UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X]

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

For the fiscal year ended December 31, 2016

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)

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]

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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 17,802,341 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 ($0.31) on the last business day of its most recently completed second fiscal quarter (June 30, 2016) was approximately $5,518,726.

The number of shares outstanding of the registrant’s common stock as of April 11, 2017 was 25,692,286.

Documents incorporated by reference:  None

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TABLE OF CONTENTS

PART I

Item 1.	Business	4
Item 1A.	Risk Factors	13
Item 2.	Properties	15
Item 3.	Legal Proceedings	15
Item 4.	Mine Safety Disclosure	15

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters
	And Issuer Purchases of Equity Securities	15
Item 6.	Selected Financial Data	17
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 8.	Financial Statements and Supplementary Data	22
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	43
Item 9A.	Controls and Procedures	43
Item 9B.	Other Information	44

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	44
Item 11.	Executive Compensation	46
Item 12.	Security Ownership of Certain Beneficial Owners and Management
	and Related Stockholder Matters	46
Item 13.	Certain Relationships and Related Transactions, and Director Independence	47
Item 14.	Principal Accounting Fees and Services	48

PART IV

Item 15.	Exhibits, Financial Statement Schedules	49
Signatures		50

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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 I

ITEM 1.  BUSINESS  

Historical Development

ForeverGreen Worldwide Corporation, formerly Whole Living, Inc. (“ForeverGreen Worldwide”), was incorporated in the state of Nevada on March 18, 1999 as Whole Living, Inc. In May of 1999, Whole Living merged with Whole Living Inc., a Utah corporation, which owned the trademark “Brain Garden” and some of the products and formulas presently being marketed by ForeverGreen Worldwide.

On January 13, 2006, Whole Living acquired a 23% interest in ForeverGreen International, LLC. ForeverGreen International is a network marketing company that focuses on whole foods and natural products.

Whole Living, Inc. changed the name of the corporation to “ForeverGreen Worldwide Corporation” on December 14, 2006 and acquired the remaining 77% interest of ForeverGreen International. ForeverGreen International became a wholly-owned subsidiary of ForeverGreen Worldwide. The Brain Garden subsidiary was dissolved after this acquisition.

Our Business

ForeverGreen Worldwide is a holding company that operates through its wholly owned subsidiary, ForeverGreen International, LLC (named alternately in this document as “the Company,” “ForeverGreen,” or “FGI”). ForeverGreen is uniquely positioned in the industry in three important ways. First, ForeverGreen has historically been known for the development, manufacturing and marketing of a comprehensive line of meal replacements shakes, nutritional beverages, and marine phytoplankton products using exclusive and proprietary processes. Secondly, ForeverGreen has developed its global Xpress envelope model with customers in more than 200 countries and territories. Thirdly, ForeverGreen sponsors the exclusive personal development training title The U of YOU which has been enjoyed by tens of thousands around the world.

ForeverGreen specializes in the development, manufacturing and marketing of a comprehensive line of, meal replacements shakes, nutritional beverages, and marine phytoplankton products. Three 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

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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.

The newest edition to the global Xpress model was launched in the fourth quarter of 2016. After months of development ForeverGreen announced their 2.0 global Xpress model headlined with  the unique Prodigy-5. Prodigy-5 includes the groundbreaking TransArmor ™ technology which provides the body with key nutrients including phytoplankton, antioxidants, vitamins and energy.  ForeverGreen partnered with Nutrisorb, LLC, a company dedicated to socially responsible use of nutritional resources that specializes in the development of proprietary ingredients, substances and processes to improve and optimize the absorption by the human body of vitamins, minerals, supplements and foods.  ForeverGreen's license agreement provides the Company with the rights to the proprietary TransArmor ™ technology and gives the Company worldwide exclusivity. As part of the license agreement, Dr. Adam Saucedo and Dr. Balamurali Ambati, the developers of TransArmor ™ technology agreed to help educate ForeverGreen and all its Members on this new technology and exclusive Prodigy-5 product, the first of several planned products featuring TransArmor ™.

In 2016 ForeverGreen also began to transition several existing products into the global Xpress model. FrequenSea, a flag-ship product, will be among the first products changed to the model. The formerly bottled formula will be released in a powder form, 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. Other products being considered are AIM, Pulse-8 and KetonX which would allow them to grow from currently approximate 12 markets, to customers worldwide.

Other products currenly performing in the global Xpress model include the exclusive production and marketing of PowerStrips, a proprietary topical product that is listed with the U.S. Food and Drug Administration as a Class I Medical Device to offer temporary relief of minor aches and pains. These patented topical adhesive strips are light, thin, and inexpensive to ship in a greeting-card sized envelope, making the product available to customers all around the world. Because of this unique product positioning and configuration, the Company has elected to operate FGXpress as the international business model of FGI.

The global introductions of both SolarStrips and BeautyStrips to the FGXpress model have been well received by ForeverGreen Members. SolarStrips are an exclusive raw food product featuring industry exclusive marine phytoplankton in a unique delivery system. BeautyStrips consists of a face mask and a serum, both specially developed with proprietary ingredients to enhance the healthy, youthful appearance of skin.

The U of YOU is a one-day experiential training designed to help us understand the power of creating a life of design, rather than one of default. At ForeverGreen we believe that the people are our best product and the only sustainable element to our success, and that the U of YOU is the actual “product development” process in ForeverGreen. The experience is comfortable, entertaining and humorous, while deeply insightful and inspiring. The U of YOU is designed for everyone, be it for family and relationships, business and money, or even health, hope and joy. We believe it may connect you tangibly to your dreams, while bringing the most meaningful areas of your life into the brightest colors imaginable. The U of YOU is about purpose, passion, and you living your truths. The U of YOU has been shared in multiple countries around the world in multiple languages with our intent to create the same positive results and effect on its audience.

While we relentlessly strive to improve our products, processes and profitability, what truly sets ForeverGreen apart is the value system that underlies every aspect of our operations. We value timelessness over trends. Our products and business practices are consciously crafted so that our employees and worldwide community Members will think of ForeverGreen as a lasting career home, not a “here-today, gone-tomorrow” profit opportunity to be consumed and discarded.

Kindness is more than a catch phrase at ForeverGreen. Our goal is for kindness to be at the core of how we treat everyone who comes in contact with our Company. Although we constantly aim for harmony and excellence, there are days when we disagree or make mistakes. When we discover a misalignment we deal with it directly, but in a

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respectful way that leaves our working relationships intact. We embrace the same growth and profit motives as any successful company, but we insist on using those profits to improve the world around us and touch as many lives as possible for the better. Every ForeverGreen Member and employee is encouraged to actively give back to their local communities through selfless acts of service. We model this expectation as a Company through various corporate outreach initiatives.

The Company disseminates products through a direct sales model known as network marketing or multilevel marketing. This form of direct selling provides entrepreneurial opportunities to individuals, often with significantly lower barriers to entry (such as education, technical experience and startup costs) than most other traditional small business ventures. Although the industry does not escape the controversies that arise in any business environment, it is important to note that this marketing model has delivered many of the world’s most respected products and services for decades to a loyal and stable customer base. In keeping with our corporate philosophy, one of the fundamental objectives of ForeverGreen is to dignify the network marketing/direct sales profession through our conduct and the results we deliver.

The lean and agile direct sales model offers unique business advantages not available to old-paradigm wholesale or consumer product companies. Because our products are sold through a global community of independent business owners, ForeverGreen is not required to carry the overhead burden of a large direct-hire sales force or costly, high-risk inventory stockpiles. The resulting margin contributes to our bottom line performance and also enables us to offer our Members competitive commission incentives.

By design, ForeverGreen has remained strategically positioned in direct sales product categories that have seen consistent growth and deliver a higher share of sales revenue. Wellness and personal products continue to be among the most popular and profitable direct sales items. Growing public concern over food additives, GMO products and the proliferation of food-related health problems suggests to management that demand for our products will remain strong for the foreseeable future. In addition, person-to-person sales, as practiced by ForeverGreen independent Members, accounts for nearly two-thirds of industry-wide sales revenue in the U.S. and as much as 80% worldwide. The key industry indicators we monitor support our assertion that ForeverGreen is in the right space at the right time.

Competition

The market for products designed to enhance physical and mental performance is large and intensely competitive. Our primary competitors include other network marketing companies that manufacture and market herbal remedies, nutritional products and personal care products. We also compete with large traditional retail businesses that offer products in similar categories. To attract positive industry attention and hold sustainable market advantage, we emphasize differentiators such as our company culture, our exclusive access to unique ingredients, the quality and efficacy of our products and the reliability and convenience of our distribution system. We emphasize products that improve health through a diet of whole-food beverages and real, natural products rather than fractionated pills and supplements. We take pride in our commitment to offering clean, all natural, and/or organic products.

Herbal remedies, personal care, and nutritional products can be purchased in a wide variety of channels of distribution. While we believe that consumers appreciate the convenience of ordering products from home through a sales person they know and trust or through a catalog, the buying habits of many consumers indicate they may not wish to change their preference for purchasing products through traditional retail channels. We address this challenge directly in our marketing approach.

