Attached files

file filename
EX-31 - 302 CERTIFICATION OF RONALD K. WILLIAMS - FOREVERGREEN WORLDWIDE CORPex311.htm
EX-31 - 302 CERTIFICATION OF JACK B. ELDRIDGE, JR. - FOREVERGREEN WORLDWIDE CORPex312.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-K/A

Amendment No.1


[X]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014


OR

[  ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For transition period ___ to ____


Commission file number: 000-26973


FOREVERGREEN WORLDWIDE CORPORATION

(Exact name of registrant as specified in its charter)

NEVADA                                                                                    

(State or other jurisdiction of incorporation or organization)

87-0621709                                        

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

644 NORTH 2000 WEST, LINDON, UTAH           

(Address of principal executive offices)

84042         

(Zip Code)


Registrant’s telephone number:  (801) 655-5500


Securities registered under Section 12(b) of the Act:  None


Securities registered under Section 12(g) of the Act:  Common Stock


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes [   ]   No [X]


Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Yes [   ]   No [X]


Indicate by check mark whether the registrant (1) 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 if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [X]




1




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


Large accelerated filer [  ]

Non-accelerated filer [  ]

Accelerated filed [  ]

Smaller reporting company [X]


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [  ]   No [X]


The aggregate market value of the 13,533,561 shares of the registrant’s voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold ($1.17) on the last business day of its most recently completed second fiscal quarter (June 30, 2014) was approximately $15,834,266.



The number of shares outstanding of the registrant’s common stock as of March 4, 2015 was 23,596,951.


Documents incorporated by reference:  None






2




TABLE OF CONTENTS


PART II


Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

4

Item 9A.  Controls and Procedures

9



PART IV

Item 15.  Exhibits, Financial Statement Schedules

10

Signatures

11





EXPLANATORY NOTE


Pursuant to a limited review of our reports by the Securities and Exchange Commission (“SEC”), the SEC has requested that we amend this annual report for the year ended December 31, 2014 to expand our disclosures to quantify and discuss in more detail our increased revenues for the 2014 year. (See “Results of Operations” in Item 7).   In addition, the SEC requested that we revise Item 9A to clarify the effectiveness of our internal control over financial reporting.  Other than the changes resulting from these revisions, the disclosures in this amended report are as of the initial filing date of March 24, 2015 and this report does not include subsequent events.





3




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


FORWARD LOOKING STATEMENTS


The Securities and Exchange Commission (“SEC”) encourages 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.



PART II


ITEM 7.  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), and FG International LLP (India).  


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


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.


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


To keep pace with our market and product growth, we anticipate the need to expand our international logistics centers. The rewards of this strategy include increased sales performance and diversified market incomes. International expansion is very expensive and profitability in a given foreign country depends on key Members who

can rapidly ramp up their business growth and volume in the target region.

 



4





Results of Operations


The following chart summarizes the consolidated statements of operations of ForeverGreen Worldwide and Subsidiaries for the years ended December 31, 2014 and 2013.  


 

Year ended December 31

SUMMARY OF OPERATING RESULTS

2014

% of Revenues

2013

% of Revenues

Revenues, net

$  58,341,422

 

$  17,757,388

 

Cost of sales

12,470,044

21.0%

4,749,298

26.7%

Gross profit

45,871,378

78.6%

13,008,090

73.3%

Selling and marketing expenses

29,740,084

51.0%

7,832,057

44.1%

General and administrative expenses

14,449,328

24.8%

4,793,204

27.0%

Total operating expenses

44,189,412

75.7%

12,625,261

71.1%

Net operating income

1,681,966

2.9%

382,829

2.2%

Total other expense

(565,795)

-1.0%

(265,987)

-1.5%

Income tax provision

87,459

.1%

--

0.0%

Net income

1,028,712

1.8%

116,843

.7%

Net income per share (basic and diluted)

 $             0.05

 

$             0.01

 


We recognized product revenues of $58,267,466, royalty revenues of $5,029, and $68,927 other revenues for 2014 compared to product revenues of $17,466,415, royalty revenues of $290,973, and $0 other revenues for 2013.  We recognize revenue upon shipment of a sales order.


The Company experienced a 229% increase in revenues in 2014 over 2013 resulting from a quarter over quarter increase in revenues. Our source of revenues is from the sale of various foods, other natural products, member sign up fees, kits, freight and handling to deliver products to the members and customers. This increase in revenues for 2014 is directly related to the increased number of members and their business.  In 2013 we had 36,216 active Members.  In 2014 that number jumped dramatically to 139,077 active Members, which is a 284% increase.  This increase very closely reflects the revenue growth of 229%.   In addition, the significant increase in revenues is related to our FGXpress products which began to be released for purchase at the end of 2012.  This product offering is unique to our business as it could be delivered through the US Postal Service via First Class mail, giving the Company a more global sales opportunity than previous products.  


