RBC LIFE SCIENCES, INC. - FORM 10-Q

Attached files

file	filename
EX-32.1 - EXHIBIT 32.1 - RBC LIFE SCIENCES, INC.	ex32-12015_09x30.htm
EX-31.2 - EXHIBIT 31.2 - RBC LIFE SCIENCES, INC.	ex31-22015_09x30.htm
EX-32.2 - EXHIBIT 32.2 - RBC LIFE SCIENCES, INC.	ex32-22015_09x30.htm
EX-31.1 - EXHIBIT 31.1 - RBC LIFE SCIENCES, INC.	ex31-12015_09x30.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



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

For the quarterly period ended September 30, 2015



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

For the transition period from ________________ to ________________

Commission file number: 000-50417

RBC Life Sciences, Inc.

(Exact name of registrant as specified in its charter)



Nevada		91-2015186
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

2301 Crown Court, Irving, Texas		75038
(Address of principal executive offices)		(Zip Code)

(972) 893-4000
Registrant's telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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

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



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

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

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



Class		Outstanding at October 26, 2015
Common Stock, $0.001 par value per share		2,212,350 shares

TABLE OF CONTENTS



		Page Number
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements Of Comprehensive Income (Loss)	4
	Condensed Consolidated Statements Of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 4.	Controls and Procedures	20

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults Upon Senior Securities	20
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	21

Signatures		22

Exhibit Index		23

PART 1 – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RBC LIFE SCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS



	September 30, 2015			December 31, 2014
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,091,450		$	1,921,349
Accounts receivable, net of allowance for doubtful accounts of $38,000 and $35,000, respectively	1,173,918			1,285,843
Inventories	4,994,773			4,799,083
Deferred income taxes	404,845			376,925
Prepaid expenses and other current assets	544,949			464,020
Total current assets	9,209,935			8,847,220
Property and equipment, net	1,340,503			4,683,496
Goodwill, net	2,158,638			2,221,347
Intangible assets, net	27,554			39,975
Other assets, net	95,012			203,906
	$	12,831,642		$	15,995,944
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable, trade	$	1,135,288		$	2,310,192
Accrued liabilities	1,214,797			1,420,050
Current maturities of long-term obligations	—			229,538
Deferred revenue	1,913,307			2,147,290
Total current liabilities	4,263,392			6,107,070
Long-term obligations, less current maturities	—			906,809
Deferred income taxes	529,400			556,440
Commitments and contingencies
Shareholders’ equity:
Common stock, $0.001 par value; 50,000,000 shares authorized; 2,212,350 shares issued and outstanding at September 30, 2015 and December 31, 2014	2,212			2,212
Additional paid-in capital	13,713,630			13,713,630
Accumulated deficit	(5,881,961		)	(5,417,092		)
Accumulated other comprehensive income	204,969			126,875
	8,038,850			8,425,625
	$	12,831,642		$	15,995,944

See notes to condensed consolidated financial statements.

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RBC LIFE SCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)



	Quarters Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Net sales	$	5,405,885		$	7,514,574		$	16,958,099		$	21,112,784
Cost of sales	2,283,152			3,232,259			7,286,424			9,526,103
Gross profit	3,122,733			4,282,315			9,671,675			11,586,681
Operating expenses:
General and administrative	3,127,469			2,836,410			8,339,254			8,196,669
Distributor commissions	1,010,214			1,363,060			3,167,044			3,475,870
Depreciation and amortization	129,921			160,894			392,183			451,195
Gain on sale of building	(1,706,878		)	—			(1,706,878		)	—
Total operating expenses	2,560,726			4,360,364			10,191,603			12,123,734
Operating income (loss)	562,007			(78,049		)	(519,928		)	(537,053		)
Interest expense	—			23,424			41,503			73,348
Earnings (loss) before income taxes	562,007			(101,473		)	(561,431		)	(610,401		)
Provision (benefit) for income taxes	231,258			22,167			(96,562		)	(102,229		)
Net earnings (loss)	330,749			(123,640		)	(464,869		)	(508,172		)

Other comprehensive income (loss):
Foreign currency translation adjustment	145,972			(13,970		)	78,094			(19,695		)
Comprehensive income (loss)	$	476,721		$	(137,610	)	$	(386,775	)	$	(527,867	)



Net earnings (loss) per share:
Basic	$	0.15	$	(0.06	)	$	(0.21	)	$	(0.23	)
Diluted	$	0.15	$	(0.06	)	$	(0.21	)	$	(0.23	)



Weighted average common shares outstanding:
Basic	2,212,350	2,212,350	2,212,350	2,212,350
Diluted	2,212,350	2,212,350	2,212,350	2,212,350

See notes to condensed consolidated financial statements.

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RBC LIFE SCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Nine Months Ended September 30,
	2015			2014
Cash flows from operating activities:
Net loss	$	(464,869	)	$	(508,172	)
Adjustment for non-cash items:
Depreciation and amortization	392,183			451,195
Stock-based compensation	—			2,107
Deferred income taxes and other	(104,411		)	(104,470		)
Gain on sale of building	(1,706,878		)	—
Change in operating assets and liabilities:
Accounts receivable	110,773			(341,765		)
Inventories	(307,899		)	120,398
Prepaid expenses and other current assets	(27,737		)	89,991
Other assets	102,021			(318,867		)
Accounts payable and accrued liabilities	(1,365,517		)	1,077,740
Deferred revenue	(217,879		)	(1,763,098		)
Net cash used in operating activities	(3,590,213		)	(1,294,941		)
Cash flows from investing activities:
Purchase of property and equipment	(180,144		)	(870,588		)
Purchase of intangible assets	—			(40,508		)
Proceeds from sale of equipment	4,818,756			—
Net cash provided by (used in) investing activities	4,638,612			(911,096		)
Cash flows from financing activities:
Payments of long-term obligations	(1,136,347		)	(157,807		)
Proceeds from exercise of stock options	—			—
Net cash used in financing activities	(1,136,347		)	(157,807		)
Effect of exchange rate changes on cash flows	258,049			16,488
Net increase (decrease) in cash and cash equivalents	170,101			(2,347,356		)
Cash and cash equivalents, beginning of period	1,921,349			3,745,684
Cash and cash equivalents, end of period	$	2,091,450		$	1,398,328

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, including the notes thereto, of RBC Life Sciences, Inc. (sometimes hereinafter referred to collectively as “we”, “our”, "us", “RBC” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the U.S. (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and disclosures that are normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to these rules and regulations. These unaudited condensed 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, 2014 (the “2014 Form 10-K”), previously filed with the Securities and Exchange Commission. All references to dollars shall mean U.S. dollars.

