|
|
|
|
| |
|
ForeverGreen Worldwide Corporation and Subsidiaries
|
|
Consolidated Statements of Cash Flows
|
|
|
|
|
|
December 31,
2015
|
|
December 31,
2014
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
:
|
|
|
|
|
|
Net income (loss)
|
$
|
(2,620,421)
|
$
|
1,028,712
|
|
Adjustments to reconcile net income (loss) to net
|
|
|
|
|
|
cash provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
828,095
|
|
377,431
|
|
Loss on settlement of claim
|
|
--
|
|
149,520
|
|
Bad debt expense
|
|
513,468
|
|
--
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Restricted cash
|
|
527,261
|
|
(589,449)
|
|
Accounts receivable
|
|
(376,719)
|
|
(140,615)
|
|
Member advances
|
|
(125,354)
|
|
(381,500)
|
|
Prepaid assets
|
|
107,133
|
|
--
|
|
Prepaid expenses
|
|
--
|
|
(452,293)
|
|
Deposits and other assets
|
|
24,058
|
|
(48,700)
|
|
Inventory
|
|
(43,780)
|
|
(945,919)
|
|
Accounts payable
|
|
2,115,546
|
|
949,635
|
|
Deferred revenue
|
|
(84,489)
|
|
(233,956)
|
|
Accrued expenses
|
|
(2,625,931)
|
|
1,719,244
|
|
Net Cash Provided by (used in) Operating Activities
|
|
(1,761,133)
|
|
1,432,110
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
Cash paid for trademarks
|
|
--
|
|
(1,263)
|
|
Purchases of property and equipment
|
|
(1,649,020)
|
|
(2,394,065)
|
|
Net Cash Used in Investing Activities
|
|
(1,649,020)
|
|
(2,395,328)
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
Proceeds from bank overdraft
|
|
31,781
|
|
9,440
|
|
Payments on notes payable
|
|
--
|
|
(17,220)
|
|
Payment of convertible note payable
|
|
--
|
|
(100,000)
|
|
Proceeds from common stock issuance
|
|
1,020,586
|
|
2,004,164
|
|
Proceeds from convertible notes payable
|
|
1,720,000
|
|
--
|
|
Proceeds from notes payable – Related party
|
|
578,546
|
|
--
|
|
Net Cash Provided by Financing Activities
|
|
3,350,913
|
|
1,896,384
|
|
Effect of Foreign Currency on Cash
|
|
(25,978
)
|
|
(637,385)
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH
|
|
(85,218)
|
|
295,781
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
|
580,522
|
|
284,741
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$
|
495,304
|
$
|
580,522
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION
|
|
|
|
|
|
Cash paid for interest
|
$
|
291,533
|
$
|
317,966
|
|
Cash paid for income taxes
|
|
--
|
|
--
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
Conversion of debt and accrued interest for equity
|
$
|
636,645
|
$
|
521,882
|
|
Common stock issued for settlement of claim
|
|
--
|
|
149,520
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements
|
9
FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The Company was incorporated on March 18, 1999 in the state of Nevada. On November 30, 1999, Whole Living, Inc. acquired the assets, leases, product line and name of Brain Garden, L.L.C., a Utah limited liability company engaged in the marketing and distribution of various natural food products, oils and bath salts. The Company maintained its headquarters in Provo, Utah.
On November 30, 1999, the Company acquired many of the assets, lease obligations and much of the product line of Brain Garden. The acquisition was recorded using the purchase method of a business combination. Intangible assets such as member down lines, customer lists and product name identifications were recorded in the acquisition in the amount of $43,294 and were amortized over 60 months. The Company paid $283,800 for the purchase of Brain Garden assets, and assumed leases in the amount of $14,500. The Company also assumed an operating lease for office space which expired during 1999.
On May 24, 2000 the Company entered into an agreement to merge with Whole Living, Inc., a Nevada Corporation (WLN), which was a non-operating public company with cash of $150,000 and a note receivable of $650,000 from Whole Living, Inc. (Utah) for funds advanced in contemplation of the merger. Pursuant to the merger, WLN issued 6,000,000 shares of common stock to the shareholders of the Company for all outstanding stock of the Company. The merger was recorded as a reverse merger, with Whole Living, Inc. (Utah) being the accounting survivor. A reverse merger adjustment was made to the books of the Company to reflect the change in capital to that of WLN. No goodwill or intangible assets were recorded in the reverse acquisition.
