials and bulk products |  | $             | 293,577   |                   | $ | 389,764  
|Packaging materials             |  |               | 410,459   |                   |   | 403,452  
|Finished goods                  |  |               | 2,295,574 |                   |   | 2,771,544
|                                |  |               |           |                   |   |          
|                                |  | $             | 2,999,610 |                   | $ | 3,564,760
|                                |  |               |           |                   |   |          

Note D  Property and Equipment:

Property and equipment at June 30, 2006 and December 31, 2005 consists of the following:



|                                       |  |               |           |                   |   |          
|-------------------------------------- |  | ------------- | --------- | ----------------- | - | ---------
|                                       |  | June 30, 2006 |           | December 31, 2005
|Building and improvements              |  | $             | 2,758,983 |                   | $ | 2,758,983
|Computer software and office equipment |  |               | 3,191,051 |                   |   | 2,992,090
|Warehouse equipment                    |  |               | 275,627   |                   |   | 257,520  
|Automotive equipment                   |  |               | 55,392    |                   |   | 55,392   
|Leasehold improvements                 |  |               | 188,238   |                   |   | 18,752   
|                                       |  |               |           |                   |   |          
|                                       |  |               | 6,469,291 |                   |   | 6,082,737
|Less  accumulated depreciation        |  |               | 3,569,819 |                   |   | 3,247,962
|                                       |  |               |           |                   |   |          
|                                       |  |               | 2,899,472 |                   |   | 2,834,775
|Land                                   |  |               | 1,141,173 |                   |   | 1,141,173
|                                       |  |               |           |                   |   |          
|                                       |  | $             | 4,040,645 |                   | $ | 3,975,948
|                                       |  |               |           |                   |   |          

Note E  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 consists of the following:



|         |  |                      |           |                          |                   |            |                    |  |                          |           |  |   |            |  
|-------- |  | -------------------- | --------- | ------------------------ | ----------------- | ---------- | ------------------ |  | ------------------------ | --------- |  | - | ---------- | -
|         |  | June 30, 2006        |           |                          | December 31, 2005 |           
|         |  | Gross carrying value |           | Accumulated amortization |                   |            | Grosscarryingvalue |  | Accumulated amortization |          
|Goodwill |  | $                    | 3,222,349 |                          | $                 | (1,127,295 | )                  |  | $                        | 3,222,349 |  | $ | (1,127,295 | )

Other intangible assets consist of the following:



|                                               |  |                      |  |                      |         |                          |                   |          |                    |  |                          |         |  |   |          |  
|---------------------------------------------- |  | -------------------- |  | -------------------- | ------- | ------------------------ | ----------------- | -------- | ------------------ |  | ------------------------ | ------- |  | - | -------- | -
|                                               |  |                      |  | June 30, 2006        |         |                          | December 31, 2005 |         
|                                               |  | Average life (years) |  | Gross carrying value |         | Accumulated amortization |                   |          | Grosscarryingvalue |  | Accumulated amortization |        
|Distribution contracts                         |  | 8                    |  | $                    | 277,369 |                          | $                 | (162,151 | )                  |  | $                        | 277,369 |  | $ | (145,675 | )
|Copyrights, trademarks and other registrations |  | 19                   |  |                      | 99,100  |                          |                   | (25,766  | )                  |  |                          | 99,100  |  |   | (23,123  | )
|Other                                          |  | 11                   |  |                      | 47,600  |                          |                   | (20,776  | )                  |  |                          | 47,600  |  |   | (18,691  | )
|                                               |  |                      |  |                      |         |                          |                   |          |                    |  |                          |         |  |   |          |  
|                                               |  |                      |  | $                    | 424,069 |                          | $                 | (208,693 | )                  |  | $                        | 424,069 |  | $ | (187,489 | )
|                                               |  |                      |  |                      |         |                          |                   |          |                    |  |                          |         |  |   |          |  



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Amortization expense related to other intangible assets totaled approximately $10,600 for the quarters ended
June 30, 2006 and 2005 and $21,200 for the six months ended June 30, 2006 and 2005. The aggregate estimated amortization expense for intangible assets remaining as of June 30, 2006 is as follows:



|                  |  |   |        
|----------------- |  | - | -------
|Remainder of 2006 |  | $ | 21,203 
|2007              |  |   | 42,407 
|2008              |  |   | 42,407 
|2009              |  |   | 24,048 
|2010              |  |   | 21,626 
|Thereafter        |  |   | 63,685 
|                  |  |   |        
|Total             |  | $ | 215,376
|                  |  |   |        

Note F  Accrued Liabilities:

Accrued liabilities at June 30, 2006 and December 31, 2005 consist of the following:



|                        |  |               |           |                   |   |          
|----------------------- |  | ------------- | --------- | ----------------- | - | ---------
|                        |  | June 30, 2006 |           | December 31, 2005
|Distributor commissions |  | $             | 434,212   |                   | $ | 458,522  
|Salaries and wages      |  |               | 454,767   |                   |   | 535,004  
|Sales and other taxes   |  |               | 79,990    |                   |   | 69,896   
|Interest                |  |               | 21,178    |                   |   | 21,617   
|Other                   |  |               | 55,457    |                   |   | 49,439   
|                        |  |               |           |                   |   |          
|                        |  | $             | 1,045,604 |                   | $ | 1,134,478
|                        |  |               |           |                   |   |          

Note G  Share-Based Compensation:

Employee stock options

On July 1, 1998, the Companys shareholders adopted the 1998 Stock Option Plan (the
1998 Plan) and reserved 500,000 shares of common stock for issuance under the 1998 Plan. The 1998 Plan provided for the issuance of both non-qualified stock options and incentive stock options (ISOs), and permitted grants to
employees, non-employee directors and consultants of the Company. Effective September 4, 2003, the Companys shareholders adopted an amendment and restatement of the 1998 Plan in the form of the 2003 Stock Incentive Plan (the 2003
Plan). The purpose of this amendment and restatement was, among other things, to reserve 3,500,000 shares of common stock for issuance under the 2003 Plan, an increase from the 500,000 shares of common stock issuable under the 1998 Plan, and
to add restricted stock as available for awards under the 2003 Plan.