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

New Accounting Pronouncements:

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which provides guidance related to revenue from contracts with customers. This guidance is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. This guidance is effective for annual reporting periods beginning after December 15, 2016 and early adoption is not permitted. The Company does not believe ASU No. 2014-09 will have a material effect on its financial position and results of operations.

In August 2014, FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern. ASU No. 2014-15 provides guidance regarding management’s responsibility to evaluate whether there exists substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. ASU No. 2014-15 is effective for annual reporting periods beginning after December 15, 2016, and interim periods thereafter. The Company does not believe ASU No. 2014-15 will have a material effect on its financial position and results of operations.

Note B – Nature of Operations and Organization:

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

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.

- 6 -

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

Note C – Inventories:

Inventories consist of the following:



	September 30, 2015		December 31, 2014
Raw materials and bulk products	$	390,389	$	370,333
Packaging materials	248,938		253,700
Finished goods	4,355,446		4,175,050
	$	4,994,773	$	4,799,083

Note D – Prepaid Expenses and Other Current Assets:

Prepaid expenses and other current assets consist of the following:



	September 30, 2015		December 31, 2014
Advance payment to suppliers	$	163,746	$	151,365
Prepaid insurance and other	317,818		239,385
Certificates of deposit - restricted	63,385		73,270
	$	544,949	$	464,020

At September 30, 2015 and December 31, 2014, the Company held certificates of deposit in the amounts of approximately $63,400 and $73,300, respectively, which were pledged to secure surety bonds.

Note E – Property and Equipment:

Property and equipment consists of the following:



	September 30, 2015			December 31, 2014
Building and improvements	$	—		$	3,834,192
Computer software and office equipment	2,586,257			3,536,399
Warehouse equipment	254,034			254,034
Automotive equipment	14,717			14,717
Leasehold improvements	191,057			208,705
	3,046,065			7,848,047
Less – accumulated depreciation	(1,705,562		)	(4,305,724		)
	1,340,503			3,542,323
Land	—			1,141,173
	$	1,340,503		$	4,683,496

Depreciation expense totaled approximately $128,800 and $137,100 for the quarters ended September 30, 2015 and 2014, respectively, and $380,400 and $424,400 for the nine months ended September 30, 2015 and 2014, respectively.

On July 15, 2015, the Company completed the previously announced sale of its headquarters building and related parcel of land in Irving, Texas for approximately $5.18 million. After repayment of outstanding mortgage debt of approximately $1.13 million secured by this facility and payment of other closing costs and adjustments, the Company received net cash proceeds of approximately $3.75 million. Effective upon closing of this sale, the Company entered into an agreement to lease back the facility from the purchaser under a lease that provides for, among other things, a lease term ending April 30, 2016 and rent of approximately $35,000 per month.

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Note F – Goodwill and Other Intangible Assets:

The Company measures its goodwill for impairment at the end of each year or in the event of an impairment indicator. No impairment losses have been recognized as a result of this testing. Goodwill balances are summarized as follows:



	Gross Carrying Value			Accumulated Amortization
Balance, December 31, 2014	$	3,285,689		$	(1,064,343	)
Currency translation adjustment	(122,366		)	59,658
Balance, September 30, 2015	$	3,163,323		$	(1,004,685	)

Other intangible assets consist of the following:



		September 30, 2015					December 31, 2014
	Average Life (years)	Gross Carrying Value		Accumulated Amortization			Gross Carrying Value		Accumulated Amortization
Copyrights, trademarks and other registrations	19	$	99,100	$	(74,654	)	$	99,100	$	(70,690	)
Business license	1	29,133		(29,133		)	37,193		(29,240		)
Other	19	12,600		(9,492		)	12,600		(8,988		)
		$	140,833	$	(113,279	)	$	148,893	$	(108,918	)

Amortization expense related to other intangible assets totaled approximately $1,200 and $10,600 for the quarters ended September 30, 2015 and 2014, respectively, and $11,800 and $26,300 for the nine months ended September 30, 2015 and 2014, respectively. The aggregate estimated amortization expense for intangible assets remaining as of September 30, 2015 is as follows:



Remainder of 2015	$	1,489
2016	5,957
2017	5,957
2018	5,957
2019	5,957
Thereafter	2,237
	$	27,554

Note G – Accrued Liabilities:

Accrued liabilities consist of the following:



	September 30, 2015		December 31, 2014
Distributor commissions and awards	$	804,892	$	867,336
Salaries and wages	370,240		468,192
Sales and property taxes	33,780		73,954
Interest	—		7,339
Other	5,885		3,229
	$	1,214,797	$	1,420,050

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Note H – Long-Term Obligations:

Long-term obligations consist of the following:



	September 30, 2015		December 31, 2014
Mortgage note payable bearing interest at 7.75%, payable in monthly installments of $25,797 through April 2019, collateralized by land and building, and personally guaranteed by the Company’s Chairman of the Board of Directors	$	—	$	1,136,347
Less – current maturities	—		(229,538		)
	$	—	$	906,809

As more fully described in Note E, this mortgage note was fully paid in July 2015 in connection with the sale of the land and building that secured the note.