In March 2002, the Company incorporated Brain Garden, LLC. as a wholly owned subsidiary.
On January 13, 2006 the Company entered into an agreement whereby it exchanged 1,266,667 shares of its post-reverse split common stock for a 23% interest in ForeverGreen International, LLC. a privately held company. This acquisition is accounted for on the equity method of accounting. As part of this reorganization the officers and directors of the Company resigned and officers of ForeverGreen International, LLC were appointed as officers of the Company.
ForeverGreen International, LLC was organized on February 19, 2003 in the state of Utah. The Company engages in the marketing and distribution of chocolate and various natural food products, oils and bath salts. In August 2005 the Company introduced FrequenSea
™
, a nutritional beverage which includes marine phytoplankton, which helped the Company to increase sales dramatically. ForeverGreen International, LLC does business under the name of ForeverGreen International, and maintains its headquarters in Lindon, Utah.
In conjunction with the January 13, 2006 acquisition the Board of Directors of the Company approved a 15:1 reverse split of its common shares, which was subsequently completed in February, 2006.
The companies operated under common management to distribute the products of both companies jointly as though one company. The combined operation subsequently combined their product lines and created a new unified catalog.
On October 15, 2006, Whole Living, Inc. entered into an agreement to purchase the remaining 77% interest of ForeverGreen International, LLC and to formally merge with Brain Garden Inc., a wholly owned subsidiary of Whole Living, Inc., to become effective December 31, 2006. They announced they would change the combined company name to ForeverGreen Worldwide Corporation. The combined company sells products in the United States, Canada, Australia, New Zealand, Singapore, Japan, United Kingdom, the Netherlands, and Germany and
10
FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
a. Organization - continued
currently has plans to expand into other areas of the world. Whole Living, Inc. changed its name to ForeverGreen Worldwide Corporation in December 2006.
During the last quarter of 2007, the Company began operations in Mexico. In 2009 the Company introduced a program to make its products available to more international countries. This program is called “the NFR program” NFR means not for resale and supports customers in many countries to enjoy limited ForeverGreen products for personal use in these countries include Argentina, Austria, Barbados, Bolivia, Chile, China, Curacao Island, Colombia, Ecuador, Dominican Republic, Ghana, Greece, Guam, Hungry, Indonesia, Ireland, Israel, Ivory Coast, Italy, Kenya, Korea, Malaysia, Morocco, Pakistan, Peru, Philippines, Poland, Portugal, Puerto Rico, South Africa, Spain, Sweden, Switzerland, Taiwan, and Trinidad.
b. Principles of Consolidation
The consolidated balance sheets and statement of operations for the periods ended December 31, 2015 and 2014 include the books of ForeverGreen Worldwide Corporation (Nevada) and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in the consolidation. These wholly owned subsidiaries include 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), ForeverGreen SP z.o.o. (Poland), ForeverGreen Team B.V., ForeverGreen Dominicana S.L.R. (Dominican Republic), FG International LLP (India), FGXpress do Brasil Comercio de Ailimentos LTDA (Brazil), and ForeverGreen Team B.V. (Netherlands).
c. Recognition of Revenue
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 sources of revenue are from the sale of various food and other natural product sales and royalties earned. 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. Returns are less than 2.5% 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 allowance for returns where material.
d. Accounts Receivable and Member Advances
In 2015 the Company’s accounting method changed for accounts receivable. The majority of accounts receivable are now sales deposits processed by third parties from the prior one to three business days that have not posted to the Company’s bank account. Other accounts receivable arise from doing business with third party distributor
11
FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
d. Accounts Receivable and Member Advances - continued
centers in various locations throughout South America and Korea. The accounts receivable are made up of fees and
royalties 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. An allowance of $0 and $0 had been recorded at December 31, 2015 and 2014, respectively.
