SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For Quarter Ended: March 31, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 0-26973
Whole Living, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 87-0621709
--------------------------------- ---------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
629 East 730 South, Suite 201, American Fork, UT 84003
- ------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 772-3300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of May 1, 2000, the Registrant had a total of 11,109,000 shares of
common stock issued and outstanding.
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Whole Living Inc.
American Fork, Utah
We have reviewed the accompanying condensed balance sheet of Whole Living, Inc.
as of March 31, 2000 and the related condensed statements of income and cash
flows for the period then ended.
These financial statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet as of December 31, 1999, and the related statements
of income, retained earnings, and cash flows for the year then ended (not
presented herein); and in our report dated March 3, 2000, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed balance sheet as of December
31, 1999, is fairly stated, in all material respects, in relation to the balance
sheet from which it has been derived.
The accompanying statements of operations and cash flows for the period ended
March 31, 1999 were not audited or reviewed by us and, accordingly, we do not
express an opinion on them.
Crouch, Bierwolf & Chisholm
May 10, 2000
2
<PAGE>
<TABLE>
Whole Living, Inc.
Balance Sheets
<CAPTION>
ASSETS
March 31 December 31
2000 1999
------------------ ----------------
CURRENT ASSETS
<S> <C> <C>
Cash $ 232,365 $ 183,069
Accounts receivable 7,149 2,548
Inventory 455,660 355,082
Prepaid expenses 23,721 46,729
------------------ ----------------
Total Current Assets 718,895 587,428
------------------ ----------------
PROPERTY & EQUIPMENT, Net 314,394 295,485
------------------ ----------------
OTHER ASSETS
Goodwill, Net 33,588 34,636
Deposits 11,506 11,506
------------------ ----------------
Total Other Assets 45,094 46,142
------------------ ----------------
TOTAL ASSETS $ 1,078,383 $ 929,055
================== ================
The accompanying notes are an integral part of these financial statements
3
<PAGE>
Whole Living, Inc.
Balance Sheet continued
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31 December 31
2000 1999
------------------ ----------------
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 183,886 $ 328,478
Accrued expenses 245,740 241,556
Current portion of long-term liabilities 1,505,123 884,721
------------------ ----------------
Total Current Liabilities 1,934,749 1,454,755
------------------ ----------------
LONG TERM LIABILITIES
Notes payable-related party 1,496,890 840,000
Notes payable 6,169 41,298
Capital lease obligations 6,184 7,905
Less current portion (1,505,123) (884,721)
------------------ ----------------
Total long term Liabilities 4,123 4,482
------------------ ----------------
TOTAL LIABILITIES 1,938,872 1,459,237
------------------ ----------------
STOCKHOLDERS' EQUITY
Common stock, authorized 50,000,000 shares
$.001 par value, issued 11,109,000 shares,
and outstanding 10,709,000 10,709 10,709
Additional paid in capital 1,213,249 1,213,249
Retained earnings (2,084,447) (1,754,140)
------------------ ----------------
Total Stockholders' Equity (860,489) (530,181)
------------------ ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,078,383 $ 929,055
================== ================
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
<TABLE>
Whole Living, Inc.
Statements of Operations
<CAPTION>
For the three For the three
months ended months ended
March 31 March 31
2000 1999
------------- --------------
<S> <C> <C>
SALES $ 960,479 $ 403,463
COST OF GOODS SOLD 606,668 141,627
------------- --------------
GROSS PROFIT 353,811 261,836
------------- --------------
OPERATING EXPENSES
General And Administrative Expenses 422,301 483,084
Selling Expenses 219,398 260,989
------------- --------------
TOTAL OPERATING EXPENSES 641,699 744,073
------------- --------------
OPERATING INCOME (LOSS) (287,888) (482,237)
------------- --------------
OTHER INCOME AND (EXPENSES)
Interest Expense (45,887) (504)
Other Income 3,468 -
------------- --------------
Total Other Income and (Expenses) (42,419) (504)
------------- --------------
NET INCOME (LOSS) $ (330,307) $ (482,741)
============= ==============
NET INCOME (LOSS) PER SHARE $ (.03) $ (.11)
============= ==============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 10,709,000 4,299,000
============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE>
<TABLE>
Whole Living, Inc.