The fair value of long-term debt is estimated based on interest rates for the same or similar instruments offered having the same or similar maturities and collateral requirements. At December 31, 2014, the fair value of fixed-rate long-term debt was approximately $1,226,000, which was $90,000 above the carrying value of approximately $1,136,000.

Note I – Share-Based Compensation:

The Company records compensation expense for all share-based payments based on the estimated grant date fair value. There was no share-based compensation expense recognized for the quarters ended September 30, 2015 or 2014, or the nine months ended September 30, 2015. Share-based compensation was $2,100 for the nine months ended September 30, 2014. There were no material tax benefits related to share-based compensation expense because virtually all share-based compensation resulted from grants of incentive stock options.

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model. There were no option grants during the quarters or nine months ended September 30, 2015 or 2014.

A summary of stock option activity for the nine months ended September 30, 2015 is as follows:



	Options		Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding on December 31, 2014	50,896		$	4.35
Granted	—		—
Exercised	—		—
Forfeited/canceled	(5,080	)	3.83
Outstanding on September 30, 2015	45,816				2.0	$	—
Exercisable on September 30, 2015	45,816		$	4.41	2.0	$	—

There were no non-vested stock options as of September 30, 2015 or changes to non-vested stock options during the nine months then ended.

As of September 30, 2015, there was no unrecognized compensation cost related to stock option grants.

Note J – Segments and Geographic Area:

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

The Nutritional Products segment manufactures and distributes a line of approximately 100 nutritional supplements and personal care products, including herbs, vitamins and minerals, as well as natural skin, hair and body care products. Nutritional Products are marketed under the "RBC Life" brand name through subsidiaries in North America and Southeast Asia. These products are

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distributed by a network comprised of independent Associates and NFR program participants in certain markets, primarily North America and Southeast Asia, and by licensees in other international markets. For the most part, licensees also market the Nutritional Products in their respective territories through a network of independent Associates.

The Medical Products segment markets a line of over 35 wound care products under the "MPM Medical" brand name through a subsidiary operating primarily in the U.S. These wound care products are distributed to hospitals, nursing homes, home health care agencies, clinics and pharmacies through a network of medical/surgical supply dealers, pharmaceutical distributors and our own sales representatives. Medical Products are used to treat and manage pain associated with wounds, in the acute care, long-term care and oncology markets.

The Company evaluates the performance of its segments primarily based on operating income (loss). All intercompany transactions have been eliminated, and intersegment revenues are not significant. In calculating operating income (loss) 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 (U.S. dollars in 000s):



	Nutritional Products			Medical Products			Consolidated
Quarter Ended September 30, 2015
Net sales	$	3,505		$	1,901		$	5,406
Depreciation and amortization	122			8			130
Operating income	300			262			562
Capital expenditures	142			—			142
Total assets	9,835			2,997			12,832
Quarter Ended September 30, 2014
Net sales	$	5,980		$	1,535		$	7,515
Depreciation and amortization	146			15			161
Operating loss	(76		)	(2		)	(78		)
Capital expenditures	234			—			234
Total assets	13,307			2,698			16,005
Nine Months Ended September 30, 2015
Net sales	$	11,914		$	5,044		$	16,958
Depreciation and amortization	354			38			392
Operating income (loss)	(858		)	338			(520		)
Capital expenditures	180			—			180
Total assets	9,835			2,997			12,832
Nine Months Ended September 30, 2014
Net sales	$	16,494		$	4,619		$	21,113
Depreciation and amortization	405			46			451
Operating income (loss)	(572		)	35			(537		)
Capital expenditures	871			—			871
Total assets	13,307			2,698			16,005

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Financial information summarized geographically is as follows (U.S. dollars in 000s):



	Quarter Ended September 30, 2015				Quarter Ended September 30, 2014
	Net sales		Long-Lived assets		Net sales		Long-Lived assets
Domestic	$	2,369	$	2,964	$	2,200	$	6,381
Russia/Eastern Europe	1,153		—		2,796		—
Canada	180		402		294		481
Southeast Asia	1,684		256		2,167		425
All others	20		—		58		—
Totals	$	5,406	$	3,622	$	7,515	$	7,287

	Nine Months Ended September 30, 2015				Nine Months Ended September 30, 2014
	Net sales		Long-Lived assets		Net sales		Long-Lived assets
Domestic	$	6,736	$	2,964	$	6,733	$	6,381
Russia/Eastern Europe	4,039		—		8,148		—
Canada	592		402		955		481
Southeast Asia	5,386		256		5,095		425
All others	205		—		182		—
Totals	$	16,958	$	3,622	$	21,113	$	7,287

Significant Customers

The Company recorded sales of Nutritional Products to Coral Club International, Inc. ("CCI"), a licensee of the Company, in the amounts of $1,110,000 and $2,796,000 during the quarters ended September 30, 2015 and 2014, respectively, and $4,039,000 and $8,148,000 during the nine months ended September 30, 2015 and 2014, respectively. The President of CCI is a former member of our Board of Directors and beneficially owns approximately 18% of our common stock. The Company also recorded sales of Medical Products to a medical/surgical dealer (see Note L for additional information related to this dealer) in the amounts of $819,000 and $700,000 during the quarters ended September 30, 2015 and 2014, respectively, and $1,900,000 and $2,091,000 during the nine months ended September 30, 2015 and 2014, respectively. In no other case did a customer of the Company account for more than 10% of net sales during the quarters or nine months ended September 30, 2015 and 2014.

Foreign Currency Translation

The local currency is the functional currency for the Company’s foreign operations. Related assets and liabilities are translated into United States dollars at exchange rates existing at the balance sheet date, and revenues and expenses are translated at weighted-average exchange rates. The foreign currency translation adjustment is recorded as a separate component of shareholders’ equity and is included in accumulated other comprehensive income (loss).