We also compete for Members (independent distributors) with other direct selling organizations, many of which have a longer operating history, higher visibility, name recognition, and financial resources. Some of the dominant network marketing companies in our existing markets are Amway Corporation, Herbalife and NuSkin Enterprises, to name a few. We also compete with many smaller network marketing companies that also offer personal care products, health and nutrition products. We compete for new Members on the strength of our product line, leadership training, compensation plan, marketing focus, corporate values and management leadership strengths.

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Products  

ForeverGreen’s mission is to produce and deliver products that improve total health through a diet of whole foods and beverages and high-quality natural products as an alternative to fractionated, processed pills and supplements. We take pride in our commitment to offering all natural, clean, and/or organic products.

The FGXpress model allows ForeverGreen to broaden its global business reach to many more countries. PowerStrips are a listed Class 1 medical device in the United States as a topical product that offers temporary relief of minor aches and pains. The global introductions of both SolarStrips and BeautyStrips to the FGXpress model have been well received by our Members. SolarStrips are an exclusive raw food nutrition supplement product featuring industry exclusive marine phytoplankton in a unique and convenient delivery system. BeautyStrips consist of a face mask and a serum, both specially developed with proprietary ingredients to enhance the healthy, youthful appearance of skin. All FGXpress products ship within our exclusive envelope model, bringing the power of the global economy to everyone’s doorstep.

During the 2016 fourth quarter, the Company launched a new addition to its FGXpress product offering, Prodigy-5. We believe that Prodigy-5 is an all-in-one nutritional shot which provides vitamins, minerals, antioxidants and energy, helping you to stay healthy, nourished, and energized. The Prodigy-5 formula contains specific nutrients based on 40 years of peer reviewed science. Prodigy-5 also works as a catalyst for other nutrients you consume in your foods and other supplements.

Prodigy-5 also works with the new, patent-pending, doctor-invented “TransArmor™ Nutrient Technology” (“TransArmor”) which prepares the body to better absorb and utilize the nutrients, especially those in Prodigy-5.  The TransArmor nutrient technology is a scientific breakthrough created by Doctor Ambati, MD and Doctor Saucedo, MD. This technology uses natural processes of the body by ensuring that specific anatomic regions (mouth and small intestine) are optimized at the moment that nutrients are found in these regions to allows the body to better absorb a specific array of nutrients.

Dr. Ambati teamed up with Dr. Saucedo as university researchers in the areas of eye disease and cardiovascular disease.  Two years ago these doctors joined forces to study and research the global crisis of malnutrition. Using Dr. Saucedo's decades of research into nutrition as a springboard, they developed TransArmor, the revolutionary nutrient tool.  Their belief is that the global crisis of micronutrient malnutrition that our race faces, now truly has a tool equal to the challenge.

In July, 2015 the Company launched the Ketopia product line. Many leading scientists, medical professionals, and nutrition experts agree the ketosis lifestyle is the pinnacle of health and well-being. Ketosis is a natural metabolic state where the body burns fat for energy rather than carbohydrates. The majority of people today have sugar-burning bodies instead of fat-burning bodies. Because of having more balanced blood sugar levels, those with fat-burning bodies typically experience better energy and fewer cravings with the use of Ketopia products.

The ForeverGreen Ketopia line is a three-product regimen consisting of KetonX™, Dough Bites™ and FIXX®. The patented KetonX is a drink that shifts the body into a state of nutritional ketosis within hours. Without KetonX, this shift typically takes days of fasting, detox or extreme diets. The product is a safe and simple way to achieve ketosis without the negative side effects of a typical ketogenic diet. Dough Bites are a cookie dough snack that are high in fiber and prebiotics and act as a "phantom" carb. They are filling, help reduce cravings and keep blood sugars level within the normal range. Finally, FIXX is a chocolate meal replacement shake that gives the body energy. Users are able to track their ketosis levels through ketone testing sticks that are available at any drug store or pharmacy.

We remain committed to providing innovative, natural products to retain exclusivity for our Members and customers. Our products take advantage of the latest in nutritional research and are designed to be easy to use and easy to sell. We believe the efficacy of our products is measurable in their nutritional and health benefits.

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We intend to continue our emphasis as a total lifestyle company focused on bringing to our domestic and international Members and customers our exclusive products.

Product Guarantees

Our 100% customer satisfaction policy allows product returns for all our products that are resalable, subject to a restocking fee. This policy improves our customer and Member satisfaction and brings us in line with Direct Selling Association recommendations. Product returns have averaged less than 2% of sales for the past several years. We also maintain an insurance policy for product liability claims of $1,000,000 USD per claim and $2,000,000 USD annual aggregate limit.

Sales and Marketing

We provide exclusive, innovative nutritional and whole-food products that are eaten or consumed to achieve healthy results within the body. While the nutritional supplement industry, consisting of individually standardized supplements, herbs and the like has been flat in recent years, the ForeverGreen exclusive and proprietary products protected through trade secrets and our proprietary processes and ingredients have experienced significant growth. In addition, the functional foods and products we offer are experiencing favorable growth.

We offer our products online and each Membership purchased also includes a virtual online website. Known as a web office, this is where Members can manage, monitor, and operate their businesses 24 hours a day from any location with internet access. This site is password protected, exclusive to Members and provides access to Company news, order information, commission information, product tracking, product information, and a library of Company documents geared to help them with their business, such as frequently-asked questions and various forms and reference materials. We also offer additional for-purchase tools like SmartBuilder to help enhance their business experience.

In addition, we offer a replicated website model to our Members allowing them to obtain an immediate online presence and personal URL for their business, which they can use as a place to direct potential new Members to learn about the Company and sign up as Members. Features on this website include Company information, video and flash presentations, prospect management and follow-up, online registration of new Members, online product ordering, online customer service and a “contact me” function that allows anyone visiting the site to contact the Member directly via email.

We rely on a network marketing system for the distribution of our products through our independent business owners (referred to as Members by ForeverGreen) and customers. Our revenue depends directly upon the sales efforts of our Members around the world. We distribute our products exclusively through independent Members who have contracted directly with the Company. Members are entitled to purchase products from us for personal use or for resale, depending on their market, and the sales by our Members have the potential to earn the Member commissions. Individuals who join as Members may enroll and sponsor other Members, and may further earn commissions from the resale of products. Our ForeverGreen compensation plan provides many different ways to earn income for our Members.

Distribution

Our main distribution center is located in Lindon, Utah along with the main corporate office. We also have a fulfillment center in Auckland, New Zealand that improves our product delivery with cost savings and efficiencies for our Australian and New Zealand markets. In addition, we have ForeverGreen offices in Costa Rica, Colombia, Chile, and Peru, Singapore, Taiwan, Japan and Mexico, but are using a third party in the Netherlands and Poland to service our Members in the European Union, and a third-party provider to distribute our products throughout Mexico. We buy raw materials from third-party suppliers, manufacture our whole-food products through manufacturing partners and warehouse the bulk food product at our facilities. We service individual product orders

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and ship to individual customers and Members in the United States, and more than 200 countries and territories throughout the world.

The global Xpress model has allowed ForeverGreen to broaden its global business reach to markets which would otherwise be inaccessible.. Several products have experienced proven success through this model.  PowerStrips, SolarStrips and BeautyStrips have been well received by our Members. All three Xpress products ship within our exclusive envelope model, bringing the power of the global economy to everyone’s doorstep.

Members and their customers pay for products prior to shipment, incurring minimal accounts receivables. Members and customers have access to place orders online through the ForeverGreen website or by phone through a growing call center. Typically, Members and customers pay for their product orders by credit card. Less than 5% of our sales are paid for with cash.

Enrollment and Sponsorship

Enrollment and sponsorship activities are encouraged, but not required of our Members. Successful Members will both enroll and sponsor new Members. The sponsoring of new Members creates multiple levels in a network marketing structure. Individuals that a Member sponsors are referred to as “downline,” or “sponsored” Members. If downline Members also sponsor new Members, they create additional levels in the structure, but their downline Members remain in the same downline network as their original sponsoring Member.

Members assist their downline Members to successfully sponsor new Members. While we provide product and Company brochures, magazines, websites, videos and other sales and marketing materials, our greatest success and retention comes from Members who are accountable and responsible for educating and training new Members with respect to our products and how to build and maintain a successful business.

Generally, Members who are new to network marketing invite friends, family Members, and acquaintances to attend conference calls, review websites and marketing materials, or attend personal or company-sponsored meetings. Members with a history in direct sales are quick to invite their contacts within the industry to experience the difference that our Company brings to the network marketing profession. Some people are attracted to become Members after experiencing our products and desiring to enjoy the wholesale pricing that Members receive.

Turnover is a typical aspect of the direct selling or network marketing industry. Our Members understand that to prevent a possible decline in their organization and sales volume, the enrollment, sponsoring and training of new Members is necessary to increase the overall Member force and motivate new and existing Members. We may experience seasonal decreases in Member sponsoring and product sales because of holidays and customary vacation periods. We cannot predict the timing or degree of these enrollment fluctuations because of the number of factors that impact the sponsoring of new Members. We cannot assure that the number, growth or productivity of our Members will be sustained at current levels or increase in the future.

Regular conference calls, the materials available online, training events, corporate events and Member Support offerings help to provide a duplicable business model that help new Members successfully begin their independent contractor business.