Statements of Cash Flows
<CAPTION>
For the three For the three
months ended months ended
March 31 March 31
2000 1999
------------- --------------
Cash Flows From Operating Activities
<S> <C> <C>
Net income (loss) $ (330,307) $ (482,741)
Adjustments to Reconcile Net Income (Loss) to
Net Cash Used in Operating Activities:
Depreciation & Amortization 17,581 11,083
Bad Debt - 7,260
Change in Assets and Liabilities
(Increase) Decrease in:
Accounts Receivable (4,601) (33,960)
Inventory (100,578) (40,607)
Prepaid expenses 23,008 (51,005)
Increase/(decrease) in:
Accounts Payable (144,592) 24,631
Accrued Expenses 4,184 70,368
------------- --------------
Net Cash Provided (Used) by Operating Activities (535,305) (494,971)
-------------- -------------
Cash Flows from Investing Activities
Purchase of Property and Equipment (35,432) (128,030)
-------------- -------------
Net Cash Provided (Used) by Investing Activities (35,432) (128,030)
-------------- -------------
Cash Flows from Financing Activities
Proceeds from debt financing 656,890 650,000
Principal payments on long term debt (36,857) (1,410)
-------------- -------------
Net Cash Provided (Used) by Financing Activities 620,033 648,590
-------------- -------------
Net Increase (Decrease) in Cash and Cash Equivalents 49,296 25,589
-------------- -------------
Cash and Cash Equivalents
Beginning 183,069 68,205
------------- --------------
Ending $ 232,365 $ 93,794
============= ==============
Supplemental Disclosures of Cash Flow Information:
Cash payments for interest $ 1,887 $ -
============= ==============
Cash payments for income taxes $ - $ -
============= ==============
Supplemental Schedule of Noncash Investing and Financing Activities
Common shares issued for services $ - $ -
============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
6
<PAGE>
Whole Living, Inc.
March 31, 2000
NOTES TO FINANCIAL STATEMENTS
Whole Living, Inc. (the "Company") has elected to omit substantially
all footnotes to the financial statements for the three months ended
March 31, 2000, since there have been no material changes (other than
indicated in other footnotes) to the information previously reported by
the Company in their Annual Report filed on Form 10-KSB for the Fiscal
year ended December 31, 1999.
UNAUDITED INFORMATION
The information furnished herein was taken from the books and records
of the Company without audit. However, such information reflects all
adjustments which are, in the opinion of management, necessary to
properly reflect the results of the period presented. The information
presented is not necessarily indicative of the results from operations
expected for the full fiscal year.
7
<PAGE>
References in this quarterly report to "Whole Living" "we," "us," and
"our" refer to Whole Living, Inc.
This Form 10Q-SB contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. For this
purpose any statements contained in this Form 10Q-SB that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, words such as "may," "will," "expect," "believe," "anticipate,"
"estimate" or "continue" or comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties, and actual results may differ materially depending on a
variety of factors, many of which are not within Whole Living's control. These
factors include but are not limited to economic conditions generally and in the
industries in which Whole Living may participate; competition within Whole
Living's chosen industry, including competition from much larger competitors;
technological advances and failure by Whole Living to successfully develop
business relationships.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Whole Living is a direct selling company involved in the distribution
and sale of proprietary whole food products, essential oils, personal care
products and turn-key, home-based business systems. Our revenue is primarily
dependent upon the efforts of a network of independent distributors who purchase
products and sales materials from us for personal use or for resale to customers
or sponsored distributors. We recognize revenue upon the receipt of the sales
order, which is simultaneous with the payment and delivery of such goods.
Revenue is net of return, which have historically been less than 1% of gross
sales. Distributor commissions are paid to several levels of distributors on
each product sale. The amount and recipient of the commissions vary depending on
the purchaser's position within our Unigen compensation plan.
Starting January 1, 2000 we have implemented an accounting change in
our method of accounting for Cost of Sales and for General and Administrative
expenses. Management made the change to produce more useful managerial
accounting. Distributor commissions have been paid to distributors on a monthly
and weekly basis based upon their personal and group sales volumes. These are
now included in "Cost of Sales." The specific accounting changes are discussed
in "Results of Operations" below.