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Note K – Earnings (Loss) Per Share:

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



	Net Earnings (Loss)			Weighted Average Shares	Per Share
Quarter Ended September 30, 2015
Basic earnings per common share	$	330,749		2,212,350	$	0.15
Effect of dilutive stock options	—			—
Diluted earnings per common share	$	330,749		2,212,350	$	0.15
Quarter Ended September 30, 2014
Basic loss per common share	$	(123,640	)	2,212,350	$	(0.06	)
Effect of dilutive stock options	—			—
Diluted loss per common share	$	(123,640	)	2,212,350	$	(0.06	)
Nine Months Ended September 30, 2015
Basic loss per common share	$	(464,869	)	2,212,350	$	(0.21	)
Effect of dilutive stock options	—			—
Diluted loss per common share	$	(464,869	)	2,212,350	$	(0.21	)
Nine Months Ended September 30, 2014
Basic loss per common share	$	(508,172	)	2,212,350	$	(0.23	)
Effect of dilutive stock options	—			—
Diluted loss per common share	$	(508,172	)	2,212,350	$	(0.23	)

The average number of stock options that were outstanding, but not included in the computation of diluted earnings (loss) per common share because their exercise price was greater than the average market price of the common stock, or were otherwise anti-dilutive, was approximately 46,000 for the quarters and nine months ended September 30, 2015 and 61,400 for the quarters and nine months ended September 30, 2014.

Note L – Legal Proceedings:

Medical/Surgical Dealer - One medical/surgical dealer accounts for a significant portion of our Medical Products sales. This dealer distributes our Medical Products and provides services primarily to nursing homes and obtains reimbursement for the price of our products from Medicare. This dealer accounted for approximately $1,900,000 and $2,091,000, or 11% and 10%, of the Company's net sales during the nine months ended September 30, 2015 and 2014, respectively.

On February 27, 2012, we were notified that this dealer filed a voluntary petition for protection under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Central District of California in Santa Ana, California on February 24, 2012. According to its bankruptcy petition, this dealer filed its petition as the most effective means of stabilizing its finances as it resolved a reimbursement guidelines dispute with Medicare, which the dealer believed was improperly withholding payments. In July 2014, pursuant to an arrangement approved by the Bankruptcy Court, this dealer's pre-petition accounts receivable balance was paid in full. In May 2015, this dealer emerged from bankruptcy following the Bankruptcy Court's confirmation of its plan of reorganization.

Environmental Research Center - On April 4, 2014, the Company received a notice from Environmental Research Center ("ERC"), a California non-profit corporation, alleging that the Company failed to include a warning notice related to lead content on labels of certain nutritional products sold in California as required under California's Safe Drinking Water and Toxic Enforcement Act of 1986 (commonly known as Proposition 65).

During the first quarter of 2015, the Company and ERC entered into a settlement agreement, which was approved by the Court having jurisdiction over this matter, pursuant to which the Company agreed to modify its labeling of the affected products and pay certain settlement costs. These settlement costs have been recognized in the accompanying condensed consolidated financial statements.

- 12 -

Mannatech - On April 28, 2015, Mannatech, Incorporated, a distributor of nutritional supplement products, filed suit against the Company alleging patent infringement with respect to sales of two of the Company's products. In July 2015, the parties entered into a settlement agreement and the suit was dismissed.

From time to time, we are a party to claims, litigation or other legal or administrative proceedings that we consider to arise in the ordinary course of our business. No assurances can be given regarding the outcome of these or any other pending proceedings, or the ultimate effect such outcomes may have. However, other than as stated above, we do not believe we are a party to any legal or administrative proceedings which, if determined adversely to us, individually or in the aggregate, would have a material effect on our financial position, results of operations or cash flows.

- 13 -


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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this report and the audited consolidated financial statements and notes thereto included in the 2014 Form 10-K.

FORWARD-LOOKING STATEMENTS

The statements included in this report, other than statements of historical or present facts, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"). All statements, other than statements of historical or present facts, that address activities, events, outcomes and other matters that we plan, expect, intend, assume, believe, budget, predict, forecast, project, estimate or anticipate (and other similar expressions) will, should or may occur in the future are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as, but not limited to, “may”, “will”, “expect", “intend”, “estimate”, “anticipate” or “believe.” These forward-looking statements are based on management's current belief, based on currently available information, as to the outcome and timing of future events. Although we believe that the expectations and assumptions reflected in the forward-looking statements are reasonable, they involve risks and uncertainties that are difficult to predict and, in many cases, beyond our control. Our forward-looking statements speak only as of the date on which this report was filed with the SEC. We expressly disclaim any obligation to issue any updates or revisions to our forward-looking statements, even if subsequent events cause our expectations to change regarding the matters discussed in those statements. Over time, our actual results, performance, or achievements will likely differ from the anticipated results, performance, or achievements that are expressed or implied by our forward-looking statements, and such differences might be significant and materially adverse to our shareholders.

We may experience variations in our actual results, performance, or achievements from quarter to quarter and/or year to year as a result of factors that include the following:


•	The level of recruiting and retention of our Associates in the North America and Southeast Asia markets and territories served by our licensees;


•	Variations in the level of business activity generated by our key customers;


•	The opening of new markets;


•	The timing and efficacy of Company-sponsored events, promotions, and other marketing and sales initiatives;


•	New product introductions;


•	The negative impact of new regulations or changes in existing regulations domestically and/or internationally that may limit or restrict the sale of certain products or require existing business practices to be changed;


•	The integration and operation of new information technology systems;


•	The inability to introduce new products or the introduction of new products by competitors;


•	Entry into one or more of our markets by competitors;


•	General conditions in the nutritional supplement industry, the network marketing industry, and the wound care industry; and


•	General economic conditions globally and/or in markets where we or our licensees conduct business.