On June 1, 2006, the Companys shareholders adopted the 2006 Stock
Incentive Plan (the 2006 Plan) under which 2,500,000 shares of common stock were reserved for issuance. The 2006 Plan provides for the issuance of non-qualified stock options, ISOs, restricted stock awards and stock appreciation rights,
and permits grants to employees, non-employee directors and consultants of the Company.

The Company has also granted employee stock options outside of the
plans described above. Under these arrangements, as of June 30, 2006, the Company had granted non-qualified options to purchase 400,000 shares of common stock.

Prior to January 1, 2006, the Company accounted for employee stock options under Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123). As
permitted under this standard, compensation cost was recognized using the intrinsic value method described in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). In accordance with
APB 25, prior to January 1, 2006, no stock-based compensation cost was reflected in net earnings, as all options granted had an exercise price equal to or greater than the quoted market price of the underlying common stock on the date of grant.



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##### Table of Contents

On January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (Revised 2004),
Share-Based Payment(SFAS 123R) and applied the provisions of the Securities and Exchange Commission Staff Accounting Bulletin No. 107 using the modified-prospective transition method. In accordance with this method,
stock-based compensation expense recognized subsequent to December 31, 2005 includes (i) compensation expense for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value
estimated in accordance with the original provisions of SFAS 123, and (ii) compensation expense for all share-based payments granted on or subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with
the provisions of SFAS 123R. Also in accordance with this method, periods ending prior to January 1, 2006 are not retroactively adjusted.

Stock-based compensation expense for the quarter and six months ended June 30, 2006 was approximately $27,400 and $50,000, respectively, and is classified as a general and administrative expense. There were no tax benefits related to
this expense because all stock-based compensation resulted from grants of ISOs. In accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, no tax benefit is recorded for an ISO unless upon
exercise a disqualifying disposition occurs. In accordance with SFAS 123R, the Company will prospectively record any excess tax benefits from the exercise of stock options as cash flows from financing activities. There were no excess tax benefits in
the six months ended June 30, 2006.

Other stock options

In April 2003, the Company granted a five-year option to purchase 25,000 shares of common stock to an individual at an exercise price of $0.10 per share in partial settlement of an obligation of BizAdigm, Inc. The Company recorded an
increase of $2,500 to additional paid-in capital in connection with this option grant, which was the fair value of this option based on the Black-Scholes option pricing model.

Fair value

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,
|                        |  | 2006                    |   |                           | 2005 (1) |  | 2006 |   |  | 2005 (1)
|Expected life (years)   |  | 9.0                     |   |                           |         |  | 9.0  |   |  |        
|Risk-free interest rate |  | 4.67                    | % |                           |         |  | 4.67 | % |  |        
|Expected Volatility     |  | 35.0                    | % |                           |         |  | 35.0 | % |  |        
|Expected Dividend yield |  | 0                       | % |                           |         |  | 0    | % |  |        

---

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



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##### Table of Contents

Stock option activity

A summary of stock option activity for the six months ended June 30, 2006 is as follows:



|                               |  |           |   |  |                                          |      |                                                     |     |                         |   |          
|------------------------------ |  | --------- | - |  | ---------------------------------------- | ---- | --------------------------------------------------- | --- | ----------------------- | - | ---------
|                               |  | Options   |   |  | Weighted-Average ExercisePrice per Share |      | Weighted-AverageRemainingContractual Term(in years) |     | AggregateIntrinsicValue
|Outstanding on January 1, 2006 |  | 3,565,000 |   |  | $                                        | 0.21 |                                                     |     |                         |   |          
|Granted                        |  | 200,000   |   |  |                                          | 0.74 |                                                     |     |                         |   |          
|Exercised                      |  | (99,000   | ) |  |                                          | 0.15 |                                                     |     |                         |   |          
|Forfeited/Canceled             |  |          |   |  |                                          |     |                                                     |     |                         |   |          
|                               |  |           |   |  |                                          |      |                                                     |     |                         |   |          
|Outstanding on June 30, 2006   |  | 3,666,000 |   |  | $                                        | 0.24 |                                                     | 5.6 |                         | $ | 1,078,555
|                               |  |           |   |  |                                          |      |                                                     |     |                         |   |          
|Exercisable on June 30, 2006   |  | 2,099,000 |   |  | $                                        | 0.26 |                                                     | 5.5 |                         | $ | 598,820  
|                               |  |           |   |  |                                          |      |                                                     |     |                         |   |          

There were no options granted during the quarter ended June 30, 2006; there was one option to purchase common
stock granted during the six months ended June 30, 2006, which had a fair value of $0.71. There were no options granted during the six months ended June 30, 2005. There were no options exercised during the quarter ended June 30, 2006;
the intrinsic value of options exercised during the six months ended June 30, 2006 was approximately $60,000. There were no options exercised during the six months ended June 30, 2005.

A summary of the status of the Companys non-vested stock options as of June 30, 2006, and changes during the six months then ended, is presented below:



|                                            |  |           |   |  |                                                |     
|------------------------------------------- |  | --------- | - |  | ---------------------------------------------- | ----
|                                            |  | Shares    |   |  | Weighted AverageGrant Date FairValue per Share
|Non-vested stock options at January 1, 2006 |  | 1,507,000 |   |  | $                                              | 0.14
|Non-vested stock options granted            |  | 200,000   |   |  |                                                | 0.71
|Vested stock options                        |  | (140,000  | ) |  |                                                | 0.14
|Forfeited stock options                     |  |          |   |  |                                                |    
|                                            |  |           |   |  |                                                |     
|Non-vested stock options at June 30, 2006   |  | 1,567,000 |   |  |                                                | 0.21
|                                            |  |           |   |  |                                                |     

As of June 30, 2006, there was approximately $262,000 of total unrecognized compensation cost related to
stock option grants. That cost is expected to be recognized over a weighted average period of 3.5 years. The total fair value of shares vested during the quarter and six months ended June 30, 2006 was approximately $2,900 and $19,700,
respectively.



