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 March 31, 2017


[  ]

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.)

632 NORTH 2000 WEST, SUITE 101, 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, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,”  “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer [  ]

Non-accelerated filer [  ]

Emerging growth company [   ]

Accelerated filer [  ]

Smaller reporting company [X]


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  [   ]


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 May 19, 2017 was 26,692,285.



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 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

10

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 2.

Unregistered Sales of Equity Securities and Use of Proceeds

16

Item 3.

Defaults upon Senior Securities

16

Item 4.

Mine Safety Disclosures

16

Item 5.

Other Information

16

Item 6.

Exhibits

16

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 month periods ended March 2017 and 2016 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 three month period ended March 2017 are not necessarily indicative of results to be expected for any subsequent period.  




2






ForeverGreen Worldwide Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

 

 

 

March 31,

2017

 

December 31,

2016

ASSETS

 

(Unaudited)

 

 

CURRENT ASSETS

 

 

 

 

 

Cash and cash equivalents

$

98,500

$

187,136

 

Restricted cash

 

244,298

 

152,106

 

Accounts receivable

 

97,287

 

170,704

 

Other receivables

 

--

 

149,153

 

Prepaid expenses and other assets

 

117,920

 

154,367

 

Inventory

 

1,190,840

 

1,480,794

 

Total Current Assets

 

1,748,845

 

2,294,260

 

 

 

 

 

PROPERTY AND EQUIPMENT, net

 

3,221,583

 

3,424,596

 

 

 

 

 

OTHER ASSETS

 

 

 

 

   

Intangible assets, net

 

5,677

 

5,694

TOTAL ASSETS

$

4,976,105

$

5,724,550

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

Bank overdraft

$

210,812

$

90,579

 

Accounts payable

 

2,828,363

 

2,751,367

 

Accrued expenses

 

3,213,285

 

3,723,610

 

Deferred revenue

 

81,930

 

81,739

 

Current portion of convertible notes payable, related parties

 

245,000

 

245,000

 

Current portion of convertible notes payable

 

1,423,474

 

1,446,660

 

Current portion of notes payable

 

259,214

 

--

 

Total Current Liabilities

 

8,262,078

 

8,338,955

 

 

 

 

 

LONG-TERM DEBT

 

 

 

 

 

Convertible notes payable, related parties

 

1,501,024

 

1,501,024

 

Convertible notes payable

 

2,288,659

 

2,294,183

 

Notes payable

 

853,000

 

1,240,000

 

Total Long-Term Debt

 

4,642,683

 

5,035,207

TOTAL LIABILITIES

 

12,904,761

 

13,374,162

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

--

 

--

 

 

 

 

 

STOCKHOLDERS' DEFICIT

 

 

 

 

 

Preferred stock; no stated par value; authorized 10,000,000 shares; no shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively

 

--

 

--

 

Common stock, par value $0.001 per share; authorized 100,000,000 shares; 26,692,285 issued and 26,692,285 outstanding March 31, 2017 and December 31, 2016, respectively

 

26,692

 

26,692

 

Additional paid-in capital

 

36,383,661

 

36,383,661

 

Treasury stock

 

(1,000,000)

 

(1,000,000)

 

Accumulated other comprehensive loss

 

(84,734)

 

(313,496)

 

Accumulated deficit

 

(43,254,275)

 

(42,746,469)

 

Total Stockholders' Deficit

 

(7,928,656)

 

(7,649,612)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$

4,976,105

$

5,724,550


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 Loss

(Unaudited)

 

 

 

March 31,

2017

 

March 31,

2016

 

 

 

 

 

TOTAL REVENUES, net

$

6,104,911

$

11,943,956

COST OF SALES, net

 

1,538,101

 

3,893,086

 

 

 

 

 

GROSS PROFIT

 

4,566,810

 

8,050,870

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

Sales and marketing

 

2,557,168

 

4,817,630

 

General and administrative

 

2,123,247

 

4,082,621

 

Depreciation and amortization

 

227,857

 

248,731

 

Total Operating Expenses

 

4,908,272

 

9,148,982

 

 

 

 

 

NET OPERATING LOSS

 

(341,462)

 

(1,098,112)

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

Gain on legal settlement

 

--

 

698,113

 

Other expense

 

(19,093)

 

(38,700)

 

Interest expense

 

(147,251)

 

(83,820)

 

Total Other Expense

 

(166,344)

 

575,593

 

 

 

 

 

Loss before income tax provision

 

(507,806)