Member Contract

A potential Member must enter into a standard Member Agreement which governs the relationship between the Company and the Member in accord with our policies and procedures. Any person may join the Company as a Member to purchase products for personal use or to build a sales organization. In order to become a Member, a person may purchase a non-commissionable online digital Member Kit which includes all the business building websites, multi-language web office and online library. No product purchases are required to become a Member, and large inventory product purchases are discouraged. However, in order to receive compensation as a Member, personal or customer monthly purchases and/or personal customer sales of a certain amount of volume are required.

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Our Member Agreement and Policies and Procedures, which outline the scope of permissible marketing activities, and information on the ForeverGreen compensation plan are posted on our website. Our Member rules and guidelines are designed to provide Members with maximum flexibility and opportunity within the bounds of governmental regulations regarding product claims, network marketing and prudent business policies and procedures. Members are independent contractors and are thus prohibited from representing themselves as our agents or as employees of the Company. Members are obligated to present our products and business opportunity ethically and professionally. Members contractually agree to abide by all local, state and federal laws and regulations pertaining to the advertising, sale and distribution of our products. All advertising must be factual and not misleading and a Member’s account may be terminated for making false claims about the income potential, the compensation plan, or product efficacy.

Members must represent to potential Members that the receipt of commissions is based on sales and substantial efforts. Products may be promoted by personal contact or by literature produced or approved by the Company. In traditional retail environments, our products generally may not be sold, and the business opportunity may not be promoted.

We are not in a position to provide the same level of direction, motivation, and oversight to our Members as we would our own employees because the Members are independent contractors residing across the United States and in many other countries. We review alleged reports of Member misconduct or breach of contract to enforce contract compliance. If we determine that a Member has violated any of the Member Policies or Procedures, we may elect to educate the Member regarding the contract terms or impose sanctions such as warnings, probation, suspension of privileges of Membership, withholding commissions until specified conditions are satisfied, termination of the Member’s rights completely or other appropriate injunctive relief. A Member may voluntarily terminate their Membership at any time.

Compensation Plan

 

We believe the ForeverGreen Hybrid Compensation Plan brings together the best of unilevel and binary compensation plans. Each personally enrolled Member is part of two trees. The Enrollment Tree addresses the unilevel features of the plan, with no limit to how many Members can be enrolled per level. The Placement Tree addresses the binary features of the plan. Each Member can only have two organizational legs, so everyone contributes building their two legs by placing their enrollments underneath.

 

A ForeverGreen Member could begin their commissions earning when their personally invited Member makes the first purchase. Our intention is to ensure all new members know what to do to achieve success in this business; therefore, we introduced the Starter concept. We believe Starter is an easy road map to success in the ForeverGreen business. Each person begins the Starter program by enrolling a Member (PEM) in each of their binary legs. They then work to help and teach the Members they recruited and others in their organization do the same. The next step in the Starter program is to recruit 2 more PEMs, a total of four PEMs recruited into their business. When a person has four active PEMs with a total of 1000 points within 2 levels of their group, they can earn $75 or $150 depending on their personal contribution. Starter is the way to keep the beginner engaged. We believe when everyone is following the same actions the result can be impressive.

            

ForeverGreen also promotes team building. We believe when people work as a team, they can be rewarded for their team actions. The Company pays 8% or 12% of their small leg organization’s purchases weekly. On top of the Team Bonus, leaders also can receive rewards from helping and leading their team. The Company pays a floating Matching Bonus from one to four levels to leaders who achieve various ranks. We also offer lucrative one-time cash bonuses to people who reach new ranks for the first time. These cash bonuses range from $500 to $100,000 depending on the level of their success.

            

Each Company product carries a specified number of commissionable volume, or “points”. Commissions or bonuses are based on a Member’s personal qualification, organizational, and leg commission volumes. A Member

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receives commissions based on a percentage of the sales volume of their downline weekly and monthly. Commission qualification volume points are essentially based upon a percentage of the product’s wholesale cost, net of any sales related taxes. As a Member’s retail business expands, and as they successfully sponsor other Members into the business, both of which expand their businesses, the Member can receive more commissions from the expanded sales volume of the downline. A Member receives weekly commission bonuses by remaining in good standing with the Company and by generating a minimum of 50 points of Personal Volume (PV).

 

The ForeverGreen compensation plan provides weekly payout. To be eligible to participate in the plan, receive bonuses, earn rank advancements, and to keep your carry-over from week to week, it is necessary to have an “active order” for 50 QV (qualifying volume) at all times. To maximize the plan, a member must be “fully qualified” at 100 QV per 4 week period.  With every product purchase, this volume (QV) is “active” for the current weekly pay period plus three more (four weekly periods total). Without an active order, qualification expires after the fourth weekly pay period, which begins on Tuesday at 12 a.m. U.S Mountain Time and ends on Monday at 11:59 p.m. U.S. Mountain Time.

 

As with any business, individual results may vary, and will be based on the Member’s personal capacity, business experience, expertise and level of desire. There are no guarantees concerning the level of success ForeverGreen Members may experience. The examples used in the Company’s training materials are exceptional results, which may not apply to an average Member, and are not intended to represent or guarantee that anyone will achieve the same or similar results.

 

There are several ways for Members to get paid under the Company’s compensation plan. The Starter Bonuses reward duplication. The Team Bonus rewards Members for helping the leg that needs it most through training, mentoring and various forms of business support. There is no limit to how many PEMs can be enrolled. The Rank Advancement Bonus rewards leadership development as a leader. Achieve a new rank once and get the title, achieve it twice and get the bonus. The Matching Bonus rewards activity that supports the business growth of PEMs. ForeverGreen has published a detailed Compensation Plan Manual and supporting collateral training materials to assist Members in building their commission and bonus income.

Trademarks, Patents and Intellectual Property

We have secured, or are in the process of securing, trademark protection in the United States and around the world in markets where we currently do business or where we have a future strategic interest. The Company holds multiple U.S. trademarks and no foreign trademarks. As we continue to expand internationally, trademark protection is increasingly important for brand recognition and Member and consumer loyalty. It is standard Company practice to follow through with ongoing trademark registration in the United States and other countries where we are experiencing growth.

A number of our products utilize proprietary formulations and processes. Although ForeverGreen does not directly hold any patents at this time, a number of our key vendors have secured or applied for patents to maintain exclusivity for the ingredients or integrated products they supply to us. To protect our own intellectual property and proprietary processes that are material to the long term health and profitability of the Company, ForeverGreen makes it a disciplined business practice to manage trade secrets and various forms of confidentiality and non-disclosure agreements.

Our exclusive PowerStrips product is listed as a Class I medical device. ForeverGreen exercises special vigilance in the area of compliance. For this reason we employ a full time compliance team that closely monitors all Company and Member messaging and is empowered to edit or remove all non-compliant language pertaining to our products. This team reports directly to our corporate General Counsel.

Strategic Partnerships

We maintain good relationships with our key vendors to ensure a continuous supply of our key products. During

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2016, we relied on two principal suppliers for our FrequenSea product. Marine Life Sciences, LLC a Nevada limited liability company (MLS) provided the marine phytoplankton and Primal Essence supplied the “AMP” technology used to process additional ingredients that accompany the marine phytoplankton in FrequenSea.

Although there are other providers in the world who claim to produce marine phytoplankton, our sourcing information indicates that the MLS product offers the best quality, the most ideal geographical location and the best harvesting and extraction methods. These factors contribute to the uniqueness and nutritional superiority of the marine phytoplankton component in our products.

In 2007, MLS acquired the worldwide rights to the exclusive blend of marine phytoplankton produced by Unique Sea Farms, Ltd. In 2008 ForeverGreen International entered into a worldwide marketing agreement with MLS, and the parties reviewed the quotas and market conditions to ensure the long-term stability of this key vendor relationship. MLS continues to share research results and other product data with ForeverGreen International and both parties have agreed to protect any proprietary information related to the product. The parties have further agreed to indemnify one another for any claims arising out of any action taken or omission by the other.

We retain the freedom to use any competitive suppliers to garner control over our product costs, quality and lead times for manufacturing and delivery. Our inventory control system ensures appropriate volumes of finished product based on the anticipated movement of each item in our catalog.

Government Regulation

Direct Selling Activities

Direct selling activities are regulated by various federal, state and local governmental agencies in the United States and foreign countries. To our knowledge, the Company’s method of distribution is in compliance in all material respects with the laws and regulations relating to not-for-resale and direct selling activities in the United States, Mexico, Japan, Canada, Singapore, New Zealand, Australia, Germany, the Netherlands, the United Kingdom, and many other markets. These laws and regulations are generally intended to prevent fraudulent or deceptive schemes, often referred to as “pyramids,” “money games,” “business opportunity” or “chain sales” schemes that promise quick rewards for little or no effort, require high entry costs, use high pressure recruiting methods, and/or do not involve legitimate products. The laws and regulations in our current markets often impose certain cancellation/product return, inventory buy-backs and “cooling-off” rights for consumers and Members, require us or our Members to register with a governmental agency impose various regulatory requirements on us.

The purpose of these laws and regulations is to ensure that Members are being compensated for sales of products and not for recruitment of new Members. The extent and provisions of these laws vary from state to state and internationally. International laws may impose significant restrictions and limitations on our business operations. For example, in foreign countries where we have not yet established a local office, our Members and customers purchase product through a not-for-resale program enabling them to receive product for personal consumption, but not to retail the product to customers.