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The following table illustrates the effect on net earnings and net earnings per share if, for the quarter and six months
ended June 30, 2005, the Company had applied the fair value recognition provisions, under which compensation expense would be recognized as incurred, of SFAS 123 to stock-based employee compensation:



|                                                                                                                                            |  |                            |         |   |                               |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ------- | - | ----------------------------- | - | ------- | -
|                                                                                                                                            |  | Quarter EndedJune 30, 2005 |         |   | Six Months EndedJune 30, 2005 |  
|Net earnings, as reported                                                                                                                   |  | $                          | 380,384 |   |                               | $ | 371,547 |  
|Deduct: Total stock-based employee compensation expense determined under fair-value-based method for all awards, net of related tax
effects |  |                            | (19,527 | ) |                               |   | (39,054 | )
|                                                                                                                                            |  |                            |         |   |                               |   |         |  
|Pro forma net earnings                                                                                                                      |  | $                          | 360,857 |   |                               | $ | 332,493 |  
|                                                                                                                                            |  |                            |         |   |                               |   |         |  
|Earnings per share:                                                                                                                         |  |                            |         |   |                               |   |         |  
|Basic and diluted, as reported                                                                                                              |  | $                          | 0.02    |   |                               | $ | 0.02    |  
|Basic and diluted, pro forma                                                                                                                |  |                            | 0.02    |   |                               |   | 0.02    |  

Note H  Long Term Obligations:

At June 30, 2006 and December 31, 2005 long-term obligations consist of the following:



|                                                                                                                                                                                                                                                                                                  |  |              |           |                  |   |          
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | ---------------- | - | ---------
|                                                                                                                                                                                                                                                                                                  |  | June 30,2006 |           | December 31,2005
|Mortgage note payable bearing interest at 7.75%, payable in monthly installments of $25,797 through April 2019, collateralized by land and
building, and personally guaranteed by the Companys Chief Executive Officer                                                                           |  | $            | 2,512,224 |                  | $ | 2,568,382
|                                                                                                                                                                                                                                                                                                  |  |             
|Note payable to bank bearing interest at 7.96%, payable interest only through June 2006 and thereafter in monthly installments of $12,550
through June 2009, collateralized by accounts receivable, inventories and equipment, and personally guaranteed by the Companys Chief Executive Officer |  |              | 400,000   |                  |   | 400,000  
|                                                                                                                                                                                                                                                                                                  |  |             
|Convertible notes (original amount $730,000) bearing interest at 10% payable quarterly, originally due two years from the date of issuance
(1997), notes are convertible into common stock any time prior to maturity at the option of the holder based on a per share conversion price of $1.32  |  |              | 121,500   |                  |   | 123,000  
|                                                                                                                                                                                                                                                                                                  |  |             
|Capital lease obligation                                                                                                                                                                                                                                                                          |  |              | 11,468    |                  |   | 14,386   
|                                                                                                                                                                                                                                                                                                  |  |              |           |                  |   |          
|                                                                                                                                                                                                                                                                                                  |  |              | 3,045,192 |                  |   | 3,105,768
|Less  current maturities                                                                                                                                                                                                                                                                         |  |              | 372,737   |                  |   | 303,655  
|                                                                                                                                                                                                                                                                                                  |  |              |           |                  |   |          
|                                                                                                                                                                                                                                                                                                  |  | $            | 2,672,455 |                  | $ | 2,802,113
|                                                                                                                                                                                                                                                                                                  |  |              |           |                  |   |          

The note payable to bank is part of a $1.3 million credit facility arranged to fund the Companys expansion
into South Korea. The other portion of this credit facility is a $900,000 line of credit. Borrowings under the line of credit bear interest at prime plus 1.0% and are limited to a borrowing base, as defined in the line of credit agreement. The
borrowing base, which was $900,000 at June 30, 2006, is calculated as a specified percentage of eligible collateral up to a maximum of $900,000. This line of credit is collateralized by accounts receivable, inventory and equipment, and is
personally guaranteed by the Companys Chief Executive Officer. In addition, the Company is required to maintain minimum amounts of working capital, cash flow and tangible net worth, as defined in the line of credit agreement. The Company was
in compliance with these covenants at June 30, 2006.



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##### Table of Contents

In May 2005, the Company financed the purchase of certain equipment in the amount of approximately $18,000 through a
capital lease. This capital lease has a term ending in 2008 and an interest rate approximating 10%.

Note I  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 marked under the RBC Life Sciences brand name. These products are distributed by a network of independent
Associates operating primarily in North America and South Korea and by licensees operating in certain other international markets. The Medical Products segment markets a line of approximately 28 wound care and oncology products in the United States
under the MPM Medical trade name. The wound care products are distributed directly to hospitals, nursing homes and home health care agencies through medical/surgical supply dealers. The oncology products are distributed to hospitals, cancer
treatment clinics and pharmacies through pharmaceutical distributors.

The Company evaluates the performance of its segments primarily based on operating
profit. All intercompany transactions have been eliminated, and intersegment revenues are not significant. In calculating operating profit for these two segments, administrative expenses incurred that are common to the two segments are allocated on
a usage basis.

Segment information is as follows (in thousands):



