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EX-31 - 302 CERTIFICATION OF CFO - FOREVERGREEN WORLDWIDE CORPex312.htm
EX-32 - SECTION 1350 CERTIFICATION - FOREVERGREEN WORLDWIDE CORPex32.htm
EX-31 - 302 CERTIFICATION OF CEO - FOREVERGREEN WORLDWIDE CORPex311.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 June 30, 2015


[  ]

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.)

644 NORTH 2000 WEST, LINDON, UTAH         

(Address of principal executive offices)

84042       

(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 August 11, 2015 was 23,596,951.




1




TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION


Item 1.  Financial Statements

2

Condensed Consolidated Balance Sheets (unaudited)

3

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited)

4

Condensed Consolidated Statements of Cash Flows (unaudited)

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

16

Item 4.  Controls and Procedures

16


PART II – OTHER INFORMATION


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

17

Item 6.  Exhibits

17

Signatures

18









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 six month periods ended June 30, 2015 and 2014 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 six month period ended June 30, 2015 are not necessarily indicative of results to be expected for any subsequent period.  





2






ForeverGreen Worldwide Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

 

 

June 30,

2015

 

December 31,

2014


ASSETS

 

(Unaudited)

 

 

CURRENT ASSETS

 

 

 

 

   Cash and cash equivalents

$

518,390

$

580,522

   Restricted cash

 

1,420,066

 

589,449

   Accounts receivable, net

 

1,627,462

 

530,509

   Member advances

 

559,607

 

381,500

   Prepaid expenses and other assets

 

518,325

 

644,189

   Inventory

 

1,782,354

 

2,017,263

           Total Current Assets

 

6,426,204

 

4,743,432

PROPERTY AND EQUIPMENT, net

 

3,103,946

 

2,565,003

OTHER ASSETS

 

 

 

               

   Deposits and other assets

 

190,532

 

208,795

   Intangible assets

 

144,918

 

192,403

           Total Other Assets

 

335,450

 

401,198

TOTAL ASSETS

$

9,865,600

$

7,709,633

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

   Bank overdraft

$

13,188

$

93,701

   Accounts payable

 

2,314,864

 

1,442,349

   Accrued expenses

 

4,359,571

 

4,879,172

   Deferred Revenue

 

524,958

 

171,885

   Notes payable, related parties

 

922,478

 

922,478

   Convertible notes, related parties

 

245,000

 

245,000

   Convertible notes payable, unrelated parties

 

1,221,756

 

331,756

            Total Current Liabilities

 

9,601,815

 

8,086,341

 

 

 

 

 

TOTAL LIABILITIES

 

9,601,815

 

8,086,341

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

--

 

--

 

 

 

 

 

STOCKHOLDERS' EQUITY (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; 25,342,285 and 23,596,951 shares issued and outstanding,

           respectively

 

25,342

 

23,597

          Additional paid-in capital

 

35,897,945

 

34,263,045

          Accumulated other comprehensive income (loss)

 

(329,175)

 

(444,442)

          Accumulated deficit

 

(35,330,327)

 

(34,218,908)

                Total Stockholders' Equity (Deficit)

 

263,785

 

(376,708)

TOTAL LIABILITIES AND

STOCKHOLDERS' EQUITY (DEFICIT)

$

9,865,600

$

7,709,633


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






3




ForeverGreen Worldwide Corporation and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)



 

 

Three months ended

June 30,

 

Six months ended

June 30,

 

 

2015

 

2014         

 

2015

 

2014

 

 

 

 

 

 

 

 

 

REVENUES, net

$

16,079,017

$

14,127,840

$

33,277,957

$

24,664,242

COST OF SALES, net

 

4,039,543

 

2,894,508

 

8,232,744

 

5,453,513

GROSS PROFIT

 

12,039,474

 

11,233,332

 

25,045,213

 

19,210,729

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

     Sales and marketing

 

7,890,203

 

7,430,651

 

16,078,464

 

12,450,697

     General and administrative

 

5,140,899

 

3,314,984

 

9,384,743

 

5,946,422

     Depreciation and amortization                                             

 

181,486

 

75,337

 

343,307

 

134,249

        Total Operating Expenses

 