As a result of these and other risks and uncertainties, sales, expenses, and results of operations could vary significantly in the future, and period-to-period comparisons should not be relied upon as indications of future performance. The foregoing list of risks and uncertainties may not contain all of the risks and uncertainties that could affect us. Please consider our forward-looking statements in light of these risks and uncertainties as you read this report.

OVERVIEW

The following discussion should be read in conjunction with management’s discussion and analysis contained in the 2014 Form 10-K, and with the condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.

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

•

Through the Nutritional Products segment, we distribute products in three broad categories: wellness products, fitness products and personal care products. Products include herbal formulas, vitamins, minerals, antioxidants and personal care products. In certain markets, principally in North America and Southeast Asia, we distribute Nutritional Products directly through a network comprised of independent Associates and individuals who participate in our NFR program.

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In certain other markets, we distribute Nutritional Products through exclusive license arrangements with third parties who, for the most part, distribute our products through an independent Associate network in the licensed territory.

•

Through the Medical Products segment, we distribute wound care products. These products are distributed mainly in the U.S. to hospitals, nursing homes, clinics and pharmacies through traditional medical/surgical supply dealers, pharmaceutical distributors and our own sales representatives. Medical Products are used to treat and manage pain associated with wounds, in the acute care, long-term care and oncology markets.

Sales by segment in dollars and as a percentage of consolidated net sales are as follows:



	Quarters Ended September 30,
	2015				2014
	(U.S. dollars in 000’s)
Nutritional Products:
Associate network	$	2,352	44	%	$	3,171	42	%
Licensees	1,153		21	%	2,809		37	%
	3,505		65	%	5,980		79	%
Medical Products	1,901		35	%	1,535		21	%
	$	5,406	100	%	$	7,515	100	%

	Nine Months Ended September 30,
	2015				2014
	(U.S. dollars in 000’s)
Nutritional Products:
Associate network	$	7,755	45	%	$	8,271	39	%
Licensees	4,159		25	%	8,223		39	%
	11,914		70	%	16,494		78	%
Medical Products	5,044		30	%	4,619		22	%
	$	16,958	100	%	$	21,113	100	%

Associate Network. Sales in this channel are dependent upon the number and productivity of our Associates. Accordingly, growth in sales is generally dependent upon the sponsorship of new Associates and retention of existing Associates. Factors that affect the number of new recruits and active Associates include entry into new geographic markets, introduction of new products, and promotional activities.

The following table sets forth our Associate networks' net sales (including NFR sales) by geographic region as a percentage of total net sales for the periods indicated:



	Nine Months Ended September 30,
	2015		2014
U.S.	23	%	27	%
Canada	8		11
Southeast Asia	69		62
	100	%	100	%

Licensees. In this channel we sell Nutritional Products to third parties who purchase products from us in accordance with a license arrangement that gives the licensee exclusive rights to distribute our products in the licensed territory. For the most part, licensees are required to distribute our products in the licensed territory through network marketing. Net sales in this distribution channel are mainly dependent upon the licensee's success in building a distribution network in the licensed territory.

Our principal licensee is CCI, which accounted for virtually all of our licensees' net sales in the nine months ended September 30, 2015 and 2014. Following the completion of a ten-year exclusive distributorship agreement between the parties, in August 2014, the Company entered into a new two-year exclusive distributorship agreement with CCI. Under the new agreement, CCI’s exclusive

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territory includes Russia and other countries located primarily in Europe and Central Asia. In consideration of the rights granted to CCI under the agreement, CCI is required to purchase certain minimum amounts of products from the Company each year, which minimum amounts are consistent with the previous agreement. The President of CCI is a former member of our Board of Directors and beneficially owns approximately 18% of our common stock.

Under the previous agreement, CCI was required to pay the Company a monthly royalty calculated as a percentage of its sales of the Company's products. Under the new agreement, in lieu of a royalty, the prices at which products are sold to CCI were marked up to include the royalty so that no additional royalty is due upon the sale of the Company's products by CCI. To affect the transition of royalty calculations under the previous agreement and the new agreement, the Company recognized royalties of $941,000 on a one-time basis in August 2014. Of this amount, approximately $476,000 was recorded as royalty revenue in the third quarter of 2014 while the remainder was recorded as deferred revenue pending shipment of the related products. These royalties are being paid over an 18-month period which began October 2014 in the approximate amount of $52,000 per month.

CCI orders products from the Company and pays for products when they are segregated in the Company's warehouse for CCI’s account. Once segregated, products are stored until CCI provides shipping instructions; segregated products are not subject to return except in the case of a manufacturing defect. The Company's sales to CCI may fluctuate from quarter to quarter, based on changes in sales demand through CCI's Associate network, regulatory changes and other logistical considerations. The backlog related to CCI’s account was $3,269,000 and $4,096,000 at September 30, 2015 and 2014, respectively.

CCI recently informed the Company that it intends to establish its own warehouse during the fourth quarter of 2015 and will no longer store its products in the Company's warehouse for later shipment. Accordingly, the Company expects to ship all CCI products stored in its warehouse to CCI during the fourth quarter of 2015.

Medical Products. We sell Medical Products primarily in the U.S. to wholesalers such as medical/surgical dealers and pharmaceutical distributors and directly to various health care providers such as hospitals, nursing homes, clinics and pharmacies through our own sales representatives. In some cases, wholesalers and distributors 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 38% and 45% of the net sales of our Medical Products during the nine months ended September 30, 2015 and 2014, respectively. In May 2015, this dealer emerged from bankruptcy after having filed a voluntary petition for protection under Chapter 11 of the U.S. Bankruptcy Code in February 2012. See Note L - Legal Proceedings in the accompanying condensed consolidated financial statements for further information related to these proceedings.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our financial statements and related disclosures in conformity with US GAAP requires us to make estimates and judgments that affect the amounts reported in our financial statements and accompanying footnotes. On an on-going basis, we evaluate these estimates and assumptions based on historical experience and various other factors and circumstances. Our management believes that the estimates and assumptions are reasonable in the circumstances; however, actual results may vary from these estimates and assumptions under different future circumstances.

