-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E9uJS2aVOsKIXIxV7uSRwOmVgTVcTaQfCq23R0EIoyZ0iUFGUSxJLOSPfNpmTU34 SJv+PusStaJ1mMPEq9C81A== 0001023175-05-000258.txt : 20051115 0001023175-05-000258.hdr.sgml : 20051115 20051115152333 ACCESSION NUMBER: 0001023175-05-000258 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20050930 FILED AS OF DATE: 20051115 DATE AS OF CHANGE: 20051115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WHOLE LIVING INC CENTRAL INDEX KEY: 0001091983 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FOOD PREPARATIONS & KINDRED PRODUCTS [2090] IRS NUMBER: 870621709 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-26973 FILM NUMBER: 051206379 BUSINESS ADDRESS: STREET 1: 433 EAST BAY BLVD CITY: PROVO STATE: UT ZIP: 84606 BUSINESS PHONE: 8016551000 MAIL ADDRESS: STREET 1: 433 EAST BAY BLVD CITY: PROVO STATE: UT ZIP: 84606 10QSB/A 1 whole10qsba1.txt 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 3 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 5 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) 6 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 7 EX-31.1 2 whole10qsba1ex311.txt PRINCIPAL EXECUTIVE OFFICER CERTIFICATION Exhibit 31.1 CHIEF EXECUTIVE OFFICER CERTIFICATION I, Douglas J. Burdick, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Whole Living, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report. 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent function): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. /s/ Douglas J. Burdick Date: November 14, 2005 ____________________________________ Douglas J. Burdick Chief Executive Officer EX-31.2 3 whole10qsba1ex312.txt PRINCIPAL FINANCIAL OFFICER CERTIFICATION Exhibit 31.2 PRINCIPAL FINANCIAL OFFICER CERTIFICATION I, Douglas J. Burdick, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Whole Living, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report. 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent function): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. /s/ Douglas J. Burdick Date: November 14, 2005 ____________________________________ Douglas J. Burdick Principal Financial Officer EX-32.1 4 whole10qsba1ex321.txt SECTION 1350 CERTIFICATION Exhibit 32.1 WHOLE LIVING, INC. CERTIFICATION OF PERIODIC REPORT Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 18 U.S.C. Section 1350 The undersigned executive officer of Whole Living, Inc. (the "Company") certifies pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that: (a) the quarterly report on Form 10-QSB of the Company for the quarter ended September 30, 2005, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (b) the information contained in the Form 10-QSB fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Douglas J. Burdick Date: November 14, 2005 ___________________________________ Douglas J. Burdick Chief Executive Officer Principal Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----