13,212,588

 

10,820,972

 

25,806,514

 

18,531,368

 

 

 

 

 

 

 

 

 

NET OPERATING INCOME (LOSS)

 

(1,173,114)

 

412,360

 

(761,301)

 

679,361

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

     Interest expense

 

(81,897)

 

(70,407)

 

(139,216)

 

(145,258)

     Gain on conversion of convertible

 

 

 

 

 

 

 

 

        notes payable

 

 

 

114,398

 

 

 

114,398

     Gain on settlement of liability

 

 

 

 

 

 

 

 

     Other Income (Expense)

 

(191,786)

 

(1,495)

 

(210,902)

 

(12,594)

        Total Other Income (Expense)

 

(273,683)

 

42,496

 

(350,118)

 

(43,454)

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income tax provision

 

(1,446,797)

 

454,856

 

(1,111,419)

 

635,907

 

 

 

 

 

 

 

 

 

Income Tax Benefit

 

--

 

--

 

--

 

--

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

$

(1,446,797)

$

454,856

$

(1,111,419)

$

635,907

 

 

 

 

 

 

 

 

 

BASIC AND DILUTED LOSS

PER COMMON SHARE

$

(0.06)

$

0.02

$

(0.05)

$

0.03

 

 

 

 

 

 

 

 

 

BASIC WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

 

        23,991,778

 

20,852,141

 

       24,385,233

 

20,548,274

 

 

 

 

 

 

 

 

 

DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

 

23,991,778

 

21,866,023

 

24,385,233

 

21,562,156

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME (LOSS)

 

 

 

 

 

 

 

 

    A Summary of the components of other

    comprehensive income (loss) for the periods

    ended June 30, 2015 and 2014 are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

       Net Income

$

(1,446,797)

$

454,856

$

(1,111,419)

$

635,907

       Other Comprehensive Income (Loss) - foreign

       currency translation

 

146,615

 

(3,806)

 

115,266

 

(16,501)

       Comprehensive Income (Loss)

$

(1,300,182)

$

451,050

$

(996,153)

$

619,406

 

 

 

 

 

 

 

 

 

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




4






ForeverGreen Worldwide Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

June 30,

2015

 

June 30,

2014

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

  

Net income (loss)

$

(1,111,419)

$

635,907

Adjustments to reconcile net income (loss) to net

 

 

 

 

cash provided by (used in) operating activities:

 

 

 

 

   Depreciation and amortization

 

337,580

 

134,249

Changes in operating assets and liabilities:

 

 

 

 

   Gain on settlement of liabilities

 

--

 

(114,398)

   Restricted cash

 

(830,617)

 

--

   Accounts receivable

 

(1,278,558)

 

(824,751)

   Prepaid expenses

 

101,850

 

(594,285)

   Deposits and other assets

 

27,827

 

(150,067)

   Inventory

 

217,766

 

(187,865)

   Accounts payable

 

919,480

 

244,939

   Deferred revenue

 

324,955

 

(162,542)

   Accrued expenses

 

(552,009)

 

(43,025)

         Net Cash Used in Operating Activities

 

(1,843,145)

 

(1,061,838)

        

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

   Cash paid for intangibles

 

--

 

(1,510)

   Purchases of property and equipment

 

(826,262)

 

(952,435)

         Net Cash Used in Investing Activities

 

(826,262)

 

(953,945)

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

   Proceeds (Payments) from bank overdraft

 

(93,701)

 

258,598

   Payments on notes payable

 

--

 

(17,220)

   Payments on convertible notes payable

 

--

 

(100,000)

   Proceeds from convertible notes payable

 

1,000,000

 

--

   Proceeds from common stock issuance

 

1,490,000

 

2,000,000

        Net Cash Provided by Financing Activities

 

2,396,299

 

2,141,378

 

 

 

 

 

Effect of Foreign Currency on Cash

 

210,976

 

(4,140)

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH

 

(62,132)

 

121,455

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

580,522

 

284,741

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

518,390

$

406,196

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION

 

 

 

 

  Cash paid for interest

$

81,898

$

145,258

  Cash paid for income taxes

 

 

 

 

 

 

 

 

 

NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

    Common stock issued for convertible notes payable

$

636,645

$

--


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 June 30, 2015 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, 2014 audited financial statements as reported in its Form 10-K. The results of operations for the six-month period ended June 30, 2015 are not necessarily indicative of the operating results for the full year ended December 31, 2015.