Cost of sales consists primarily of the cost of procuring and packaging products, and the cost of shipping product to our international subsidiaries and warehouses and to our Members, plus credit card sales processing fees.  Cost of sales was approximately 21.0% of revenues for 2014 compared to 26.7 % of revenues for 2013.  The 2014 decrease is primarily due to decreasing our product and shipping costs.  During 2014, we were able to optimize pricing with several key vendors.  Product costs also decreased because the Company’s sales mix was more heavily weighted towards FGX PowerStrips.  The product and shipping costs for this product line is lower than our other FGI product lines.


Management continues to negotiate better costs and terms with our key vendors to lower our cost of goods sold.   




5




New products have been and will continue to be introduced to bolster Member recruiting and product sales.  In addition, management intends to improve our marketing plan to enhance overall profitability.  Our management will continue to scrutinize expenses related to our operating activities and order fulfillment to determine appropriate actions to take to reduce these costs.


Selling and marketing expenses include sales commissions paid to our members, special incentives, costs for incentive trips and other rewards incentives.  In 2014 this expense grew to 51% of revenues compared to 44.1% in 2013.  The increase is a result of two major factors; a) attracting additional leaders to the Company and b) the transition from the legacy ForeverGreen (FGI) marketing plan to the new more aggressive FGX marketing plan.  


During 2014, Company management made a conscious effort to invite and attract significant direct marketing leaders to our Company.  A direct marketing leader is simply an independent contractor, which we title “Members”, who normally earns a monthly sales commission.  These leaders are experienced in training others how to build a successful and profitable direct selling business.  During 2014 ForeverGreen spent $1.4 million in short-term incentives recruiting new leaders.  These leaders were able to recruit, enroll, train, and influence their business contacts in a way which positively impacted ForeverGreen product sales.  The costs associated with this initiative have been recorded as selling and marketing expenses.  This strategy has been hugely successful as evidenced by the convincing increase in revenues.  The Company expects to realize continued benefits from the efforts this year to partner with recognized and respected industry leaders.  


General and administrative expenses decreased as a percentage of revenues from 27.0% in 2013 to 24.8% in 2014.  The majority of the dollar increase is due to hiring more employees, the occupation of new corporate office space, professional fees, and increased travel cost.  Additionally, the Company started to make a matching contribution to the employee benefit plan.


Total other expense increased for 2014 compared to 2013 by $299,809.  The majority of the increase is due to a loss on the settlement of a prior year claim in 2014, not having gains on debt conversions or sale of assets as the Company did in 2013, and miscellaneous other expenses.


In 2014 the Company had an income tax provision of $87,459 compared to $0 in 2013.  Even though the Company has a large net operating loss, the Company had to expense the $87,459 due the alternative minimum tax law.


For the first time in Company history, the Company has generated annual net income in excess of $1 million.


Liquidity and Capital Resources


 

Year ended December 31

SUMMARY OF BALANCE SHEET

2014

 

2013

Cash and cash equivalents

$     580,522

 

$        284,741

Total current assets

4,743,432

 

1,925,100

Total assets

7,709,633

 

2,699,519

Total current liabilities

8,086,341

 

4,291,881

Long-term debt

--

 

2,009,156

Total liabilities

8,086,341

 

6,301,037

Accumulated deficit

(34,218,908)

 

(35,247,620)

Total stockholders’ deficit

$      (376,708)

 

$   (3,601,518)





6




Our total assets increased to $7,709,633 at December 31, 2014 compared to $2,699,519 at December 31, 2013. The increase is primarily due to an increase in inventory, purchase of property and equipment, and cash and cash equivalents.


Our total liabilities at December 31, 2014 were $8,086,341 compared to $6,301,037 at December 31, 2013.  We note a major factor in the increase of current liabilities is the fact that debt of approximately $1.5 million is now due within the next twelve months.  The total liability increase reflects a net increase of accounts payable of $994,802 due to increased inventory purchases to support increasing revenues and supporting a much larger volume of business on a day to day basis.  Net deferred revenue decreased by $233,956 due to increased efficiency of shipping orders to our Members. Accrued expenses increased by $1,517,863 due to increased commissions payable resulting from higher revenues from our Members.  A net decrease in notes payable of $509,922 was due to a non-related party converting their convertible note payable and the Company paying off a note payable.


At December 31, 2014 the Company had cash and cash equivalents of $580,522, with a working capital deficit of $3,342,909.  This increase from the 2013 deficit of $2,366,781 was due to management investing in more assets, improving our information systems, expanding into new markets and reducing debt.  During 2014 the Company financed its operations with net cash flows from operations and the sale of common stock.


Management anticipates that future additional capital needed for cash shortfalls will be provided by either debt or equity financing.  We may pay these loans with cash, if available, or convert these loans into common stock.  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.  


