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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, 2012


[  ]

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: 000-26973


FOREVERGREEN WORLDWIDE CORPORATION

(Exact name of registrant as specified in its charter)


Nevada                                                                                    

(State or other jurisdiction of incorporation or organization)

87-0621709                                        

(I.R.S. Employer Identification No.)

972 North 1430 West, Orem, Utah         

(Address of principal executive offices)

84057       

(Zip Code)


(801) 655-5500

(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 [  ]


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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes [X]    No [   ]


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

Large accelerated filer [  ]

Non-accelerated filer [  ]

Accelerated filer [  ]

Smaller reporting company [X]


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   

Yes [   ]   No [X]


The number of shares outstanding of the registrant’s common stock as of November 9, 2012 was 14,892,141.




1




TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION


Item 1.  Financial Statements

2

Condensed Consolidated Balance Sheets

3

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

4

Condensed Consolidated Statements of Cash Flows

5

Notes to the Condensed Consolidated Financial Statements

6

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

11

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

15

Item 4.  Controls and Procedures

15


PART II – OTHER INFORMATION


Item 1.  Legal Proceedings

16

Item 1A.  Risk Factors

16

Item 6.  Exhibits

17

Signatures

17




PART I – FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS


The financial information set forth below with respect to our statements of operations for the three and nine month periods ended September 30, 2012 and 2011 is unaudited.  This financial information, in the opinion of management, includes all adjustments consisting of normal recurring entries necessary for the fair presentation of such data.  The results of operations for the nine month periods ended September 30, 2012, are not necessarily indicative of results to be expected for any subsequent period.  













2




ForeverGreen Worldwide Corporation

Condensed Consolidated Balance Sheets


 

 

September 30, 2012

 

 

December 31, 2011

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

     CURRENT ASSETS

 

 

 

 

 

         Cash and cash equivalents

$

124,215

 

$

223,099

         Accounts Receivable

 

148,537

 

 

103,770

         Prepaid expenses

 

169,098

 

 

158,714

         Inventory

 

870,673

 

 

1,145,560

         Total Current Assets

 

1,312,523

 

 

1,631,143

 

 

 

 

 

 

     PROPERTY AND EQUIPMENT, net

 

87,277

 

 

151,144

 

 

 

 

 

 

     OTHER ASSETS

 

 

 

 

 

         Deposits and other assets

 

64,592

 

 

64,454

         Trademarks, net

 

49,930

 

 

51,319

         Customer base, net

 

363,758

 

 

427,950

         Total Other Assets

 

478,280

 

 

543,723

     TOTAL ASSETS

$

1,878,080

 

$

2,326,010

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

     CURRENT LIABILITIES

 

 

 

 

 

         Bank overdraft

$

167,939

 

$

179,586

         Accounts payable

 

877,164

 

 

1,183,101

         Accrued expenses

 

2,327,365

 

 

2,110,674

         Due to related parties

 

133,014

 

 

178,127

         Banking line of credit

 

53,502

 

 

100,420

         Current portion of long-term debt

 

2,135

 

 

1,945

         Notes payable, related parties

 

922,478

 

 

922,478

         Convertible notes payable, related parties

 

245,000

 

 

245,000

         Notes payable, unrelated parties

 

1,008,476

 

 

1,008,476

         Total Current Liabilities

 

5,737,073

 

 

5,929,807

 

 

 

 

 

 

     LONG-TERM DEBT

 

 

 

 

 

         Notes payable

 

18,712

 

 

21,147

         Total Long-Term Debt

 

18,712

 

 

21,147

     Total Liabilities

 

5,755,785

 

 

5,950,954

 

 

 

 

 

 

     STOCKHOLDERS' DEFICIT

 

 

 

 

 

         Preferred stock; no stated par value; authorized

10,000,000 shares; no shares issued or outstanding

-

 

 

-

         Common stock, par value $0.001 per share;

         authorized 100,000,000 shares;14,892,141 and

      14,892,141 shares respectively issued and outstanding

14,892

 

 

14,892

         Additional paid-in capital

 

30,934,109

 

 

30,934,109

         Other comprehensive income (loss)

 

20,037

 

 

(450)

         Accumulated deficit

 

(34,846,743)

 

 

(34,573,495)

         Total Stockholders' Deficit

 

(3,877,705)

 

 

(3,624,944)

     TOTAL LIABILITIES AND STOCKHOLDERS'

     DEFICIT

$

1,878,080

 

$

2,326,010




The accompanying notes are an integral part of these condensed consolidated financial statements.




