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: June 30, 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 of incorporation) (I.R.S. Employer 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 August 16, 2000, the Registrant had a total of 13,144,000 shares
of common stock issued and outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE> 2
Whole Living, Inc.
Financial Statements
June 30, 2000
<PAGE> 3
Whole Living, Inc.
Balance Sheets
ASSETS
June 30, December 31,
2000 1999
------------- -------------
(Unaudited)
Current Assets
Cash $ - $ 183,069
Accounts Receivable 92,232 2,548
Advances 41,501 -
Inventory 395,660 355,082
Prepaid Expenses 28,519 46,729
------------- -------------
Total Current Assets 557,912 587,428
------------- -------------
Property & Equipment, Net 467,280 295,485
------------- -------------
Other Assets
Goodwill, Net 32,190 34,636
Deposits 16,506 11,506
------------- -------------
Total Other Assets 48,696 46,142
------------- -------------
Total Assets $ 1,073,888 $ 929,055
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 276,844 $ 328,478
Accrued Expenses 256,261 241,556
Notes Payable 619,296 884,721
------------- -------------
Total Current Liabilities 1,152,401 1,454,755
------------- -------------
Long Term Liabilities
Notes Payable - Related Party 552,000 840,000
Notes Payable 142,238 41,298
Capital Lease Obligations 5,271 7,905
Less Current Portion (619,296) (884,721)
------------- -------------
Total Long Term Liabilities 80,213 4,482
------------- -------------
Total Liabilities 1,232,614 1,459,237
------------- -------------
Stockholders' Equity
Common Stock, $.001 par value; 50,000,000 shares
authorized; 12,709,000 and 10,709,000 shares
issued and outstanding, respectively 12,709 10,709
Additional Paid-In Capital 2,211,249 1,213,249
Retained Deficit (2,382,684) (1,754,140)
------------- -------------
Total Stockholders' Equity (158,726) (530,182)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,073,888 $ 929,055
============= ============
<PAGE> 4
Whole Living, Inc.
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the three For the three For the six For the six
months ended months ended months ended months ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
-------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Sales $ 1,163,561 $ 630,035 $ 2,124,040 $ 1,033,498
Cost Of Goods Sold 773,021 479,562 1,379,689 844,931
-------------- -------------- ------------- --------------
Gross Profit 390,540 150,473 744,351 188,567
-------------- -------------- ------------- --------------
Operating Expenses
General & Administrative 609,643 453,121 1,031,944 874,048
Selling Expenses 79,910 128,192 299,308 227,596
Research & Development - 1,047 - 1,047
-------------- -------------- ------------- --------------
Total Operating Expenses 689,553 582,360 1,331,252 1,102,691
-------------- -------------- ------------- --------------
OTHER INCOME(EXPENSE)
Interest Expense (753) (605) (46,640) (1,109)
Interest Income 1,529 900 4,997 900
Loss on Sale of Asset - (6,090) - (6,090)
-------------- -------------- ------------- --------------
Total Other Income(Expense) 776 (5,795) (41,643) (6,299)
-------------- -------------- ------------- --------------
NET INCOME(LOSS) $ (298,237) $ (437,682) $ (628,544) $ (920,423)
============== ============== ============= ==============
WEIGHTED AVERAGE INCOME(LOSS)
PER SHARE $ (0.027) $ (0.056) $ (0.058) $ (0.134)
============== ============== ============= ==============
WEIGHTED AVERAGE SHARES OUTSTANDING 10,909,000 7,773,903 10,809,000 6,887,632
============== ============== ============= ==============
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Whole Living, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
For the six months ended
June 30
---------------------------
2000 1999
------------- -------------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income(Loss) $ (628,544) $ (920,423)
Adjustments to Reconcile Net Income(Loss) to
Net Cash Provided(Used) in Operating Activities:
Depreciation & Amortization 45,679 24,325
Change in Assets and Liabilities
(Increase) Decrease in:
Accounts Receivable (89,684) (54,994)
Inventory (40,578) (115,342)
Prepaid Expenses 18,210 (85,954)
Increase (Decrease) in:
Accounts Payable and Accrued Expenses (36,453) 53,166
Deferred Expenses - 97,186
------------- -------------
Net Cash Provided(Used) by Operating Activities (731,370) (1,002,036)
------------- -------------
Cash Flows from Investing Activities
Payments for Property & Equipment (215,028) (117,427)
Payments for Advances (41,501) -
Payments for Goodwill - (16,767)
Payments for Deposits (5,000) -
------------- -------------
Net Cash Provided(Used) by Investing Activities (261,529) (134,194)
------------- -------------
Cash Flows from Financing Activities
Proceeds from Stock Issuance - 800,000
Proceeds from Debt Financing 861,257 340,000
Principal Payments on Debt Financing (51,427) (27,070)
------------- -------------
Net Cash Provided(Used) by Financing Activities 809,830 1,112,930
------------- -------------
Increase in Cash (183,069) (23,300)
Cash and Cash Equivalents at Beginning of Period 183,069 68,205
------------- -------------
Cash and Cash Equivalents at End of Period $ - $ 44,905
============= =============
Supplemental Disclosures of Cash Flow Information:
Cash Paid for:
Interest $ 2,644 $ -
============= =============
Income Taxes $ - $ -
============= =============
Non-Cash :
Common Stock issued for Notes Payable & Accrued Interest $ 1,000,000 $ -
============= =============
</TABLE>
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
Whole Living, Inc. (the "Company") has elected to omit substantially
all footnotes to the financial statements for the six months ended June 30,
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.