NOTE 2 – 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.


Principles of Consolidation

The consolidated balance sheets and statement of operations at June 30, 2015 include the books of ForeverGreen Worldwide Corporation (Nevada) and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in the consolidation. During the period ended June 30, 2015, the Company formed ForeverGreen Peru S.A.C., a wholly owned subsidiary.


Foreign Currency Translation

The Company’s functional currency is recorded in various currencies, corresponding to the various foreign subsidiaries and its reporting currency is the United States dollar. Management has adopted ASC 830-20, “Foreign Currency Matters – Foreign Currency Transactions.”  All assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. For revenues and expenses, the weighted average exchange rate for the period is used.  Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in other comprehensive loss.


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.


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.





6




FOREVERGREEN WORLDWIDE CORPORATION

Notes to the Condensed Consolidated Financial Statements

(Unaudited)


NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued


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. Such potentially dilutive shares are excluded when the effect would be anti-dilutive. Our potentially dilutive shares from convertible notes payable in the amount of 4,083,403 were excluded as of June 30, 2015.


Revenue Recognition

Revenues and costs of revenues are recognized during the period in which the products 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 for sale of products when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the fee is fixed or determinable, and (iv) collectability is reasonably assured.


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 members for a 30 day period and the consumer has the same return policy in effect against the member. All conditions of ASC 605-10 are met and the revenue is recorded upon sale, with an estimated allowance for returns where material.


Inventory

Inventory is recorded at the lower of cost or market and valued on a first-in, first-out basis. Inventory consists primarily of consumable food products and ingredients. Food products are discarded as they reach the expiration dates because the food products are made with natural foods containing a minimum of preservatives. Non-food products are reviewed periodically to determine any obsolescence and a reserve is booked when appropriate. The products have expiration dates that range from 3 months on some of the food products to 2 years for non-food products. On June 30, 2015 and December 31, 2014, the reserve for obsolete inventory had balances in the amount of $40,000 and $40,000, respectively. This allowance is due to receiving some defective inventory.


Accounts Receivable and Member Advances

Accounts receivable arise from doing business with third party distributor centers in various locations throughout South America and Korea. The accounts receivable are made up of fees owed by the distribution centers to the Company for the right to do business in our name. The Company evaluates the need for an allowance for doubtful accounts when it is determined that collection amounts owed is unlikely. No allowance has been recorded at June 30, 2015 or at December 31, 2014.


Members are required to pay for products prior to shipment. Members typically pay for products in cash, by wire transfer or by credit card. Accordingly, the Company seldom carries accounts receivable from members that are not distribution centers and any balances carried would be minimal.  As a business growth incentive, the Company advanced $559,607 to new Members to assist them with building their businesses. No allowance has been recorded for uncollectable advances.





7





FOREVERGREEN WORLDWIDE CORPORATION

Notes to the Condensed Consolidated Financial Statements

(Unaudited)


NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued


Valuation of Long-lived Assets

In accordance with ASC 360-10, the carrying values of the Company’s long-lived assets are reviewed for impairment annually and whenever events or changes in circumstances indicate that they may not be recoverable. The Company records impairment of long-lived assets to be held and used or to be disposed of when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount.  The Company’s assessment of events and circumstances indicated that an analysis for impairment of long-lived assets as of June 30, 2015 was not needed.


Intangible Assets

Intangible assets consist of patent costs, trademark costs and the customer base. Patent costs are costs incurred to develop and file patent applications. Trademark costs are costs incurred to develop and file trademark applications. If the patents or trademarks are approved, the costs are amortized using the straight-line method over the estimated lives of 7 years for patents and 10 years for trademarks. Unsuccessful patent and trademark application costs are expensed at the time the application is denied. Management assesses the carrying values of long-lived assets for impairment when circumstances warrant such a review. In performing this assessment, management considers current market analysis of the technology and future cash flows.