3




ForeverGreen Worldwide Corporation

Condensed Consolidated Statement of Operations and Comprehensive Loss

(Unaudited)


 

 

Three months ended

September 30,

 

Nine months ended

September 30,

 

 

2012

 

2011

 

2012

 

2011


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES, net

$

3,060,736

$

3,681,901

$

9,781,990

$

9,985,916

COST OF SALES, net

 

2,086,174

 

2,697,167

 

6,784,215

 

7,534,102

GROSS PROFIT

 

974,562

 

984,734

 

2,997,775

 

2,451,814

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

     Salaries and wages

 

548,280

 

546,669

 

1,651,207

 

1,596,559

     Professional fees

 

116,224

 

94,112

 

377,203

 

381,115

     General and administrative                                             

 

347,299

 

319,536

 

1,047,130

 

897,738

       Total Operating Expenses

 

1,011,803

 

960,317

 

3,075,540

 

2,875,412

 

 

 

 

 

 

 

 

 

NET OPERATING LOSS

 

(37,241)

 

24,417

 

(77,765)

 

(423,598)

 

 

 

 

 

 

 

 

 

OTHER EXPENSE

 

 

 

 

 

 

 

 

     Interest expense

 

(70,344)

 

(63,818)

 

(195,537)

 

(164,055)

     Other Income

 

-

 

-

 

 54

 

-

       Total Other Expense

 

(70,344)

 

(63,818)

 

(195,483)

 

(164,055)

 

 

 

 

 

 

 

 

 

Loss from continuing operations before income tax provision

 

 

(107,585)

 

 

(39,401)

 

 

(273,248)

 

 

(587,653)

Income Tax Benefit

 

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

$

(107,585)

$

(39,401)

$

(273,248)

$

(587,653)

 

 

 

 

 

 

 

 

 

BASIC AND DILUTED LOSS

 

 

 

 

 

 

 

 

PER COMMON SHARE

$

(0.01)

$

(0.00)

$

(0.02)

$

(0.04)

 

 

 

 

 

 

 

 

 

BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF

 

 

 

 

 

 

 

 

COMMON SHARES OUTSTANDING

 

14,892,141

 

14,892,141

 

14,892,141

 

14,892,141

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME (LOSS)

 

 

 

 

 

 

 

 

    A Summary of the components of other

    comprehensive income (loss) for the fiscal

    years ended September 30, 2012  and

    2011 are as follows:

 

 

 

 

 

 

 

 

Net Loss

$

(107,585)

$

(39,401)

$

(273,248)

$

(587,653)

Other Comprehensive Income (Loss)

 

(31,984)

 

134,576

 

20,487

 

91,111

Comprehensive Income (Loss)

$

(139,569)

$

95,175

$

(252,761)

$

(496,452)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The accompanying notes are an integral part of these condensed consolidated financial statements.





4




ForeverGreen Worldwide Corporation

Condensed Consolidated Statement of Cash Flows

(Unaudited)


 

 

For the Nine Months

September 30,

 

 

2012

 

2011

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

     Net Loss

$

(273,248)

$

(587,653)

     Adjustments to reconcile net loss to net cash used in

       operating activities:

 

 

 

 

          Depreciation and amortization

 

131,570

 

195,464

     Changes in operating assets and liabilities:

 

 

 

 

          Accounts receivable

 

(44,767)

 

(42,051)

          Prepaid expenses

 

(10,384)

 

(98,807)

          Inventory

 

274,887

 

(537,315)

          Deposits

 

(138)

 

18,450

          Accounts payable and accrued expenses

 

(89,247)

 

172,528

     Net Cash Used in Operating Activities

 

(11,327)

 

(879,384)

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

     Cash paid for trademarks

 

2,121

 

(550)

     Purchases of property and equipment

 

-

 

2,644

     Net Cash Provided by Investing Activities

 

2,121

 

2,094

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

     Bank overdraft

 

(11,647)

 

135,054

     Net proceeds from revolving bank line of credit

 

(46,918)

 

47,513

     Payments on notes payable

 

(2,245)

 

(1,473)

     Proceeds from notes payable

 

-

 

778,899

     Proceeds from notes payable - related parties

 

100,000

 

200,000

     Payments on notes payable -related parties

 

(145,113)

 

(267,500)

     Net Cash Provided by (Used in) Financing Activities

 

(105,923)

 

892,493

 

 

 

 

 

Effect of Foreign Currency on Cash

 

16,245

 

91,111

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH

 

(98,884)

 

106,314

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

223,099

 

178,124

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

124,215

$

284,438

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION

 

 

 

 

     Cash paid for interest

$

5,072

$

11,778

     Cash paid for income taxes

$

-

$

-

 

 

 

 

 











The accompanying notes are an integral part of these condensed consolidated financial statements.