Management believes that there have been no significant changes during the nine months ended September 30, 2015 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 2014 Form 10-K.

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RESULTS OF OPERATIONS

The following table sets forth our operating results as a percentage of net sales for the periods indicated:



	Quarters Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	42.2		43.0		43.0		45.1
Gross profit	57.8		57.0		57.0		54.9
Operating expenses:
General and administrative	57.9		37.7		49.2		38.7
Distributor commissions	18.7		18.1		18.7		16.5
Depreciation and amortization	2.4		2.1		2.3		2.1
Gain on sale of building	(31.6	)	—		(10.1	)	—
Total operating expenses	47.4		57.9		60.1		57.3
Operating income (loss)	10.4		(0.9	)	(3.1	)	(2.4	)
Interest expense	—		0.3		0.2		0.4
Earnings (loss) before income taxes	10.4		(1.2	)	(3.3	)	(2.8	)
Provision (benefit) for income taxes	4.3		0.3		(0.6	)	(0.5	)
Net earnings (loss)	6.1	%	(1.6	)%	(2.7	)%	(2.4	)%

Quarter ended September 30, 2015 compared with the quarter ended September 30, 2014 (U.S. dollars in 000s except per share amounts)

Net sales. Net sales for the quarter ended September 30, 2015 were $5,406 compared with net sales for the same period in 2014 of $7,515, a decrease of $2,109, or 28%. This decrease resulted from a $2,475 decrease in net sales of Nutritional Products that was partially offset by a $366 increase in net sales of Medical Products. The decrease in net sales of Nutritional Products resulted from a $1,656 decrease in net sales to our licensees and a $819 decrease in net sales through our Associate network.

Associate Network. Overall, net sales through the Associate network channel decreased by $819 during the third quarter of 2015 compared to the same period in 2014. This decrease in sales was primarily attributable to a $196 decline in Malaysia, a $116 decline in Taiwan sales, and a $336 decline in North American sales. Associate network sales during the third quarter of 2015 were negatively affected by certain operating issues that arose in the second quarter in connection with the deployment of a new computer system in April 2015. While these operating issues were largely resolved by the end of the second quarter, third quarter sales were negatively affected.

Licensees. Net sales to our licensees decreased as a result of decreased shipments to CCI; sales to CCI decreased $1,686, or 60%, during the third quarter of 2015. Sales to CCI are impacted by a variety of factors including global economic trends, regulatory changes and logistical considerations, which can impact the timing of shipments into CCI's markets.

Medical products. Sales to the largest customer in this segment, which distributes wound care products and provides services to the nursing home market, increased $119 during the third quarter of 2015 compared to the third quarter of 2014. This sales increase was primarily attributable to an increase in the quantity of products sold. Sales to this dealer in the third quarter of 2015 were approximately $819, or 43%, of the net sales of our Medical Products. In May 2015, the dealer emerged from bankruptcy after having filed a voluntary petition for protection under Chapter 11 of the U.S. Bankruptcy Code in February 2012. See Note L - Legal Proceedings for further information related to these proceedings. This sales increase was primarily attributable to increased sales of certain collagen-based wound care products.

Cost of sales. Cost of sales for the quarter ended September 30, 2015 was $2,283 compared with $3,232 for the quarter ended September 30, 2014, a decrease of $949, or 29%. As a percentage of net sales, cost of sales was approximately 42% in the third quarter of 2015 and 43% in the third quarter of 2014. The decrease in cost of sales as a percentage of net sales was primarily the result of a shift in the mix of sales toward lower cost Associate network and Medical Products sales from higher cost licensee sales.

General and administrative. General and administrative expenses for the quarter ended September 30, 2015 were $3,127 compared with expenses in the third quarter of 2014 of $2,836, an increase of $291, or 10%. This increase was primarily attributable

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to higher foreign exchange losses and increased administrative expenses associated with operations in certain Asian markers. As a percentage of net sales, general and administrative expenses were 58% and 38% in the quarters ended September 30, 2015 and 2014, respectively.

Distributor commissions. Distributor commissions were $1,010 for the quarter ended September 30, 2015 compared with $1,363 in the third quarter of 2014, a decrease of $353, or 26%. With respect to our Associate network, distributor commissions as a percentage of commissionable sales (exclusive of rebates that are recorded as a reduction of sales) were approximately 42% in the third quarter of 2015 and 2014. On a consolidated basis, distributor commissions as a percentage of net sales were 19% and 18% in the quarters ended September 30, 2015 and 2014, respectively.

Gain on sale of building. On July 15, 2015, the Company completed the previously announced sale of its headquarters building and related parcel of land in Irving, Texas for approximately $5,180. The Company received approximately $3,750 in net cash proceeds from this sale, and the gain recognized with respect to the sale was approximately $1,707.

Income taxes. We recorded a provision for income taxes of $231 and $22 during the quarters ended September 30, 2015 and 2014, respectively, based on our estimate of the effective annual income tax rate for the applicable period.

Net earnings (loss). As a result of the factors described above, the net income for the quarter ended September 30, 2015 was $331, or $0.15 per share, compared with a net loss in the third quarter of 2014 of $124, or $0.06 per share.

Nine months ended September 30, 2015 compared with the nine months ended September 30, 2014 (U.S. dollars in 000s except per share amounts)

Net sales. Net sales for the nine months ended September 30, 2015 were $16,958 compared with net sales for the same period in 2014 of $21,113, a decrease of $4,155, or 20%. This decrease resulted from a $4,580 decrease in net sales of Nutritional Products that was partially offset by a $425 increase in net sales of Medical Products. The decrease in net sales of Nutritional Products resulted from a $4,064 decrease in net sales to our licensees and a $516 decrease in net sales through our Associate network.