 

(522,519)

 

Income Tax Provision (Benefit)

 

--

 

--

 

 

 

 

 

NET LOSS

$

(507,806)

$

(522,519)

 

 

 

 

 

BASIC AND DILUTED LOSS PER COMMON SHARE

$

(0.02)

$

(0.02)

 

 

 

 

 

BASIC AND DILUTED WEIGHTED AVERAGE NUMBER

 

 

 

 

OF COMMON SHARES OUTSTANDING

 

26,692,285

 

25,342,285

 

 

 

 

 

COMPREHENSIVE LOSS

 

 

 

 

A summary of the components of other comprehensive loss for the fiscal years ended March 31, 2017 and 2016 is as follows:

 

 

 

 

 

Net Loss

$

(507,806)

$

(522,519)

 

 

 

 

 

 

Other Comprehensive Income (Loss) – foreign currency translation

 

228,762

 

22,804

 

 

 

 

 

 

Comprehensive Loss

$

(279,044)

$

(499,715)

 

 

 

 

 

 

 

 

 

 

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)

 

 

March 31,

2017

 

March 31,

2016

CASH FLOWS FROM OPERATING ACTIVITIES :

 

 

 

 

Net loss

$

(507,806)

$

(522,519)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

   Depreciation and amortization

 

226,970

 

249,337

Changes in operating assets and liabilities:

   Restricted cash

 

(92,191)

 

12,187

   Accounts receivable

 

73,417

 

(133,107)

   Other receivables

 

--

 

(1,254,991)

   Member advances

 

--

 

2,903

   Prepaid expenses

 

36,447

 

(56,154)

   Deposits and other assets

 

149,153

 

12,785

   Inventory

 

289,954

 

(79,644)

   Accounts payable

 

76,996

 

1,616,343

   Deferred revenue

 

191

 

7,571

   Accrued expenses

 

(510,327)

 

85,547

         Net Cash Used in Operating Activities

 

(257,196)

 

(59,742)

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

   Purchases of property and equipment

 

(23,939)

 

(206,750)

         Net Cash Used in Investing Activities

 

(23,939)

 

(206,750)

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

   Proceeds from bank overdraft

 

120,233

 

29,122

   Proceeds from convertible notes payable

 

--

 

200,000

   Repayment of convertible notes payable

 

(28,710)

 

--

   Repayment of notes payable

 

(127,786)

 

--

        Net Cash Provided by Financing Activities

 

(36,263)

 

229,122


Effect of Foreign Currency on Cash

 

228,762

 

16,699

 

 

 

 

 

NET DECREASE IN CASH

 

(88,636)

 

(20,671)

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

187,136

 

495,304

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

98,500

$

474,633

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION

 

 

 

 

    Cash paid for interest

$

93,173

$

75,169

 

 

 

 

 

NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

    Notes payable issued for leasehold improvements

$                  

--

$

506,158

    Beneficial conversion feature

$

--

$

55,000


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 March 31, 2017 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, 2016 audited financial statements as reported in its Form 10-K. The results of operations for the three month period ended March 31, 2017 are not necessarily indicative of the operating results for the full year ended December 31, 2017.


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 March 31, 2017 include the books of ForeverGreen Worldwide Corporation (Nevada) and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in the consolidation.


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 FASB Accounting Standards Codification (“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


Reclassification

Certain balances in previously issued financial statements have been reclassified to be consistent with the current period presentation.


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. As of March 31, 2017, there were 13,519,486 common stock equivalents from convertible notes that were excluded from the diluted EPS (earnings per share) calculation as their effect is anti-dilutive.


Revenue Recognition

Revenues and costs of revenues are recognized during the period in which the products are provided. The Company applies the provisions of 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 March 31, 2017 and December 31, 2016, the reserve for obsolete inventory had balances in the amount of $433,225 and $433,225, respectively.


Accounts Receivable

Accounts receivable are sales deposits processed by third parties from the prior one to four days that have not posted to the Company’s bank account.  


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 March 31, 2017 was not needed.




7




FOREVERGREEN WORLDWIDE CORPORATION

Notes to the Condensed Consolidated Financial Statements

(Unaudited)


NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued


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.