5




FOREVERGREEN WORLDWIDE CORPORATION

Notes to the Condensed Consolidated Financial Statements

(Unaudited)


NOTE 1 – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


The accompanying consolidated financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows as of and for the period ended September 30, 2012 and for all periods presented have been made.


Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2011 audited financial statements as reported in its Form 10-K. The results of operations for the nine month period ended September 30, 2012 are not necessarily indicative of the operating results for the full year ended December 31, 2012.


NOTE 2 – GOING CONCERN


The Company's financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern. The Company has incurred operating losses during the nine months ended September 30, 2012 of $273,248 and has an accumulated net loss totaling $34,846,743. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.


In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.


The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.


NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Basis of Presentation

The accompanying consolidated financial statements are prepared on the basis of accounting principles generally accepted in the United States of America.


Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.






6




FOREVERGREEN WORLDWIDE CORPORATION

Notes to the Condensed Consolidated Financial Statements

(Unaudited)


NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED


Fair Value of Financial Instruments

The carrying amounts reported in the balance sheets for accounts receivable, accounts payable and accrued liabilities approximate fair value because of the immediate or short-term nature of these financial instruments. The carrying amounts reported for notes payable approximate fair value because the underlying instruments are at interest rates which approximate current market rates.


Basic and Diluted Loss Per Share

Basic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted loss per share is computed by dividing net loss by the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Our potentially dilutive shares, which include outstanding common stock options, common stock warrants and convertible debentures, have not been included in the computation of diluted net loss per share attributable to common stockholders for all periods presented, as the results would be anti-dilutive. Such potentially dilutive shares are excluded when the effect would be to reduce net loss per share. There were 6,353,275 and 6,353,275 such potentially dilutive shares excluded as of September 30, 2012 and 2011.


New Accounting Pronouncements

After evaluating the recent accounting pronouncements through the date of this filing, the Company has concluded that application of these pronouncements will have no material impact on the Company’s financial results.


Reclassification

Certain prior year balances and amounts in these financial statements have been reclassified in order to conform to the presentation of current year balances and amounts.


NOTE 4 – NOTES PAYABLE


Long-term debt is detailed as follows:

 

 

September 30,

2012

 

December 31,

2011

Note payable to Wells Fargo Bank bearing interest

  at 7%, principle and interest due monthly,

  matures  August, 2019, secured by equipment

  

$

    20,847

 

$    23,092

Less current portion of notes payable

   

    (2,135)

 

       (1,945)

    Net Long-Term Debt

$

    18,712

 

$     21,147






7




FOREVERGREEN WORLDWIDE CORPORATION

Notes to the Condensed Consolidated Financial Statements

(Unaudited)


NOTE 4 – NOTES PAYABLE - CONTINUED


Other current notes payable are detailed in the following table:

Type

Collateral

Origination Date

Interest Rate

Due Date

Original Amount

Balance at September 30, 2012

Balance at December 31, 2011

Not Convertible Related

Inventory and Business Assets

12/9/2008

14%

Due on Demand

$485,000

       $485,000

$485,000

Not Convertible Related

Inventory and Business Assets

7/31/2009

15%

Due on Demand

$437,478

$437,478

$437,478

Convertible Related

Inventory and Business Assets

10/7/2010

14%

Due on Demand

$45,000

$45,000

$45,000

Convertible Related

Inventory and Business Assets

1/19/2011

14%

Due on Demand

$200,000

$200,000

$200,000

Total Related

 

 

 

 

 

$1,167,478

$1,167,478

Convertible Unrelated

Inventory and Business Assets

1/19/2011

14%

Due on Demand

$394,962

$394,962

$394,962

Convertible Unrelated

Inventory and Business Assets

3/14/2011

14%

Due on Demand

$100,000

$100,000

$100,000

Convertible Unrelated

Inventory and Business Assets

5/26/2011

10%

12/31/2012

$281,758

$281,758

$281,758

Convertible Unrelated

Inventory and Business Assets

3/9/2010

15%

Due on Demand

$231,756

$231,756

$231,756

Banking Line of Credit

None

7/9/2005

7%

Revolving

$53,502

$53,502

$100,420

Total Unrelated

 