Any assertion or determination that we are not in compliance with existing laws or regulations could potentially have a material adverse effect on our business and results of operations. We cannot assure that regulatory authorities in our existing markets will not impose new legislation or change existing legislation that might adversely affect our business in those markets. Also, we cannot assure that new judicial interpretations of existing law will not be issued that adversely affect our business. Regulatory action, whether or not it results in a final determination adverse to us, has the potential to create negative publicity, with detrimental effects on the motivation and recruitment of our Members and, consequently, on our revenue and net income.

Regulation of Personal Care and Nutritional Food Products

Our products and related marketing and advertising are subject to governmental regulation by various domestic

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agencies and authorities, including the Food and Drug Administration, which regulates food, medical products and cosmetics. The advertising and marketing of our products are regulated by the Federal Trade Commission, which enforces consumer protection laws in regard to truth in advertising. The Consumer Product Safety Commission protects the public from unreasonable risk of injuries and death associated with consumer products, and the United States Department of Agriculture regulates food safety and quality. Similar types of agencies exist in our foreign markets. To date, we have not experienced any governmental actions related to health or safety and food and drug regulations for our products.

Our markets have regulations concerning product formulation, labeling and packaging. These laws and regulations often require us to, among other things, conform product labeling to the language and regulations, and register or qualify products with the applicable government authority or obtain necessary approvals or file necessary notifications for the marketing of such products. Many of our existing markets also regulate product claims and advertising. These laws regulate the types of claims and representations that can be made regarding the capabilities of products. For example, in the United States we are unable to make any claim that our nutritional products will diagnose, cure, mitigate, treat, or prevent disease.

Employees

As of the date of this filing we have 65 full-time employees with some services, employee and management functions being performed by ForeverGreen employees. Many of these employees directly support the Member network. Our employees are not presently covered by any collective bargaining agreement. We believe our relationships with our employees are good, and we have not experienced any work stoppages.

ITEM 1A.  RISK FACTORS  

You should carefully review and consider the risks described below, as well as the other information in this report and in other reports and documents we file with the SEC when evaluating our business and future prospects. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties, not presently known to us, or that we currently see as immaterial, may also occur.  If any of the following risks or any additional risks and uncertainties actually occurs, then our business, financial condition and results of operations could be seriously harmed. In that event, the market price of our common stock could decline and you could lose all or a portion of the value of your investment in our common stock. You should not draw any inference as to the magnitude of any particular risk from its position in the following discussion.

Recent economic conditions have made it more difficult for some companies to raise capital and obtain financing.

The Company continues to attract new Members to join our Company.  However, the Company has a working capital deficit of $6,044,695 and accumulated deficit of $42,746,469 at December 31, 2016, and 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.  Our inability to raise additional capital or to obtain additional financing, if needed, could inhibit our ability to implement our business strategies and meet our goals. This, in turn, could slow the financial momentum the Company is currently experiencing.

We rely solely on one supplier for our marine phytoplankton and PowerStrips products and the loss of, or unexpected interruption in this service would materially adversely affect our results of operations and financial condition.   

A shortage of raw materials or an unexpected interruption of product supply from these suppliers could result in higher prices for these products.  In the event of loss of these suppliers we may no longer be able to continue to offer these products. We may not be able to raise prices sufficiently or quickly enough to offset the negative effects of the loss of product lines, which may adversely affect our results of operations or financial condition.

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Because our direct-to-consumer sales rely on the marketability of key personalities, the inability of a key personality to perform his or her role, or the existence of negative publicity surrounding a key personality, may adversely affect our revenues.

Direct-to-consumer products may be marketed with a key personality through our independent member channels. The inability or failure of a key personality to fulfill his or her role, or the ineffectiveness of a key personality as a spokesperson for a product, a reduction in the exposure of a key personality due to the discontinuance of a marketing program, or otherwise, or negative publicity about a key personality may adversely affect the sales of our product associated with that personality and could affect the sale of other products. A decline in sales would negatively affect our results of operations and financial condition.

The failure of our suppliers to supply quality materials in sufficient quantities, at a favorable price, and in a timely fashion could adversely affect our results of operations.

We buy our raw materials from a variety of suppliers. The loss of any of our principal suppliers or of a supplier that provides any hard-to-obtain materials could adversely affect our business operations. Although we believe that we could establish alternate sources for most of our raw materials, any delay in locating and establishing relationships with other sources could result in product shortages, with a resulting loss of sales and customers. In certain situations we may be required to alter our products or to substitute different materials from alternative sources.

There can be no assurance that suppliers will provide the quality raw materials needed by us in the quantities requested or at a price we are willing to pay.

Because we do not control the actual production of these raw materials, we are also subject to delays caused by interruption in production of materials based on conditions outside of our control, including weather, transportation interruptions, strikes and natural disasters or other catastrophic events.

Product liability claims could harm our business. We may be required to pay for losses or injuries purportedly or actually caused by our products.

Historically we have had no claims and relatively little financial exposure from product claims.  We have experienced difficulty in finding insurers that are willing to provide product liability coverage at reasonable rates due to insurance industry trends and the rising cost of insurance generally. However, we have elected to purchase product liability insurance which minimizes the Company’s financial risk.  If any of our products are found to cause any injury or damage, we believe the liability insurance coverage should substantially minimize the financial impact to the company.  However, there is some risk the Company will be subject an amount of liability associated with any injuries or damages. This liability could be substantial and may exceed our reserves.

Collectively, our officers and directors own a significant amount of our common stock, giving them influence over corporate transactions and other matters and potentially limiting the influence of other stockholders on important policy and management issues.

Our officers and directors, together with their families and affiliates, beneficially owned approximately 29.3% of our outstanding shares of common stock as of April 11, 2017.  As a result, our officers and directors could influence such business matters as the election of directors and approval of significant corporate transactions. Various transactions could be delayed, deferred or prevented without the approval of stockholders, including:

 

·

transactions resulting in a change in control

·

mergers and acquisitions

·

tender offers

·

election of directors

·

proxy contests

 

There can be no assurance that conflicts of interest will not arise with respect to the officers and directors who own shares of our common stock or that conflicts will be resolved in a manner favorable to us or our other stockholders.

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Our expansion into foreign markets exposes our business to risks related to those economies which may result in loss of revenues.

We have entered into agreements with Members and suppliers in foreign countries and we may establish similar arrangements in other countries in the future. As a result, our future revenues may be affected by the economies of these countries. Our international operations are subject to a number of risks, such as, unexpected changes in regulatory environments, import and export restrictions and tariffs, difficulties in staffing and managing international operations, potentially adverse recessionary environments and economies outside the United States, and possible political and economic instability.  

ITEM 2.  PROPERTIES

On September 29, 2015 the Company signed a new ten year lease with WI Commercial West Lindon, LLC, for its offices and warehouse located in Lindon, Utah.  The lease rate for that building is $22,220 per month and the Company is leasing 32,720 square feet.

On October 18, 2016, as part of our expense restructuring initiative, the Company negotiated the exit from the building lease with Lindon LLC in order to consolidate the corporate offices and warehouse all within the same space.  Under the terms of the agreement, the Company agreed to pay $30,000 on October 19, 2016 and 12 monthly payments of $10,000 each beginning in November of 2016.  In addition, the Company agreed to transfer ownership of all tenant improvements (book value of $270,838) and office furnishings (book value of $447,499).

The Company also has a warehouse lease in Ecuador.  The Company leases office space in the countries of Japan, Mexico, Colombia, Costa Rica, Ecuador, Bolivia, Taiwan, and Philippines.

ITEM 3.  LEGAL PROCEEDINGS

The Company is involved in various disputes and legal claims arising in the normal course of our business.  In the opinion of management any resulting litigation will not have a material effect on our financial position and results of operations.

ITEM 4.  MINE SAFETY DISCLOSURE

Not applicable to our operations.

PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is quoted on the OTC Bulletin Board under the symbol “FVRG.”  The following table represents the range of the high and low trading prices of our common stock for each quarter of the 2016 and 2015 years as reported by the OTC Bulletin Board.

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	2016			2015
Fiscal Quarter Ended	High	Low		High	Low
March 31	$ 0.59	$ 0.25		$ 1.02	$ 0.67
June 30	0.46	0.28		1.77	1.00
September 30	0.42	0.30		1.23	0.64
December 31	$ 0.37	$ 0.21		$ 0.74	$ 0.47

Our shares are subject to Section 15(g) and Rule 15g-9 of the Securities and Exchange Act, commonly referred to as the “penny stock” rule.  The rule defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions.  Trading in the penny stocks is subject to additional sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors.  Accredited investors, in general, include certain institutional investors and individuals with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse.  

For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of our securities and must have received the purchaser’s written consent to the transaction prior to the purchase.  Additionally, for any transaction involving a penny stock, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock.  A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the security.  Finally, monthly statements must be sent to the purchaser disclosing recent price information for the penny stocks.  Consequently, these rules may restrict the ability of broker-dealers to trade or maintain a market in our common stock and may affect the ability of shareholders to sell their shares.

Holders

As of April 11, 2017, we had 146 shareholders of record, which does not include shareholders who hold shares in “street accounts” of securities brokers.

Dividends

We have not paid cash or stock dividends and have no present plan to pay any dividends, intending instead to reinvest our earnings, if any.  For the foreseeable future, we expect to retain any earnings to finance the operation and expansion of our business and the payment of any cash dividends on our common stock is unlikely.