Whole Living's short operating history and operating losses raise
substantial doubt about our ability to continue as a going concern. This fact is
reported by our independent auditors, Crouch, Bierwolf & Chisholm. However,
management believes anticipated increases in revenues and tighter departmental
budgets designed to reduce operating expenses may reduce our operating losses.
Liquidity and Capital Resources
We have funded our cash requirements primarily through revenues,
loans, and private placements of equity securities. For the three month period
ended March 31, 2000, we had $232,365 cash on hand with $718,895 in total
current assets compared to $183,069 cash on hand and $587,428 total current
assets for the year ended December 31, 1999. Our total current liabilities for
the 2000 quarter were $1,934,749, with 77.8% of those current liabilities
allocated to notes payable, mostly to related parties, compared to total current
liabilities of $1,454,755, with 60.8% allocated to notes payable for the 1999
year.
As of December 31, 1999 our principal commitments consisted of notes
payable and office and equipment leases. Future minimum capital lease payments
totaled $7,905 through the year 2002. Future minimum principal payments on notes
payable totaled $884,721 through 2000. Future minimum payments on operating
leases totaled $438,702 through 2002. Other commitments include a $5,000 bonus
which we are obligated to pay each month to one distributor.
8
<PAGE>
Management believes that our cash needs for at least the next six
months can be met by loans from our directors, officers and shareholders. We
have an understanding with such individuals that such loans will be repaid once
we have sufficient internal cash flows and/or are able to obtain additional
funding through private placements of our stock.
Since our inception, internal cash flows, alone, have not been
sufficient to maintain our operations. Our future internal cash flows will be
dependent on a number of factors: 1) our ability to encourage our distributors
to sponsor new distributors and increase their own personal sales; 2) our
ability to promote our product lines with our distributors; 3) our ability to
develop successful new product lines; 3) effects of regulatory changes, if any;
and 4) our ability to remain competitive in our markets. Actual costs and
revenues could vary from the amounts we expect or budget, possibly materially,
and those variations are likely to affect how much additional financing we will
need for our operations.
Management anticipates that additional capital will be provided by
private placements of our common stock once we are able to return the listing of
our stock to the OTC Bulletin Board. The removal of our common stock listing
from the OTC Bulletin Board and the subsequent listing on the National Quotation
Bureau Pink Sheets has adversely affected our trading market and our ability to
raise capital through equity. We intend to issue such stock pursuant to
exemptions 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 do not currently intend to make a public offering of
our stock. 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.
If we fail to raise the necessary funds through private placements, we
anticipate we will require debt financing. We have not investigated the
availability, source and terms for external financing at this time and we can
not assure that funds will be available from any source, or, if available, that
we will be able to obtain the funds on terms agreeable to us. Also, the
acquisition of funding through the issuance of debt could result in a
substantial portion of our cash flows from operations being dedicated to the
payment of principal and interest on the indebtedness, and could render us more
vulnerable to competitive and economic downturns.
Results of Operations
The following table summarizes our operations for the three month
period ended March 31, 1999 ("1999 period") and 2000 ("2000 period").
Three Month Period Ended
March 31, 2000 March 31, 1999
-------------- --------------
Sales $ 960,479 $ 403,463
Cost of Sales 606,668 141,627
Gross Profit 353,811 261,836
General & Administrative Expenses 422,301 483,084
Selling Expenses 219,398 260,989
Total Operating Expense 641,699 744,073
Operating Income (Loss) (287,888) (482,237)
9
<PAGE>
Net Profit (Loss) 330,307 482,741
Quarters Ended March 31, 2000 and 1999
Revenues increased $557,016 comparing first quarter 1999 to first
quarter 2000. The increased revenues were a result of an increase in the number
of independent distributors and their efforts in selling our products. Costs of
Sales increased from 35.1% of revenues for first quarter 1999 compared to 63.2%
for first quarter 2000. This increase is due primarily to management's decision
to reclassify the accounting chart of accounts as of January 1, 2000. Expenses
reclassified as Cost of Sales in 2000 are: freight-in for product, sales
commissions paid to independent distributors and credit card sales processing
fees (merchant account). Previously, Cost of Sales had consisted almost entirely
of Cost of Goods.
