UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Amendment No. 1
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarterly period ended September 30, 2005
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 000-26973
WHOLE LIVING, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 87-0621709
(State of incorporation) (I.R.S. Employer Identification No.)
433 East Bay Boulevard, Provo, Utah 84606
(Address of principal executive offices)
Registrant's telephone number: (801) 655-1000
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of October 25, 2005 Whole Living, Inc. had a total of 66,377,245 shares of
common stock outstanding.
Transitional small business disclosure format: Yes [ ] No [X]
THIS REPORT HAS BEEN AMENDED TO CORRECT THE COLUMN HEADINGS AND DISCUSSIONS IN
RESULT OF OPERATIONS.
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis or Plan of Operation.........3
PART II: OTHER INFORMATION
Item 6. Exhibits .........................................................6
Signatures.................................................................7
2
PART I: FINANCIAL INFORMATION
References in this quarterly report to "Whole Living" "we," "us," and "our"
refer to Whole Living, Inc. and its subsidiary.
SPECIAL NOTE REGARDING 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," "will," "expect," "believe,"
"anticipate," "estimate," "project," or "continue" or comparable terminology
used in connection with any discussion of future operating results or
financial performance identify forward-looking statements. You are cautioned
not to place undue reliance on the forward-looking statements, which speak
only as of the date of this report. All forward-looking statements reflect
our present expectation of future events and are subject to a number of
important factors and uncertainties that could cause actual results to differ
materially from those described in the forward-looking statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
EXECUTIVE OVERVIEW
Whole Living is a holding company that operates through its wholly-owned
subsidiary, Brain Garden, Inc. We are a total lifestyle company focused on
bringing our customers convenient whole foods, personal care products,
household cleaners and synthetic free alternatives to medicines. We employ a
network marketing system to introduce our products to customers and
independent distributors, and our distributors sponsor new distributors.
During 2004 we increased our product offerings to include hot cereals and
healthy meal makers, plus we introduced a complete new line of Pulse. We
launched our new essential oils World of Wellness program as part of our
return to our focus on a total lifestyle company. Also, in December 2004 we
opened a new fulfillment center in Brisbane, Australia to reduce costs and
shipping time from ten days to three days for products to Australia and New
Zealand.
During early 2005 we focused our marketing efforts on the "90 Days to Freedom"
program that gave customers a first hand experience of primary whole-food
nutrition. We relied on our two-hour nutritional seminar format and we
planned eleven seminars around the United States and Australia. We followed
up each seminar with a conference approximately 45 days after the initial
seminar with the intent to provide distributors with the opportunity to bring
potential customers to sample our products.
In late April 2005, we launched a new marketing initiative to increase sales
and awareness of our expanded product lines. We called this series the
"Changing Lives Seminars." The Changing Lives Seminars includes a 90-minute
presentation that introduces our company message, offers product samples, and
focuses on healthier lifestyles and presents the benefits of whole foods in
modern diets. We conducted an eleven city tour and followed it up with a
second round city tour in the continental United States, Hawaii and Brisbane.
Management believes this model will help brand our products and programs, as
well as assist new distributors in attracting new clients.
Our major challenge for the next twelve months will be to increase our sales
through our business model. Management will also continue to evaluate
expenses related to operating activities, especially production and order
fulfillment, and we intend to make adjustments to improve profitability.
LIQUIDITY AND CAPITAL RESOURCES
Our revenues are not at a level that can support our operations and we
recorded a net loss of $1,286,330 for the nine month period ended September
30, 2005. Net cash used by operating activities was $1,781,458 for the nine
month period ended September 30, 2005 (the "2005 nine month period") compared
to $976,091 for the nine month period ended September 30, 2004 (the "2004 nine
month period"). Net cash used by investing activities was $25,439 for
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the 2005 nine month period compared to $357,300 for the 2004 nine month
period. The investing activities for both periods were primarily related to
the purchase of property and equipment.
We will need additional financing to fund operations and to further develop
our business plan. If we are unable to obtain additional funding we may be
required to reduce personnel or scale back our business plans. For the short
term management believes that revenues and additional financing will provide
funds for operations. For the long term, management expects that the
development of our Changing Lives Seminars and our World of Wellness programs
will increase our revenues. We will likely continue to raise additional funds
through loans, as needed. Management intends to use any available cash to
fund our operations.
FINANCING
Historically, we have financed our operations through revenues and debt
financing. Net cash provided by financing activities was $1,806,897 for the
2005 nine month period compared to $1,333,391 for the 2004 nine month period
and was primarily related to debt financing in both periods. Management
anticipates that additional capital for cash shortfalls will be provided by
debt financing. We may pay these loans with cash, if available, or convert
these loans into common stock.
We may also issue private placements of stock to raise additional funding.
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.
COMMITMENTS AND CONTINGENT LIABILITIES
We have an operating lease for our office and manufacturing facility at
$17,400 per month. Future minimum payments on operating leases for office
space and warehouse space were $208,800 through 2005 at December 31, 2004.
Our total current liabilities at September 30, 2005, were $2,480,383 and
included a bank overdraft of $55,871, accounts payable of $238,245, accrued
expenses of $167,328, and the current portion of long-term liabilities of
$2,018,939. Our long term liabilities are notes payable to shareholders.
OFF-BALANCE SHEET ARRANGEMENTS
None.
RESULTS OF OPERATIONS
The following discussions are based on the consolidated financial statements
of Whole Living and Brain Garden, Inc. These discussions summarize our
financial statements for the three and nine month periods ended September 30,
2005 and 2004 and should be read in conjunction with the financial statements,
and notes thereto, included with this report at Part I, Item I, above.