Associate network. Net sales through the Associate network channel decreased by $516 during the nine months ended September 30, 2015 compared to the same period in 2014. The decrease in sales was due to a $807 decline in North American sales, which was primarily caused by certain operating issues that arose in the second quarter in connection with the deployment of a new computer system in April 2015. While these operating issues were largely resolved by the end of the second quarter, third quarter sales were also negatively affected. This decline in sales was partially offset by sales growth in our Southeast Asia markets, which reported increased sales of $291 during the first nine months of 2015. Sales growth in Asia was attributable to the opening of offices in Malaysia and Indonesia in February 2014 and June 2014, respectively.

Licensees. Net sales to our licensees decreased as a result of decreased shipments to CCI; sales to CCI decreased $4,109, or 50%, during the first nine months of 2015. Sales to CCI are impacted by a variety of factors including global economic and political factors, regulatory changes and logistical considerations, which can impact the timing of shipments into CCI's markets.

Medical Products. Sales to the largest customer in this segment, which distributes wound care products and provides services to the nursing home market, declined by $191 during the first nine months of 2015 compared to the first nine months of 2014. Sales to this dealer in the first nine months of 2015 were approximately $1,900, or 38%, of the net sales of our Medical Products. In May 2015, the dealer emerged from bankruptcy after having filed a voluntary petition for protection under Chapter 11 of the U.S. Bankruptcy Code in February 2012. See Note L - Legal Proceedings in the accompanying condensed consolidated financial statements for further information related to these proceedings. Sales to other customers increased $616 during the first nine months of 2015 primarily due to increased sales of certain collagen-based wound care products.

Cost of sales. Cost of sales for the nine months ended September 30, 2015 was $7,286 compared with $9,526 for the nine months ended September 30, 2014, a decrease of $2,240, or 24%. As a percentage of net sales, cost of sales was approximately 43% in the first nine months of 2015 and 45% in the first nine months of 2014. The decrease in cost of sales as a percentage of net sales was primarily the result of a shift in the mix of sales toward lower cost Associate network and Medical Products from higher cost licensee sales.

General and administrative. General and administrative expenses for the nine months ended September 30, 2015 were $8,339 compared with expenses in the first nine months of 2014 of $8,197, an increase of $142, or 2%. This increase was attributable to increased foreign exchange losses associated with the strengthening of the US Dollar against the currencies of certain Asian countries where we have operations and expenses associated with our Malaysia and Indonesia offices that opened in February 2014 and June 2014, respectively. These expense increases were partially offset by the one-time write off of certain start up costs

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associated with our entry into Hong Kong in the first quarter of 2014 that did not recur in 2015 and lower sales and marketing expenses in North America. As a percentage of net sales, general and administrative expenses were 49% and 39% in the nine months ended September 30, 2015 and 2014, respectively.

Distributor commissions. Distributor commissions were $3,167 for the nine months ended September 30, 2015 compared with $3,476 in the first nine months of 2014, a decrease of $309, or 9%. With respect to our Associate network, distributor commissions as a percentage of commissionable sales (exclusive of rebates that are recorded as a reduction of sales) were approximately 40% in the first nine months of 2015 and 41% in the first nine months 2014. On a consolidated basis, distributor commissions as a percentage of net sales were 19% and 17% in the nine months ended September 30, 2015 and 2014, respectively.

Income taxes. We recorded income tax benefits of $97 and $102 during the nine months ended September 30, 2015 and 2014, respectively, based on our estimate of the effective annual income tax rate for the applicable period.

Net loss. As a result of the factors described above, the net loss for the nine months ended September 30, 2015 was $465, or $0.21 per share, compared with a net loss in the first nine months of 2014 of $508, or $0.23 per share.

LIQUIDITY AND CAPITAL RESOURCES (U.S. dollars in 000s)

Cash and working capital. During the first nine months of 2015, we had a net increase in cash of $170 compared with a net decrease in cash of $2,347 in the first nine months of 2014. At September 30, 2015, we had working capital of $4,947, a $2,207 increase from working capital at December 31, 2014 of $2,740. During the first nine months of 2015, working capital and cash fluctuated significantly due to the timing of cash receipts from customers, payments to vendors, and the reasons described below.

Operating activities. In the first nine months of 2015, our operating activities used cash flow of $3,590. In the first nine months of 2014, our operating activities used cash flow of $1,295. The net loss adjusted for non-cash activities, including depreciation and amortization, the gain on sale of building, share-based compensation and deferred taxes, used cash flows of $1,884 and $159 in the first nine months of 2015 and 2014, respectively. With respect to the first nine months of 2015, cash was also used to reduce accounts payable and accrued liabilities by $1,366, which is generally attributable to the normal fluctuation in timing of billings from and payments to suppliers, and to increase inventory in the Southeast Asian markets by $308. With respect to the first nine months of 2014, cash was also used to increase accounts receivable and other assets by $661 attributable to royalties due from CCI, and to decrease deferred revenues by $1,763 reflecting a decrease in CCI's order deposits and its inventory held for later shipment.

Investing activities. During the first nine months of 2015, we used $180 for capital expenditures, which was related to the replacement of our Associate Sales and Marketing computer system with a new computer system that was deployed in April 2015. In December 2013, the Company engaged GSAT, Inc. to develop the new Associate Sales and Marketing computer system. The founder and CEO of GSAT, Inc. is a member of our Board of Directors.

On July 15, 2015, we completed the previously announced sale of our headquarters office/warehouse facility located in Irving, Texas for approximately $5,180. After repayment of outstanding mortgage debt of approximately $1,130 secured by this facility and payment of other closing costs and adjustments, we received net cash proceeds of approximately $3,750. Effective upon closing of this sale, we entered into an agreement to lease back the facility from the purchaser under a lease that expires on April 30, 2016 and provides for, among other things, rent of approximately $35 per month.