Members are required to pay for products prior to shipment. Members typically pay for products by credit cards, wire transfer, e-wallet accounts, other payment cards, and cash. Accordingly, the Company seldom carries accounts receivable from members that are not distribution centers and any balances carried would be minimal. In 2014 and 2015, in order to increase business, the Company advanced $506,854 to new Members to assist them with building their businesses. An allowance of $341,333 and $0 has been recorded at December 31, 2015 and 2014, respectively for uncollectable advances.
e. Earnings Per Share
The computation of earnings per share (EPS) of common stock is based on the weighted average number of shares outstanding at the date of the financial statements. Basic and diluted earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Potentially dilutive shares at December 31, 2015 from convertible debentures in the amount of 28,757,473 were excluded from our 2015 EPS calculation because their effect would be anti-dilutive. Potentially dilutive shares at December 31, 2014 from convertible debentures in the amount of 797,184 were included in the 2014 EPS calculation.
f. Income Taxes
The Company provides for income taxes under ASC 740, Accounting for Income Taxes. ASC 740 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. The Company’s predecessor operated as entity exempt from Federal and State income taxes.
g. Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents.
In 2014 the Company began using a new credit card processor to better serve our members world-wide. Due to the risk factor of member chargebacks the new processor required a reserve be created by reserving 10% of all transactions that they processed. The reserve is revolving meaning six months after the beginning of the reserve the Company will receive back the 10% collected during the first of the reserve. During 2015, the Company established relationships with new merchant processing partners, both domestically and internationally. The new processors currently do not require a reserve. At December 31, 2015 the total amount of this reserve was $62,382 which is presented as restricted cash on the balance sheet.
h. Property and Equipment
Expenditures for property and equipment and for renewals and betterments, which extend the originally estimated economic life of assets or convert the assets to a new use, are capitalized at cost. Expenditures for maintenance,
12
FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
h. Property and Equipment – continued
repairs and other renewals of items are charged to expense. When items are disposed of, the cost and accumulated depreciation are eliminated from the accounts, and any gain or loss is included in the results of operations.
Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Depreciable asset lives range from 3 to 7 years with leasehold improvements being depreciated over the lesser of the term of the lease or the life of the improvements. Depreciation expense for the period ended December 31, 2015 and 2014 is $733,379 and $284,694, respectively.
i. Long-Lived Assets
In accordance with ASC 360-10, 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 determined no impairment adjustment was needed based on the analysis for the years ended December 31, 2015 and 2014.
j. 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 December 31, 2015 and 2014 there was an allowance for obsolete inventory in the amount of $40,000 and $40,000, respectively.
k. Fair Value of Financial Instruments
The carrying amounts reported in the balance sheets for the cash and cash equivalents, receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The carrying value of convertible notes payable approximates fair value because negotiated terms and conditions are consistent with current market rates as of December 31, 2015 and 2014.
l. Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make assumptions that affect the amounts reported in the financial statements and accompanying notes. In these financial statements, assets, liabilities and earnings involve extensive reliance on management’s estimates. Actual results could differ from those estimates.
m. Concentrations
Financial instruments that potentially subject the Company to concentrations of credit risks consist of cash and cash equivalents. The Company places its cash and cash equivalents at well-known, quality financial institutions. At times, such cash and investments may be in excess of the FDIC insurance limit. The accounts are insured by the
13
FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
m. Concentrations - continued
Federal Deposit Insurance Corporation up to $250,000 each. The amounts held for the Company regularly exceed that amount.
The Company has an agreement with one vendor, owned 50% by a Company director, that supplies 100% of a significant ingredient that is included in several top selling products. It could decrease sales significantly if that vendor were to discontinue the supply of this ingredient. 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.
o. 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. The Customer base is amortized over 10 years. 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 years ended December 31, 2015 and 2014.
p. Deferred Revenue
The Company recognizes revenues upon the shipment of product. As of December 31, 2015, the Company had received payment of $87,396 for sales which were not shipped as of the period end and as such recorded deferred revenue of $87,396 compared to $171,885 for December 31, 2014.
q. 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.
r. Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
14
FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
s. Advertising
Advertising cost are expensed as incurred and are presented as part of the general and administrative expense. Advertising expense totaled $154,203 in 2015 compared to $84,843 in 2014.
t. Shipping and Handling
The Company’s shipping and handling costs are included in the cost of sales for all periods presented. Shipping and handling revenues are included in total revenues, net for all periods presented.
u. Sales and Marketing
Selling and marketing expenses include sales commissions paid to our members, special incentives, costs for incentive trips and other rewards incentives.
NOTE 2 – RESTRICTED CASH
In 2014 the Company implemented a new credit card processor option to better serve our members world-wide. Due to the risk factor of member chargebacks, the new processor required that a 10% reserve of all processed transactions be held. This is a six month revolving reserve until the contract is terminated. At December 31, 2014 the total amount of this reserve was $589,449 at December 31, 2015 this amount was reduced to $62,382 as the
Company migrated merchant processing business to providers who did not require a reserve.