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 – NOTES PAYABLE


Convertible notes payable and notes payable as of March 31, 2017


TYPE

CONVERSION RATE PER SHARE

ORIGINATION DATE

INTEREST RATE

DUE DATE

BALANCE

Convertible, Related party

0.68

12/1/2015

10%

12/31/2018

$1,501,024

Convertible, Related party

0.15

10/7/2010

14%

12/31/2017

$45,000

Convertible, Related party

0.20

1/19/2011

14%

12/31/2017

$200,000

Convertible, Non-related

0.20

3/9/2010

14%

12/31/2017

$231,756

Convertible, Non-related

0.20

3/14/2011

14%

12/31/2015

$100,000

Convertible, Non-related

0.70

2/25/2015

14%

12/31/2015

$891,718

Convertible, Non-related

1.00

7/6/2015

12%

8/31/2015

$200,000

Convertible, Non-related

0.35

5/27/2016

10%

12/31/2018

$500,000

Convertible, Non-related

0.35

6/23/2016

10%

12/31/2018

$150,000

Convertible, Non-related

0.35

7/8/2016

10%

12/31/2018

$50,000

Convertible, Non-related

0.40

11/4/2016

6%

5/30/2019

$264,245

Convertible, Non-related

0.40

11/4/2016

6%

11/30/2019

$324,414

Convertible, Non-related

0.63

11/212016

6%

5/30/2023

$1,000,000

Non-related

NA

10/21/2016

NA

9/25/2020

$853,000

Non-related

NA

3/1/2016

4.66%

3/01/2018

$259,214

Total

 

 

 

 

$6,570,371


The Company has not issued any new promissory notes during first quarter 2017.


NOTE 4 - 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.




8





FOREVERGREEN WORLDWIDE CORPORATION

Notes to the Condensed Consolidated Financial Statements

(Unaudited)


NOTE 5 – INVENTORY


 

 

March 31,

2017

 

December 31,

2016

Raw Materials

$

1,138,256

$

 1,290,902

Finished Goods

 

485,809

 

623,117

Total Inventory

 

1,624,065

 

1,914,019

Less Reserve for Obsolete Inventory

 

(433,225)

 

(433,225)

Total Inventory (net of reserve)

$

1,190,840

$

 1,480,794

 

NOTE 6 – GOING CONCERN


As reported in the accompanying consolidated financial statements the Company has a working capital deficit of $6,513,233 and accumulated deficit of $43,254,275 at March 31, 2017, 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 has reviewed its cost structure and is taking steps to implement cost saving measures deemed to be effective.  This includes a reduction in labor force, restructuring of lease agreements, revised pricing of certain products to enhance sales incentives, and a marketing plan which involves more interaction with a broad scope of customers and Members.


Additionally, we expect we will take advantage of limited 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 is reviewing improvements to the marketing plan which will enhance the opportunities for continued growth.  The Company intends to seek debt and equity financing as necessary.


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.  


NOTE 7 – SUBSEQUENT EVENTS


On April 27, 2017, the Company signed a $500,000 promissory note with a related party with a 10% interest rate and a repayment date of December 31, 2018.  The note holder has the option to convert the note into common stock at a conversion rate of $0.20 per share.


On April 27, 2017, the Company signed a $500,000 promissory note with a related party with a 10% interest rate and a repayment date of December 31, 2018.  The note holder has the option to convert the note into common stock at a conversion rate of $0.20 per share.




9




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, Forevergreen Dominicana S.R.L. (Dominican Republic), Forevergreen Peru, SAC, ForeverGreen SP z.o.o , (Poland), FGXpress do Brasil Comercio de Alimentos LTDA (Brazil), and ForeverGreen Team B.V. (Netherlands).


We intend to continue our emphasis as a total lifestyle company focused on bringing our domestic and international Members and customers our exclusive Prodigy-5, Ketopia line, PowerStrip, SolarStrips, and BeautyStrips products, as well as a few select “Farmers Market” products.  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.


Our major challenges for the next twelve months will be to respond to current economic conditions and to properly manage our systems and logistics centers around the world to support the demand for our 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.


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.  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.






10




During the first three months of 2017 the Company experienced several updates that included updates to the global Xpress model and important business announcements.


In January, ForeverGreen announced the official intention to transition certain existing best-selling products into the global Xpress model, also known as the envelope model. FrequenSea, a flag-ship Farmers Market product is being reviewed and evaluated as the first product changed to the model, as FrequenSea Pro, which will become available as soon as possible. The currently bottled formula is to be released in a powder format, expanding its customer range globally. FrequenSea Pro will be an upgraded and improved version from FrequenSea and will be another great product in the revolutionary global Xpress model.