Comparison of 2005 and 2004 Three and Nine Month Period Operations
- -------------------------------------------------------------------
Three month Three month Nine month Nine month
period ended period ended period ended period ended
Sept. 30, 2005 Sept. 30, 2004 Sept. 30, 2005 Sept. 30, 2004
-------------- -------------- -------------- --------------
Sales $ 833,066 $ 1,535,457 $ 3,109,752 $ 5,408,313
Cost of
goods sold 623,754 1,104,154 2,248,623 4,104,323
4
Gross profit 209,312 431,303 861,129 1,303,990
Total operating
expenses 576,460 821,559 2,074,100 2,621,993
Total other
expense (29,372) (20,838) (73,359) (118,307)
Net loss (396,520) (411,094) (1,286,330) (1,436,310)
Net loss
per share $ (0.01) $ (0.01) $ (0.02) $ (0.03)
We recognize revenue upon the receipt of the sales order, which is
simultaneous with the payment and delivery of goods. Sales are net of
returns, which have historically been less than 2% of sales. Sales for the
2005 third quarter decreased 45.7% compared to the 2004 third quarter and
sales for the 2005 nine month period decreased 42.5% compared to the 2004 nine
month period.
Cost of goods sold consists primarily of the cost of procuring and packaging
products, sales commissions paid to our independent distributors, the cost of
shipping product to distributors, plus credit card sales processing fees. As
sales have decreased so have cost of goods sold. Cost of goods sold ranged
from approximately 72% to 75% of total sales for the comparable 2005 and 2004
periods.
Cost of goods sold also includes distributor commissions that are paid to
several levels of distributors on each product sold. The amount and recipient
of the commission varies depending on the purchaser's position within the
Unigen Plan. Distributor commissions are paid to distributors on a monthly
basis based upon their personal and group sales volume. Additional bonuses
are paid weekly to distributors. The overall payout average for sales
commissions has historically been approximately 36% to 38% of product sales.
Total operating expenses decreased 29.8% for the 2005 third quarter compared
to the 2004 third quarter and these expenses decreased 20.8% for the 2005 nine
month period compared to the 2004 nine month period. Selling expenses, which
include marketing expenses, the support of sales meetings and events, and
certain customer service expenses, decreased 72.8% for the 2005 third quarter
compared to the 2004 third quarter. Selling expenses decreased 24.5% for the
2005 nine month period compared to the 2004 nine month period. This decrease
was primarily due to a reduction in marketing efforts in the 2005 periods.
General and administrative expenses, which include general office expense,
management and employees' salaries, and the support systems for the
distributor network, decreased 16.5% for the 2005 third quarter compared to
the 2004 third quarter and these expenses decreased 20.1% for the 2005 nine
month period compared to the 2004 nine month period.
Total other expense for the 2004 and 2005 periods was primarily related to
interest expense from debt financing.
As a result of the above, we recorded net losses and net loss per share for
the 2005 and 2004 periods.
The following chart summarizes our balance sheet at September 30, 2005, and
December 31, 2004.
Summary of Balance Sheet
---------------------------
As of September 30, 2005 As of December 31, 2004
------------------------ -----------------------
Cash $ - $ -
Total current assets 455,925 549,081
Total assets 1,121,174 1,395,763
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Total current liabilities 2,480,383 1,547,245
Total liabilities 2,480,383 1,547,245
Retained deficit (15,123,815) (13,837,486)
Total stockholders equity $ (1,359,209) $ (151,482)
At September 30, 2005 our total current liabilities increased primarily due to
notes payable of $2,018,939.
FACTORS AFFECTING FUTURE PERFORMANCE
Internal cash flows alone have not been sufficient to maintain our operations.
We have had a history of losses and have been unable to attain profitability.
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.
Our future internal cash flows will be dependent on a number of factors,
including:
.. Our ability to encourage our distributors to sponsor new distributors and
increase their own personal sales;
.. Our ability to promote our product lines with our distributors;
.. Our ability to develop successful new product lines;
.. Effects of future regulatory changes in the area of direct marketing, if
any; and
.. Our ability to remain competitive in our markets.
In addition, we have entered into agreements with independent distributors and
suppliers located in Australia, Canada, New Zealand, and the United Kingdom.
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, longer payment cycles, unexpected changes in regulatory environments,
import and export restrictions and tariffs, difficulties in staffing and
managing international operations, greater difficulty or delay in accounts
receivable collection, potentially adverse recessionary environments and
economies outside the United States, and possible political and economic
instability.
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS
Part I Exhibits
31.1 Chief Executive Officer Certification
31.2 Principal Financial Officer Certification
32.1 Section 1350 Certification
Part II Exhibits
3.1 Articles of Incorporation of Whole Living (Incorporated by reference
to Form exhibit 2.1 10-SB, as amended, filed August 9, 1999)
3.2 Certificate of Amendment to Articles of Incorporation for Whole Living,
Inc. (Incorporated by reference to exhibit 3.2 for Form 10-QSB, filed
November 15, 2004)
3.3 Bylaws of Whole Living (Incorporated by reference to exhibit 2.4 to the
Form 10-SB, as amended, filed August 9, 1999)
10.1 Lease Agreement between Whole Living and Dare Associates, LLC, dated
September 6, 2002 (Incorporated by reference to exhibit 10.1 for Form
10-KSB, filed April 8, 2003)
21.1 Subsidiaries of Whole Living, Inc. (Incorporated by reference to
exhibit 21.1 for Form 10-QSB, filed November 14, 2003)
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WHOLE LIVING, INC.
/S/ Douglas J. Burdick
Date: November 14, 2005 By:______________________________________
Douglas J. Burdick
President, Chief Executive Officer and Director
Principal Financial and Accounting Officer
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