Recent Sales of Unregistered Securities

On April 4, 2016, the Board of Directors approved the issuance of 350,000 shares of common stock to Capital Communications, Inc. in consideration for interest expense of $132,300.  We relied on an exemption from the registration requirements provided by Section 4(a)(2) of the Securities Act.

On October 19, 2016, the Board of Directors approved the issuance of 1,000,000 shares of common stock to Vision Money Management in consideration for $300,000.  We relied on an exemption from the registration requirements provided by Section 4(a)(2) of the Securities Act.

Issuer Purchase of Securities

In an isolated transaction, the Company repurchased 1,000,000 shares on November 21, 2016.  The Company issued a convertible note payable to Ya-Ya Legacy Trust in the amount of $1,000,000 in exchange for 1,000,000 shares of Company common stock. The note has an annual interest rate of 6% and the principal amount of the note and all accrued interest is due and payable on or before May 30, 2023.  The note has a conversion feature for common shares at $0.63 per share. As of December 31, 2016 the note has a remaining balance of $1,000,000.  The Company returned the 1,000,000 shares to the treasury.

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ITEM 6.  SELECTED FINANCIAL DATA

Not applicable to smaller reporting companies.

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), 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.  

During 2016 the Company financed its operations with net cash flows from operations, the issuance of promissory notes, and the sale of common stock.  These factors combined, raise substantial doubt about the Company’s ability to continue as a going concern. 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.

 

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.

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Results of Operations

The following chart summarizes the consolidated statements of operations of ForeverGreen Worldwide and Subsidiaries for the years ended December 31, 2016 and 2015.  

	Year ended December 31
SUMMARY OF OPERATING RESULTS	2016	% of Revenues	2015		% of Revenues
Revenues, net	$ 40,279,290			$ 67,127,261
Cost of sales	11,492,807	28.5%	17,652,972		26.3%
Gross profit	28,786,483	71.5%	49,474,289		73.7%
Selling and marketing expenses	17,089,205	42.4%	30,240,630		45.0%
General and administrative expenses	15,770,360	39.2%	21,349,012		31.8%
Total operating expenses	32,859,565	81.6%	51,589,642		76.8%
Net operating loss	(4,073,082)	-10.1%	(2,115,353)		-3.2%
Total other expense	(1,844,732)	-4.6%	(446,753)		-0.7%
Income tax provision (benefit)	(10,674)	0.0%	58,315		0.1%
Net loss	$ (5,907,140)	-14.7%	$ (2,620,421)		-3.9%
Net loss per share (basic and diluted)	$ (0.23)		$ (0.11)

We recognized product revenues of $38,086,511 and other revenues of $2,192,779 for 2016 compared to product revenues of $66,331,924 and other revenues of $795,337 for 2015.  

The Company experienced a 40% decrease in revenues in 2016 over 2015 resulting from an overall Company strategy to restructure expenses.  Some of the cost cutting initiatives implemented resulted in a loss of revenues, but the net effect of the changes was to put the Company in a position for improved profitability.  Our source of revenues is from the sale of various foods, other natural products, member sign up fees, kits, and freight and handling to deliver products to the members and customers.  The FGXpress product offering was responsible for 64% and 81% of sales, in 2016 and 2015, respectively; while The Farmer’s Market product offering represented 36% and 19% of sales in 2016 and 2015, respectively.  The increase in the Farmer’s Market revenue mix for 2016 was primarily driven by the Ketopia product line, which comprises about $6.1 million of the 2015 product revenue and $7.0 million in 2016. The FGXpress product offering is unique to our business as it can be delivered through the US Postal Service via First Class mail, giving the Company a more global sales opportunity than previous products.  In 2016 active Members decreased to 72,470 compared to 132,942 active members in 2015.

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 28.5% of revenues for 2016 compared to 26.3% of revenues for 2015.  The 2016 increase is primarily due to the higher product and shipping costs of our Farmer’s Market products, with KetonX being the most popular.  Typically, the Farmer’s Market products are shipped in a box, instead of an envelope. The Company is able to realize much lower delivery costs with its envelope products.  As the FGXpress product line became a smaller part of the overall revenue mix, the Company in turn saw a higher cost of sales in 2016.

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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.  As the TransArmor™ technology is implemented in additional products, the Company expects the FGXpress product mix to become a larger part of its total revenues.  With this shift to more envelope products, the Company will be able to deliver those products more inexpensively than a corresponding Farmer’s Market product.  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 2016 this expense decreased to 42.4% of revenues compared to 45.0% in 2015.  The decrease is a result of Ketopia becoming a larger part of the revenue mix and how the Ketopia product was marketed. Knowing the product cost was higher, the Company had to manage an offset, higher product costs needed to be offset by lower sales and marketing costs.

The Company management constantly makes a conscious effort to invite and attract direct marketing leaders to our Company.  A direct marketing leader is simply an independent contractor, which we title “Members”, who normally earn a minimum of $200 in personal commissions and have enrolled at least two people.  These leaders are experienced in training others how to build a successful and profitable direct selling business.  During 2016 ForeverGreen spent $131,032 in short-term incentives recruiting new leaders, compared with $239,000 spent in 2015.  The costs associated with this initiative have been recorded as selling and marketing expense.  The number of leaders during 2016 who fit the direct marketing leader description was 7,998.  Of those, 5,595 were still active at the end of the year.  These leaders were able to recruit, enroll, train, and influence their business contacts in a way which positively impacted ForeverGreen product sales.  The Company expects to realize continued benefits from the efforts this year to partner with recognized and respected industry leaders.  

General and administrative expenses increased as a percentage of revenues from 31.8% in 2015 to 39.2% in 2016. The majority of the increase is due to the increased relative cost of employees.  While total cost of employees decreased by $1,890,066, it increased as a percentage of revenue by 4.6% in 2016.  Additionally, the Company incurred some additional one-time costs as it implemented some labor force reduction initiatives.  Several other expenses, including office lease, insurance, professional fees and software programming decreased year over year, but were a larger percentage of the smaller revenue base.  The Company has taken measures during the year to reduce expenses back to levels appropriate for the expected revenues in the future.

 

Total other expense increased for 2016 compared to 2015 by $1,397,979.  The majority of the increase for 2016 was due to expenses related to the Company disposing of significant fixed assets in conjunction with the exit from a building lease.

In 2016 the Company had an income tax benefit of $10,674 compared to a $58,315 income tax expense in 2015. The 2016 tax benefit is comprised largely from foreign taxes, which decreased below zero in the current year.

 

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Liquidity and Capital Resources

	Year ended December 31
SUMMARY OF BALANCE SHEET	2016		2015
Cash and cash equivalents	$ 187,136		$ 495,304
Total current assets	2,294,260		3,994,888
Total assets	5,724,550		7,781,438
Total current liabilities	8,338,955		7,687,664
Long-term debt	5,035,207		1,501,024
Total liabilities	13,374,162		9,188,688
Accumulated deficit	(42,746,469)		(36,839,329)
Total stockholders’ deficit	$ (7,649,612)		$ (1,407,250)

Our total assets decreased to $5,724,550 at December 31, 2016 from $7,781,438 at December 31, 2015. The decrease is primarily due to a decrease in cash of $308,168 and a decrease in Accounts Receivable of $412,159 resulting from the reduced level of revenues, and a decrease in inventory of $546,848 as product was sold while reduced cash flows limited FGI’s ability to replenish inventory levels.  Prepaid Expenses also decreased by $357,656 due to reductions in Prepaid Inventory and Prepaid Rent and an increased reserve against Member Advances resulted in a decrease of $165,521.  Property and equipment increased in 2016 by $68,574 mostly due to capitalization of software upgrades for the Company’s point of sale and commission system.

Our total liabilities at December 31, 2016 were $13,374,162 compared to $9,188,688 at December 31, 2015.  The increase consists of an increase to convertible notes payable of $2,317,369 received from a non-related party, a new promissory note line-of-credit with a balance at December 31, 2016 of $1,240,000, and an increase in accrued expenses of $968,246 due mainly to increases in accrued commissions and accrued VAT taxes payable.  Accounts payable decreased by $297,170 due to lower levels of activity during the year.

At December 31, 2016, the Company had cash and cash equivalents of $187,136, a working capital deficit of $6,044,695 and accumulated deficit of $42,746,469, negative cash flows from operations, and has experienced cash flow difficulties.  This decrease from the 2015 working capital deficit of $3,692,776 was due to the reductions of cash, accounts receivable, member advances, prepaid expenses and inventory defined earlier.  During 2016 the Company financed its operations with net cash flows from operations, the issuance of promissory notes, and the sale of common stock.  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.

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 our shareholders may experience dilution in the value per share of their common stock.

	Year ended December 31
SUMMARY OF CASH FLOWS	2016		2015
Net cash used in operating activities	$ (689,738)		$ (1,761,133)
Net cash used in investing activities	(1,050,741)		(1,649,020)
Net cash provided by financing activities	1,254,833		3,350,913
Effect of foreign currency on cash	177,478		(25,978)
Net decrease in cash	$ (308,168)		$ (85,218)

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The net cash used in operating activities decreased by $1,071,395 in 2016.  This is attributable to significant reductions in revenues and management’s cost reduction initiatives not keeping pace with the decline.  The initiatives included reductions in labor force, negotiating out of building leases, and paying one-time costs associated with the termination of certain contracts.