General and administrative expenses, which include general office
expense, management and employees' salaries, and other support systems for the
distributor network, decreased $60,783 from first quarter 1999 to first quarter
2000. In percentage terms, general and administrative expenses declined from
119.7% of revenues in 1999 to 43.9% of revenues in 2000. The decrease is due in
part to the reclassification of the accounting chart of accounts, as discussed
above, as well as to the implementation of effective departmental fiscal
guidelines by management.
Selling expenses, including marketing and customer service expenses,
decreased $41,591 from the first quarter 1999 compared to the same period in
2000. In percentage terms these expenses declined from 64.6% of revenues in 1999
to 22.8% of revenues for 2000, due to sales revenue growth and to the
implementation of effective departmental fiscal measures.
Operating losses declined from $482,237 in 1999 to $287,888 in 2000.
Our net loss for the 2000 period was 36.4% of revenues compared to 119.6% of
revenues for the 1999 period. We recorded a net loss per share of $0.11 for the
1999 period compared to $0.03 for the 2000 period. Cash to fund operating losses
came primarily from loans from related parties.
Net cash used by operating activities was $535,305 for the 2000 period
compared to $494,971 for the 1999 period. Net cash provided by financing
activities were relatively similar with $648,590 provided in the 1999 period and
$620,033 provided in the 2000 period. Proceeds from debt financing were the
primary source of these funds.
Management anticipates our operating losses to continue in the short
term. However, management has implemented tighter departmental budgets, which
are intended to reduce operating expenses. We have acquired an additional 1,752
new distributors during the first quarter of 2000, bringing our total active
distributors to approximately 10,155. We hope this growth will increase revenues
and combined with reduced operating expenses our losses may decrease in the
second quarter of 2000.
Seasonal Aspects
In the direct selling industry, the summer months of June, July and
August, and the holiday months of November and December are relatively soft.
However, in our short operating history we have not experienced a decrease in
sales during these time periods and are unsure how the industry-wide
fluctuations will affect our business in the future.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Part I: Exhibits.
Exhibit # Description
--------- -----------
24 Consent of Crouch, Bierwolf & Chisholm, dated May 10, 2000
27 Financial Data Schedule
(b) Reports on Form 8-K.
None
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned who are duly authorized.
WHOLE LIVING, INC.
Date: May 19, 2000 By: /s/ Bill Turnbull
-------------------------------------
Bill Turnbull, Secretary and Director
/s/ Mark Burdge
-------------------------------------
Mark Burdge, Chief Financial Officer
12
CROUCH, BIERWOLF & CHISHOLM
Certified Public Accountants
50 West Broadway, Suite 1130
Salt Lake City, Utah 84101
A Partnership of Office (801) 363-1175
Professional Corporations Fax (801) 363-0615
Brent E. Crouch, CPA, PC Brent's Mobile (801) 918-1999
Nephi J. Bierwolf, CPA, PC Nephi's Mobile (801) 971-0405
Todd D. Chisholm, CPA, PC Todd's Mobile (801) 898-2223
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use of our report, dated May 10, 2000, in this
quarterly report on Form 10-QSB for Whole Living, Inc.
/s/ Crouch, Bierwolf & Chisholm
Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
May 10, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001091983
<NAME> WHOLE LIVING, INC.
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 232,365
<SECURITIES> 0
<RECEIVABLES> 7,149
<ALLOWANCES> 0
<INVENTORY> 455,660
<CURRENT-ASSETS> 718,895
<PP&E> 378,548
<DEPRECIATION> (67,154)
<TOTAL-ASSETS> 1,078,383
<CURRENT-LIABILITIES> 1,934,749
<BONDS> 0
0
0
<COMMON> 10,709
<OTHER-SE> (871,198)
<TOTAL-LIABILITY-AND-EQUITY> 1,078,383
<SALES> 960,479
<TOTAL-REVENUES> 960,479
<CGS> 606,668
<TOTAL-COSTS> 641,699
<OTHER-EXPENSES> 3,438
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,887
<INCOME-PRETAX> (330,307)
<INCOME-TAX> 0
<INCOME-CONTINUING> (330,307)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (330,307)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