|                               |  |                      |        |                  |   |              |  |   |       
|------------------------------ |  | -------------------- | ------ | ---------------- | - | ------------ |  | - | ------
|                               |  | Nutritional Products |        | Medical Products |   | Consolidated
|Quarter ended June 30, 2006    |  |                      |        |                  |   |              |  |   |       
|Net sales                      |  | $                    | 5,297  |                  | $ | 906          |  | $ | 6,203 
|Depreciation and amortization  |  |                      | 152    |                  |   | 14           |  |   | 166   
|Operating profit               |  |                      | 368    |                  |   | 149          |  |   | 517   
|Capital expenditures           |  |                      | 16     |                  |   |             |  |   | 16    
|Total assets                   |  |                      | 11,691 |                  |   | 1,442        |  |   | 13,133
|                               |  |                      |       
|Quarter ended June 30, 2005    |  |                      |        |                  |   |              |  |   |       
|Net sales                      |  | $                    | 4,595  |                  | $ | 763          |  | $ | 5,358 
|Depreciation and amortization  |  |                      | 137    |                  |   | 10           |  |   | 147   
|Operating profit               |  |                      | 332    |                  |   | 112          |  |   | 444   
|Capital expenditures           |  |                      | 21     |                  |   |             |  |   | 21    
|Total assets                   |  |                      | 11,759 |                  |   | 1,116        |  |   | 12,875
|                               |  |                      |       
|Six Months ended June 30, 2006 |  |                      |        |                  |   |              |  |   |       
|Net sales                      |  | $                    | 9,361  |                  | $ | 1,650        |  | $ | 11,011
|Depreciation and amortization  |  |                      | 305    |                  |   | 27           |  |   | 332   
|Operating profit               |  |                      | 341    |                  |   | 202          |  |   | 543   
|Capital expenditures           |  |                      | 370    |                  |   |             |  |   | 370   
|Total assets                   |  |                      | 11,691 |                  |   | 1,442        |  |   | 13,133
|                               |  |                      |       
|Six Months ended June 30, 2005 |  |                      |        |                  |   |              |  |   |       
|Net sales                      |  | $                    | 8,132  |                  | $ | 1,366        |  | $ | 9,498 
|Depreciation and amortization  |  |                      | 275    |                  |   | 20           |  |   | 295   
|Operating profit               |  |                      | 357    |                  |   | 141          |  |   | 498   
|Capital expenditures           |  |                      | 59     |                  |   |             |  |   | 59    
|Total assets                   |  |                      | 11,759 |                  |   | 1,116        |  |   | 12,875



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##### Table of Contents

Financial information summarized geographically for the quarters and six months ended June 30, 2006 and 2005 is
listed below (in thousands):



|                    |  |                                |        |                                |   |           |  |                   |       |  |   |      
|------------------- |  | ------------------------------ | ------ | ------------------------------ | - | --------- |  | ----------------- | ----- |  | - | -----
|                    |  | Quarter ended June 30, 2006    |        | Quarter ended June 30, 2005   
|                    |  | Net sales                      |        | Long-Lived assets              |   | Net sales |  | Long-Lived assets
|Domestic            |  | $                              | 2,497  |                                | $ | 5,886     |  | $                 | 2,663 |  | $ | 6,347
|Canada              |  |                                | 401    |                                |   | 389       |  |                   | 496   |  |   | 398  
|South Korea         |  |                                | 200    |                                |   | 557       |  |                   |      |  |   |     
|Former Soviet Union |  |                                | 2,858  |                                |   |          |  |                   | 2,140 |  |   |     
|All others          |  |                                | 247    |                                |   |          |  |                   | 59    |  |   |     
|                    |  |                                |        |                                |   |           |  |                   |       |  |   |      
|Totals              |  | $                              | 6,203  |                                | $ | 6,832     |  | $                 | 5,358 |  | $ | 6,745
|                    |  |                                |        |                                |   |           |  |                   |       |  |   |      
|                    |  |                               
|                    |  | Six Months ended June 30, 2006 |        | Six Months ended June 30, 2005
|                    |  | Net sales                      |        | Long-Lived assets              |   | Net sales |  | Long-Lived assets
|Domestic            |  | $                              | 5,040  |                                | $ | 5,886     |  | $                 | 5,233 |  | $ | 6,347
|Canada              |  |                                | 870    |                                |   | 389       |  |                   | 1,013 |  |   | 398  
|South Korea         |  |                                | 429    |                                |   | 557       |  |                   |      |  |   |     
|Former Soviet Union |  |                                | 4,125  |                                |   |          |  |                   | 3,138 |  |   |     
|All others          |  |                                | 547    |                                |   |          |  |                   | 114   |  |   |     
|                    |  |                                |        |                                |   |           |  |                   |       |  |   |      
|Totals              |  | $                              | 11,011 |                                | $ | 6,832     |  | $                 | 9,498 |  | $ | 6,745
|                    |  |                                |        |                                |   |           |  |                   |       |  |   |      

Significant Customers

The Company recorded sales to Coral Club International, Inc., a licensee of the Company, in the amounts of $2,858,000 and $2,140,000 during the quarters ended June 30, 2006 and 2005, respectively, and $4,125,000
and $3,138,000 during the six months ended June 30, 2006 and 2005, 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 and six months ended June 30, 2006 and 2005.

Note J  Earnings Per Share:

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



|                                  |  |              |         |        |            |           |   |     
|--------------------------------- |  | ------------ | ------- | ------ | ---------- | --------- | - | ----
|                                  |  | Net Earnings |         | Shares |            | Per Share
|Quarter ended June 30, 2006       |  |              |         |        |            |           |   |     
|Basic earnings per common share   |  | $            | 292,855 |        | 20,155,294 |           | $ | 0.01
|Effect of dilutive stock options  |  |              |        |        | 2,248,824  |           |   |     
|                                  |  |              |         |        |            |           |   |     
|Diluted earnings per common share |  | $            | 292,855 |        | 22,404,118 |           | $ | 0.01
|                                  |  |              |         |        |            |           |   |     
|Quarter ended June 30, 2005       |  |              |         |        |            |           |   |     
|Basic earnings per common share   |  | $            | 380,384 |        | 20,056,294 |           | $ | 0.02
|Effect of dilutive stock options  |  |              |        |        | 1,126,734  |           |   |     
|                                  |  |              |         |        |            |           |   |     
|Diluted earnings per common share |  | $            | 380,384 |        | 21,183,028 |           | $ | 0.02
|                                  |  |              |         |        |            |           |   |     
|Six months ended June 30, 2006    |  |              |         |        |            |           |   |     
|Basic earnings per common share   |  | $            | 254,217 |        | 20,149,794 |           | $ | 0.01
|Effect of dilutive stock options  |  |              |        |        | 2,341,869  |           |   |     
|                                  |  |              |         |        |            |           |   |     
|Diluted earnings per common share |  | $            | 254,217 |        | 22,491,663 |           | $ | 0.01
|                                  |  |              |         |        |            |           |   |     
|Six months ended June 30, 2005    |  |              |         |        |            |           |   |     
|Basic earnings per common share   |  | $            | 371,547 |        | 20,056,294 |           | $ | 0.02
|Effect of dilutive stock options  |  |              |        |        | 563,367    |           |   |     
|                                  |  |              |         |        |            |           |   |     
|Diluted earnings per common share |  | $            | 371,547 |        | 20,619,661 |           | $ | 0.02
|                                  |  |              |         |        |            |           |   |     



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##### Table of Contents

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 500,000 and 402,000 for the quarters ended June 30, 2006 and 2005, respectively, and 500,000 and 402,000 for
the six months ended June 30, 2006 and 2005, respectively.