Net cash used in investing activities decreased by $598,279 in 2016 compared to 2015.  This decrease is due to less fixed asset purchases in 2016 and by the Company disposing of significant fixed assets in conjunction with the exit from a building lease.

Net cash provided by financing activities decreased by $2,096,080 compared to 2015.  This decrease is due to less cash received from note issuances, stock issuances and an increase in payments on notes payable compared to 2015.

Commitments and Obligations

The Company has an agreement with one vendor, Marine Life Sciences, LLC, that supplies 100% of 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 December 31, 2016, the Company has $1,691,660 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, 2016 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 $433,225 as of December 31, 2016 and $40,000 as of December 31, 2015 to present them at their lower of cost or market in our consolidated balance sheets.

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.

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ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

INDEX

Report of Independent Registered Public Accounting Firm

23

Consolidated Balance Sheets

24

Consolidated Statements of Operations and Comprehensive Income

25

Consolidated Statements of Stockholders’ Deficit

26

Consolidated Statements of Cash Flows

27

Notes to the Consolidated Financial Statements

29

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

ForeverGreen Worldwide Corporation

 

We have audited the accompanying consolidated balance sheets of ForeverGreen Worldwide Corporation (“the Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive loss, stockholders’ deficit, and cash flows for each of the years in the two year period ended December 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ForeverGreen Worldwide Corporation as of December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 14 to the consolidated financial statements, the Company has suffered net losses since inception and has accumulated a significant deficit. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 14. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Sadler, Gibb & Associates, LLC

Salt Lake City, UT

April 13, 2017  

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24

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25

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

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ForeverGreen Worldwide Corporation and Subsidiaries
Consolidated Statements of Cash Flows
				December 31, 2016		December 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss			$	(5,907,140)	$	(2,620,421)
Adjustments to reconcile net loss to net cash used in operating activities:
	Depreciation and amortization			1,111,653		828,095
	Loss on extinguishment of debt			422,061		--
	Bad debt expense			158,652		513,468
	Shares issued for interest expense			132,300		--
	Loss on disposal of assets			663,789		--
Changes in operating assets and liabilities:
	Restricted cash			(89,724)		527,261
	Accounts receivable			518,015		(376,719)
	Member advances			6,869		(125,354)
	Prepaid expenses and other assets			553,312		131,191
	Other receivables			(105,856)		--
	Inventory			546,848		(43,780)
	Accounts payable			(297,170)		2,115,546
	Deferred revenue			(5,657)		(84,489)
	Accrued expenses			1,602,310		(2,625,931)
		Net Cash Used in Operating Activities		(689,738)		(1,761,133)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of property and equipment			(1,050,741)		(1,649,020)
		Net Cash Used in Investing Activities		(1,050,741)		(1,649,020)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Bank overdraft payable			(34,903)		31,781
	Payments on notes payable			(291,158)		--
	Payment on convertible note payable			(219,106)		--
	Proceeds from common stock issuance			300,000		1,020,586
	Proceeds from convertible notes payable			900,000		1,720,000
	Proceeds from note payable			600,000		--
	Proceeds from notes payable – related party			--		578,546
		Net Cash Provided by Financing Activities		1,254,833		3,350,913
		Effect of Foreign Currency on Cash		177,478		(25,978)
NET CHANGE IN CASH				(308,168)		(85,218)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD				495,304		580,522
CASH AND CASH EQUIVALENTS AT END OF PERIOD			$	187,136	$	495,304
SUPPLEMENTAL CASH FLOW INFORMATION
	Cash paid for interest		$	177,220	$	291,533
	Cash paid for income taxes			--		--
-continued-   27

ForeverGreen Worldwide Corporation and Subsidiaries
Consolidated Statements of Cash Flows
			December 31, 2016		December 31, 2015
	Conversion of debt and accrued interest for equity	$	--	$	636,645
	Convertible note issued for treasury shares		1,000,000		--
	Beneficial conversion feature		55,000		--
	Discount on notes payable		25,000		--
	Notes payable issued for leasehold improvements		506,158		--
	Convertible notes issued for accrued commissions		636,475		--
The accompanying notes are an integral part of these consolidated financial statements

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FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

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.

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

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FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  –  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 financial statements 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 2.0% 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, Member Advances, and Other Receivables

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.  The Company evaluates the need for an

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FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued

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, 2016 and 2015, 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 prior years, 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 was recorded at December 31, 2015 for uncollectable advances, at December 31, 2016 an allowance of $499,985 was recorded, fully allowing against the advances, leaving a balance of $0 as of December 31, 2016.

Other receivables are related to a lawsuit that resulted in a settlement due to FGI.  The balance receivable at December 31, 2016 was $150,000 and has been fully received in 2017.

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 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, 2016 from convertible debentures in the amount of 13,393,110 were excluded from our 2016 EPS dilutive calculation because their effect would be anti-dilutive.  Potentially dilutive shares at December 31, 2015 from convertible debentures in the amount of 28,757,473 were excluded in the 2015 EPS dilutive 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.

g. Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents.

In 2015 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.  At December 31, 2016, the total amount of this reserve was $152,106, 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,

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FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – 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.

It is our policy to capitalize certain costs incurred in connection with developing or obtaining internal use software. Capitalized software costs are included in “Property, Plant and Equipment” on our consolidated balance sheets and are primarily amortized over a 3-5 year period. Software costs that do not meet capitalization criteria are expensed immediately.

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, 2016 and 2015 is $993,612 and $733,379, respectively.

i. Impairment of 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, 2016 and 2015.

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, 2016 and 2015 there was an allowance for obsolete inventory in the amount of $433,225 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, 2016 and 2015.

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.

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FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – continued

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 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.

n. 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.

o.   Deferred Revenue

The Company recognizes revenues upon the shipment of product. As of December 31, 2016, the Company had received payment of $81,739 for sales which were not shipped as of the period end and as such recorded deferred revenue of $81,739 compared to $87,396 for December 31, 2015.

p.  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.

q.  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.

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FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – continued

r.  Advertising

Advertising cost are expensed as incurred and are presented as part of the general and administrative expense. Advertising expense totaled $102,390 in 2016 compared to $154,203 in 2015.

s.   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.

t. 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 2016 the Company implemented a new credit card processor option to better serve our members world-wide. Due to the Company not having prior experience with this processor, an initial 10% reserve of all processed transactions was implemented.  This is a six-month revolving reserve until the contract is modified. At December 31, 2016, the total amount of this reserve was $152,106.

At the end of 2015, the Company was exiting a relationship with one of its merchant processors who held a $62,382 reserve amount at December 31, 2015.  This amount was subsequently returned to the Company in 2016.

NOTE 3 – INVENTORIES

Inventories for December 31, 2016 and 2015 were classified as follows:

	2016		2015
Raw Materials	$ 1,290,902		$ 1,055,243
Finished Goods	623,117		1,012,399
Total Inventory	1,914,019		2,067,642
Less Reserve	(433,225)		(40,000)
Total Inventory (net of  reserve)	$ 1,480,794		$ 2,027,642

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 $993,612 and $733,379 for the years ended December 31, 2016 and 2015, respectively.

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FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

NOTE 4 – PROPERTY AND EQUIPMENT – continued

Property and equipment consists of the following at December 31, 2016 and 2015:

	2016		2015
Leasehold improvements	$ 600,691		$ 576,002
Office furniture & fixtures	292,492		803,003
Equipment	619,567		637,359
Vehicles	72,154		72,154
Computer equipment	973,944		1,049,981
Computer software	4,250,606		3,210,259
Total Fixed Assets	6,809,454		6,348,758
Accumulated depreciation	(3,384,858)		(2,855,588)
Property and equipment, net	$ 3,424,596		$ 3,493,170

NOTE 5 – INTANGIBLE ASSETS

Intangible assets consist of the following at December 31, 2016 and 2015.

	2016		2015
Customer Base	$ 855,900		$ 855,900
Trademarks	85,439		69,472
Less accumulated amortization	(935,645)		(827,648)
Net intangible assets	$  5,694		$      97,724

Trademark, patent and customer based amortization expense for the years ended December 31, 2016 and 2015 were $92,030 and $93,797, respectively.  The estimated amortization for the next five years is as follows:

2017

$    5,694

2018 and beyond

$          0

NOTE 6 – ACCRUED EXPENSES

Accrued expenses consist of the following at December 31, 2016 and 2015:

		2016		2015
Accrued employee benefits	$	64,669	$	117,555
Accrued taxes		1,094,793		962,055
Accrued member commissions		1,515,123		1,279,429
Other accrued liabilities		1,049,025		398,736
Total	$	3,723,610	$	$ 2,757,775

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FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

NOTE 7 – NOTES PAYABLE

Long-term liabilities are detailed in the following schedules as of December 31, 2016 and 2015:

		2016		2015
Convertible notes payable, related parties	$	1,746,024	$	1,746,024
Notes payable, related parties		--		--
Convertible notes payable		3,740,843		1,423,474
Notes payable		1,240,000		--
Less current portion		(1,691,660)		(1,668,474)
Net Long-Term Liabilities	$	5,035,207	$	1,501,024

All notes are secured with inventory and other business assets as collateral.