COMMON STOCK
On June 21, 2000, the Company's $1,000,000 notes payable, which
includes accrued interest, was converted to 2,000,000 shares of the Company's
common stock at $.50 per share.
ADVANCES
During the three months ended June 30, 2000, the Company incurred
costs of $41,501 for the organization of a wholly owned subsidiary in
Queensland, Australia. As of June 30, 2000, the subsidiary is in the process
of being established. It is the intention of management to have the
subsidiary operational on September 1, 2000. At this time, the subsidiary
will be billed for these organizational costs.
<PAGE> 7
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
OR PLAN 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.
Results of Operations
The following table summarizes our operations for the six and three month
periods ended June 30, 1999 and 2000. Starting January 1, 2000 we have
implemented a 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. Cost of sales now include: 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. We have adjusted the figures for
the three month period ended June 30, 1999 in order to maintain a consistent
presentation with the current year.
Three Month Period Ended Six Month Period Ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------- ------------- ------------- --------------
Sales $ 1,163,561 $ 630,035 $ 2,124,040 $ 1,033,498
Cost of Sales 773,021 479,562 1,379,689 844,931
Gross Profit 390,540 150,473 744,351 188,567
General & Administra-
tive Expenses 609,643 453,121 1,031,944 874,048
Selling Expenses 79,910 128,192 299,308 227,596
Research & Development
Expenses - 1,047 - 1,047
Total Operating Expense 689,553 582,360 1,331,252 1,102,691
Net Income (Loss) (298,237) (437,682) (628,544) (920,423)
<PAGE> 8
Sales increased $533,526 for the second quarter of 2000 compared to the
second quarter of 1999 and sales increased $1,090,542 for the 2000 six month
period compared to the 1999 six month period. These increases were due
primarily to the continued development of our distributor network.
Costs of sales were 66.4% of sales for the second quarter of 2000
compared to 76.1% of sales for the 1999 second quarter. Cost of sales were
64.9% of sales for the 2000 six month period compared to 81.7% of sales for
the 1999 six month period. Cost of sales as a percentage of sales decreased
due to better product procurement and changes in pricing and commission
structure.
General and administrative expenses, which include general office
expense, management and employees' salaries, and other support systems for the
distributor network increased $156,522 in the 2000 second quarter compared to
the 1999 second quarter. These expenses increased $157,896 in the 2000 six
month period compared to the 1999 six month period. These increases were
primarily the result of an increase in the number of employees and other
resources required to service the significant growth in revenues.
Selling expenses, including marketing and customer service expenses
decreased $48,282 from the 1999 second quarter compared to the same quarter in
2000 and increased $1,712 from the 1999 six month period to the 2000 six month
period. Selling expenses for the 2000 second quarter were 6.9% of sales
compared to 20.3% of sales for the 1999 second quarter. For the 2000 six
month period they were 14.1% of sales compared to 22.0% for the 1999
comparable period. The decrease as a percentage of sales in 2000 was
primarily due to tighter administrative controls together with growth in
revenues.
Total operating expenses decreased to 59.2% of sales in the 2000 second
quarter compared to 92.4% of sales in the 1999 second quarter. These expenses
were 62.6% of sales for the 2000 six month period compared to 106.7% of sales
for the 1999 comparable period. The decrease as a percentage of sales is
primarily attributable to managements implementation of tighter departmental
budgets.
Net losses declined 31.8% in the 2000 second quarter compared to the 1999
second quarter and they decreased 31.7% in the 2000 six month period compared
to the 2000 six month period. Cash to fund operating losses came primarily
from loans from related parties. Management anticipates operating losses to
decrease in the future due to anticipated increases in revenues from domestic
and, particularly, from international operations, and as a result of
management's efforts to implement tighter departmental budgets designed to
make operations more efficient.