 

 

 

 

$1,061,978

$1,108,896



NOTE 5 – RECOGNITION OF REVENUE

Revenues and costs of revenues from services are recognized during the period in which the services are provided. The Company applies the provisions of FASB Accounting Standards Codification (“ASC”) 605-10, Revenue Recognition in Financial Statements ASC 605-10, which provides guidance on the recognition, presentation, and disclosure of revenue in financial statements filed with the SEC. ASC 605-10 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. In general, the Company recognizes revenue related to monthly contracted amounts for services provided when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the fee is fixed or determinable, and (iv) collectability is reasonably assured.





8




FOREVERGREEN WORLDWIDE CORPORATION

Notes to the Condensed Consolidated Financial Statements

(Unaudited)


NOTE 5 – RECOGNITION OF REVENUE - CONTINUED


The Company’s source of revenue is from the sale of various food and other natural products. The Company recognizes the sale upon shipment of such goods. The Company offers a 100% satisfaction guarantee against defects for 30 days after the sale of their product except for a few circumstances. The Company extends this return policy to its distributors for a 30 day period and the consumer has the same return policy in effect against the distributor. Returns are less than 2% of sales for both years presented. Revenues are reported net of returns. All conditions of ASC 605-10 are met and the revenue is recorded upon sale, with an estimated accrual for returns where material.


NOTE 6 - COMMITMENTS AND CONTINGENCIES


UTI United States, Inc. (“UTI”) filed a complaint against ForeverGreen International, L.L.C. on August 27, 2009 in the Third District Court, State of Utah Salt Lake County, West Jordan Department. UTI alleges that it has not been paid $31,172 for shipping and freight services provided to ForeverGreen International and is seeking that amount, plus interest and costs of the action. The Company is aggressively defending its position and feels strongly that this claim will not result in a liability.


On June 13, 2012, Environmental Research Center, a non-profit corporation, filed a complaint in the Superior Court of California, County of Orange, against ForeverGreen Worldwide Corporation and ForeverGreen International, LLC. The complaint alleges that the Company failed to provide health hazard warnings related to lead to consumers of its products in California. Environmental Research Center is seeking injunctive relief, an order compelling the Company to provide the health hazard warnings to past consumers and unspecified civil penalties. The Company plans to aggressively defend its position and feels strongly that this claim will not result in a liability.


NOTE 7 – INVENTORY


Inventories for September 30, 2012 and December 31, 2011 were classified as follows:


 

 

2012

 

2011

Raw Materials

 

$335,352

 

$442,147

Finished Goods

 

562,400

 

730,491

     Total Inventory

 

897,752

 

1,172,638

Less Reserve for Obsolete Inventory

 

(27,079)

 

(27,079)

     Total Inventory (net of  reserve)

 

$870,673

 

      $ 1,145,559



NOTE 8 – RELATED PARTY TRANSACTIONS


As of December 31, 2010 the Company owed $972,976 to related parties. During the year ended December 31, 2011, the Company repaid $267,500 of the related party notes payable during 2011, leaving a balance owing of $1,008,476.


During the nine month period ended September 30, 2012 the Company borrowed a total of $100,000 from a related party for operating expenses. These notes had an interest rate of 10%, were secured with business assets, and had maturity dates ranging from February 3, 2012 to July 30, 2012.  The Company re-paid the full $100,000 of these notes plus interest.




9




FOREVERGREEN WORLDWIDE CORPORATION

Notes to the Condensed Consolidated Financial Statements

(Unaudited)


NOTE 8 – RELATED PARTY TRANSACTIONS - CONTINUED


Company officers have paid for expenses on behalf of the Company from time to time, which amounts are non-interest bearing and are due on demand.  During the nine month period ended September 30, 2012, the Company repaid $45,113 towards these related parties.  These amounts are recorded as due to related parties amounting to $133,014 and $178,127 at September 30, 2012 and December 31, 2011, respectively.


NOTE 9 – SUBSEQUENT EVENTS


The Company has evaluated subsequent events from the balance sheet date through the date the financial statements were issued and has determined that there are no such events that would have a material impact on the financial statements.