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FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

NOTE 7 – NOTES PAYABLE - continued

On March 1, 2016, the Company issued a promissory note for $506,158 in exchange for leasehold improvements to a Company warehouse and offices.  This note has an annual interest rate of 4.66%.  The principal amount of the note and all accrued interest is due and payable on or before March 1, 2018.  As of December 31, 2016 the Company has paid $184,158 toward the note balance, leaving a balance of $322,000 due on this note.

On March 11, 2016, the Company issued two promissory notes for $100,000 each. Both notes have an annual interest rate of 10% and are secured by the Company's inventory. The principal amount of the notes and all accrued interest is due and payable on or before February 28, 2021.  The notes have a conversion feature for common shares at $0.40 per share. Due to the fact that the trading price of our stock was greater than the stated conversion rate of this note, a total discount of $55,000 for the beneficial conversion was recorded against these notes and will be amortized against interest expense through the life of the notes. As of December 31, 2016 interest expense of $55,000 was recorded as part of the amortization of the beneficial conversion feature of these notes. Both of these notes were paid off on May 18, 2016.

On May 27, 2016, the Company issued a promissory note for $500,000. The note has an annual interest rate of 10% and is secured by the Company's inventory. The principal amount of the note and all accrued interest is due and payable on or before December 31, 2018.  The note has a conversion feature for common shares at $0.35 per share.  As of December 31, 2016, the note has a remaining balance of $500,000.

On June 23, 2016, the Company issued a promissory note for $150,000. The note has an annual interest rate of 10% and is secured by the Company's inventory. The principal amount of the note and all accrued interest is due and payable on or before December 31, 2018.  The note has a conversion feature for common shares at $0.35 per share.  As of December 31, 2016, the note has a remaining balance of $150,000.

On July 8, 2016, the Company issued a promissory note for $50,000. The note has an annual interest rate of 10% and is secured by the Company's inventory. The principal amount of the note and all accrued interest is due and payable on or before December 31, 2018.  The note has a conversion feature for common shares at $0.35 per share.  As of December 31, 2016, the note has a remaining balance of $50,000.

On August 10, 2016, the Company entered into an investment agreement with a third party for $525,000, including an original issue discount of $25,000. Pursuant to the agreement, the third party agreed to invest $500,000 and will be paid back the $525,000, in one of the following ways: A royalty of $0.75 for each Prodigy-5 product sold and membership position calculated weekly or a guaranteed minimum weekly cash payment of $6,000 whichever is greater.  As of December 31, 2016 the Company has paid $54,000, leaving a balance of $471,000 due and interest expense of $2,939 was recorded as part of the amortization of the original issue discount. This agreement was terminated on October 21, 2016 and replaced by a new investment agreement, resulting in a loss on extinguishment of $422,061.

On October 21, 2016 the Company terminated the investment agreement dated August 10, 2016 and entered into a new investment agreement with the same third party for $1,025,000.  Pursuant to the agreement, the third party agreed to invest $600,000 (of which $500,000 was paid in the prior period on August 10, 2016 and an additional $100,000 was paid on November 7, 2016).  The $1,025,000 amount due will be paid back in one of the following ways: A royalty of $0.75 for each Prodigy-5 product sold calculated weekly or a guaranteed minimum weekly cash payment of $5,000, whichever is greater.  As of December 31, 2016, the note has a remaining balance of $918,000.

On November 4, 2016, the Company issued a promissory note in the amount of $42,292 in settlement of distributor

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FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

NOTE 7 – NOTES PAYABLE - continued

commissions payable. The note has an annual interest rate of 6% and is secured by the Company's inventory. The principal amount of the note and all accrued interest is due and payable on or before March 30, 2017.  The note has a conversion feature for common shares at $0.40 per share. As of December 31, 2016 the note has a remaining balance of $23,186.

On November 4, 2016, the Company issued a promissory note in the amount of $324,414 in settlement of distributor commissions payable. The note has an annual interest rate of 6% and is secured by the Company's inventory. The principal amount of the note and all accrued interest is due and payable on or before November 30, 2019.  The note has a conversion feature for common shares at $0.40 per share. As of December 31, 2016 the note has a remaining balance of $324,414.

On November 4, 2016, the Company issued a promissory note in the amount of $269,769 in settlement of distributor commissions payable. The note has an annual interest rate of 6% and is secured by the Company's inventory. The principal amount of the note and all accrued interest is due and payable on or before May 30, 2019.  The note has a conversion feature for common shares at $0.40 per share. As of December 31, 2016 the note has a remaining balance of $269,769.

On November 21, 2016, the Company issued a promissory note in the amount of $1,000,000 in exchange for the Company common stock (treasury shares). The note has an annual interest rate of 6% and the principal amount of the note and all accrued interest is due and payable on or before May 30, 2023.  The note has a conversion feature for common shares at $0.63 per share. As of December 31, 2016 the note has a remaining balance of $1,000,000.

NOTE 8 – COMMON STOCK

2016 Issuances

On April 4, 2016, the Company issued 350,000 shares of common stock in consideration for $132,300 as interest expense.

On October 19, 2016, the Company issued of 1,000,000 shares of common stock for $300,000 in cash proceeds.

On November 21, 2016 the Company repurchased 1,000,000 shares of treasury stock through a note payable issuance (see also Note 7).

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.

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FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

NOTE 9 – RELATED PARTY TRANSACTIONS

The Company has note payable agreements with related parties.  See Note 7 for obligations under the agreement.

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,
		2016		2015
Current:
U.S. federal taxes	$	--	$	1,923
State taxes		(2,479)		4,472
International taxes		(8,195)		51,920
	$	(10,674)	$	58,315
Deferred:
U.S. federal taxes	$	--	$	--
State taxes		--		--
International taxes		--		--
		--		--
Provision (benefit) for income taxes	$	(10,674)	$	58,315

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FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

NOTE 10 – PROVISION FOR INCOME TAXES - continued

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,
		2016		2015
Book income (loss) from operations	$	(1,507,873)	$	(906,422)
State tax (benefit) expense		(155,005)		17,659
Permanent items		253,916		402,147
Foreign rate differential		293,186		658,375
Foreign tax credits		(32,714)		(35,846)
Return to provision items		(80,845)		31,450
Other Deferred Adjustments		(103)		--
Change in valuation allowance		1,218,764		(109,048)
Total provision for income taxes	$	(10,674)	$	58,315

The effective tax rate was 0.24% and negative 2.19% for the years ended 2016 and 2015, respectively.

Net deferred tax assets consist of the following components as of:

		December 31,
		2016		2015
Net operating loss carry forwards	$	8,335,504	$	7,289,516
Accrued commissions		316,176		369,766
Inventory differences		288,236		87,288
Employee accruals		25,214		37,635
Depreciation and amortization		(701,012)		(641,511)
U.S. federal credits		178,673		143,955
Allowance for doubtful accounts		194,944		133,029
Other		29,589		28,882
Valuation allowance		(8,667,324)		(7,448,560)
Net deferred taxes	$	--	$	--

The Company assesses the need for a valuation allowance against its deferred income tax assets at December 31, 2016. Factors considered in this assessment include recent and expected future earnings and the Company’s liquidity and equity positions. As of December 31, 2016, and 2015, the Company has determined that a valuation allowance is necessary against the entire amount of its net deferred income tax asset.

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FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

NOTE 10 – PROVISION FOR INCOME TAXES - continued

As of December 31, 2016, the Company has U.S. federal and state net operating loss carry forwards of $21,365,507 and 21,424,632, 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 to 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 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 leases facilities and warehouses under operating leases with terms ranging from 12 months to 60 months. The annual non-cancelable operating lease payments on these leases are as follows:

Total Lease Commitments:
2017	$	329,934
2018		301,564
2019		283,585
2020		292,093
2021		300,826
Total	$	1,508,002

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.

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FOREVERGREEN WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

NOTE 12 – EMPLOYEE BENEFIT PLAN

 

The Company sponsors an employee benefit plan under Section 401(k) of the Internal Revenue Code. This plan covers 100 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 2016 and 2015 were $141,733 and $142,149 respectively.

NOTE 13 – CONCENTRATION OF RISK

The Company purchased two significant products from two separate independent suppliers during the years ended December 31, 2016 and 2015.  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 $6,044,695 and accumulated deficit of $42,746,469 at December 31, 2016, negative cash flows from operations, and has experienced 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.

NOTE 15 – SUBSEQUENT EVENTS

In accordance with ASC 855-10, the Company management reviewed all material events through the date of this report and noted no material subsequent events to report.

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ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING

AND FINANCIAL DISCLOSURE

We have not had a change in or disagreement with our independent registered public accounting firm on accounting financial disclosure during the past two fiscal years.

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 our controls were ineffective as of December 31,2016.

Notwithstanding this finding of ineffective disclosure controls and procedures, we concluded that the consolidated financial statements included in this Form 10-K 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.

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, 2016, 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.  Based upon that framework, management concluded that our internal control over financial reporting had material weaknesses and was ineffective as of December 31, 2016. A material weakness is a deficiency, or combination thereof, in internal control over financial reporting, such that there is a

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reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

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.

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, 2016.  

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.

ITEM 9B.  OTHER INFORMATION

None.

PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

Our directors and executive officers and their respective ages and positions and biographical information are presented below.  Our bylaws require three directors who serve until our next annual meeting or until each is succeeded by another qualified director.  Our executive officers are chosen by our board of directors and serve at its discretion.  There are no existing family relationships between or among any of our executive officers or directors.