Financing activities. During the first nine months of 2015, financing activities included the repayment of long-term debt in the amount of $1,136, most of which was made in connection with the sale of our headquarters office/warehouse facility located in Irving, Texas . During the first nine months of 2014, financing activity included the repayment of long-term debt in the amount of $158.

Share repurchase program. On August 28, 2013, the Company announced that the Board of Directors had authorized a plan to repurchase, at management's discretion, up to 111,000 shares of common stock, representing 5% of the Company's outstanding common stock. The Company's repurchase plan was effective as of that date and expired on February 28, 2015. No common stock repurchase transactions were executed as a result of the share repurchase program.

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General liquidity and cash flows. Presently, the Company is considering alternative sources of capital, including bank borrowings, and other types of debt or equity financings to facilitate our expansion in Asia and provide flexibility in the event of a decrease in demand for our products, including a decrease in demand from our licensees, which could adversely affect our liquidity. We can give no assurance, however, that we will be able to obtain any additional outside financing or obtain financing on terms we would find commercially acceptable. During the next 12 months, we have no significant capital expenditures planned.

Other than those factors described above, we are not aware of any trends or uncertainties that would significantly affect our liquidity or capital resources in the future.


ITEM 4.	Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15(b) and 15d-15(b) under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer (as our principal executive officer and principal financial officer, respectively), evaluated as of September 30, 2015, 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 (as our principal executive officer and principal financial officer, respectively) concluded that our disclosure controls and procedures, as of September 30, 2015, were effective to provide reasonable assurance that information required to be disclosed by us in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and were effective to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate, to allow timely discussions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There has been no change in internal control over financial reporting (as defined in Rule 13(a)-15 or Rule 15d-15 of the Exchange Act) that occurred during the quarter ended September 30, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION


ITEM 1.	Legal Proceedings.

On February 24, 2012, a medical/surgical dealer that accounted for approximately $1,900,000 and $2,091,000 of the Company's sales during the nine months ended September 30, 2015 and 2014, respectively, filed a voluntary petition for protection under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Central District of California in Santa Ana, California. See Part I, Item 1, Note L - Legal Proceedings of this report for additional information related to these proceedings, which is incorporated herein by reference.

On April 4, 2014, the Company received a notice from Environmental Research Center, a California non-profit corporation alleging that the Company failed to include a warning notice related to lead content on labels of certain Nutritional Products sold in California as required under California's Safe Drinking Water and Toxic Enforcement Act of 1986. During the first quarter of 2015, the Company and ERC entered into a settlement agreement, which was approved by the Court having jurisdiction over this matter, pursuant to which the Company agreed to modify its labeling of the affected products and pay certain settlement costs. See Part I, Item 1, Note L - Legal Proceedings of this report for additional information related to this notice, which is incorporated herein by reference.

On April 28, 2015, Mannatech, Incorporated, a distributor of nutritional supplement products, filed suit against the Company alleging patent infringement with respect to sales of two of the Company's products. In July 2015, the parties entered into a settlement agreement and the suit was dismissed.


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

Not applicable


ITEM 3.	Defaults Upon Senior Securities.

Not applicable

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ITEM 4.	Mine Safety Disclosures.

Not applicable


ITEM 5.	Other Information.

Not applicable


ITEM 6.	Exhibits.

The Exhibit Index filed herewith is incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	RBC Life Sciences, Inc.
	Registrant

November 16, 2015	By:	/s/ Steven E. Brown
Date	Its:	Chief Executive Officer
		(principal executive officer)

November 16, 2015	By:	/s/ Daley L. Seeker
Date	Its:	Vice President-Finance and Chief Financial Officer
		(principal financial and accounting officer)

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RBC LIFE SCIENCES, INC.

Exhibit Index



Exhibit Number	Description
3.1	Amended Articles of Incorporation of the Company (incorporated by reference to the Company’s Annual Report on Form 10-K filed March 27, 2014)

3.2	Amended By-laws of the Company (incorporated by reference to the Company’s Annual Report on Form 10-K filed March 27, 2014)

10.1	Commercial Lease Agreement dated July 15, 2015 between BCKK Investment Group, Inc. and American Christmas Light & Supply, Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company with the SEC on July 21, 2015)

10.2	Commercial Sublease Agreement dated July 15, 2015 between American Christmas Light & Supply, Inc., and the Company (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the Company with the SEC on July 21, 2015)

10.3	Commercial Contract of Sale between the Company and Decor Pro LLC, as modified, dated April 9, 2015 (incorporated by reference to Exhibit 10.1 to the Current Report on From 8-K filed by the Company with the SEC on June 3, 2015)

31.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

31.2	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

101.INS	XBRL Instance Document *

101.SCH	XBRL Taxonomy Extension Schema Document *

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document *

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document *

101.LAB	XBRL Taxonomy Extension Label Linkbase Document *

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document *

* Filed or furnished electronically herewith.

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EXHIBIT 31.1

SECTION 302 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Steven E. Brown, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of RBC Life Sciences, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 16, 2015



	/s/ Steven E. Brown
	Steven E. Brown
	Chief Executive Officer

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EXHIBIT 31.2

SECTION 302 - CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Daley L. Seeker, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of RBC Life Sciences, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 16, 2015



	/s/ Daley L. Seeker
	Daley L. Seeker
	Vice President-Finance and Chief Financial Officer

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EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of RBC Life Sciences, Inc. (the “Company”) for the quarter ended September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven E. Brown, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:


1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



	/s/ Steven E. Brown
	Steven E. Brown
	Chief Executive Officer
	November 16, 2015

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EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of RBC Life Sciences, Inc. (the “Company”) for the quarter ended September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daley L. Seeker, Vice President-Finance and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:


1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



	/s/ Daley L. Seeker
	Daley L. Seeker
	Vice President-Finance and Chief Financial Officer
	November 16, 2015

- 27 -

Attached files

RBC LIFE SCIENCES, INC. Reports

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