NOTE 3 – INVENTORIES
Inventories for December 31, 2015 and 2014 were classified as follows:
|
|
|
| |
|
|
|
|
|
|
|
2015
|
|
2014
|
|
Raw Materials
|
$ 1,055,243
|
|
$ 1,271,915
|
|
Finished Goods
|
1,012,399
|
|
785,348
|
|
Total Inventory
|
2,067,642
|
|
2,057,263
|
|
Less Reserve
|
(40,000)
|
|
(40,000)
|
|
Total Inventory (net of reserve)
|
$ 2,027,642
|
|
$ 2,017,263
|
NOTE 4 – PROPERTY AND EQUIPMENT
Depreciation is computed using the straight-line method and is recognized over the estimated lives of the property and equipment. Depreciation expense was $733,379 and $284,694 for the years ended December 31, 2015 and 2014, respectively.
15
FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 4 – PROPERTY AND EQUIPMENT - continued
Property and equipment consists of the following at December 31, 2015 and 2014:
|
|
|
| |
|
|
2015
|
|
2014
|
|
Leasehold improvements
|
$ 576,002
|
|
$ 571,639
|
|
Office furniture & fixtures
|
803,003
|
|
761,557
|
|
Equipment
|
637,359
|
|
597,362
|
|
Vehicles
|
72,154
|
|
72,154
|
|
Computer equipment
|
1,049,981
|
|
929,284
|
|
Computer software
|
3,210,259
|
|
1,780,508
|
|
Total Fixed Assets
|
6,348,758
|
|
4,712,504
|
|
Accumulated depreciation
|
(2,855,588)
|
|
(2,147,501)
|
|
Property and equipment, net
|
$ 3,493,170
|
|
$ 2,565,003
|
NOTE 5 – INTANGIBLE ASSETS
Intangible assets consist of the following at December 31, 2015 and 2014.
|
|
|
| |
|
|
2015
|
|
2014
|
|
Customer Base
|
$ 855,900
|
|
$ 855,900
|
|
Trademarks
|
69,472
|
|
70,354
|
|
Less accumulated amortization
|
(827,648)
|
|
(733,851)
|
|
Net intangible assets
|
$ 97,724
|
|
$ 192,403
|
Trademark, patent and customer based amortization expense for the years ended December 31, 2015 and 2014 were $93,797 and $92,559, respectively. The estimated amortization for the next five years is as follows:
2016 $ 92,600
2017 $ 5,124
NOTE 6 – ACCRUED EXPENSES
Accrued expenses consist of the following at December 31, 2015 and 2014:
|
|
|
| |
|
|
2015
|
|
2014
|
|
Accrued employee benefits
|
$ 117,555
|
|
$ 185,111
|
|
Accrued taxes
|
962,055
|
|
925,853
|
|
Accrued member commissions
|
1,279,429
|
|
2,748,565
|
|
Other accrued liabilities
|
398,736
|
|
1,019,643
|
|
Total
|
$2,757,775
|
|
$ 4,879,172
|
16
FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 7 – NOTES PAYABLE
Long-term liabilities are detailed in the following schedules as of December 31, 2015 and 2014:
|
|
|
|
| |
|
|
|
2015
|
|
2014
|
|
Convertible notes payable, related parties
|
$
|
1,746,024
|
$
|
922,478
|
|
Notes payable, related parties
|
|
--
|
|
245,000
|
|
Convertible notes payable, unrelated parties
|
|
1,423,474
|
|
--
|
|
Notes payable, unrelated parties
|
|
--
|
|
331,756
|
|
Less current portion of Notes Payable
|
|
(1,668,474)
|
|
(1,499,234)
|
|
Net Long-Term Liabilities
|
$
|
1,501,024
|
$
|
--
|
All notes are secured with inventory and other business assets as collateral.