10




In this report references to “ForeverGreen,” “we,” “us,” “our” and “the Company” refer to ForeverGreen Worldwide Corp. and its subsidiary.



NOTE REGARDING FORWARD LOOKING STATEMENTS


The U.S. Securities and Exchange Commission (“SEC”) encourages reporting companies to disclose forward-looking information so that investors can better understand future prospects and make informed investment decisions.  This report contains these types of statements.  Words such as “may,” “expect,” “believe,” “anticipate,” “estimate,” “project,” or “continue” or comparable terminology used in connection with any discussion of future operating results or financial performance identify forward-looking statements.  You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report.  All forward-looking statements reflect our present expectation of future events and are subject to a number of important factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.



ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Executive Overview


ForeverGreen Worldwide is a holding company that operates through its wholly owned subsidiary, ForeverGreen International, LLC.  Our product philosophy is to develop, manufacture and market the best of science and nature through innovative formulations as we produce and manufacture a wide array of whole foods, nutritional supplements, personal care products and essential oils.


We believe that consuming healthy and natural whole foods and beverages is the basis of health and longevity. We provide health answers, not only through exclusive nutritional whole food beverages, but also by providing a broad product line of delicious whole foods that can be eaten for every meal, instead of the processed, fatty and preservative-laden synthetic meals prevalent in society today. Many competing companies provide capsules, powders, pills or tablets as nutritional supplements, but we believe these generally fail to provide an every-meal alternative to the processed and nutrient depleted foods found in the three main daily meals of most common consumers. We provide the every-meal answer with a variety of appetizing healthy food products that allow our Members and customers to eat healthy for every meal and snack throughout the day. In addition, we provide healthy personal care products as an alternative to the chemical-laden and synthetic products in the marketplace that may potentially negatively impact our health.


We introduced a new brand philosophy “RESTORATION90” in early 2012 in an effort to simplify the products available from ForeverGreen, The products are all now branded under the philosophy of Restoration Biology, branded as RESTORATION90.  We define RESTORATION90 as the simple concept that the body does not know its chronological age, but knows its biological age. If the body is given the proper raw materials, the body can work miracles and the body can restore itself to a more youthful biological age. ForeverGreen specializes in providing excellent raw materials.


ForeverGreen introduced the Raw Promise with a new product called “E2L” in May 2012. The Raw Promise Pack and its products are designed to support the company’s philosophy of Restoration90 biology. The product “E2L” stands for “eat to live” instead of the more common habit of “live to eat”. The proprietary formula contains ingredients that help the body manage cravings and in turn helps the consumer become a more decisive eater. The Raw Promise Pack also includes other ForeverGreen top selling products:   FrequenSea, Inspirin, FIXX, Pulse 8, Pulse bars and bags, kale chips and green roll-up smoothies; a complete program to support proper weight management.  This pack and program focus on the current epidemic of weight management challenges and obesity throughout the world.





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The Raw Promise Pack has created positive results for some people who want to eat healthier and lose weight, we have created a marketing campaign to encourage people to send in their testimonial videos to share their story with others.  We hosted a leadership event in Las Vegas, Nevada on November 4 to 7, 2012 to celebrate the top winners of this Raw Promise Transformation Contest. During this leadership event, we met with our leaders to create the business strategy for 2013.


In response to ForeverGreen’s distributor leadership and the current economic conditions, ForeverGreen introduced a new compensation plan: “The People’s Plan” which started on July 27, 2011.  The People’s Plan is very simple to learn, which in turn means it is simple to teach and duplicate with our current Members and new Members. Part of the simplicity of the new People’s Plan is it incorporates the People’s Pack.  In March of 2012 we updated our compensation plan to pay 9 generations, along with a 5 level fast start payout.


Our major challenge for the next twelve months will be to respond to the economic conditions and properly manage our systems and logistics centers around the world to support the demand for our products and the business opportunity.  Included in this challenge is the need to continue to create a customer service and Member satisfaction level of the highest quality.  Overcoming economic down turns will require skilled personnel, and manufacturing and shipping facilities.  Management intends to modify our operating activities, especially production and order fulfillment, for the current economic environment as well as prepare the Company for the upturn of demand as people continue to look for other income opportunities and choose ForeverGreen as the company they can align with for their future.


We have implemented a new duplication system in Japan focusing on educating people about the importance of heart health.  We are seeing more growth from Japan and we anticipate a better growth pattern in the fourth quarter of 2012 and beyond.