The Company recognizes impairment losses when undiscounted cash flows estimated to be generated from long-lived assets are less than the net carrying amount of intangible assets. No impairment was recognized, accordingly, during the periods ended June 30, 2015 and 2014.


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.


NOTE 3 – DEBT

 

Notes payable as of June 30, 2015


AMOUNT

TYPE

CONVERSION RATE PER SHARE

ORIGINATION DATE

INTEREST

RATE

DUE DATE

$     485,000


Related party (Director – controlled entity)

NA

12/9/2008

10%

Due on demand


$     437,478

Related party (Director)

NA

7/31/2009

10%

12/31/2015   

$       45,000

Convertible,

Related party (Director)

.15

10/7/2010

10%

12/31/2015

$     200,000

Convertible,

Related party (Director)

.20

1/19/2011

10%

12/31/2015

$     100,000

Convertible,

Non-related

.20

3/14/2011

10%

12/31/2015

 

8

 



FOREVERGREEN WORLDWIDE CORPORATION

Notes to the Condensed Consolidated Financial Statements

(Unaudited)


NOTE 3 – DEBT - continued


Notes payable as of June 30, 2015 - continued


AMOUNT


TYPE

CONVERSION RATE PER SHARE


ORIGINATION DATE

INTEREST

RATE


DUE DATE


$     231,756                 


Convertible,  

Non-related     

     


.20


3/9/2010


10%


12/31/15

$     890,000

Convertible

Non-related

.70

4/9/2015

  8%

12/31/15

$  2,389,234

Total

 

 

 

 


NOTE 4 – MEMBER ADVANCES


The Company has advanced amounts to three Members in the amount of $559,607.  The first Member’s advance amount of $365,000 is due on demand and bears a 10% compound annual interest rate.  The second Member’s advance amount of $178,608 bears an 8% compound annual interest rate is to be repaid in future commissions owing to the Member up through December 31, 2015 and starting in 2016 is to be repaid in $8,000 monthly payments or 9% of future commissions, whichever is greater. The third Member’s advance of $10,000 bears an 8% compound annual interest rate and is to be repaid with future commissions. The remaining $6,000 represents amounts advanced to another member and is due on demand and bears no interest.


NOTE 5 – COMMITMENTS AND CONTINGENCIES


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


NOTE 6 – INVENTORY


Inventories for June 30, 2015 and December 31, 2014 were classified as follows:


 

 

June 30,

2015

 

December 31,

2014

Raw Materials

$

1,092,739

$

 1,271,915

Finished Goods

 

729,615

 

785,348

Total Inventory

 

1,822,354

 

2,057,263

Less Reserve for Obsolete Inventory

 

(40,000)

 

(40,000)

Total Inventory (net of reserve)

$

1,782,354

$

 2,017,263

    







9

 



FOREVERGREEN WORLDWIDE CORPORATION

Notes to the Condensed Consolidated Financial Statements

(Unaudited)


NOTE 7 – COMMON STOCK


During May 2015, the Company authorized the issuance of 1,450,000 restricted shares to an escrow account. The shares in escrow are held as collateral against the convertible note payable (balance at June 30, 2015 of $890,000) entered into during April 2015 (Note 3). Because the shares are considered to be contingently issued shares they were not included in the reported outstanding share balance or in the calculation of EPS as of June 30, 2015.


During May 2015, a non-related party converted a note payable in the amount of $630,000 in principle and $6,645 in accrued interest into 910,000 shares of the escrowed common stock described in the previous paragraph.


On May 27, 2015, the Company entered into an Agreement with a third party to sell up to 2,500,000 shares of common stock. The third party was to purchase $1,000,000 of stock upon execution of the agreement and was to purchase an additional $2,000,000 of stock, conditioned upon the Company entering into a joint venture agreement with an affiliate of the third party by June 30, 2015. Pursuant to the agreement, 835,334 shares of stock were purchased by a non-related party at $1.20 per share for total cash proceeds of $1,000,000. The Company did not enter into a joint venture agreement as of June 30, 2015, or through the date of this filing and therefore has not issued any additional shares of common stock to the third party.