February saw European growth with a successful tour promoting and focusing on the global Xpress model. The continued emphasis on Prodigy-5 with the exclusive TransArmor technology was well received by customers, members and leaders in standing-room only venues throughout the European Union. At the end of February, management implemented a reduction in labor force initiative which realized about a 38% reduction in labor costs.


March was highlighted by the announcement of ForeverGreen’s continued commitment to overall cost reductions and a path to profitability. The Company and its management embarked on a restructuring program to cut expenses and improve productivity, essentially shifting its focus from top-line revenue growth to expense management and profitability.


Subsequent to the end of the quarter, Patrick (“Rick”) Redford was named as the new CEO, allowing Ron Williams the flexibility to spend more time to be in the field alongside the great Company leaders, sharing the vision and inspiring them to grow their respective business organizations. In addition, two of our founding investors, agreed to invest additional capital to support the supply chain needs during this transition. These events, combined with the consolidation of product, improvements in the international business strategies, and ongoing cost reduction decisions, have placed the Company in a position for future growth and profitability.


We will continue to look for opportunities to improve upon or expand the restructuring and cost cutting initiatives implemented last year and the beginning of this year. The Company continues reviewing its entire line of products to determine which products may be phased out or reworked to fit into the exciting global Xpress model.  We continually manage our systems and logistics centers around the world to support the demand for our products and business opportunity. We continually challenge ourselves to continue to meet a high standard of quality and customer service and maintain the highest levels of Member satisfaction.


Overcoming periodic economic downturns and managing profitability will continue to 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 Prodigy-5 begins to ship and as people continue to look for alternative income opportunities. We are actively positioning ForeverGreen to be the Company they can align with for the future in addition to traditional employment options.






[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY.]





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Results of Operations


The following chart summarizes the consolidated statements of operations of ForeverGreen Worldwide and subsidiaries for the three month periods ending March 31, 2017 and 2016.


SUMMARY OF OPERATIONS

 

Three month period ended March 31,

 

 

(Unaudited)

 

 

2017

 

2016

Revenues, net

$

6,104,911

$

11,943,956

Cost of sales

 

1,538,101

 

3,893,086

Gross profit

 

4,566,810

 

8,050,870

Selling and marketing expenses

 

2,557,168

 

4,817,630

General and administrative expenses

 

2,123,247

 

4,082,621

Total operating expenses

 

4,908,272

 

9,148,982

Net operating loss

 

(341,462)

 

(1,098,112)

Total other income (expense)

 

(166,344)

 

575,593

Income tax provision

 

--

 

--

Net loss

$

(507,806)

$

(522,519)

Net loss per share (basic and diluted)

$

(0.02)

$

(0.02)


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. We recognize revenue upon shipment of a sales order. The Company recognized product revenues of $5,782,386 and shipping and other revenues of $322,525 for the first quarter of 2017 compared to product revenues of $11,092,833, and shipping and other revenues of $851,123 for the comparable period in 2016.


The Company experienced a 48.9% decrease in revenues totaling $5,839,045 for the 2017 first quarter compared to the 2016 first quarter. The decrease in revenues relates to a decline in the number of members placing monthly orders.  The Company has also experienced a shortage of some inventory items which restricted the ability to deliver some of the items ordered.  Management has initiatives to increase global marketing focus emphasizing the global envelope model during the remainder of 2017.


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 25.2% of revenues totaling $1,538,101 for the first quarter of 2017 compared to 32.6% of revenues totaling $3,893,086 for first quarter of 2016. This percentage decrease is primarily attributable to a change in the sales mix between Xpress envelope products compared with the Farmers Market products.  Xpress envelope products increased to 70.4% of product sales in 2017 compared with 63.5% in 2016.  Reduced sales of the Ketopia product, which has a higher product cost and is more expensive to deliver to our members, also contributed to the reduced cost of sales.


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 Member leadership incentives and




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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 were 41.9% of revenues totaling $2,557,168 for the 2017 first quarter compared to 40.3% of revenues totaling $4,817,630 for 2016 first quarter.  This percentage increase is due to Xpress model products being a larger percentage of product sales, which have a slightly higher commission rate than other products in our line.


General and administrative expenses were $2,123,247, or 34.8% of revenue, for the 2017 first quarter compared to $4,082,621 or 34.2% of revenue, for the 2016 first quarter, representing a decrease of $1,959,374 from the prior year.  These decreases are primarily due to the implementation of cost cutting initiatives during 2017. The Company labor force has been reduced both domestically as well as internationally.  These restructuring efforts involved employee severance agreements, some of which were mandated by local employment tax laws.  Extra costs in legal fees were also incurred in the 2016 first quarter as the Company restructured a number of lease arrangements and the litigation settlement.