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
2015 NOTES PAYABLE
|
|
|
|
AMOUNT
|
TYPE
|
CONVERSION RATE PER SHARE
|
ORIGINATION DATE
|
INTEREST
RATE
|
DUE DATE
|
|
$ 1,501,024
|
Convertible, Related party
|
0.68
|
12/01/2015
|
10%
|
12/31/2018
|
|
$ 45,000
|
Convertible, Related party
|
0.15
|
10/01/2010
|
10%
|
12/312015
|
|
$ 200,000
|
Convertible, Related party
|
0.20
|
01/19/2011
|
10%
|
12/31/2015
|
|
$ 100,000
|
Convertible, Non-related
|
0.20
|
01/19/2011
|
10%
|
12/31/2015
|
|
$ 231,756
|
Convertible, Non-related
|
0.20
|
02/10/2010
|
10%
|
12/31/2015
|
|
$ 891,718
|
Convertible, Non-related
|
0.20
|
02/25/2015
|
10%
|
12/31/2015
|
|
$ 200,000
|
Convertible, Non-related
|
0.20
|
07/06/2015
|
10%
|
08/31/2015
|
|
2014 NOTES PAYABLE
|
|
|
|
AMOUNT
|
TYPE
|
CONVERSION RATE PER SHARE
|
ORIGINATION DATE
|
INTEREST
RATE
|
DUE DATE
|
|
$ 485,000
|
Related party
|
|
12/09/2008
|
10%
|
Due on demand
|
|
$ 437,478
|
Related party
|
|
07/31/2009
|
10%
|
12/312015
|
|
$ 45,000
|
Convertible, Related party
|
0.15
|
10/01/2010
|
14%
|
12/31/2015
|
|
$ 200,000
|
Convertible, Related party
|
0.20
|
01/19/2011
|
14%
|
12/31/2015
|
|
$ 100,000
|
Convertible, Non-related
|
0.20
|
01/19/2011
|
14%
|
12/31/2015
|
|
$ 231,756
|
Convertible, Non-related
|
0.20
|
02/10/2010
|
10%
|
12/31/2015
|
NOTE 8 – COMMON STOCK
2015 Issuances
On May 15 2015, the Company issued 835,334 shares of stock for $1,000,000 in cash proceeds.
On May 15, 2015, the Company converted 910,000 shares of stock for a reduction of their promissory note in the amount of $600,000 in principal and $36,345 in accrued interest and other loan costs with a conversion rate of $0.70 per share.
17
FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 8 – COMMON STOCK-continued
2014 Issuances
On January 29, 2014, 1,000,000 shares of stock were purchased by a non-related party at $1.00 per share.
On January 30, 2014, 1,000,000 shares of stock were purchased by a non-related party at $1.00 per share.
On September 15, 2014 an executive of the Company was issued 140,000 shares of restricted common stock at $1.07 to settle a prior year claim which has been recorded as a loss on settlement of claim in the statement of operations.
NOTE 9 – OPERATING LEASES
The Company has operating leases as follows:
|
|
|
| |
|
Country
|
Start Date
|
End Date
|
Monthly Payments
|
|
Ecuador Warehouse
|
7/1/2015
|
7/1/2016
|
$ 850
|
|
Ecuador Office
|
10/1/2015
|
10/1/2017
|
$ 1,600
|
|
Chile Office
|
Month to Month
|
|
$ 555
|
|
Colombia Office
|
7/15/2015
|
7/15/2016
|
$ 802
|
|
Mexico Office
|
4/1/2015
|
4/1/2016
|
$ 1,735
|
|
Peru Office
|
8/1/2015
|
8/1/2016
|
$ 700
|
|
Japan Office
|
10/1/2015
|
9/30/2016
|
$ 1,793
|
|
Singapore Office
|
3/1/2015
|
2/28/2016
|
$ 8,730
|
|
Singapore Other
|
9/1/2015
|
8/31/2016
|
$ 6,111
|
|
Hong Kong Office
|
11/7/2015
|
11/6/2017
|
$ 3,174
|
|
Hong Kong Other
|
8/15/2015
|
8/14/2017
|
$ 12,467
|
|
Taiwan Office
|
Month to Month
|
|
$ 1,134
|
|
Puerto Rico
|
10/1/2015
|
9/30/2016
|
$ 2,525
|
|
Philippines
|
7/1/2015
|
6/30/2016
|
$ 2,404
|
|
Dominican Republic
|
4/1/2015
|
4/31/2016
|
$ 880
|
|
Brazil
|
9/1/2015
|
9/1/2018
|
$ 304
|
|
Bolivia
|
8/1/2015
|
8/1/2016
|
$ 800
|
|
US Headquarters
|
3/1/2014
|
2/28/2019
|
$37,561
|
|
US Office
|
Month to Month
|
|
$ 8,750
|
|
US Warehouse
|
1/1/2013
|
12/31/2020
|
$ 5,761
|
|
| |
|
|
|
|
Total Lease Commitments:
|
|
2016
|
$ 929,904
|
|
2017
|
701,759
|
|
2018
|
574,711
|
|
2019
|
158,775
|
|
2020
|
80,147
|
|
Total
|
$2,445,296
|
18
FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 10 – PROVISION FOR INCOME TAXES
The Company provides for income taxes under ASC 740,
Income Taxes
. ASC 740 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse.