NOTE 8 – SUBSEQUENT EVENTS


On July 6, 2015, the Company signed a $300,000 short term promissory note with a non-related party with an 8% interest rate and a repayment date of August 31, 2015.  The note holder has the option to convert the note into common stock at a conversion rate of $1.00 per share.







10





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


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 which operates through its wholly-owned subsidiaries ForeverGreen International, LLC, Productos Naturales Forevergreen Internacional en Mexico S.A. de C.V., FVGR Colombia S.A.S., 3-101-607360 S.A. (a Costa Rican corporation), ForeverGreen Chile SpA, Forevergreen (Aust & NZ) Pty, Ltd, ForeverGreen Singapore Pte Ltd, ForeverGreen Taiwan, ForeverGreen Japan (KK), ForeverGreen Peru SAC, ForeverGreen (HK) Limited (Hong Kong), ForeverGreen Marketing Corporation (Philippines), FG International LLP (India), Forevergreen Puerto Rico LLC and Forevergreen Dominicana S.R.L. (Dominican Republic).  


We intend to continue our emphasis as a total lifestyle company focused on bringing our domestic and international Members and customers our exclusive FGXpress products, PowerStrips SolarStrips and BeautyStrips products and our newly announced Ketopia weight management line for North America. In addition through the Farmers Market, we will continue to share FrequenSea, supplements, whole foods and meal replacement shakes to our Members and customers. In addition, our focus is to assist prospective Members in creating a home-based business with home business training, mentorship and accountability so that they can benefit from the residual income stream opportunities we offer. As our international markets mature, additional ForeverGreen products may also be introduced in each international market. We will seek relations with key vendors to continue developing innovative new products that are exclusive to our Members.


During the second quarter of 2015 the Company experienced exciting updates and international expansion that included:


New growth in Middle Eastern Markets. President of MEA, India, Australia and New Zealand, Joe Jensen, spent several days traveling and established local and regional shipping in the UAE, Jordan, Saudi Arabia, and Kuwait. He established local shipping in Israel and Turkey as well. ForeverGreen is thrilled with the new leadership developing in these areas.


ForeverGreen honored as Best of State. On May 9, 2015 ForeverGreen received its Best of State award for Product Distribution.  The Best of State Awards were created to recognize outstanding individuals, organizations and businesses in Utah.  This award strongly relates and speaks to the ForeverGreen Company, mission and culture and its drive to provide excellent services and products.





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Expanded and enhanced operations throughout Europe. ForeverGreen launched an online store as well as hired its first European Director of Operations and European General Manager. All European orders are now filled from the European warehouse, improving delivery times and lowering delivery costs.


ForeverGreen experiences historic launch convention.  In June 2015 ForeverGreen held its Welcome Home Product Launch in Las Vegas, Nevada.  There were a record number of attendees and sales along with live translation in six languages. Those in attendance in Las Vegas were joined around the world online with views over 50,000.


ForeverGreen establishes and develops Brazilian market.  As a top-five market, Brazil is very important to ForeverGreen. During the quarter ForeverGreen made signup and product purchases available to Members in Brazil. Excitement is expected to continue to build for the first official corporate event on August 9, 2015 where two new products will be announced exclusively for that market.


Industry expert Jack Zufelt joins ForeverGreen membership.  World-famous author and speaker Jack Zufelt is an impactful trainer and international speaker and will add value as a key figure in ForeverGreen family.


New weight management system announcement, Ketopia.  For the past two years the Company has been in negotiations to be granted exclusivity of a patent-pending technology. The Company was chosen over other top industry leaders to manufacture this product. The products will be sold as a three-product system including, KetonX and Dough Bites, along with the already established meal replacement energy shake, FIXX®.  The Ketopia product line was launched July 10, 2015.


Anti-doping certification received from BSCG for PowerStrips.  The Banned Substances Control Group (BSCG) has issued an anti-doping certification for ForeverGreen’s PowerStrips. Being certified free of banned substances and also drug free is a very important step. This will increase our target market as it opens up the world of athletes.


The Company continues to negotiate a business relationship with a California-based company specializing in a variety of innovative holistic and health products. These negotiations include developing a relationship which will create specialized products for the Company’s Versativa brand of products, and a strategic investment in the Company through a significant purchase of the Company’s restricted common stock. ForeverGreen management believes that this relationship and the creation of these products will align the Company with the future of this industry and improve the Company’s worldwide sales.