In the Philippines, we have received one more product permit for AIM which will allow us to market the product more aggressively and allow our members to resell the product to others legally.


We are expanding our markets and exclusive products and we anticipate the need to expand our international logistics centers.  For example, in August 2012 we completed the registration of our natural products in Russia and intend to expand into that market.  The rewards include increased sales and diversified market incomes.  However, international expansion is very expensive and key Members must experience rapid growth to be profitable in a foreign country.


Liquidity and Capital Resources


During the nine month period ended September 30, 2012 (“2012 nine month period”) we invested in marketing and advertising to facilitate our expected growth.  At September 30, 2012, cash decreased to $124,215 and we recorded a net loss of $273,248 for the 2012 nine month period.  We also had negative working capital of $4,424,550 at September 30, 2012. Our net loss decrease for the 2012 nine month period compared to the 2011 nine month period was directly related to lower commissions and cost of goods cost reductions.  The loss was expected as we continued to invest in international expansion in our Latin American markets and specific Eastern European countries with incorporations, product registrations and operational needs. The losses and negative working capital for the 2012 nine month period raise doubt as to our ability to continue as a going concern.  In this regard, management intends to continue to find ways to increase revenues and manage expenses, improving profitability and the liquidity of ForeverGreen.


During the 2012 nine month period we relied on our revenues and additional financing to fund operations. We relied upon three short term loans from related parties of $40,000 in January, $30,000 in March, and $30,000 in June. The January and March short term loans were paid back in full, including interest, in the 2012 nine month period; the June short term loan was paid back on July 30, 2012 with interest. We are currently looking forward to and investing in the growth of our Company due to the signing of several top industry leading entrepreneurs and their down-lines. Management will continue to scrutinize expenses related to our operating activities and order fulfillment to determine appropriate actions to take to reduce these costs.




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Management anticipates that any cash shortfalls will be covered by debt financing.  We may pay these loans with cash, if available, or convert these loans into common stock.  We may also issue private placements of stock to raise additional funding or to pay for services provided to us.  Any private placement likely will rely upon exemptions from the registration requirements provided by federal and state securities laws.  The purchasers and manner of issuance will be determined according to our financial needs and the available options.  We also note that if we issue more shares of our common stock, our shareholders may experience dilution in the value per share of their common stock.


Commitments and Contingent Liabilities


Our total liabilities at September 30, 2012 were $5,755,785 compared to $5,950,954 at December 31, 2011.  The majority of the decrease is reflected in a decrease in accounts payable.


The Company has two building leases for office, production and warehouse space in Orem, Utah.  The Company signed a new lease in 2011 for the office space at a monthly rent of $9,750.  The production warehouse lease for $10,061 per month began September 1, 2006 and expires August 31, 2013 with provisions for an automatic five year extension.  All leases have a provision for an annual increase of 3%.  The buildings ForeverGreen leases are sufficiently large enough to accommodate all of our administrative, warehouse and production.


The Company has an office in Mexico with a one year lease paying $2,000 per month and an office in Colombia with a one year lease paying $840 per month. The Company added offices in Chile and Costa Rica in 2011.  The Chile office has a one year lease and is paying $1,390 per month, and the Costa Rica office has a 3 year lease and is paying $1,500.  All rent amounts above are in USD.


Our total current liabilities at September 30, 2012 reflect the continued use of a line of credit and bank overdraft, along with accounts payable and notes payable.   Our accounts payable of $877,164 were primarily related to vendor purchases.  Our accrued expenses of $2,327,365 were related to commissions payable, sales tax payable, foreign GST and VAT taxes payable, interest payable and payroll taxes payable.  We also carry notes payable and lines of credit of $2,196,801 related to loans from related parties, as well as third parties.  These notes carry 10% interest and have due dates through December 31, 2012.


Results of Operations


The following chart summarizes the unaudited consolidated financial statements of ForeverGreen Worldwide at September 30, 2012 and December 31, 2011.  The consolidated unaudited balance sheets and unaudited statements of operations include the books of ForeverGreen Worldwide and its wholly-owned subsidiary, ForeverGreen International, LLC.  The following chart is a summary of our financial statements for the periods noted and should be read in conjunction with the financial statements, and notes thereto, included with this report at Part I, Item 1, above.