The assumed conversion of the convertible notes would have an anti-dilutive effect on
diluted loss per common share for the quarters and six months ended June 30, 2006 and 2005, and accordingly have been excluded from the computation.

Note K  Comprehensive Income:

Comprehensive income 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:



|                                        |  |                         |         |      |                           |         |      |  |      |         |  |   |         |  
|--------------------------------------- |  | ----------------------- | ------- | ---- | ------------------------- | ------- | ---- |  | ---- | ------- |  | - | ------- | -
|                                        |  | Quarters Ended June 30, |         |      | Six Months Ended June 30, |        
|                                        |  | 2006                    |         | 2005 |                           |         | 2006 |  | 2005 |        
|Net earnings                            |  | $                       | 292,855 |      | $                         | 380,384 |      |  | $    | 254,217 |  | $ | 371,547 |  
|Other comprehensive income (loss):      |  |                         |         |      |                           |         |      |  |      |         |  |   |         |  
|Foreign currency translation adjustment |  |                         | 28,167  |      |                           | (5,227  | )    |  |      | 30,619  |  |   | (6,654  | )
|                                        |  |                         |         |      |                           |         |      |  |      |         |  |   |         |  
|Comprehensive income                    |  | $                       | 321,022 |      | $                         | 375,157 |      |  | $    | 284,836 |  | $ | 364,893 |  
|                                        |  |                         |         |      |                           |         |      |  |      |         |  |   |         |  

Note L  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.



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##### Table of Contents

ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.

The following
discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this report and the audited
consolidated financial statements and notes thereto included in the 2005 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 2005 Form 10-K. Many of these factors are beyond the Companys ability to control or predict. We caution you
not to put undue reliance on forward-looking statements or to project any future results based on such statements or on present or prior earnings levels. We do not undertake any obligation to publicly release any revisions to any forward-looking
statement to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events. Please consider our forward-looking statements in light of those risks as you read this report.

OVERVIEW

We operate in two industry segments, Nutritional Products
and Medical Products.



| |  | Through the Nutritional Products segment, we distribute products in three broad categories: (i) wellness products, (ii) weight loss products and (iii) fitness
products. Products include herbal formulas, vitamins, minerals, antioxidants and personal care products. In North America, South Korea and Japan we distribute Nutritional Products directly through a network of independent Associates. In certain
other markets, we distribute Nutritional Products through exclusive license arrangements with third parties, who, for the most part, distribute our products through an independent Associate network in the licensed territory.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Through the Medical Products segment, we distribute wound care and oncology products. These products are distributed in the United States to hospitals, nursing homes, clinics and
pharmacies through traditional medical/surgical supply dealers and pharmaceutical distributors.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



|                      |  |                         |       |  |      |   |  |   |       |  |     |  
|--------------------- |  | ----------------------- | ----- |  | ---- | - |  | - | ----- |  | --- | -
|                      |  | Quarters Ended June 30, |      
|                      |  | 2006                    |       |  | 2005 |  
|                      |  | (U.S. dollars in 000s) |      
|Nutritional Products: |  |                         |       |  |      |   |  |   |       |  |     |  
|Associate network     |  | $                       | 2,193 |  | 35   | % |  | $ | 2,399 |  | 45  | %
|Licensees             |  |                         | 3,104 |  | 50   | % |  |   | 2,196 |  | 41  | %
|                      |  |                         |       |  |      |   |  |   |       |  |     |  
|                      |  |                         | 5,297 |  | 85   | % |  |   | 4,595 |  | 86  | %
|Medical Products      |  |                         | 906   |  | 15   | % |  |   | 763   |  | 14  | %
|                      |  |                         |       |  |      |   |  |   |       |  |     |  
|                      |  | $                       | 6,203 |  | 100  | % |  | $ | 5,358 |  | 100 | %
|                      |  |                         |       |  |      |   |  |   |       |  |     |  



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##### Table of Contents

|                      |  |                           |        |  |      |   |  |   |       |  |     |  
|--------------------- |  | ------------------------- | ------ |  | ---- | - |  | - | ----- |  | --- | -
|                      |  | Six Months Ended June 30, |       
|                      |  | 2006                      |        |  | 2005 |  
|                      |  | (U.S. dollars in 000s)   |       
|Nutritional Products: |  |                           |        |  |      |   |  |   |       |  |     |  
|Associate network     |  | $                         | 4,690  |  | 43   | % |  | $ | 4,884 |  | 52  | %
|Licensees             |  |                           | 4,671  |  | 42   | % |  |   | 3,248 |  | 34  | %
|                      |  |                           |        |  |      |   |  |   |       |  |     |  
|                      |  |                           | 9,361  |  | 85   | % |  |   | 8,132 |  | 86  | %
|Medical Products      |  |                           | 1,650  |  | 15   | % |  |   | 1,366 |  | 14  | %
|                      |  |                           |        |  |      |   |  |   |       |  |     |  
|                      |  | $                         | 11,011 |  | 100  | % |  | $ | 9,498 |  | 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, |  
|              |  | 2006                    |   |  | 2005                      |   |  | 2006 |   |  | 2005 |  
|United States |  | 72                      | % |  | 79                        | % |  | 72   | % |  | 79   | %
|Canada        |  | 19                      |   |  | 21                        |   |  | 19   |   |  | 21   |  
|South Korea   |  | 9                       |   |  |                          |   |  | 9    |   |  |     |  
|              |  |                         |   |  |                           |   |  |      |   |  |      |  
|              |  | 100                     | % |  | 100                       | % |  | 100  | % |  | 100  | %
|              |  |                         |   |  |                           |   |  |      |   |  |      |  

In February 2006, we began distribution of Nutritional Products through our Associate network in South Korea. We
initiated sales activities after establishing a fully staffed office located in Seoul, South Korea; however, the full range of Nutritional Products we market in South Korea was not available for distribution until early May 2006. Net sales in this
market were $200,000 and $429,000 during the quarter and six months ended June 30, 2006, respectively. Although there is no assurance that net sales in South Korea will increase, based on the market analysis we performed prior to opening this
market, we continue to believe that expansion into this market will ultimately make a positive contribution to our consolidated net sales and future earnings.