ASC 740 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of all available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
Taxes based on income (loss) were as follows:
|
|
|
| |
|
|
For the Years Ended
|
|
|
December 31,
|
|
|
2015
|
|
2014
|
|
Current:
|
|
|
|
|
U.S. federal taxes
|
$ 1,923
|
|
$ 59,818
|
|
State taxes
|
4,472
|
|
6,098
|
|
International taxes
|
51,920
|
|
21,543
|
|
|
$ 58,315
|
|
$ 87,459
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
U.S. federal taxes
|
$ --
|
|
$ --
|
|
State taxes
|
--
|
|
--
|
|
International taxes
|
--
|
|
--
|
|
|
$ --
|
|
$ --
|
|
|
|
|
|
|
Provision for income taxes
|
$ 58,315
|
|
$ 87,459
|
The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate of 34% to pretax income for the following reasons:
|
|
|
| |
|
|
|
|
|
|
|
For the Years Ended
|
|
|
December 31,
|
|
|
2015
|
|
2014
|
|
Book income (loss) from operations
|
$ (906,422)
|
|
$ 377,425
|
|
State tax (benefit) expense
|
17,659
|
|
196,052
|
|
Permanent items
|
402,147
|
|
956,370
|
|
Foreign rate differential
|
658,375
|
|
(32,013)
|
|
Foreign tax credits
|
(35,846)
|
|
(48,073)
|
|
Return to provision items
|
31,450
|
|
|
|
Change in valuation allowance
|
(109,048)
|
|
(1,362,302)
|
|
Total provision for income taxes
|
$ 58,315
|
|
$ 87,459
|
19
FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 10 – PROVISION FOR INCOME TAXES - continued
Net deferred tax assets consist of the following components as of:
|
|
|
| |
|
|
December 31,
|
|
|
2015
|
|
2014
|
|
Net operating loss carry forwards
|
$ 7,289,973
|
|
$ 6,895,359
|
|
Accrued commissions
|
369,766
|
|
788,690
|
|
Inventory differences
|
87,288
|
|
89,212
|
|
Employee accruals
|
37,635
|
|
66,443
|
|
Depreciation and amortization
|
(641,968)
|
|
(444,029)
|
|
U.S. federal credits
|
143,955
|
|
107,891
|
|
Allowance for doubtful accounts
|
133,029
|
|
-
|
|
Other
|
28,881
|
|
19,522
|
|
Valuation allowance
|
(7,448,560)
|
|
(7,523,118)
|
|
Net deferred taxes
|
$ --
|
|
$ --
|
The Company assesses the need for a valuation allowance against its deferred income tax assets at December 31, 2015. Factors considered in this assessment include recent and expected future earnings and the Company’s liquidity and equity positions. As of December 31, 2015 and 2014, the Company has determined that a valuation allowance is necessary against the entire amount of its net deferred income tax asset.
As of December 31, 2015, the Company has U.S. federal and state net operating loss carry forwards of $18,689,347 and $18,749,254, respectively. These carry forwards are available to offset future taxable income, if any, and begin to expire in 2019. The utilization of the net operating loss carry forwards is dependent upon the tax laws in effect at the time the net operating loss carry forwards can be utilized and may be significantly limited based on ownership changes within the meaning of section 382 of the Internal Revenue Code.
Under FASB ASC 740-10-05-6, tax benefits are recognized only for the tax positions that are more likely than not be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in the company's tax return that do not meet these recognition and measurement standards.
The Company had no liabilities for unrecognized tax benefits and the Company has recorded no additional interest or penalties.