 

Year ended December 31

SUMMARY OF CASH FLOWS

2014

 

2013

Net cash provided by operating activities

$     1,432,110

 

$        127,275

Net cash used in investing activities

(2,395,328)

 

(438,267)

Net cash provided by financing activities

1,896,384

 

480,706

Effect of foreign currency on cash

(637,385)

 

25,774

Net increase in cash

$       295,781

 

$          195,488


The net cash provided by operating activities increased by $1,304,835 in 2014.  This increase is directly attributable to an increase in commissions payable and accounts payable.  Both are reflective of the increase in revenues.  Net cash used in investing activities increased by $1,957,061 in 2014.  This increase is due to the increase in capitalized computer software, capitalized computer hardware, and lease hold improvements for the new headquarters in Lindon Utah.  Net cash provided by financing activities increased by $1,415,678.  This increase is due to the proceeds from the sale of 2,000,000 shares of common stock. The effect of foreign currency on cash changed by $663,159 from 2014 to 2013.  This change is attributable to the Company expanding its operations into new international markets increasing its exposure to foreign exchange translation variances.


Commitments and Obligations


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




7





As of December 31, 2014 the Company has $1.5 million 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


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 December 31, 2014 and determined no adjustment to long-lived assets was needed.


The Company adjusts its inventories to lower of cost or market. Additionally we adjust the carrying value of our inventory based on assumptions regarding future demand for our products and market conditions. If future demand and market conditions are less favorable than management’s assumptions, additional inventory write-downs could be required. Likewise, favorable future demand and market conditions could positively impact future operating results if previously written down inventories are sold. We have obsolete and slow moving inventories which have been adjusted downward $40,000 and $5,660 to present them at their lower of cost or market in our consolidated balance sheets as of December 31, 2014 and December 31, 2013, respectively.


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.







8




ITEM 9A.  CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures


Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, management 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 as of December 31, 2014, these disclosure controls and procedures were effective.   


Management’s Annual Report on Internal Control over Financial Reporting


Our management is responsible to establish and maintain adequate internal control over financial reporting.   Our Chief Executive Officer and Chief Financial Officer are responsible to design or supervise a process that provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  The policies and procedures include:

maintenance of records in reasonable detail to accurately and fairly reflect the transactions and dispositions of  assets,

reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with  generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and directors, and

reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.


Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations, including the possibility of human error and circumvention by collusion or overriding of controls.  Accordingly, even an effective internal control system may not prevent or detect material misstatements on a timely basis.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.


For the year ended December 31, 2014, our management has relied on the Committee of Sponsoring Organizations of the Treadway Commission (COSO), “Internal Control - Integrated Framework,” to evaluate the effectiveness of our internal control over financial reporting.  In the first quarter of December 31, 2013 we identified areas of ineffectiveness in our internal controls over financial reporting and during early 2013 we implemented changes to our accounting system maintenance control, vendor payable and expenditure control and communications between departments.  For the year ended December 31, 2014, management has determined that our internal controls over financial reporting were effective.  


Changes in Internal Controls over Financial Reporting


Our Chief Financial Officer has determined that there were no changes made in the implementation of our internal controls over financial reporting during the fourth quarter of the year ended December 31, 2014.  


This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting because as a small reporting company we are not subject to that requirement.






9




PART IV


ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES


(a)(1)

Financial Statements


The audited financial statements of ForeverGreen Worldwide Corp. are not included in this amended report.


(a)(2) Financial Statement Schedules


Financial statement schedules are not included in this amended report.


(a)(3)

Exhibits


3 (i)

Articles of incorporation, as revised (Incorporated by reference to exhibit 3.1 for Form 8-K, as

amended, filed December 18, 2006)

3(ii)

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

18, 2006)

10.1

Lease agreement between ForeverGreen International LLC and Big Stick Enterprises, LLC, dated

March 1, 2014.

(Filed March 24, 2015)

21.1

Subsidiaries of ForeverGreen (Filed March 24, 2015)

31.1

Chief Executive Officer Certification

31.2

Chief Financial Officer Certification

32.1

Section 1350 Certification  (Filed March 24, 2015)

101.INS

XBRL Instance Document (Filed March 24, 2015)

101.SCH

XBRL Taxonomy Extension Schema Document (Filed March 24, 2015)

101.CAL

XBRL Taxonomy Calculation Linkbase Document (Filed March 24, 2015)

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document (Filed March 24, 2015)

101.LAB

XBRL Taxonomy Label Linkbase Document (Filed March 24, 2015)

101.PRE

XBRL Taxonomy Presentation Linkbase Document (Filed March 24, 2015)

 

 






10




SIGNATURES


Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized


FOREVERGREEN WORLDWIDE CORPORATION



By:  /s/Ronald K. Williams

         Ronald K. Williams, President




Date:  December 10, 2015



 





11