Name	Age	Position Held	Term of Director
Ronald K. Williams	55	Chairman of the Board President Chief Executive Officer	From January 2006 until our next annual meeting
Jack B. Eldridge, Jr.	53	Chief Financial Office Treasurer
George H. Brimhall II	75	Director	From April 2008 until our next annual meeting
John S. Clayton	52	Director Secretary	From April 2008 until our next annual meeting

Ronald K. Williams – Mr. Williams was appointed as our President and CEO in January 2006 and was appointed Secretary and Treasurer in March 2013.  He resigned as Secretary and Treasurer on February 27, 2014.  Mr. Williams was an original founder of Whole Living in 1998.  He previously served as Director, President and CEO of Whole Living from November 1998 to October 2002.   He formed and he launched ForeverGreen International, LLC operations in May 2004.  He started in the network marketing industry in the 1980's as a member for NuSkin International and learned the trade and business with them.  He then went on to Neways International and became

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its Vice-president of Sales and Marketing.  Then he served as a Senior Executive at Young Living Essential Oils.

Jack B. Eldridge, Jr. – Mr. Eldridge was appointed as our Chief Financial Officer in September 2013 and he was appointed as Treasurer in February 2014.  He is a licensed Certified Public Accountant and has over twenty-five years of international experience with large companies where he conducted accounting and reporting activities in foreign countries for the international companies.  He also guided these companies as they prepared and launched operations in new foreign markets.

From March 2011 to the September 2013 Mr. Eldridge was employed as the International Controller of Max International, LLC, a company that sells nutritional supplements.  From October 2000 to February 2011 he was employed as the Director of Finance – International Controller of Neways Services, Inc., a division of Neways International, a networking company offering advanced nutritional, personal care, and household products.  He earned a Bachelor of Science in Accounting and a Master of Business Administration, both at Brigham Young University located in Utah.

George H. Brimhall II – Mr. Brimhall was appointed as a Director in April 2008.  Since 1974 he has been self-employed with GNS Development Corporation which has a business plan focused on commercial recreational development.  

John S. Clayton – Mr. Clayton was appointed as a Director in April 2008 and he was appointed as Secretary in February 2014.  Since 2002 he has been self-employed with First Equity Holdings Corp., an investment company.  

During the past ten years none of our executive officers have been involved in any legal proceedings that are material to an evaluation of their ability or integrity; namely:  (1) filed a petition under federal bankruptcy laws or any state insolvency laws, nor had a receiver, fiscal agent or similar officer appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing; (2) been convicted in a criminal proceeding or named subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) been the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him or her from or otherwise limiting his/her involvement in any type of business, securities or banking activities; or (4) been found by a court of competent jurisdiction in a civil action, by the SEC or the Commodity Futures Trading Commission to have violated any federal or state securities law, and the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended, or vacated.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers and persons who own more than ten percent of our common stock, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock.  Officers, directors and ten-percent or greater beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file.  Based upon a review of those forms and representations regarding the need for filing for the year ended December 31, 2016, we believe all reports were filed timely.

Code of Ethics

We have not adopted a code of ethics for our principal executive and financial officers.  Until we establish a code of ethics, our management intends to continue to promote honest and ethical conduct, full and fair disclosure in our reports to the SEC, and compliance with applicable governmental laws and regulations.  

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Corporate Governance

We do not have a standing nominating committee for directors, nor do we have an audit committee with an audit committee financial expert serving on that committee.  Our entire board of directors, including Messrs. Williams, Brimhall and Clayton, act as our nominating and audit committee.

ITEM 11.  EXECUTIVE COMPENSATION

Executive Compensation

The following tables show the compensation paid to our named executive officers in all capacities during the years ended December 31, 2016 and 0.

SUMMARY COMPENSATION TABLE
Name and Principal Position	Year	Salary	All Other Compensation (1)	Total
Ronald K Williams, CEO	2016	$ 210,105	$ 305,317	$ 515,422
	2015	210,105	352,493	562,598
Jack B Eldridge, CFO	2016	165,307	21,265	186,572
	2015	$ 153,519	$ 20,587	$ 174,106
(1) Represents sales and growth incentives and company provided health benefits.

We do not have any employment contracts with the above named executive officers.  We do not offer a retirement benefit plan to our executive officers, nor have we entered into any contract, agreement, plan or arrangement, whether written or unwritten, that provides for payments to a named executive officer at or in connection with the resignation, retirement or other termination of a named executive officer, or a change in control of the company or a change in the named executive officer’s responsibilities following a change in control.

Outstanding Equity Awards

The named executive officers did not have any outstanding equity awards at December 31, 2016.

Compensation of Directors

We do not have any standard arrangement for compensation of our directors for any services provided as director, including services for committee participation or for special assignments.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Securities Authorized under Equity Compensation Plans

We did not have any equity compensation plans in effect at December 31, 2016.

Beneficial Owners

The following tables set forth the beneficial ownership of our management and any other person or group who beneficially owns more than 5% of our voting common stock.  Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.  Except as indicated by footnote, the persons named in the table below have sole voting power and investment power with

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respect to the shares of common stock shown as beneficially owned by them.  The percentage of beneficial ownership is based upon 25,692,285 shares of common stock outstanding as of April 11, 2017.

MANAGEMENT
Name of beneficial owner	Amount and nature of beneficial ownership	Percent of class
Ronald K. Williams	1,883,128	7.3
Jack B. Eldridge, Jr.	222,764	Less than 1%
George H. Brimhall II	3,859,404 (1)	15.0
John S. Clayton	1,574,648 (2)	6.1
All executive officers and directors as a group	7,539,944	29.3
(1)    Represents 1,796,439 shares held by Mr. Brimhall and his spouse, 1,905,965 shares held by GBB Trust and 157,000 shares held by G&B Family, LLC.
2)    Represents 407,022 shares held by Mr. Clayton and 1,167,626 shares held by his company, First Equity Holdings Corp.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE  

Related Party Transactions

The following information summarizes transactions we have either engaged in for the past two fiscal years or propose to engage in, involving our executive officers, directors, more than 5% stockholders, or immediate family members of these persons.  These transactions were negotiated between related parties without “arm’s length” bargaining and, as a result, the terms of these transactions may be different than transactions negotiated between unrelated persons.

As of December 31, 2016 the Company owed a total amount of $1,501,024 in principal with no accrued interest to John S. Clayton, our Director and Secretary.

As of December 31, 2016 the Company owed a total of $245,000 in principal plus $85,903 of accrued interest to George H. Brimhall II, our Director.  During 2010 the Company borrowed $45,000 from Mr. Brimhall and issued a convertible note payable with a conversion rate of $0.15 per share, interest at 14% and payable on December 31, 2015.  The Company borrowed an additional $200,000 from Mr. Brimhall in 2011 with a conversion rate of $0.20 per share, interest at 14% and payable on December 31, 2015.  On March 1, 2016 the Company signed an addendum extending the Brimhall note of $45,000 and the note of $200,000 to December 31, 2017.

Director Independence

We do not have an independent director, as defined under NASDAQ Stock Market Rule 5605(a)(2), serving on our board.  This rule defines persons as “independent” who are neither officers nor employees of the company and have no relationships that, in the opinion of the board of directors, would interfere with the exercise of independent judgment in carrying out their responsibilities as directors.  

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ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

Accountant Fees

The following table presents the aggregate fees billed for each of the last two fiscal years by our independent registered public accounting firm, Sadler, Gibb and Associates, LLC in connection with the audit of our financial statements and other professional services rendered by the accounting firm.

	2016		2015
Audit fees	$  97,500		$  97,500
Audit-related fees	0		0
Tax fees	0		$2,890
All other fees	$           0		$  1,630

Audit fees represent fees for professional services rendered by our independent registered public accounting firm for the audit of our annual financial statements and review of the financial statements included in our Forms 10-Q or services that are normally provided by our principal accountants in connection with statutory and regulatory filings or engagements.

Audit-related fees represent professional services rendered for assurance and related services by the accounting firm that are reasonably related to the performance of the audit or review of our financial statements that are not reported under audit fees.  

Tax fees represent professional services rendered by the accounting firm for tax compliance, tax advice, and tax planning.  

All other fees represent fees billed for products and services provided by the accounting firm, other than the services reported for the other three categories.

Pre-approval Policies

We do not have a standing audit committee currently serving and as a result our board of directors performs the duties of an audit committee.  Our board of directors will evaluate and approve in advance, the scope and cost of the engagement of an accounting firm before the accounting firm renders audit and non-audit services.  We do not rely on pre-approval policies and procedures.

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PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)(1)

Financial Statements

The audited financial statements of ForeverGreen Worldwide Corp. are included in this report under Item 8 on pages 22 through 43.  

(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

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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:  April 13, 2017

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:  /s/ Ronald K. Williams          Ronald K. Williams         Chairman of the Board,         President, Chief Executive Officer	Date:  April 13, 2017
By:  /s/ Jack B. Eldridge, Jr.       Jack B. Eldridge, Jr.       Chief Financial Officer, Treasurer	Date:  April 13, 2017
By:  /s/ John S. Clayton         John S. Clayton         Director, Secretary	Date:   April 13, 2017

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