SUMMARY OF BALANCE SHEET

 

Nine month period ended September 30, 2012

 


Year ended

Dec. 31, 2011

 

 

(Unaudited)

 

 

Cash and cash equivalents

$

             124,215

$

            223,099

Total current assets

 

          1,312,523

 

         1,631,143

Total assets

 

          1,878,080

 

         2,326,010

Total current liabilities

 

          5,737,073

 

         5,929,807


SUMMARY OF BALANCE SHEET

 

Nine month period ended September 30, 2012

 


Year ended

Dec. 31, 2011

 

 

(Unaudited)

 

 

Long-term debt

 

                18,712

 

              21,147

Total liabilities

 

            5,755,785

 

          5,950,954

Accumulated deficit

 

         (34,846,743)

 

      (34,573,495)

Total stockholders’ equity

$

          (3,877,705)

$

        (3,624,944)



SUMMARY OF OPERATIONS

 

Three month period ended

September 30,

 

Nine month period ended

September 30,

 

 

2012

 

2011

 

2012

 

2011

Revenues, net

$

3,060,736

$

3,681,901

$

9,781,990

$

9,985,916

Cost of sales

 

2,086,174

 

2,697,167

 

6,784,215

 

7,534,102

Gross profit

 

974,562

 

984,734

 

2,997,775

 

2,451,814

Total operating expenses

 

1,011,803

 

960,317

 

3,075,540

 

2,875,412

Net income (loss) from continuing operations

 

(37,241)

 

24,417

 

(77,765)

 

(423,598)

Total other income (expense)

 

(70,344)

 

(63,818)

 

(195,483)

 

(164,055)

Net earnings (loss)

 

(107,585)

 

(39,401)

 

(273,248)

 

(587,653)

Net earnings (loss) per share (basic)

 

(0.01)

 

(0.00)

 

(0.02)

 

(0.04)


Our source of revenue is from the sale of various foods, other natural products, distributor sign up kits and freight and handling.  Sales are net of returns, which have historically averaged 1.6% of sales; however, for the 2012 nine month period returns were 1.133%, down from 1.4% in the 2011 comparable period.  Sales for the 2012 nine month period decreased 2.08%  ($203,926) compared to the same period in 2011, and sales for the three month period ended September 30, 2012 (“2012 third quarter”) decreased by 16.87% ($621,165) in comparison to the 2011 third quarter.  


Cost of sales consists primarily of sales commissions paid to our distributors, the cost of procuring and packaging products, and the cost of shipping product to Members, plus credit card sales processing fees.  Cost of sales was approximately 68.16% of revenues for the 2012 nine month period and was 69.35% of revenues for the 2012 third quarter. This is an improvement compared to 75.45% of revenues for the 2011 nine month period and 73.26% of revenues for the 2011 third quarter. This is a cost savings of $749,887 for the first nine months and $610,993 for the third quarter over the same time periods in 2011.  The decrease in the 2012 interim periods was mostly attributable to the decrease costs paid in our distributor commissions plan as transitional payments ended in 2011.


Total operating expenses increased in the 2012 nine month period by $200,128 and by $51,486 for the 2012 third quarter compared to the 2011 interim periods.  Salaries and wages have increased $54,648 for the first nine months in 2012 and have increased $1,611 for the third quarter over the same periods in 2011 .  General and administrative




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expenses increased by $149,392 for the 2012 nine month period and by $27,763 for the 2012 third quarter as compared to the 2011 interim periods.  These increases are due to the opening of our new Latin markets in the fourth quarter of 2011 along with expenses incurred in preparation of opening specific new markets in Eastern Europe.


Even though our sales are down compared to last year, our cost savings outweigh those sales declines resulting in lower net loss of $273,248 for the nine months in 2012 compared to a net loss of $587,653 for the same period in 2011.



Off-balance Sheet Arrangements


We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.


Critical Accounting Estimates


We account for our investments in our subsidiary using the purchase method of accounting.  The excess of the consideration paid for a subsidiary over the fair value of acquired tangible assets less the fair value of acquired liabilities is assigned to intangible assets and goodwill.  We rely on an independent third party valuation to ascertain the amount to allocate to identifiable intangible assets, and the useful lives of those assets.  We amortize identifiable intangible assets over their useful life unless that life is determined to be indefinite.  The useful life of an intangible asset that is being amortized is evaluated each reporting period as to whether events and circumstances warrant a revision to the remaining period of amortization.  Goodwill is not amortized, but is tested for impairment on an annual basis.  The implied fair value of goodwill is determined by allocating fair value to all assets and liabilities acquired; the excess of the price paid over the amounts assigned to assets and liabilities acquired is the implied fair value of goodwill.



ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Not applicable to smaller reporting companies.



ITEM 4.  CONTROLS AND PROCEDURES


Disclosure Controls and Procedures


We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our filings under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC.  This information is accumulated to allow timely decisions regarding required disclosure.  Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report and concluded that our disclosure controls and procedures were not effective.  In 2012 we reevaluated our policies and methods related to impairment of goodwill and determined that an adjustment to the value of goodwill was required for the year ended December 31, 2009.  Accordingly, we restated our financial statements for the period ended December 31, 2009 and 2010 and have instituted new policies and methods for determination of impairment of goodwill for future reports.  


Changes to Internal Control over Financial Reporting


Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act).  Management conducted an evaluation of the effectiveness




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of our internal control over financial reporting based on the criteria set forth in “Internal Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management determined that there were no changes made in our internal control over financial reporting during the quarter ended September 30, 2012 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.



PART II – OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS  


On June 13, 2012, Environmental Research Center, a non-profit corporation, filed a complaint in the Superior Court of California, County of Orange, against ForeverGreen Worldwide Corporation and ForeverGreen International, LLC.  ForeverGreen Worldwide received service of the complaint on July 29, 2012.  The complaint alleges that the Company failed to provide health hazard warnings related to lead to consumers of its products in California. Environmental Research Center is seeking injunctive relief, an order compelling the Company to provide the health hazard warnings to past consumers and unspecified civil penalties.  The Company has engaged legal counsel to vigorously defend against these allegations.



ITEM 1A.  RISK FACTORS


Factors Affecting Future Performance


Actual costs and revenues could vary from the amounts we expect or budget, possibly materially, and those variations are likely to affect how much additional financing we will need for our operations.  



Management plans to increase sales and decrease expenses where appropriate to improve profitability.  Our future internal cash flows will be dependent on a number of factors, including:

The growth of the United States and the global economy;

Our ability to encourage our Members to sponsor new Members and increase their own personal sales;

Our ability to promote our product lines with our Members and customers;

Our ability to develop successful new exclusive product lines;

Our ability to obtain essential oil raw materials for some of our products;

Effects of future regulatory changes in the area of direct marketing, if any;

Our ability to remain competitive in our domestic and international markets; and

Our ability to decrease shipping time and expense.



Our expansion into foreign markets exposes our business to risks related to those economies which may result in loss of revenues.


We have entered into agreements with Members and suppliers in foreign countries and we may establish similar arrangements in other countries in the future.  As a result, our future revenues may be affected by the economies of these countries.  Our international operations are subject to a number of risks, such as, longer payment cycles, unexpected changes in regulatory environments, import and export restrictions and tariffs, difficulties in staffing and managing international operations, potentially adverse recessionary environments and economies outside the United States, and possible political and economic instability.  






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ITEM 6.  EXHIBITS


Part I Exhibits

No.

 

Description

31.1

 

Chief Executive Officer Certification

31.2

 

Chief Financial Officer Certification

32

 

Section 1350 Certification


Part II Exhibits

No.

 

Description

3(i)

 

Articles of incorporation, as revised (Incorporated by reference to exhibit 3.1 for Form 8-K, as amended, filed December 18, 2006)

3(ii)

 

Bylaws, as revised (Incorporated by reference to exhibit 3.2 for Form 8-K, as amended, filed December 18, 2006)

10.1

 

Lease agreement between ForeverGreen International LLC and Rocky Mountain Development,

LLC,  dated July 1, 2011 (Incorporated by reference to exhibit 10.1 to Form 10-K, filed May 18,

2012)

101.INS

 

XBRL Instance Document

101.SCH

 

XBRL Taxonomy Extension Schema Document

101.CAL

 

XBRL Taxonomy Calculation Linkbase Document

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

XBRL Taxonomy Label Linkbase Document.

101.PRE

 

XBRL Taxonomy Presentation Linkbase Document.

 

 

 

 

 

 



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.



FOREVERGREEN WORLDWIDE CORPORATION




By:  /s/Ronald K. Williams

        Ronald K. Williams

        Chairman of the Board, President,

        Chief Executive Officer and Principal Financial Officer






Date:  November 15, 2012






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