Management expects revenues to increase as a result of the launch of our
Australian operations. However, these revenues will be offset by the
establishment of new operations and operating costs. As of June 30, 2000 we
have incurred costs of $41,501 for the organization of a subsidiary in
Queensland, Australia. We hope to have this subsidiary operational within the
next quarter. As of June 2000, 100 independent distributors in Australia have
qualified at the rank of "Captain" and we have acquired approximately 300 new
distributors in that country. We also anticipate launching operations in Asia
in the last half of the year 2000.
Liquidity and Capital Resources
We have funded our cash requirements primarily through sales, loans, and
private placements of equity securities. For the six month period ended June
30, 2000, we had no cash on hand with $557,912 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 were $1,152,401
for the 2000 six month period, with 53.7% of those current liabilities
allocated to notes payable, compared to total current liabilities of
$1,454,755, with 60.8% allocated to notes payable for the 1999 year. We
recorded a loss per share of $0.058 for the six month period ended June 30,
2000 compared to a loss per share of $0.134 for the 1999 fiscal year.
<PAGE> 9
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.
Net cash used for operating activities in the 2000 six month period was
$731,370 compared to $134,194 for the 1999 six month period. Net cash used by
investing activities was $261,529 for the 2000 six month period compared to
$134,194 for the 1999 six month period. Cash flows provided by financing
activities was $809,830 for the 2000 six month period and came primarily from
debt financing.
On May 16, 2000 we negotiated a settlement of the $340,000 promissory
note, dated March 17, 1999, payable to PHI Mutual Ventures LLC on May 1, 2000.
This loan was secured by common stock held in the name of Messrs. Williams,
Turnbull and Vassel, our officers. Pursuant to the terms of the settlement,
Mr. Vassel transferred to PHI Mutual Ventures 632,567 common shares of the
total 1,567,567 shares pledged by him in consideration for release from the
debt. 225,000 shares were returned to Mr. Vassel and 700,000 shares were
transferred to an escrow account and subsequently transferred to certain
distributors, employees, consultants and vendors. The principal and interest
amount of $371,500 was consolidated with a note payable to Capital
Communications, Inc. of $676,500, principal and interest, resulting in a
promissory note of $1,100,000 payable to Capital Communications.
Subsequently, $1,000,000 of this note was converted into 2,000,000 shares of
common stock on June 21, 2000. The remaining $100,000 due on the note payable
was consolidated with an new note payable to Capital Communications, dated
August 1, 2000, for an additional $300,000 that we borrowed. This note is
secured by all the business assets of Whole Living, including inventory, as
well as, the 3,135,134 shares pledged as collateral by Messrs. Williams and
Turnbull. It carries an interest rate of 14% per annum and is due February 7,
2001.
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 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.
Management anticipates that additional capital will be provided by
private placements of our common stock. 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.
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
<PAGE> 10
decrease in sales during these time periods and are unsure how the
industry-wide fluctuations will affect our business in the future.
PART II. OTHER INFORMATION
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
On June 21, 2000, we issued 800,000 shares valued at $400,000 to Capital
Communications, Inc. to satisfy a note payable. The issuance of these shares
was exempt from the registration requirements of the Securities Act of 1933 by
reason of Section 4(2) as a private transaction not involving a public
distribution.
On June 21, 2000, we issued 1,200,000 common shares valued at $600,000 to
Development Specialties, Inc. to satisfy a note payable. The issuance of
these shares was exempt from the registration requirements of the Securities
Act of 1933 by reason of Section 4(2) as a private transaction not involving a
public distribution.
On August 1, 2000, we issued 35,000 common shares to Donald Mayer,
President of Universal Business Insurance to cancel a debt of $23,500 payable
to Universal Business Insurance. The issuance of these shares was exempt from
the registration requirements of the Securities Act of 1933 by reason of
Section 4(2) as a private transaction not involving a public distribution.
ITEM 5. OTHER INFORMATION
On May 19, 2000, Bruno Vassel III resigned as our Vice-President,
Treasurer and Director. Mr. Vassel plans to pursue other interests. The
Board of Directors has decided not to appoint a new Vice-President or
Treasurer at this time, nor to appoint or nominate a new director.
On July 28, 2000, the listing for our common stock returned to the OTC
Bulletin Board.
In June 2000 we introduced our home-business system and key products to
approximately 1,500 potential distributors gathered in Sydney, Melbourne and
Brisbane, Australia. We intend to make similar introductions in Asia within
the last half of 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Part I: Exhibits.
Exhibit # Description
27 Financial Data Schedule
(b) Reports on Form 8-K.
None
<PAGE> 11
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: 8/16 , 2000 By: /s/ Bill Turnbull
-------------------------------------
Bill Turnbull, Secretary and Director
By: /s/ Craig Lewis
--------------------------------------
Craig Lewis, Chief Financial Officer