The major challenges for ForeverGreen over the next twelve months will be to respond to current economic conditions and to properly manage its systems and logistics centers around the world to support the demand for its products and business opportunity. Included in this challenge is the need to continue to meet a high standard of quality and customer service and maintain the highest levels of Member satisfaction.


Overcoming periodic economic downturns will require skilled personnel and responsive manufacturing and shipping facilities. Management intends to continue ongoing process improvement initiatives, especially in the areas of production and order fulfillment. These new operating efficiencies are targeted to address the current economic environment as well as prepare the Company for the upturn in demand as people continue to look for alternative income opportunities. ForeverGreen is being actively positioned as the company people can align with for the future as traditional employment options.


To keep pace with the market and product growth, ForeverGreen anticipates the need to expand its international logistics centers. The rewards of this strategy include increased sales performance and diversified market incomes. International expansion is very expensive and profitability in a given foreign country depends on key Members who can rapidly ramp up their business growth and volume in the target region.







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Results of Operations


The following chart summarizes the consolidated statements of operations of ForeverGreen Worldwide and Subsidiaries for the three and six month periods ending June 30, 2015 and 2014.


SUMMARY OF OPERATIONS

 

Three month period ended

June 30,

 

Six month period ended

June 30,

 

 

(Unaudited)

 

(Unaudited)

 

 

2015

 

2014

 

 

2015

 

2014

Revenues, net

$

16,079,017

$

14,127,840

 

$

33,277,957

$

24,664,242

Cost of sales

 

4,039,543

 

2,894,508

 

 

8,232,744

 

5,453,513

Gross profit

 

12,039,474

 

11,233,332

 

 

25,045,213

 

19,210,729

Selling and marketing expenses

 

7,890,203

 

7,430,651

 

 

16,078,464

 

12,450,697

General and administrative expenses

 

5,322,385

 

3,390,321

 

 

9,728,050

 

6,080,671

Total operating expenses

 

13,212,588

 

10,820,972

 

 

25,806,514

 

18,531,368

Net operating income

 

(1,173,114)

 

412,360

 

 

(761,301)

 

679,361

Total other income (expense)

 

(273,683)

 

42,496

 

 

(350,118)

 

(43,454)

Income tax provision

 

--

 

--

 

 

--

 

--

Net earnings (loss)

$

(1,446,797)

$

454,856

 

$

(1,111,419)

$

635,907

Net earnings (loss) per share both

(basic) and diluted

$

(0.03)

$

0.02

 

$

(0.05)

$

0.03


The Company recognized product revenues of $31,306,029 and shipping and other revenues of $1,971,928, for the six month period of 2015 compared to product revenues of $23,340,433 and shipping and other revenues of $1,323,809 for the same period of 2014.  The Company recognized product revenues of $15,190,411 and shipping and other revenues of $888,606, for the second quarter of 2015 compared to product revenues of $13,257,977, and shipping and other revenues of $869,863 for the 2014 second quarter.  


The Company experienced a 34.9% increase in revenues for the 2015 six month period over the 2014 six month period and experienced a 13.81% increase in revenues for the 2015 second quarter over the 2014 second quarter. Our source of revenue is from the sale of various foods, other natural products, kits, and freight and handling to deliver products to the Members and customers. This increase in revenues is directly related to the increased number of Members and their business.  We recognize revenue upon shipment of a sales order.


Cost of sales consists primarily of the cost of procuring and packaging products, the cost of shipping product to our international subsidiaries, warehouses and to our Members, plus credit card processing fees.  Cost of sales was approximately 24.7% of revenues for the six month period of 2015 compared to 22.1% of revenues for 2014.  Cost of sales was approximately 25.1% of revenues for the second quarter of 2015 compared to 20.4% of revenues for second quarter of 2014. These increases are primarily attributable to increased shipping and handling costs for our European market.  Management expects to realize improved shipping and handling costs in the third and fourth quarters of this year.