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 88% and 97% of licensee net sales in
the six months ended June 30, 2006 and 2005, 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 owns
approximately 20% of our outstanding common stock.

Medical Products. We sell Medical Products primarily to wholesalers such as medical/surgical
dealers and pharmaceutical distributors. These wholesalers supply various health care providers such as hospitals, nursing homes, clinics and pharmacies. In some cases, wholesalers maintain their own sales forces to market products that they supply,
which include our products.

This segments largest customer, a medical/surgical dealer, accounted for 55% and 44% of Medical Products net sales in
the six months ended June 30, 2006 and 2005, respectively.



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##### Table of Contents

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of the Companys financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America 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.
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 other than the adoption of SFAS 123R, there have been no significant changes during the six months ended June 30, 2006 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 2005 Form 10-K.

Stock-Based Compensation Expense

Effective January 1, 2006, we adopted the fair value recognition
provisions of SFAS 123R using the modified prospective transition method; therefore we have not restated results for prior periods. Under this transition method, we recognize compensation expense for all stock options granted prior to, but not yet
vested as of January 1, 2006,based on the grant date fair value estimated in accordance with the original provision of SFAS 123. Stock-based compensation expense for all stock-based compensation awards granted after December 31,
2005 is based on the grant date fair value estimated in accordance with the provisions of SFAS 123R. Prior to the adoption of SFAS 123R on January 1, 2006, the Company recognized stock-based compensation expense in accordance with APB 25, and
provided pro forma disclosure of the effect on net earnings and earnings per share as if the fair value method defined by SFAS 123 had been applied to its stock-based compensation. Under the fair value recognition provisions of SFAS 123R, the
Company recognizes stock-based compensation expense for those shares expected to vest on a straight-line basis over the requisite service period of the award.

Determining the appropriate fair value model and calculating the fair value of share-based payment awards requires the input of subjective assumptions. The assumptions used in calculating the fair value of share-based payment awards
represent managements best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be
materially different in the future. See Note G to the condensed consolidated financial statements for further discussion of stock-based compensation.

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, |  
|                              |  | 2006                    |   |  | 2005                      |   |  | 2006  |   |  | 2005  |  
|Net sales                     |  | 100.0                   | % |  | 100.0                     | % |  | 100.0 | % |  | 100.0 | %
|Cost of sales                 |  | 42.4                    |   |  | 40.9                      |   |  | 38.0  |   |  | 37.7  |  
|                              |  |                         |   |  |                           |   |  |       |   |  |       |  
|Gross profit                  |  | 57.6                    |   |  | 59.1                      |   |  | 62.0  |   |  | 62.3  |  
|Operating expenses:           |  |                         |   |  |                           |   |  |       |   |  |       |  
|General and administrative    |  | 34.3                    |   |  | 32.7                      |   |  | 39.1  |   |  | 36.7  |  
|Distributor commissions       |  | 12.4                    |   |  | 15.4                      |   |  | 15.0  |   |  | 17.4  |  
|Depreciation and amortization |  | 2.6                     |   |  | 2.7                       |   |  | 3.0   |   |  | 3.0   |  
|                              |  |                         |   |  |                           |   |  |       |   |  |       |  
|Total operating expenses      |  | 49.3                    |   |  | 50.8                      |   |  | 57.1  |   |  | 57.1  |  
|                              |  |                         |   |  |                           |   |  |       |   |  |       |  
|Operating profit              |  | 8.3                     |   |  | 8.3                       |   |  | 4.9   |   |  | 5.2   |  
|Interest expense              |  | 1.0                     |   |  | 1.2                       |   |  | 1.1   |   |  | 1.3   |  
|                              |  |                         |   |  |                           |   |  |       |   |  |       |  
|Earnings before income taxes  |  | 7.3                     |   |  | 7.1                       |   |  | 3.8   |   |  | 3.9   |  
|Provision for income taxes    |  | 2.6                     |   |  |                          |   |  | 1.5   |   |  |      |  
|                              |  |                         |   |  |                           |   |  |       |   |  |       |  
|Net earnings                  |  | 4.7                     | % |  | 7.1                       | % |  | 2.3   | % |  | 3.9   | %
|                              |  |                         |   |  |                           |   |  |       |   |  |       |  



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##### Table of Contents

Quarter ended June 30, 2006 compared with Quarter ended June 30, 2005

Net sales.Net sales for the quarter ended June 30, 2006 were $6,203,000 compared with net sales for the prior year of $5,358,000, an increase of $845,000 or
16%. This increase was due to a $702,000 increase in net sales of Nutritional Products and a $143,000 increase in net sales of Medical Products. Net sales of Nutritional Products to our licensees increased $908,000 while net sales of Nutritional
Products to our Associate network decreased $206,000.

Associate Network. We began distribution of our Nutritional Products in South Korea in
February 2006 and recorded net sales of $200,000 during the quarter ended June 30, 2006. Net sales in this market during the quarter were adversely affected by the termination of an Associate in June 2006. This Associate, who had a sales
organization in both the U.S. and South Korea, was terminated for violating certain of the Companys Associate policies and procedures with which Associates are contractually obligated to comply. We have undertaken a variety of initiatives to
minimize the effect of this termination and build sales in this market, although no assurance can be given that these initiatives will be successful.

Net
sales in the North American market declined approximately $404,000 during the second quarter of 2006. We attribute this decrease to a decline in the number of active Associates, which resulted from low levels of sponsorship of new Associates by the
current Associate network. During the second quarter of 2006, we initiated certain new marketing programs intended to encourage greater levels of sponsorship by the Associate network in North America. While we believe these programs and other
actions we may undertake in the future will ultimately increase the sponsorship of new Associates, we can give no assurance that the decline of active Associates will not continue.

