The accompanying notes are an integral part of these condensed consolidated financial statements.
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 six-month period ended June 30, 2018 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 Companys December 31, 2017 audited financial statements as reported in its Form 10-K. The results of operations for the six-month period ended June 30, 2018 are not necessarily indicative of the operating results for the full year ended December 31, 2018.
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, 2018 include the books of ForeverGreen Worldwide Corporation (Nevada) and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in the consolidation.
Recognition of Revenue
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The Companys 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 2.0% of sales for both years presented. Revenues are reported net of returns. All conditions of ASC 606 are met and the revenue is recorded upon sale, with an estimated allowance for returns where material.
Foreign Currency Translation
The Companys 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 financial statements in conformity with generally accepted accounting principles requires
6
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 managements estimates. 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.
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 June 30, 2018, there were 40,379,504 common stock equivalents from convertible notes that were excluded from the diluted EPS (earnings per share) calculation as their effect is anti-dilutive.
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 Companys financial results.
NOTE 3 DEBT
Notes Payable:
Notes payable consisted of the following as of June 30, 2018 and December 31, 2017:
| |
Balance December 31, 2017
|
$ 759,247
|
Cash additions
|
--
|
Expense additions
|
--
|
Cash payments
|
(218,714)
|
Balance June 30, 2018
|
$ 540,533
|
Less current portion June 30, 2018
|
(7,533)
|
Total long-term June 30, 2018
|
533,000
|
Convertible Notes Payable:
Convertible notes payable due to non-related parties consisted of the following as of June 30, 2018 and December 31, 2017:
| |
Balance December 31, 2017, net
|
$ 4,198,524
|
Cash additions
|
115,000
|
Expense additions
|
--
|
Cash payments
|
(41,336)
|
Conversions
|
--
|
Amortization of debt discounts
|
47,845
|
Balance June 30, 2018, net
|
$ 4,320,033
|
Less current portion June 30, 2018
|
(896,756)
|
Total long-term June 30, 2018
|
3,423,277
|
7
Convertible Notes Payable Related Parties:
Convertible notes payable due to related parties consisted of the following as of June 30, 2018 and December 31, 2017:
| |
Balance December 31, 2017, net
|
$ 2,681,577
|
Cash additions
|
--
|
Expense additions
|
--
|
Cash payments
|
--
|
Conversions
|
--
|
Amortization of debt discounts
|
139,359
|
Balance June 30, 2018, net
|
$ 2,820,936
|
Less current portion June 30, 2018
|
(1,102,936)
|
Total long-term June 30, 2018
|
1,718,000
|
NOTE 4 COMMITMENTS AND CONTINGENCIES
The Company leases facilities and warehouses under operating leases with terms ranging from 12 months to 120 months. The total rent expense recorded during the six-months ended June 30, 2018 was $188,601. The future annual non-cancelable operating lease payments on these leases are as follows:
|
| |
Total Lease Commitments:
|
2018 - remaining
|
$
|
129,593
|
2019
|
|
330,865
|
2020
|
|
339,373
|
2021
|
|
348,106
|
2022
|
|
356,831
|
Thereafter
|
|
1,095,455
|
Total
|
$
|
2,600,223
|
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 5 INVENTORY
|
|
|
| |
|
|
June 30,
2018
|
|
December 31,
2017
|
Raw Materials
|
$
|
191,387
|
$
|
433,463
|
Finished Goods
|
|
396,552
|
|
325,312
|
Total Inventory
|
|
587,939
|
|
758,775
|
Less Reserve for Obsolete Inventory
|
|
(40,000)
|
|
(40,000)
|
Total Inventory (net of reserve)
|
$
|
547,939
|
$
|
718,775
|
NOTE 6 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 $5,650,218 and accumulated deficit of $45,607,710 at June 30, 2018, negative cash flows
8
from operations, and has experienced cash flow difficulties. These factors combined, raise substantial doubt about the Companys ability to continue as a going concern. Managements 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.
NOTE 7 SUBSEQUENT EVENTS
On July 7, 2018 the Company received a draw of $15,000 from a promissory note issued in June of 2018 from a non-related party with a 10% interest rate and a repayment date of September 30, 2018. The note holder has the option to convert the note into common stock at a conversion rate of $0.12 per share.
On July 25, 2018 the Company converted $699,690 of debt to 3,500,000 shares of common stock.
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. MANAGEMENTS 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), FVGR Bolivia S.R.L., ForeverGreen Peru SAC, ForeverGreen (HK) Limited (Hong Kong), Forevergreen Peru, SAC and ForeverGreen Team B.V. (Europe).
During 2017, and through the first six months of 2018, the Company completed its planned consolidation and restructuring of the Company, including reducing overhead costs, streamlining the Company's product offerings, reducing shipping costs, reduction of personnel and consolidating domestic and foreign warehouse and office spaces. These strategies were directed to reduce overhead and debt, streamline domestic and international operations, improve distribution channels and consolidate the Company's product offerings. While gross profits increased, we recorded a net loss for 2017, as well as through 2018. The Company is now seeing the positive impact on the Company's model and its profitability.
Four key differentiators separate ForeverGreen from our competitors in the direct sales and traditional consumer spaces. One is our proprietary marine phytoplankton nutritional component which is sourced through exclusive strategic partnerships in both farming and processing. The second is our patent-pending
Aqueous Molecular Partitioning
(AMP
) technology which renders ingredients water-soluble without the use of chemicals or heat which may compromise the nutritional value or health benefits of many processed foods. Third is our industry exclusive license agreement to the patented ingredients in KetonX
, the flagship product of the Ketopia weight management product line. Fourth is our unique global express model delivery method, enabling the Company to deliver a number of its products to many countries around the world both economically and efficiently.
During the coming year, ForeverGreen intends to empower a health-conscious global community with emphasis on self-care that necessitates mindfulness. To achieve this objective, t
he Company is strengthening its focus on its domestic and international Membership and consumer base by introducing a new and focused marketing effort on creating The Total Health Experience, which revolutionizes how people take care of their health by facilitating the convergence of the Companys nutraceuticals, advanced technologies and most complete entrepreneurial opportunity.
ForeverGreen is dedicated to its Members by continuing to give home business training and mentorship while facilitating accountability so residual income is a reality and is attractive to prospective Members. As our
10
international markets mature, additional ForeverGreen products are expected to 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 with opportunities that include a complete build-out of a Preferred Customer program.
Our major challenge 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.
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, 2018 and 2017.