Total other expense was $166,344 for the 2017 first quarter compared to other income of $575,593 for the 2016 first quarter.  This decrease of $741,937 is primarily attributable to the legal settlement that was reported in the 2016 first quarter.


The Company experienced net loss of $507,806 for the 2017 first quarter compared to a net loss of $522,519 for the 2016 first quarter. This represents an increase of $14,713 which is attributable to the Company’s decreasing revenues.  The Company also realized some one-time costs associated with reducing the overall labor force during the 2017 first quarter.


Liquidity and Capital Resources


SUMMARY OF BALANCE SHEET

 

Three months ended

March 31,

2017

 


Year ended

December 31, 2016

 

 

(Unaudited)

 

 

Cash and cash equivalents

$

98,500

$

187,136

Total current assets

 

1,748,845

 

2,294,260

Total assets

 

4,976,105

 

5,724,550

Total current liabilities

 

8,262,078

 

8,338,955

Total liabilities

 

12,904,761

 

13,374,162

Accumulated deficit

 

(43,254,275)

 

(42,746,469)

Total stockholders’ deficit

$

(7,928,656)

$

(7,649,612)


The Company’s total assets decreased to $4,976,105 as of March 31, 2017 compared to $5,724,550 as of December 31, 2016. The 13% decrease of $748,445 is due to decreases in inventory of $289,954, other receivables of $149,153 related to the collection of a litigation settlement, and property and equipment of $203,013 due to depreciation and amortization.


The Company’s total liabilities at March 31, 2017 were $12,904,761 compared to $13,374,162 at December 31, 2016, a decrease of $469,401.  This decrease is attributable to a $510,325 decrease in accrued expenses.




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As reported in the accompanying consolidated financial statements the Company has a working capital deficit of $6,513,233 and accumulated deficit of $43,254,275 at March 31, 2017, 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 has reviewed its cost structure and is taking steps to implement cost saving measures deemed to be effective.  This includes a reduction in labor force, restructuring of lease agreements, revised pricing of certain products to enhance sales incentives, and a marketing plan which involves more interaction with a broad scope of customers and Members.  


Additionally, we expect we will take advantage of limited 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 is reviewing improvements to the marketing plan which will enhance the opportunities for continued growth.  The Company intends to seek debt and equity financing as necessary.


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 a related party, 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 March 31, 2017 the Company has $1,927,688 in debt that will be due in the next twelve months.  Management anticipates it will satisfy these notes payable through increased revenues or negotiation of new payment due dates.


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


Long-lived assets

 

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 March 31, 2017 and determined no adjustment to long-lived assets was needed.


Inventory

 

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




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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.


Accounts Receivable

 

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


Under the supervision and with the participation of our management, our Chief Executive Officer, who also acts as our Principal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report.  The disclosure controls and procedures ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rule and forms; and (ii) accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure.  Based on that evaluation, management concluded that our controls were not effective as of March 31, 2017.


The material weaknesses relate to the limited number of persons responsible for the recording and reporting of financial information, the lack of separation of financial reporting duties, and the limited size of our management team in general. We are in the process of evaluating methods of improving our internal control over financial reporting, including the possible addition of financial reporting staff and the increased separation of financial reporting responsibility, and intend to implement such steps as are necessary and possible to correct these material weaknesses.


Notwithstanding this finding of ineffective disclosure controls and procedures, we concluded that the consolidated financial statements included in this Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.


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 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 March 31, 2017 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.  




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PART II – OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS


None.



ITEM 1A. RISK FACTORS


We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.



ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


None.



ITEM 3.  DEFAULTS UPON SENIOR SECURITIES


None.



ITEM 4.  MINE SAFETY DISCLOSURES


Not applicable.



ITEM 5.  OTHER INFORMATION


None.



ITEM 6.  EXHIBITS


Part I Exhibits


No.

 

Description

31.1

 

Chief Executive Officer Certification

31.2

 

Principal Financial Officer Certification

32.1

 

Section 1350 Certification





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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 WI Commercial West Lindon LLC,

dated September 29, 2015  (Incorporated by reference to exhibit 10.1 to Form 10-Q, filed

November 14, 2016)

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.





17





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/ Patrick A. Redford

         Patrick A. Redford

         Chief Executive Officer

         Principal Financial Officer






Date:  May 19, 2017





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