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During the quarter, the Company was exposed to more than $800,000 worth of orders being placed with stolen credit card data.  This resulted in some product being shipped and commissions being paid that would not normally have been paid.  The Company estimates the financial impact was approximately $500,000.  During the quarter, the Company implemented additional internal controls and reporting which are much more proficient at identifying and stopping fraudulent order activity.  These controls have been fully implemented at the beginning of the third quarter. The future financial impact is expected to be negligible.  


Management continues to negotiate better costs and terms with our key vendors to lower our cost of goods sold.  New products have been and will continue to be introduced to bolster Member recruiting and product sales.  In addition, management intends to improve our marketing plan to enhance overall profitability.  Our management will continue to scrutinize expenses related to our operating activities and order fulfillment to determine appropriate actions to take to reduce these costs.


Sales and marketing expenses for the six month period of 2015 were 48.3% of revenues compared to 50.4% for the six month period 2014 and were 49.1% of revenues for the 2015 second quarter compared to 52.5% for 2014 second quarter.  These decreases are due to management being more selective in offering incentives to new Members.


General and administrative expenses for the six month period of 2015 were 29.1% of revenues compared to 24.6% for the six month period 2014 and were 31.97% of revenues for the 2015 second quarter compared to 23.9% for 2014 second quarter.  These increases of approximately $3.64 million (Up to $9,728,050 in the current six month period from $6,080,671 in the prior year period) are due to management investing heavily in the growth of the Company through the rebranding/image campaign and the global launch convention held in Las Vegas.  Management took the opportunity to upgrade the look of the product line which had accumulated over the last ten years of business.  The new look presents a more modern image which brings consistency across the various FGXpress and Farmers Market products.  This initiative also involved a facelift to the Company’s website.


The total other expense for the six month period of 2015 was down slightly at 0.1% compared to 0.01% for the same period in 2014 and was down slightly at 0.17% for the second quarter of 2015 compared to 0.03 % for 2014 second quarter. These decreases are due to the write off of expenses from the dissolution of a former entity in India.


Our net loss was $1,446,797 and net earnings of $454,856 for the three months ended June 30, 2015 and June 30, 2014, respectively and $1,111,419 and $635,907 for the six months ended June 30, 2015 and June 30, 2014, respectively. The loss is attributable to the Company’s global launch convention in May, the Company’s rebranding and image campaign which was revealed at the convention, and the increased costs associated with the fraudulent order activity previously mentioned.


Liquidity and Capital Resources


SUMMARY OF BALANCE SHEET

 

Six months ended

June 30,

2015

 


Year ended

Dec. 31, 2014

 

 

(Unaudited)

 

 

Cash and cash equivalents

$

518,390

$

580,522

Total current assets

 

6,426,204

 

4,743,432

Total assets

 

9,865,600

 

7,709,633

Total current liabilities

 

9,601,815

 

8,086,341





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SUMMARY OF BALANCE SHEET - continued

 

Six months ended

June 30,

2015

 


Year ended

Dec. 31, 2014

 

 

(Unaudited)

 

 

Total liabilities

 

9,601,815

 

8,086,341

Accumulated deficit

 

(35,330,327)

 

(34,218,908)

Total stockholders’ equity (deficit)

$

263,785

$

(376,708)


The Company’s total assets increased to $9,985,600 at June 30, 2015 compared to $7,709,633 at December 31, 2014. The increase is primarily due to increased accounts receivable of $1,096,953 and an increase of $830,617 in restricted cash.  During the quarter, the Company had to deal with an abnormal amount of orders being placed with stolen credit cards.  The Company spent a significant amount of time and resources improving the detection of these orders.  While working through this project, the merchant processors increased their reserve amount with the Company while also delaying some of the settlement deposits.  Prior to the quarter, the Company normally had about 3 to 4 day’s worth of sales in receivables, while this quarter saw that increase to 8 to 10 days.  Additionally, the previous average 5 percent of total sales reserved increased to 10 percent.  In July this fraudulent activity had been drastically reduced and is not expected to have a material impact on the Company’s future costs.  The remaining $348,397 was an increase in fixed assets of $538,943 as management continues to invest in the Company’s long term assets offset by a decrease in inventory of $234,909, an increase in member advances of $178,107, a decrease in prepaid expenses of $125,864, and the balance is a decrease in other assets.