Licensees. The growth in net sales to our licensees relates mainly to growth of CCI. Sales to CCI increased $718,000 in the second quarter of 2006. CCIs sales growth is attributed to the continued
expansion of the independent Associate network in CCIs territory. However, sales to CCI may vary significantly from quarter to quarter irrespective of the sales demand of CCIs independent Associate network. 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. We then store these products until CCI provides shipping instructions. Because we do not recognize revenue until we ship products to
CCI, our sales to CCI will fluctuate from quarter to quarter depending on a number of logistical considerations, only one of which is the sales demand of CCIs independent Associate network. Backlog related to CCIs account was $3,469,000
and $3,487,000 at June 30, 2006 and 2005, respectively.

Medical products. The growth in net sales of Medical Products is mainly related
to increased sales to the largest customer in this segment. Sales to this customer increased $132,000 during the second quarter of 2006 compared to the second quarter of 2005. We attribute this increase to the growth of this
customers business.

Cost of sales. Cost of sales for the quarter ended June 30, 2006 was $2,629,000 compared with cost of sales in the
prior year of $2,190,000, an increase of $439,000 or 20%. As a percentage of net sales, cost of sales was 42% in 2006 and 41% in 2005. As a percentage of net sales, gross profit decreased 1% because of the change in sales mix of Nutritional Products
between sales to the Associate network and sales to licensees.

Distributor commissions. Distributor commissions for the quarter ended June 30,
2006 were $769,000 compared with distributor commissions in 2005 of $826,000, a decrease of $57,000 or 7%. With regard to our Associate network, distributor commissions as a percentage of commissionable sales were 32% in the second quarter of 2006
and 2005. On a consolidated basis, distributor commissions as a percentage of net sales declined to 12% in the second quarter of 2006 compared with 15% in 2005. This percentage decline was related to the change in sales mix of Nutritional Products
between sales to the Associate network and sales to licensees.

General and administrative. General and administrative expenses for the quarter
ended June 30, 2006, were $2,126,000 compared with 2005 expenses of $1,754,000, an increase of $372,000 or 21%. Of this increase, $309,000 resulted from general and administrative expenses incurred in connection with the expansion of our
Associate network into South Korea. Also, approximately $27,000 of this increase resulted from recognition of stock-based compensation pursuant to the adoption of SFAS 123R as of January 1, 2006. As a percentage of net sales, general and
administrative expenses were 34% and 33% in 2006 and 2005, respectively.



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##### Table of Contents

Income taxes.We recorded a provision for income taxes of $160,000 during the quarter ended June 30, 2006
based on the earnings before income taxes reported for the period. We recorded this provision because earnings of the Company have now more than offset the available net operating loss carryforwards as determined for financial reporting purposes.

Net earnings. As a result of the factors described above, the net earnings for the quarter ended June 30, 2006 were $293,000, or $0.01 per
share, compared with net earnings in the prior year of $380,000 or $0.02 per share.

Six Months ended June 30, 2006 compared with Six Months
ended June 30, 2005

Net sales.Net sales for the six months ended June 30, 2006 were $11,011,000 compared with net sales for the
prior year of $9,498,000, an increase of $1,513,000 or 16%. This increase was due to a $1,229,000 increase in net sales of Nutritional Products and a $284,000 increase in net sales of Medical Products. Net sales of Nutritional Products to our
licensees increased $1,423,000 while net sales of Nutritional Products to our Associate network decreased $194,000.

Associate Network. We began
distribution of our Nutritional Products in South Korea in February 2006 and recorded net sales of $429,000 during the six months ended June 30, 2006. Net sales in this market during the period were adversely affected by the termination of an
Associate in June 2006. This Associate, who had a sales organization in both the U.S. and South Korea, was terminated for violating certain of the Companys Associate policies and procedures with which Associates are contractually obligated to
comply. We have undertaken a variety of initiatives to minimize the effect of this termination and build sales in this market, although no assurance can be given that these initiatives will be successful.

Net sales in the North American market declined approximately $621,000 during the first six months of 2006. We attribute this decrease to a decline in the number of
active Associates, which resulted from low levels of sponsorship of new Associates by the current Associate network. During the first six months of 2006, we initiated certain new marketing programs intended to encourage greater levels of sponsorship
by the Associate network in North America. While we believe these programs and other actions we may undertake in the future will ultimately increase the sponsorship of new Associates, we can give no assurance that the decline of active Associates
will not continue.

Licensees. The growth in net sales to our licensees relates mainly to growth of CCI. Sales to CCI increased $988,000 in the
first six months of 2006. CCIs sales growth is attributed to the continued expansion of the independent Associate network in CCIs territory. 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. We then store these products until CCI provides shipping instructions. Because we do not recognize revenue until we ship products to CCI, our sales to CCI will fluctuate from quarter to quarter depending
on a number of logistical considerations, only one of which is the sales demand of CCIs independent Associate network. Backlog related to CCIs account was $3,469,000 and $3,487,000 at June 30, 2006 and 2005, respectively.

Medical products. The growth in net sales of Medical Products is related to increased sales to the largest customer in this
segment. Sales to this customer increased $317,000 during the first six months of 2006 compared to 2005. We attribute this increase to the growth of this customers business.

Cost of sales. Cost of sales for the six months ended June 30, 2006 was $4,182,000 compared with cost of sales in the prior year of $3,574,000, an increase
of $608,000 or 17%. As a percentage of net sales, cost of sales was 38% in 2006 and 2005.

Distributor commissions. Distributor commissions were
$1,653,000 for the six months ended June 30, 2006 and 2005. With regard to our Associate network, distributor commissions as a percentage of commissionable sales were 33% in the first six months of 2006 compared with 32% in 2005. On a
consolidated basis, distributor commissions as a percentage of net sales declined to 15% in the first six months of 2006 compared with 17% in 2005. This percentage decline was related to the change in sales mix of Nutritional Products between sales
to the Associate network and sales to licensees.



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##### Table of Contents

General and administrative. General and administrative expenses for the six months June 30, 2006, were
$4,310,000 compared with 2005 expenses of $3,485,000, an increase of $825,000 or 24%. Of this increase, $661,000 resulted from general and administrative expenses incurred in connection with the expansion of our Associate network into South Korea.
Also, approximately $50,000 of this increase resulted from recognition of stock-based compensation pursuant to the adoption of SFAS 123R as of January 1, 2006. As a percentage of net sales, general and administrative expenses were 39% and 37%
in 2006 and 2005, respectively.