NOTE 11 – COMMITMENTS AND CONTINGENCIES
On August 24, 2015, Pruvit Ventures, Inc. filed a complaint in the United States District Court, Eastern District of Texas, Sherman Division, against Axcess Global LLC (Axcess) and ForeverGreen International LLC (FGI) alleging, among other things, breach of contract and unfair competition. Both Axcess and FGI answered the complaint and asserted counterclaims against Pruvit for, among other things, patent infringement, false advertising, and misappropriation of trade secrets. Both FGI and Axcess claimed injunctive relief as well as damages in an amount to be determined. As of March 30, 2016, Axcess Global Sciences, LLC, ForeverGreen International, LLC and Pruvit Ventures, Inc. reached an agreement to settle the existing lawsuit between them. The settlement
20
FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 11 – COMMITMENTS AND CONTINGENCIES - continued
resolves all claims between all parties to the litigation. Under the settlement agreement, the parties have agreed to dismiss the pending litigation and to refrain from any statements that disparage or criticize the other. Other terms of the settlement agreement are confidential.
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 12 – EMPLOYEE BENEFIT PLAN
The Company sponsors an employee benefit plan under Section 401(k) of the Internal Revenue Code. This plan covers employees who are at least 21 years of age and have met a six-month service requirement. The Company makes a matching contribution equal to 100 percent of the first two percent of a participant's compensation that is contributed by the participant, and 50 percent of that deferral that exceeds two percent of the participant's compensation, not to exceed six percent of the participant's compensation, subject to the limits of ERISA. In addition, the Company may make a discretionary contribution based on earnings. The Company's matching contributions vest equally over a four year service period. Contributions made by the Company to the plan in the United States for the years ended 2015 and 2014 were $142,149 and $104,805 respectively.
NOTE 13 – CONCENTRATION OF RISK
The Company purchased two significant products from two separate independent suppliers during the years ended December 31, 2015 and 2014. These materials are significant in several of our top selling products. If our vendors were to discontinue supplying those materials, it could decrease sales significantly. The Company recognizes there are other providers, but consider these suppliers to have the very best quality. One main vendor, MLS, is 50% owned by a director.
NOTE 14 – GOING CONCERN
The accompanying financial statements have been prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As reported in the accompanying consolidated financial statements the Company has a working capital deficit of $3,692,776 and accumulated deficit of $36,839,329 at December 31, 2015, negative cash flows from operations, and has experienced periodic cash flow difficulties. These factors combined, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans to address and alleviate these concerns are as follows:
The Company continues to monitor its cost structure and implements cost saving measures deemed to be effective. The Company has initiated some new marketing initiatives to stimulate growth in its monthly revenues, which combined with some new equity financing is allowing the Company to continue to invest in its expansion plan. This plan has involved hosting a number of industry leaders who are performing their due diligence on our Company. Additionally, we expect we will take advantage of some international expansion opportunities. These expansion opportunities will continue to be evaluated and those which provide the best opportunity for success will be pursued on a priority basis. New products have been and will continue to be introduced to bolster Member recruiting and sales. Management will make improvements to the marketing plan to enhance the success that is developed. The Company intends to seek debt and equity financing as necessary.
21
FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 15 - SUBSEQUENT EVENTS
On March 1, 2016 The Company signed a 2 year note with WICP to pay for warehouse/office buildout totaling $506,158. The note bears annual interest of 3.5% plus LIBOR and is due on March 1, 2018
On March 1, 2016 the Company signed a promissory note for $400,000 which bears annual interest of $10 and is due on demand. This note is convertible at $0.40. Through the filing date the Company has received $100,000.
On March 1, 2016 the Company signed a promissory note for $400,000 which bears annual interest of $10 and is due on demand. This note is convertible at $0.40. Through the filing date the Company has received $100,000.
On March 1, 2016 the Company signed an addendum extending the Leland Buttle note of $231,756 to December 31, 2017.
On March 1, 2016 the Company signed an addendum extending the George & Brenda Brimhall note of $45,000 to December 31, 2017.
On March 1, 2016 the Company signed an addendum extending the George & Brenda Brimhall note of $200,000 to December 31, 2017.
22
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1)
Financial Statements
The audited financial statements of ForeverGreen Worldwide Corp. are included in this amended report under Item 8 on pages 4 through 22.
(a)(2) Financial Statement Schedules
All financial statement schedules are included in the footnotes to the financial statements or are inapplicable or not required.
(a)(3)
Exhibits- continued