The Company’s total liabilities at June 30, 2015 were $9,601,815 compared to $8,086,341 at year end 2014.  This increase is due to an $890,000 increase in convertible notes payable. The remaining increase was in accounts payable due to purchasing inventory to support increasing sales and support a larger volume of business. A decrease in accrued expenses of $519,601 is due to lower commissions payable as we had one and a half commission periods that were payable at December 31, 2014, whereas at June 30, 2015 we only had one period that was not paid.


Management anticipates that any future additional capital needed for cash shortfalls will be provided 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.  Any private placement likely will rely upon exemptions from registration provided by federal and state securities laws.  The purchasers and manner of issuance will be determined according to our financial needs and the available exemptions.  We also note that if we issue more shares of our common stock then our shareholders may experience dilution in the value per share of their common stock.  


Commitments and Obligations


The Company has an agreement with one vendor, Marine Life Sciences, LLC, that supplies 100% of a the marine phytoplankton included in several top selling products.  If that vendor were to discontinue the supply of this ingredient, our sales could decrease significantly. There are other providers of that ingredient in the world; however, the Company considers this provider to have the very best quality, which is nutritionally superior to other sources of this ingredient, and has no intention of obtaining it from any other provider.


As of June 30, 2015 the Company has $2.4 million in debt with a due date of December 31, 2015. Management anticipates it will satisfy these notes payable through increased revenues or negotiation of new payment due dates.


On July 6, 2015, the Company signed a $300,000 short term promissory note with a non-related party with an 8% interest rate and a repayment date of August 31, 2015.  The note holder has the option to convert the note into common stock at a conversion rate of $1.00 per share.




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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


The Company records impairment of long-lived assets to be held and used or to be disposed of when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount. The Company did an annual analysis for the period ended June 30, 2015 and determined no adjustment to long-lived assets was needed.


The Company adjusts its inventories to lower of cost or market. Additionally we adjust the carrying value of our inventory based on assumptions regarding future demand for our products and market conditions. If future demand and market conditions are less favorable than management’s assumptions, additional inventory write-downs could be required. Likewise, favorable future demand and market conditions could positively impact future operating results if previously written down inventories are sold.


In determining the allowance for doubtful accounts, the Company evaluates the collectability of its accounts receivable and member advances based on a combination of factors. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations to us (e.g., bankruptcy filings), the Company records a specific allowance for doubtful accounts against amounts due to reduce the net recognized receivable to the amount it reasonably believe will be collected. For all other customers, the Company recognizes allowances for doubtful accounts based on the length of time the receivables are past due. If circumstances change (e.g., unexpected material adverse changes in a major customer’s ability to meet its financial obligation to us or higher than expected customer defaults), the Company’s estimates of the recoverability of amounts could differ from the actual amounts recovered



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 effective.  


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). Our management has determined that there were no changes made in the implementation of our internal controls over financial reporting during the quarter ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.  



PART II – OTHER INFORMATION


ITEM 1. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


On May 18, 2015, the Company authorized the issuance of 910,000 shares of common stock to Capital Communications to convert a note payable in the amount of $630,000 in principle and $6,645 in accrued interest.  All shares will be privately issued with a restrictive legend, in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933.


On May 26, 2015 the Company authorized the issuance of 835,334 shares of common stock to GH Investments, LLC for $1,000,000 cash which was received in two payments of $500,000 each on May 28, 2015 and June 1, 2015. All shares will be privately issued with a restrictive legend, in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933.



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 Big Stick Enterprises, LLC, dated

March 1, 2015.

(Incorporated by reference to exhibit 10.1 to Form 10-K, filed March 28, 2014)

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.





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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.



FOREVERGREEN WORLDWIDE CORPORATION




By:  /s/ Ronald K. Williams

         Ronald K. Williams

         Chairman of the Board, President,

         Chief Executive Officer






Date:  August 13, 2015




By:  /s/ Jack B. Eldridge Jr.

          Jack B. Eldridge Jr.        

         Chief Financial Officer

         Treasurer




Date:  August 13, 2015





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