Income taxes.We recorded a provision for income taxes of $160,000 during the six months ended June 30, 2006
based on the earnings before income taxes reported for the period. We recorded this provision because earnings of the Company have now more than offset the available net operating loss carryforwards as determined for financial reporting purposes.

Net earnings. As a result of the factors described above, the net earnings for the six months ended June 30, 2006 were $254,000, or $0.01 per
share, compared with net earnings in the prior year of $372,000 or $0.02 per share.

LIQUIDITY AND CAPITAL RESOURCES

Cash and working capital. During the six months ended June 30, 2006, we had a net increase in cash of $431,000 compared with a net increase in cash of
$1,092,000 in 2005. At June 30, 2006, we had working capital of $1,245,000, a $105,000 increase from working capital at December 31, 2005 of $1,140,000. These increases were attributable to cash flows from operating activities.

Operating activities. In the first six months of 2006, our operating activities provided cash flows of $834,000 compared with $1,282,000 in 2005. This decline
was primarily related to the timing of payments received from certain large customers, the timing of inventory purchases, the timing of payments made to suppliers and deposits made with various entities in connection with the establishment of
operations in South Korea. In the first six months of 2006, net earnings adjusted for non-cash activities, which include depreciation and amortization, stock-based compensation and deferred income taxes, provided cash flows of $796,000 compared with
$667,000 in 2005.

Investing activities.During the first six months of 2006, we used cash of $370,000 related to the purchase of property and
equipment. Most of this property and equipment was purchased in connection with the establishment of operations in South Korea.

Financing
activities. During the first six months of 2006, we used cash of $48,000 related to financing activities. We used cash of $61,000 to repay long-term debt, which use was partially offset by proceeds received from the exercise of employee stock
options.

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, 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.

In connection with the establishment of operations in South Korea, we arranged a $1.3 million credit facility with a bank. This
credit facility is comprised of a $900,000 line of credit secured by inventory and accounts receivable and a five-year note in the amount of $400,000 secured by equipment. At June 30, 2006, there were no borrowings outstanding under the line of
credit. In addition to this credit facility, we may seek additional outside sources of capital including bank borrowings, other types of debt or equity financings to provide further funding for this project if we determine additional funding is
necessary. We can give no assurance, however, that we would be able to obtain additional outside financing on terms we would find acceptable.

We have no
plans or requirements for any significant capital expenditures during the next 12 months other than those described above.

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.



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##### Table of Contents

ITEM 3. Quantitative and Qualitative Disclosure 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 and interest 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 and South Korea that accounted for 8% and 4%, respectively, of net sales during the first six months of 2006. Canadian operations accounted for 10% of net sales during fiscal 2005. We advance funds
to and from our foreign subsidiaries denominated in U.S. dollars, exposing the foreign subsidiary to the effect of changes in spot exchange rates of the Canadian dollar and Korean Won 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 $44,000 from our Canadian operation and $1,159,000 to our Korean operation at June 30, 2006, a
10% adverse change in the currency rate would reduce earnings before tax by approximately $120,000.

Interest rates

Our credit arrangements expose us to fluctuations in interest rates. At June 30, 2006, we had $121,000 outstanding in indebtedness, which provided for interest to be
paid monthly based on a variable rate. Thus, interest rate changes would result in a change in the amount of interest to be paid each month. Based upon the interest rates and borrowings at June 30, 2006, a 10% increase in interest rates would
adversely affect our financial position, annual results of operations and cash flows by approximately $1,300.

ITEM 4. Controls and Procedures.

As required by Rule 13a-15(b) and Rule 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, 2006, 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, 2006, 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.

Our
management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of our financial reporting and the preparation of published financial statements in accordance with generally accepted accounting principles.We believe, however, that a controls system, no
matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if
any, within a company have been detected.

There has been no change in internal controls over financial reporting that occurred during the quarter ended
June 30, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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##### Table of Contents

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 2005 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 2005 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 1,
2006. At this meeting the following persons were elected to serve as directors until the 2007 Annual Meeting of Shareholders:



|                  |  |            |  |         
|----------------- |  | ---------- |  | --------
|                  |  | For        |  | Withheld
|Steven E. Brown   |  | 18,938,697 |  | 31,809  
|David H. Brune    |  | 18,948,156 |  | 22,350  
|J. Ike Guest      |  | 18,949,156 |  | 21,350  
|Clinton H. Howard |  | 18,948,156 |  | 22,350  
|Wayne R. Holbrook |  | 18,938,697 |  | 31,809  
|Joseph P. Philipp |  | 18,948,156 |  | 22,350  
|Kenneth L. Sabot  |  | 18,948,156 |  | 22,350  

At this meeting, the shareholders also approved an amendment to the Companys Articles of Incorporation to
change the name of the Company from Royal BodyCare, Inc. to RBC Life Sciences, Inc. The vote in favor of this proposal was as follows:



|                 |  |                  |  |                   
|---------------- |  | ---------------- |  | ------------------
|For  18,935,173 |  | Against  17,333 |  | Abstained  18,000

At this meeting, the shareholders also approved the 2006 Stock Incentive Plan. The vote in favor of this proposal
was as follows:



|                 |  |                   |  |                   
|---------------- |  | ----------------- |  | ------------------
|For  14,653,466 |  | Against  194,826 |  | Abstained  61,800

ITEM 5. Other Information.

None

ITEM 6. Exhibits.

The Exhibit Index filed herewith is incorporated herein by reference.



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##### Table of Contents

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.RegistrantBy:

/s/ Clinton H. HowardIts:

Chief Executive OfficerBy:

/s/ Steven E. BrownIts:

Vice President-Finance and Chief Financial
Officer (Principal Financial and Accounting Officer)


|      |  |                
|----- |  | ---------------
|DATE: |  | August 10, 2006
|      |  | Irving, Texas  



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##### Table of Contents

RBC LIFE SCIENCES, INC.

Exhibit Index



|               |  |                                                                                                                                                      
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                          
|31.1           |  | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                               
|               | 
|31.2           |  | Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                               
|               | 
|32.1           |  | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|               | 
|32.2           |  | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



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